10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2005

Commission File Number 1-10312

SYNOVUS FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

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

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

(706) 649-2401
(Registrants’ telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ       No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12B-2 of the Exchange Act).

Yes þ       No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12B-2 of the Exchange Act).

Yes o       No þ

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

Class	October 31, 2005
Common Stock, $1.00 Par Value	312,308,253 shares

SYNOVUS FINANCIAL CORP.

INDEX

		Page
		Number
Part I.	Financial Information:
Item 1.	Unaudited Financial Statements
	Consolidated Balance Sheets September 30, 2005 and December 31, 2004		3
	Consolidated Statements of Income Nine and Three Months Ended September 30, 2005 and 2004		4
	Consolidated Statements of Cash Flows Nine Months Ended September 30, 2005 and 2004		5
	Notes to Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		39
Item 4.	Controls and Procedures		40
Part II.	Other Information:
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41
Item 6.	Exhibits		42
Signature Page			43
Exhibit Index			44
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATION OF THE CEO & CFO

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PART I. FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

SYNOVUS FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30,			December 31,
(In thousands, except share data)	2005			2004
ASSETS
Cash and due from banks	$	879,838			683,035
Interest earning deposits with banks		2,510			4,153
Federal funds sold and securities purchased under resale agreements		150,853			135,471
Trading account assets		26,069			—
Mortgage loans held for sale		169,659			120,186
Investment securities available for sale		2,821,018			2,695,593
Loans, net of unearned income		20,904,677			19,480,396
Allowance for loan losses		(283,557	)		(265,745	)
Loans, net		20,621,120			19,214,651
Premises and equipment, net		668,822			638,407
Contract acquisition costs and computer software, net		437,684			401,074
Goodwill, net		454,315			416,283
Other intangible assets, net		47,033			41,628
Other assets		796,169			699,697
Total assets	$	27,075,090			25,050,178
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing retail and commercial deposits	$	3,573,766			3,337,908
Interest bearing retail and commercial deposits		14,188,694			12,948,523
Total retail and commercial deposits		17,762,460			16,286,431
Brokered time deposits		2,516,750			2,291,037
Total deposits		20,279,210			18,577,468
Federal funds purchased and securities sold under repurchase agreements		880,605			1,208,080
Long-term debt		2,256,388			1,879,583
Other liabilities		594,365			576,474
Total liabilities		24,010,568			22,241,605
Minority interest in consolidated subsidiaries		189,616			167,284
Shareholders’ equity:
Common stock — $1.00 par value. Authorized 600,000,000 shares; issued 317,944,667 in 2005 and 315,636,047 in 2004; outstanding 312,283,129 in 2005 and 309,974,509 in 2004		317,945			315,636
Surplus		677,178			628,396
Treasury stock – 5,661,538 shares in 2005 and 2004		(113,944	)		(113,944	)
Unearned compensation		(2,593	)		(106	)
Accumulated other comprehensive income (loss)		(14,663	)		8,903
Retained earnings		2,010,983			1,802,404
Total shareholders’ equity		2,874,906			2,641,289
Total liabilities and shareholders’ equity	$	27,075,090			25,050,178

See accompanying Notes to Consolidated Financial Statements.

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SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Nine Months Ended					Three Months Ended
	September 30,					September 30,
(In thousands, except per share data)	2005		2004			2005		2004
Interest income:
Loans, including fees	$	988,474		765,849			355,574		272,547
Investment securities		80,114		74,341			27,379		24,952
Mortgage loans held for sale		5,333		5,092			2,241		1,729
Federal funds sold and securities purchased under resale agreements		2,859		1,404			1,160		510
Interest earning deposits with banks		113		18			58		9
Total interest income		1,076,893		846,704			386,412		299,747
Interest expense:
Deposits		281,689		151,756			110,772		55,646
Federal funds purchased and securities sold under repurchase agreements		22,756		12,430			5,252		4,995
Long-term debt		63,696		45,875			25,563		15,672
Total interest expense		368,141		210,061			141,587		76,313
Net interest income		708,752		636,643			244,825		223,434
Provision for losses on loans		61,745		54,464			19,639		21,192
Net interest income after provision for losses on loans		647,007		582,179			225,186		202,242
Non-interest income:
Electronic payment processing services		644,070		558,138			223,123		197,823
Merchant services		170,009		19,758			74,208		6,517
Other transaction processing services revenue		137,868		125,683			44,030		43,007
Service charges on deposit accounts		84,050		91,129			28,748		31,344
Fiduciary and asset management fees		33,342		31,676			11,167		10,623
Brokerage and investment banking revenue		17,871		16,387			5,801		5,012
Mortgage banking income		21,604		19,527			8,276		6,861
Credit card fees		26,946		21,389			9,563		8,004
Securities gains (losses), net		598		(89	)		—		(24	)
Other fee income		23,537		21,573			8,217		7,451
Other operating income		28,908		55,004			12,599		11,364
Non-interest income before reimbursable items		1,188,803		960,175			425,732		327,982
Reimbursable items		227,975		172,499			79,644		56,309
Total non-interest income		1,416,778		1,132,674			505,376		384,291
Non-interest expense:
Salaries and other personnel expense		612,120		556,210			213,695		194,624
Net occupancy and equipment expense		274,245		244,650			98,772		80,073
Other operating expenses		315,922		216,921			113,300		74,699
Non-interest expense before reimbursable items		1,202,287		1,017,781			425,767		349,396
Reimbursable items		227,975		172,499			79,644		56,309
Total non-interest expense		1,430,262		1,190,280			505,411		405,705
Minority interest in subsidiaries’ net income		27,810		20,581			9,306		7,480
Income before income taxes		605,713		503,992			215,845		173,349
Income tax expense		226,527		185,681			81,853		64,341
Net income	$	379,186		318,311			133,992		109,008
Net income per share:
Basic	$	1.22		1.04			0.43		0.35
Diluted		1.20		1.03			0.43		0.35
Weighted average shares outstanding:
Basic		311,204		306,435			311,842		309,448
Diluted		314,648		309,348			315,336		312,343
Dividends declared per share	$	0.55		0.52			0.18		0.17

See accompanying Notes to Consolidated Financial Statements.

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SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended
	September 30,
(In thousands)	2005			2004
Cash flows from operating activities:
Net income	$	379,186			318,311
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on loans		61,745			54,464
Depreciation, amortization and accretion, net		139,493			60,449
Increase in interest receivable		(22,470	)		(6,397	)
Increase (decrease) in interest payable		16,705			(4,076	)
Equity in income of joint ventures		(5,331	)		(19,178	)
Minority interest in subsidiaries’ net income		27,810			20,581
Increase in trading account assets		(26,069	)		—
(Increase) decrease in mortgage loans held for sale		(49,473	)		7,378
Increase in prepaid and other assets		(72,582	)		(27,785	)
Increase (decrease) in other liabilities		(50,917	)		70,778
Decrease in billings in excess of costs and profit on uncompleted contracts		—			(24,845	)
Gain on sale of banking location		—			(15,849	)
Impairment of developed software		3,619			10,059
Increase in accrued salaries and employee benefits		5,794			17,054
Other, net		(18,862	)		97,605
Net cash provided by operating activities		388,648			558,549
Cash flows from investing activities:
Net cash paid for acquisitions		(56,983	)		(36,655	)
Net decrease in interest earning deposits with banks		1,643			83
Net (increase) decrease in federal funds sold and securities purchased under resale agreements		(15,382	)		47,797
Proceeds from maturities and principal collections of investment securities available for sale		557,533			1,176,661
Proceeds from sales of investment securities available for sale		40,188			42,036
Purchases of investment securities available for sale		(753,163	)		(1,214,494	)
Net cash received on sale of banking location		—			25,069
Net increase in loans		(1,480,579	)		(2,045,842	)
Purchases of premises and equipment		(78,737	)		(88,706	)
Proceeds from disposal of premises and equipment		3,251			1,836
Increase in contract acquisition costs		(11,756	)		(22,441	)
Additions to licensed computer software from vendors		(10,049	)		(19,237	)
Additions to internally developed computer software		(17,435	)		(3,996	)
Net cash used by investing activities		(1,821,469	)		(2,137,889	)
Cash flows from financing activities:
Net increase in demand and savings deposits		860,808			946,556
Net increase in certificates of deposit		840,934			442,482
Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements		(327,475	)		270,929
Principal repayments on long-term debt		(239,079	)		(370,993	)
Proceeds from issuance of long-term debt		620,249			491,139
Dividends paid to shareholders		(167,313	)		(156,973	)
Proceeds from issuance of common stock		43,888			16,975
Net cash provided by financing activities		1,632,012			1,640,115
Effect of exchange rate changes on cash and cash equivalent balances held in foreign currencies		(2,388	)		575
Increase in cash and due from banks		196,803			61,350
Cash and due from banks at beginning of period		683,035			696,030
Cash and due from banks at end of period	$	879,838			757,380

See accompanying Notes to Consolidated Financial Statements.

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SYNOVUS FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods covered by this report have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Synovus Financial Corp. (Synovus) consolidated financial statements and related notes appearing in the 2004 annual report previously filed on Form  10-K.

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

Note 2 — Supplemental Cash Flow Information

For the nine months ended September 30, 2005 and 2004, Synovus paid income taxes (net of refunds received) of $225.2 million and $120.7 million, respectively. For the nine months ended September 30, 2005 and 2004, Synovus paid interest of $347.6 million and $212.7 million, respectively.

Non-cash investing activities consisted of loans of approximately $12.4 million and $9.8 million, which were foreclosed and transferred to other real estate during the nine months ended September 30, 2005 and 2004, respectively.

Note 3 — Comprehensive Income

Other comprehensive income (loss) consists of net unrealized gains (losses) on securities available for sale, net unrealized gains (losses) on cash flow hedges, and foreign currency translation adjustments. Comprehensive income consists of net income plus other comprehensive income (loss). Comprehensive income for the nine months ended September 30, 2005 and 2004 was $355.6 million and $307.3 million, respectively. For the three months ended September 30, 2005 and 2004 comprehensive income was $119.8 million and $136.2 million, respectively.

Note 4 — Long-Term Debt

In June 2005, Synovus issued $450 million of subordinated notes due June 15, 2017. This debt bears a coupon interest rate of 5.125%. Interest is payable semi-annually and principal is due at maturity.

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Note 5 — Derivative Instruments

Synovus accounts for its derivative financial instruments under Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133 requires recognition of all derivatives as either assets or liabilities on the balance sheet and requires measurement of those instruments at fair value through adjustments to either accumulated other comprehensive income, current earnings, or both, as appropriate. As part of its overall interest rate risk management activities, Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risks. These derivative instruments consist primarily of interest rate swaps and commitments to sell mortgage loans. The interest rate lock commitments made to prospective mortgage loan customers also represent derivative instruments since it is intended that such loans will be sold.

Interest rate swap transactions generally involve the exchange of fixed-rate and floating-rate interest payment obligations without the exchange of the underlying principal amounts. Entering into interest rate contracts involves not only interest rate risk, but also the risk of counterparties’ failure to fulfill their legal obligations. Notional principal amounts often are used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller.

A summary of interest rate swap contracts utilized for interest rate risk management at September 30, 2005 is shown in the following table.

			Weighted Average													Net
									Maturity							Unrealized
	Notional		Receive			Pay			In		Unrealized					Gains
(Dollars in thousands)	Amount		Rate			Rate(*)			Months		Gains		Losses			(Losses)
Receive fixed swaps:
Fair value hedges	$	587,500		4.32	%		3.66	%		84		162		(11,549	)		(11,387	)
Cash flow hedges		500,000		5.55	%		6.75	%		11		—		(4,490	)		(4,490	)
Total	$	1,087,500		5.17	%		5.08	%		50		162		(16,039	)		(15,877	)

(*) Variable pay rate based upon contract rates in effect at September 30, 2005.

At September 30, 2005, outstanding commitments to sell mortgage loans amounted to approximately $168.6 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 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 September 30, 2005 was an unrealized gain of $685,191.

At September 30, 2005, Synovus had interest rate lock commitments in the amount of $119.6 million. The fair value of these commitments was an unrealized loss of $761,515.

Synovus also enters into derivative financial instruments to meet the financing and interest rate risk management needs of its customers. Upon entering into these instruments to meet customer needs, Synovus enters into offsetting positions in order to minimize the risk to Synovus. These derivative financial instruments are recorded at fair value with any resulting gain or loss recorded

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in current period earnings. As of September 30, 2005, the notional amount of customer related derivative financial instruments was $660.6 million.

Note 6 — Stock-Based Compensation

Synovus accounts for its fixed stock-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 is recorded on the grant date only to the extent that the current market price of the underlying stock exceeds the exercise price on the grant date.

SFAS No. 123, “Accounting for Stock-Based Compensation,” established accounting and disclosure requirements using a fair value based method of accounting for stock-based compensation plans. As allowed by SFAS No. 123, Synovus has elected to apply the accounting method prescribed under APB Opinion No. 25, and has adopted the disclosure requirements of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.”

If Synovus had determined compensation expense based on the fair value at the grant date for its stock options granted under SFAS No. 123, net income and earnings per share for the three and nine months ended September 30, 2005 and 2004 would have been reduced to the pro forma amounts indicated in the following tables.

For the nine months ended September 30, 2005 and 2004:

(In thousands, except per share data)	2005			2004
Net income as reported	$	379,186			318,311
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(10,125	)		(9,763	)
Net income – pro forma	$	369,061			308,548
Earnings per share:
Basic — as reported	$	1.22			1.04
Basic — pro forma		1.19			1.01
Diluted — as reported		1.20			1.03
Diluted — pro forma		1.17			1.00

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For the three months ended September 30, 2005 and 2004:

(In thousands, except per share data)	2005			2004
Net income as reported	$	133,992			109,008
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(3,647	)		(3,649	)
Net income — pro forma	$	130,345			105,359
Earnings per share:
Basic — as reported	$	0.43			0.35
Basic — pro forma		0.42			0.34
Diluted — as reported		0.43			0.35
Diluted — pro forma		0.41			0.34

Note 7 — Business Combinations

On March 1, 2005, Total System Services, Inc. (TSYS), a majority owned consolidated subsidiary of Synovus, completed the acquisition of Vital Processing Services, L.L.C. (Vital), by purchasing the 50-percent equity stake formerly held by Visa U.S.A. for $95.8 million, including $782,000 of direct acquisition costs. TSYS recorded the acquisition of the 50% interest as a purchase business combination, requiring that TSYS allocate the purchase price to the assets acquired and liabilities assumed based on their relative fair values. TSYS is in the process of finalizing the purchase price allocation and has preliminarily allocated $34.6 million to goodwill, $12.0 million to intangible assets and the remaining amount to the assets and liabilities acquired. Vital’s results of operations have been included in the consolidated financial results beginning March 1, 2005.

The preliminary purchase price allocation is presented below:

(In thousands)	At March 1, 2005
Cash and cash equivalents	$	19,399
Contract acquisition costs and computer software, net		31,733
Intangible assets		12,000
Goodwill		34,571
Other assets		30,597
Total assets acquired		128,300
Other liabilities		32,457
Total liabilities assumed		32,457
Minority interest		49
Net assets acquired	$	95,794

Pro forma information related to the impact of this acquisition on Synovus’ consolidated financial statements, assuming such acquisition had occurred at the beginning of the periods reported, is not presented as such impact is not significant.

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Effective October 1, 2005, TSYS acquired the remaining 49% interest of Merlin Solutions, Inc., a subsidiary of Vital, for approximately $2.0 million. TSYS has recorded the acquisition of the incremental 49% interest as a business combination requiring TSYS to allocate the purchase price to the assets acquired and liabilities assumed based on their relative fair values.

Note 8 — Operating Segments

Synovus has two reportable segments: Financial Services and TSYS. The Financial Services segment provides financial services including banking, financial management, insurance, mortgage and leasing services through 39 subsidiary banks and other Synovus offices in Georgia, Alabama, South Carolina, Florida, and Tennessee. TSYS provides electronic payment processing and other related services to card-issuing institutions in the United States, Mexico, Canada, Honduras, Puerto Rico and Europe. The significant accounting policies of the segments are described in the summary of significant accounting policies in the 2004 annual report previously filed on Form 10-K. All inter-segment services provided are charged at the same rates as those charged to unaffiliated customers. Such services are included in the results of operations of the respective segments and are eliminated to arrive at consolidated totals.

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Segment information as of and for the nine months ended September 30, 2005 and 2004 is presented in the following table:

		Financial
(In thousands)		Services		TSYS (a)		Eliminations			Consolidated
Interest income	2005	$	1,076,930		2,520		(2,557	)(b)	$	1,076,893
	2004		846,704		648		(648	)(b)		846,704
Interest expense	2005		370,538		160		(2,557	)(b)		368,141
	2004		210,556		153		(648	)(b)		210,061
Net interest income	2005		706,392		2,360		—			708,752
	2004		636,148		495		—			636,643
Provision for loan losses	2005		61,745		—		—			61,745
	2004		54,464		—		—			54,464
Net interest income after provision	2005		644,647		2,360		—			647,007
for loan losses	2004		581,684		495		—			582,179
Total non-interest income	2005		242,435		1,189,662		(15,319	)(c)		1,416,778
	2004		246,520		900,134		(13,980	)(c)		1,132,674
Total non-interest expense	2005		476,740		968,841		(15,319	)(c)		1,430,262
	2004		467,093		737,167		(13,980	)(c)		1,190,280
Income before income taxes	2005		410,342		223,181		(27,810	)(d)		605,713
	2004		361,111		163,462		(20,581	)(d)		503,992
Income tax expense	2005		148,341		78,186		—			226,527
	2004		130,047		55,634		—			185,681
Net income	2005		262,001		144,995		(27,810	)(d)		379,186
	2004		231,064		107,828		(20,581	)(d)		318,311
Total assets	2005		25,867,241		1,357,291		(149,442	)(e)		27,075,090
	2004		23,337,175		1,127,997		(75,679	)(e)		24,389,493

(a)	Includes equity in income of joint ventures which is included in non-interest income.
(b)	Interest on TSYS’ cash deposits with the Financial Services segment and on TSYS’ line of credit with a Synovus affiliate bank.
(c)	Principally, electronic payment processing and other services provided by TSYS to the Financial Services segment.
(d)	Minority interest in TSYS and GP Network Corporation (a TSYS subsidiary).
(e)	Primarily TSYS’ cash deposits with the Financial Services segment.

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Segment information as of and for the three months ended September 30, 2005 and 2004 is presented in the following table:

		Financial
(In thousands)		Services		TSYS (a)		Eliminations			Consolidated
Interest income	2005	$	386,412		1,033		(1,033	)(b)	$	386,412
	2004		299,749		272		(274	)(b)		299,747
Interest expense	2005		142,582		38		(1,033	)(b)		141,587
	2004		76,503		84		(274	)(b)		76,313
Net interest income	2005		243,830		995		—			244,825
	2004		223,246		188		—			223,434
Provision for loan losses	2005		19,639		—		—			19,639
	2004		21,192		—		—			21,192
Net interest income after provision for loan losses	2005		224,191		995		—			225,186
	2004		202,054		188		—			202,242
Total non-interest income	2005		87,220		423,583		(5,427	)(c)		505,376
	2004		76,699		312,432		(4,840	)(c)		384,291
Total non-interest expense	2005		161,154		349,684		(5,427	)(c)		505,411
	2004		157,551		252,994		(4,840	)(c)		405,705
Income before income taxes	2005		150,257		74,894		(9,306	)(d)		215,845
	2004		121,202		59,627		(7,480	)(d)		173,349
Income tax expense	2005		55,078		26,775		—			81,853
	2004		43,935		20,406		—			64,341
Net income	2005		95,179		48,119		(9,306	)(d)		133,992
	2004		77,267		39,221		(7,480	)(d)		109,008
Total assets	2005		25,867,241		1,357,291		(149,442	)(e)		27,075,090
	2004		23,337,175		1,127,997		(75,679	)(e)		24,389,493

(a)	Includes equity in income of joint ventures which is included in non-interest income.
(b)	Interest on TSYS’ cash deposits with the Financial Services segment and on TSYS’ line of credit with a Synovus affiliate bank.
(c)	Principally, electronic payment processing and other services provided by TSYS to the Financial Services segment.
(d)	Minority interest in TSYS and GP Network Corporation (a TSYS subsidiary).
(e)	Primarily TSYS’ cash deposits with the Financial Services segment.

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Segment information for the changes in the carrying amount of goodwill for the nine months ended September 30, 2005 is shown in the following table:

	Financial
(In thousands)	Services			TSYS			Total
Balance as of December 31, 2004	$	345,722			70,561			416,283
Goodwill acquired during period		235	(1)		39,549	(3)		39,784
Impairment losses		—			—			—
Other		(440	)(2)		(1,312	)(4)		(1,752	)
Balance as of September 30, 2005	$	345,517			108,798			454,315

(1)	Synovus acquired all of the issued and outstanding shares of GLOBALT, Inc. on May 31, 2002. The terms of the merger agreement provide for contingent consideration based on a percentage of a multiple of earnings before interest, income taxes, depreciation and other adjustments, as defined in the agreement (EBT), for each of the three years ending December 31, 2004, 2005 and 2006. The contingent consideration is payable by February 15th of each year subsequent to the respective calendar year for which the EBT calculation is made. The fair value of the contingent consideration is recorded as an addition to goodwill. On February 15, 2005, Synovus recorded additional contingent consideration of $226,000, which was based on 4% of a multiple of GLOBALT’s EBT for the year ended December 31, 2004.
	Additionally, during the first quarter of 2005, Synovus recorded goodwill of $9,000 resulting from additional acquisition expenses related to the June 1, 2004 acquisition of Trust One Bank in Memphis, Tennessee.
(2)	During the third quarter of 2005, Synovus recorded a reduction in goodwill of $440,000 associated with the sale of two bank charters.
(3)	Goodwill acquired during the nine months ended September 30, 2005 consists of $34.6 million in goodwill based on the preliminary purchase price allocation for the Vital acquisition which was completed on March 1, 2005 (see Note 7 for additional information regarding this acquisition). The remaining $4.9 million in additional goodwill consists of fifty percent of the previously recorded goodwill on Vital’s balance sheet, which is now being consolidated in TSYS’ balance sheet
(4)	On August 2, 2004, TSYS completed the acquisition of Clarity Payment Solutions, Inc. During the second quarter of 2005, TSYS recorded a final adjustment to the purchase price allocation, which resulted in a $1.3 million reduction in other liabilities with a corresponding $1.3 million decrease in goodwill.

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Intangible assets (excluding goodwill) net of accumulated amortization as of September 30, 2005 and December 31, 2004 are presented in the table below.

(In thousands)	September 30, 2005		December 31, 2004
Purchased trust revenues	$	2,994		3,204
Core deposit premiums		24,605		28,116
Employment contracts / non-competition agreements		541		783
Acquired customer contracts		4,233		5,195
Intangibles associated with the acquisition of minority interest in TSYS		2,158		2,372
Customer relationships		12,225		1,550
Other		277		408
Total carrying value	$	47,033		41,628

Note 9 — Dividends per Share

Dividends declared per share for the quarter ended September 30, 2005 were $0.1825, up 5.3% from $0.1733 for the third quarter of 2004. For the nine months ended September 30, 2005, dividends declared per share were $0.5475, an increase of 5.3% from $0.5199 for the same period in 2004.

Note 10 — Recent Accounting Pronouncements

In December 2003, the AICPA’s Accounting Standards Executive Committee (AcSEC) issued Statement of Position No. 03-3 (SOP No. 03-3), “Accounting for Certain Loans or Debt Securities Acquired in a Transfer.” SOP No. 03-3 provides guidance on accounting for loans and associated loss reserves acquired in a transfer or business combination. Certain loans may be required to be transferred net of reserves where there are differences between contractual and expected cash flows which are attributable, at least in part, to credit quality. SOP No. 03-3 is effective for loans acquired after December 31, 2004. Synovus adopted SOP No. 03-3 effective January 1, 2005. No business combination with a financial institution has been consummated nor has a loan portfolio been acquired since adoption. Synovus believes that a determination of the impact that SOP No. 03-3 will have on its financial statements will not be meaningful until Synovus enters into a business combination with a financial institution and/or acquires a future loan portfolio.

On November 13, 2003, the Emerging Issues Task Force (EITF) issued EITF Issue No. 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” This guidance was to be applied in other-than-temporary impairment evaluations performed in reporting periods beginning after June 15, 2004. Disclosures were effective in annual financial statements for fiscal years ended after December 15, 2003, for investments accounted for under Financial Accounting Standards Board (FASB) Statements No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and No. 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations.” The disclosure requirements for all other investments were effective in annual financial statements for fiscal years ended after June 15, 2004. In September 2004, the FASB issued FASB Staff Position (FSP) EITF Issue 03-1-1 which sets aside the measurement and recognition guidance set forth in paragraphs 10-20 of EITF Issue No. 03-1. The FASB has indicated that new measurement and recognition guidance

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will not be issued, however, a new FSP, which will clarify existing guidance, is expected. Synovus expects that adoption of the effective provisions of EITF Issue No. 03-1 will not have a material impact on its financial statements.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award.

SFAS No. 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. Compensation cost will be recognized on or after the required effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated under SFAS No. 123 for either recognition or pro forma disclosures.

On March 29, 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 107 (SAB 107), “Share-Based Payment”. SAB 107 expresses the views of the SEC staff regarding the interaction between SFAS No. 123R and certain SEC rules and regulations, provides the staff’s views regarding the valuation of share-based payments by public companies, and provides guidance regarding share-based payments with non-employees.

On April 14, 2005, the SEC amended Rule 4-01(a) of Regulation S-X that amended the compliance date for SFAS No. 123R. The SEC’s new rule allows companies to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period that begins after June 15, 2005. Synovus will adopt SFAS No. 123R effective January 1, 2006.

Synovus estimates that the adoption of SFAS No. 123R will result in an additional expense in 2006 of approximately $12 million, net of tax, relating to the expensing of unvested stock options estimated to be outstanding at January 1, 2006. Additionally, Synovus will incur an additional after-tax expense of approximately $1.4 million in 2005 and $1.2 million in 2006, in conjunction with new restricted stock awards that were granted during the first quarter of 2005. While stock options have been the primary method of equity-based compensation historically, going forward, restricted stock awards are expected to be Synovus’ primary method of equity-based compensation.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle by requiring retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Synovus does not expect the impact of SFAS No. 154 on its financial position, results of operations or cash flows to be material.

15

Note 11 — Other

Certain amounts in 2004 have been reclassified to conform to the presentation adopted in 2005.

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

Executive Summary

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

About Our Business

     Synovus is a diversified financial services holding company, based in Columbus, Georgia, with more than $27 billion in assets. Synovus operates two business segments: the Financial Services and the Transaction Processing Services (TSYS) segments. The Financial Services segment provides integrated financial services including banking, financial management, insurance, mortgage and leasing services through 39 subsidiary banks and other Synovus offices in five southeastern states. At September 30, 2005, our subsidiary banks ranged in size from $38.2 million to $4.6 billion in total assets. The Transaction Processing Services segment provides electronic payment processing services through our 81% owned subsidiary Total System Services, Inc. (TSYS), one of the world’s largest companies for outsourced payment services. Our ownership in TSYS gives us a unique business mix: for the first nine months of 2005, 55% of our consolidated revenues and 31% of our net income came from TSYS.

Our Key Financial Performance Indicators

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

Financial Services

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

TSYS

•  Revenue Growth •  Expense Management

2005 Financial Performance Highlights

Consolidated

• Net income of $134.0 million, up 22.9% and $379.2 million, up 19.1% for the three and nine months ended September 30, 2005 as compared to the same periods in 2004

• Diluted earnings per share of $0.43 for the three months ended September 30, 2005, up 21.9%, and $1.20 for the nine months ended September 30, 2005, up 17.1%, as compared to the same periods in 2004

Financial Services

• Net income growth: 23.2% and 13.4% for the three and nine months ended September 30, 2005 over the corresponding periods in the prior year. The comparison is impacted by the $9.7 million after-tax gain from the sale of the banking operations in Quincy, Florida in the first quarter of 2004. Excluding this gain, the Financial Services net income

17

	growth was 18.3% for the nine months ended September 30, 2005 over the corresponding period in the prior year
•	Net interest margin before fees: 4.04% and 4.01% for the three and nine months ended September 30, 2005 as compared to 3.90% for both the three and nine months ended September 30, 2004
•	Net interest margin after fees: 4.18% and 4.15% for the three and nine months ended September 30, 2005 as compared to 4.25% for both of the same periods in 2004
•	The net interest margin after fees increased 3 basis points in the third quarter compared to the second quarter of 2005. Yields on earning assets increased 30 basis points while the effective cost of funds increased 27 basis points.
•	Loan growth: 10.8% increase from September 30, 2004
•	Credit quality measures remained strong:

• Non-performing assets ratio of 0.49%, down from 0.52% at December 31, 2004 and 0.56% at September 30, 2004

• Past dues over 90 days as a percentage of total loans of 0.08%, down from 0.09% at December 31, 2004 and 0.12% at September 30, 2004

• Total past dues as a percentage of total loans of 0.49% compared to 0.43% at December 31, 2004 and 0.63% at September 30, 2004

• Net charge-off ratio of 0.26% for the third quarter of 2005 compared to 0.26% for the third quarter of 2004, and 0.29% compared to 0.22% for the first nine months of 2005 and 2004, respectively

• Deposit growth: 14.1% increase from a year ago (12.2% growth excluding brokered time deposits)

• Fee income: up 13.7% for the quarter and down 1.7% for the first nine months of 2005 compared to the corresponding periods in the prior year. Excluding the first quarter 2004 $15.8 million pre-tax gain from the sale of the Quincy bank operations, fee income for the first nine months of 2005 increased 5.1% compared to the prior year.

• General and administrative expenses up by 2.3% for the quarter and 2.1% for the first nine months of 2005 over the corresponding periods in the prior year. Excluding the impact of acquisitions, divestitures and the change in methodology related to loan origination costs, the increase is 9.0% for the first nine months of 2005.

• Headcount was up 77, or 1.2%, as compared to December 31, 2004 and up 95, or 1.5%, compared to September 30, 2004.

TSYS

• Revenue growth before reimbursable items: 37.7% and 34.9% for the three and nine months ended September 30, 2005 over the corresponding periods in the prior year

• Expense growth before reimbursable items: 37.3% and 31.1% for the three and nine months ended September 30, 2005 over the corresponding periods in the prior year

• Net income growth: 22.8% and 34.6% for the three and nine months ended September 30, 2005 over the corresponding periods in the prior year

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Other highlights at TSYS include:

• TSYS successfully converted the account portfolio of JPMorgan Chase.

• TSYS signed an agreement to process Capital One’s credit card accounts.

• TSYS renewed agreements with C&A Modas in Mexico as well as agreements with the Navy Federal Credit Union, Vienna, VA,; Juniper Bank, Wilmington, DE; Trustmark National Bank, Jackson, MS and Allied Irish Bank, Dublin, Ireland.

• TSYS and Bank of America agreed to add five years to the current agreement to provide exclusive processing services through 2014. The expanded relationship covers all consumer and commercial credit Visa and MasterCard accounts issued by Bank of America, as well as the recently acquired portfolio of FleetBoston Financial Corp. (FleetBoston), which was converted to TSYS in mid-March. Subsequent to this agreement, Bank of America announced its intention to acquire MBNA Corporation. TSYS and Bank of America are in discussions to determine TSYS’ future role in providing consumer credit card processing to Bank of America. See “Major Customer” on page 29 for additional information with respect to TSYS’ relationship with Bank of America.

• Vital Processing Services, TSYS’ wholly owned merchant processing subsidiary, announced a renewal of its service agreement with Bank of America.

2005 Earnings Outlook

On July 20, 2005, we increased our 2005 earnings guidance from an earnings per share (EPS) growth range of 13% to 16% over 2004 to an EPS growth range of 14% to 17%. This guidance is based on the following assumptions:

• Modest increases in short-term interest rates,

• A favorable credit environment with a net charge-off ratio of approximately 0.30%, and

• TSYS’ net income growth in the 25% to 28% range.

Critical Accounting Policies

The accounting and financial reporting policies of Synovus conform to accounting principles generally accepted in the United States of America and to general practices within the banking and electronic payment processing 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.

Synovus’ critical accounting policies are described in the “Financial Review” section of Synovus’ 2004 annual report on Form 10-K. There have been no material changes to Synovus’ critical accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions in 2005.

Business Combinations

Refer to Note 7 of the Notes to Consolidated Financial Statements for a discussion of business combinations.

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Balance Sheet

During the first nine months of 2005, total assets increased $2.025 billion. The more significant increases consisted of loans, net of unearned income, up $1.424 billion, cash up $196.8 million, investment securities available for sale up $125.4 million, contract acquisition costs and computer software, up $69.7 million, and goodwill up $38.0 million.

On March 1, 2005, TSYS completed the acquisition of the remaining 50% interest in Vital. Prior to this date, TSYS accounted for its interest in Vital under the equity method of accounting (the carrying value was $49.7 million at December 31, 2004). Vital is now a consolidated subsidiary of TSYS. Accordingly, the comparison of Synovus’ consolidated balance sheet at September 30, 2005 to December 31, 2004 is impacted by the consolidation of Vital. The more significant of the changes were the goodwill addition of $39.5 million, the contract acquisition costs and computer software addition of $60.0 million, and the other liabilities addition of $59.1 million.

Providing the necessary funding for the balance sheet growth during the first nine months of 2005, the deposit base grew $1.70 billion, long-term debt increased $376.8 million, and shareholders’ equity increased $233.6 million. These increases were partially offset by a $327.5 million decrease in federal funds purchased and securities sold under repurchase agreements.

Loans

Compared to September 30, 2004, total loans grew by 10.8%. The loan growth was broad-based across our geographic markets, with half of our banks increasing at a double-digit rate. On a sequential quarter basis, total loans outstanding grew by $424.8 million or 8.2% annualized. The sequential quarter annualized loan growth by portfolio types was as follows: commercial real estate 14.7%, commercial and industrial (3.8%), and consumer 3.7%. Synovus expects to grow loans at a low double-digit rate for the full year.

The tables on pages 23 and 24 illustrate the composition of the loan portfolio (classified by loan purpose) as of September 30, 2005. The commercial real estate portfolio totals $12.5 billion, which represents 59.6% of the total loan portfolio. Loans for the purpose of financing investment properties total $3.9 billion, which is only 18.6% of the total loan portfolio, or less than one-third of the total commercial real estate portfolio. The investment properties loan category includes $626.2 million in loans in the Atlanta market. This amount represents 3.0% of the total loan portfolio, or 5.0% of the total commercial real estate portfolio. The primary source of repayment on investment property loans is the income from the underlying property (e.g., hotels, office buildings, shopping centers, and apartment units’ rental income), with the collateral as the secondary source of repayment. Additionally, in almost all cases, these loans are made on a recourse basis, which provides another source of repayment. From an underwriting standpoint, these loans are evaluated by determining the impact of higher interest rates, as well as lower occupancy rates, on the borrower’s ability to service debt.

Commercial loans for the purpose of financing 1-4 family properties represent $3.8 billion or 18.3% of the total loan portfolio, and 30.8% of the total commercial real estate portfolio. The 1-4 family properties category includes $1.06 billion in loans in the Atlanta market, which is 5.1% of the total loan portfolio, or 27.6% of the 1-4 family properties category. Included in total commercial real estate loans are $3.7 billion in commercial and industrial related real estate loans. These loans are categorized as owner-occupied and other property loans on the table shown on page 23. These loans represent 17.9% of the total loan portfolio, or 30.1%

20

of the total commercial real estate portfolio. The primary source of repayment on these loans is revenue generated from products or services offered by the business or organization (e.g., accounting; legal and medical services; retailers; manufacturers and wholesalers). These loans typically carry the personal guarantees of the principals of the business.

Commercial and industrial loans represent $5.2 billion or 24.8% of the total loan portfolio at September 30, 2005. The primary source of repayment on these loans is revenue generated from products or services offered by the business or organization (e.g., accounting, legal and medical services; retailers; manufacturers and wholesalers). These loans typically carry the personal guarantees of the principals of the business. These loans are diversified by geography, industry, and loan type. Consumer loans at September 30, 2005 total $3.3 billion, representing 15.8% of the total loan portfolio.

Credit Quality

Credit quality measures remained strong. The non-performing assets ratio was 0.49% at September 30, 2005 compared to 0.52% at December 31, 2004 and 0.56% at September 30, 2004. The quality of our commercial real estate portfolio remains strong with a non-performing loan ratio of only 0.30% of total commercial real estate loans at September 30, 2005. This compares to an overall non-performing loan ratio for the total loan portfolio of 0.42%. The year-to-date net charge-off ratio for the first nine months of 2005 was 0.29% compared to 0.22% for the same period of 2004. Net charge-offs for the quarter totaled $13.6 million, or 0.26% of average loans compared to 0.26% for the third quarter of 2004. We expect that the net charge-off ratio for the year will be approximately 0.30%.

Past due levels remained very favorable, with total loans past due (and still accruing interest) at 0.49% of loans. Loans 90 days past due and still accruing interest at September 30, 2005 were $16.0 million, or 0.08% of total loans, compared to 0.09% at year-end 2004 and 0.12% at September 30, 2004. 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 on the loans. Management further believes the resolution of these delinquencies will not cause a material increase in non-performing assets.

The allowance for loan losses is $283.6 million, or 1.36% of net loans, at September 30, 2005 compared to $265.7 million, or 1.36% of net loans, at December 31, 2004. The allowance to non-performing loans coverage was 331% at September 30, 2005, compared to 330% at
December 31, 2004.

The provision for loan losses was $19.6 million for the third quarter of 2005 compared to $21.2 million for the third quarter of 2004. For the first nine months of 2005, the provision for loan losses was $61.7 million as compared to $54.5 million for the same period in 2004. For the first nine months of 2005, total provision expense covered net charge-offs by 1.41 times compared to 1.91 times for the same period a year ago.

21

(Dollars in thousands)	September 30, 2005			December 31, 2004
Non-performing loans	$	85,571		$	80,456
Other real estate		16,951			21,492
Non-performing assets	$	102,522		$	101,948
Loans 90 days past due and still accruing	$	16,013		$	18,138
Allowance for loan losses	$	283,557		$	265,745
Allowance for loan losses as a % of loans		1.36	%		1.36	%
As a % of loans and other real estate:
Non-performing loans		0.41	%		0.41	%
Other real estate		0.08			0.11
Non-performing assets		0.49	%		0.52	%
Allowance to non-performing loans		331.37	%		330.30	%

Management continuously monitors non-performing and past due loans, to prevent further deterioration regarding the condition of these loans. Management is not aware of any material loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have been excluded from non-performing assets. Management believes non-performing assets include all material loans in which doubts exist as to the collectibility of amounts due according to the contractual terms of the loan agreement.

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The following table shows the composition of the loan portfolio and non-performing loans (classified by loan purpose) as of September 30, 2005.

									% of
							Total		Total
				% of			Non-		Non-
(Dollars in thousands)	Total			Total Loans			performing		performing
Loan Type	Loans			Outstanding			Loans		Loans
Commercial Real Estate
Multi-Family	$	527,826			2.5	%	$	275		0.3	%
Hotels		779,736			3.7			1,371		1.6
Office Buildings		797,886			3.8			5,201		6.1
Shopping Centers		641,620			3.1			—		—
Commercial Development		821,660			3.9			85		0.1
Other Investment Property		328,120			1.6			81		0.1
Total Investment Properties		3,896,848			18.6			7,013		8.2
1-4 Family Construction		1,414,675			6.8			1,089		1.3
1-4 Family Perm /Mini-Perm		1,075,143			5.1			2,106		2.5
Residential Development		1,345,662			6.4			7,973		9.3
Total 1-4 Family Properties		3,835,480			18.3			11,168		13.1
Land Acquisition		978,813			4.8			1,053		1.2
Total Investment-Related Real Estate		8,711,141			41.7			19,234		22.5
Owner-Occupied		2,443,318			11.7			11,210		13.1
Other Property		1,302,379			6.2			6,529		7.6
Total Commercial Real Estate		12,456,838			59.6			36,973		43.2
Commercial & Industrial		5,185,634			24.8			39,899		46.6
Consumer		3,306,529			15.8			8,699		10.2
Unearned Income		(44,324	)		(0.2	)		—		—
Total	$	20,904,677			100.0	%	$	85,571		100.0	%

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The following table compares the composition of the loan portfolio at September 30, 2005, June 30, 2005 and September 30, 2004.

							3Q05						3Q05
	Total Loans						vs			Total Loans			vs
(Dollars in thousands)	Sept. 30,			June 30,			2Q05			Sept. 30,			3Q04
Loan Type	2005			2005			% change (1)			2004			% change (1)
Commercial Real Estate
Multi-Family	$	527,826		$	526,820			0.8	%	$	563,195			(6.3	)%
Hotels		779,736			804,316			(12.1	)		788,160			(1.1	)
Office Buildings		797,886			786,262			5.9			724,883			10.1
Shopping Centers		641,620			628,701			8.2			565,994			13.4
Commercial Development		821,660			803,494			9.0			659,350			24.6
Other Investment Property		328,120			330,992			(3.4	)		255,169			28.6
Total Investment Properties		3,896,848			3,880,585			1.7			3,556,751			9.6
1-4 Family Construction		1,414,675			1,372,556			12.2			1,093,713			29.3
1-4 Family Perm /Mini-Perm		1,075,143			1,087,763			(4.6	)		828,892			29.7
Residential Development		1,345,662			1,219,186			41.2			985,318			36.6
Total 1-4 Family Properties		3,835,480			3,679,505			16.8			2,907,923			31.9
Land Acquisition		978,813			913,488			28.4			886,014			10.5
Total Investment- Related Real Estate		8,711,141			8,473,578			11.1			7,350,688			18.5
Owner-Occupied		2,443,318			2,335,195			18.4			2,180,811			12.0
Other Property		1,302,379			1,202,920			32.8			1,347,030			(3.3	)
Total Commercial Real Estate		12,456,838			12,011,693			14.7			10,878,529			14.5
Commercial & Industrial		5,185,634			5,235,982			(3.8	)		4,946,453			4.8
Consumer		3,306,529			3,275,924			3.7			3,086,455			7.1
Unearned Income		(44,324	)		(43,765	)		5.1			(40,381	)		9.8
Total	$	20,904,677		$	20,479,834			8.2	%	$	18,871,056			10.8	%

(1) Percentage changes are annualized.

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Deposits

Total deposits at September 30, 2005 were $20.3 billion, a $1.7 billion increase from December 31, 2004. Total deposits excluding brokered time deposits increased by $1.48 billion, or 12.1% annualized from December 31, 2004.

Compared to a year ago, total deposits grew by 14.1%. Excluding brokered time deposits, total deposits grew by 12.2% over the prior year. This growth was led by increases in both large denomination certificates of deposit and money market accounts, with increases of 19.9% and 15.2%, respectively.

Total deposits, excluding brokered time deposits, increased $326.1 million, or 7.5% annualized, compared to June 30, 2005. The growth was driven by strong growth in money market accounts, certificates of deposit, and demand deposit accounts. These increases were partially offset by a $305.5 million decrease in NOW account balances, which was largely due to fluctuations in one large public fund deposit account.

On a sequential quarter basis, average deposits (excluding brokered certificates of deposit) grew at an annualized rate of 14.9%. The primary contributors to this growth were money market accounts and large denomination certificates of deposit, which grew at an annualized rate of 36.5% and 26.1%, respectively.

Capital Resources and Liquidity

Synovus has always placed great emphasis on maintaining a strong capital base and continues to exceed regulatory capital requirements. Additionally, based on internal calculations and previous regulatory exams, each of the subsidiary banks is currently in compliance with regulatory capital guidelines. Total risk-based capital was $3.632 billion at September 30, 2005, compared to $2.935 billion at December 31, 2004. The ratio of total risk-based capital to risk-weighted assets was 14.23% at September 30, 2005 compared to 12.44% at December 31, 2004. The increase at September 30, 2005 is primarily attributed to the impact of proceeds from our June 2005 issuance of subordinated debt as discussed below. The leverage ratio was 9.99% at September 30, 2005 compared to 9.78% at December 31, 2004. The equity-to-assets ratio was 10.62% at September 30, 2005 compared to 10.54% at year-end 2004.

Synovus’ management actively analyzes and manages the liquidity position in coordination with the appropriate committees at subsidiary banks. Management must ensure that adequate liquidity, at a reasonable cost, is available to meet the cash flow needs of depositors, borrowers, and creditors. Management constantly monitors and maintains appropriate levels of assets and liabilities so as to provide adequate funding sources to meet estimated customer withdrawals and future loan requests. Subsidiary banks have access to overnight federal funds lines with various financial institutions, which total approximately $3.2 billion and can be drawn upon for short-term liquidity needs. Banking liquidity and sources of funds have not changed significantly since December 31, 2004.

The Parent Company requires cash for various operating needs including dividends to shareholders, acquisitions, capital infusions into subsidiaries, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Parent Company is dividends from the subsidiary banks. The Parent Company enjoys an excellent reputation and credit standing in the capital markets and has the ability to raise substantial amounts of funds in the form of either short-term or long-term borrowings. The Parent Company utilized this

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capability in June 2005 by issuing $450 million in twelve year maturity subordinated debt. This debt bears a coupon interest rate of 5.125% and is rated “A-” by Standard and Poors Corp. and “A3” by Moody’s Investor Service. Proceeds from this issue were used to pay off $30 million in short-term borrowings. The remainder of the proceeds will be used to pay off $200 million of senior debt maturing in December 2005 and for general corporate purposes. As a short-term liquidity source, the Parent Company has access to a $25 million line of credit with an unaffiliated banking organization. The amount of this line was reduced from $80 million upon completion of our subordinated debt issue. Synovus had no borrowings outstanding on this line of credit at September 30, 2005.

The consolidated statements of cash flows detail cash flows from operating, investing, and financing activities. For the nine months ended September 30, 2005, operating activities provided net cash of $388.6 million, investing activities used $1.821 billion, and financing
activities provided $1.632 billion, resulting in an increase in cash and due from banks of $196.8 million.

Earning Assets, Sources of Funds, and Net Interest Income

Average total assets for the first nine months of 2005 were $26.0 billion, up 14.0% over the first nine months of 2004. Excluding the impact of acquisitions and divestitures in both years, average assets increased 13.2%. Average earning assets were up 13.9% in the first nine months of 2005 over the same period last year, and represented 88.4% of average total assets. When compared to the same period last year, average deposits increased $2.6 billion, average federal funds purchased and securities sold under repurchase agreements decreased $318.6 million, average long-term debt increased $371.4 million, and average shareholders’ equity increased $336.4 million. This growth provided the funding for $2.6 billion growth in average net loans and $216.3 million growth in average investments.

Net interest income for the nine months ended September 30, 2005 was $708.8 million, up $72.1 million, or 11.3%, over $636.6 million for the nine months ended September 30, 2004. For the three months ended September 30, 2005, net interest income was $244.8 million, up $21.4 million, or 9.6%, over $223.4 million for the same period a year ago.

During the third quarter of 2004, Synovus reassessed the standard loan origination costs and methodology used in conjunction with its accounting for loan origination fees and costs. As part of this assessment, Synovus changed its methodology and now recognizes these costs netted against origination fees over the life of the respective loans as an adjustment of yield (interest income). Synovus had previously recognized fee income over the life of its loans after recognizing a portion of fee income upon loan origination to offset origination costs. The new methodology was implemented on a prospective basis effective October 18, 2004. The change was not material to Synovus’ financial position, results of operations, or cash flows. The new methodology did, however, result in a decrease in general and administrative expenses of $36.2 million and $12.2 million for the nine and three months ended September 30, 2005 with a corresponding decrease (of approximately the same amount) in interest income and the net interest margin when compared to the respective periods in 2004.

The net interest margin after fees was 4.15% for the nine months ended September 30, 2005, down 10 basis points from the nine months ended September 30, 2004. This decrease was due to the aforementioned change in methodology for loan origination fees and costs. The net interest margin before fees for the nine months ended September 30, 2005 was 4.01%, up 11 basis points from 3.90% for the nine months ended September 30, 2004. The increase in the margin before

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fees was driven by an 95 basis point increase in loan yields before fees. A significant increase in variable rate loan yields, primarily due to a 179 basis point increase in the average prime rate, was the main contributor to the increased loan yields. Earning asset yields before fees increased by 86 basis points, which was partially offset by a 75 basis point increase in the effective cost of funds. The increase in the effective cost of funds was primarily due to an increase in the cost of variable rate deposits and wholesale funding, the most significant of which were a 123 basis point increase in money market rates and a 148 basis point increase in the rate on federal funds purchased and securities sold under repurchase agreements.

On a sequential quarter basis, net interest income increased by $7.8 million, while the net interest margin after fees increased by 3 basis points to 4.18%. The margin expansion was primarily due to increased yields on the variable rate portion of the loan portfolio, which accounts for approximately two-thirds of the total loan portfolio. The yield on earning assets increased by 30 basis points, which was due to a 33 basis point increase in loan yields including fees resulting from a 51 basis point increase in the average prime rate for the quarter. The effective cost of funds increased 27 basis points for the quarter. This increase was primarily driven by higher rates on money market accounts and an upward repricing of large denomination certificates of deposit.

The tax-equivalent adjustment that is required in making yields on tax-exempt loans and investment securities comparable to taxable loans and investment securities is shown in the following table. The taxable-equivalent adjustment is based on a 35% Federal income tax rate.

	Nine Months Ended				Three Months Ended
	September 30,				September 30,
(In thousands)	2005		2004		2005		2004
Interest income	$	1,076,893		846,704		386,412		299,747
Taxable-equivalent adjustment		4,873		5,257		1,664		1,710
Interest income, Taxable-equivalent		1,081,766		851,961		388,076		301,457
Interest expense		368,141		210,061		141,587		76,313
Net interest income, Taxable-equivalent	$	713,625		641,900		246,489		225,144

Non-Interest Income

Total non-interest income during the first nine months of 2005 increased $284.1 million, or 25.1%, over the same period a year ago. For the three months ended September 30, 2005, total non-interest income increased $121.1 million, or 31.5% over the same period in 2004. For the first nine months of 2005, excluding reimbursable items, the increase in non-interest income was 23.8%, over the first nine months of 2004. For the third quarter of 2005, excluding reimbursable items, the increase was 29.8% over the same period in 2004.

Financial Services:

Total non-interest income for the Financial Services segment for the nine months ended September 30, 2005 was $242.4 million, down 1.7% from the first nine months of 2004. For the third quarter of 2005, total non-interest income was $87.2 million, up 13.7% as compared to the same period a year ago. The results for the first nine months of 2004 include a $15.8 million

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pre-tax gain from the sale of a banking location completed in the first quarter of 2004. Excluding the gain on sale of the banking location, as well as the impact of acquisitions and divestitures, non-interest income for the first nine months of 2005 increased by 5.1% as compared to the first nine months of 2004.

Service charges on deposit accounts, the single largest component of Financial Services fee income, were $28.7 million for the three months ended September 30, 2005, and $84.1 million for the first nine months of 2005, down 8.3% and 7.8%, respectively, from the same periods a year ago. Service charges on deposit accounts consist of non-sufficient funds (NSF) fees (which represent 62% of the total), account analysis fees, and all other service charges. The decline in account analysis fees was the primary driver for the decrease in service charges on deposits.

For the quarter, NSF fees were $18.5 million, down 3.8% from a year ago. For the nine months ended September 30, 2005, NSF fees were $352.7 million, down 2.1% from the same period last year. The recent trend in NSF fees has been improving as we experienced an increase in NSF fees of $923,850, or 5.2%, during the third quarter compared to the second quarter of 2005. This follows a second quarter increase of 6.4% over the first quarter of 2005. Account analysis fees were $3.7 million for the quarter, down 23.1% and $11.7 million for the nine months ended September 30, 2005, down 26.7% from last year. The decrease is mainly due to higher earnings credits on commercial demand deposit accounts (DDA). All other service charges on deposit accounts, which consist primarily of monthly fees on consumer DDA and saving accounts, were $6.5 million for the quarter, and $19.7 million for the first nine months of 2005, down 10.3% and 7.8%, respectively, from the same periods in 2004. The decrease is largely due to continued growth in the number of checking accounts with no monthly service charge.

Credit card fees increased 25.9% to $26.9 million for the nine months ended September 30, 2005 as compared to the first nine months of 2004. For the third quarter of 2005, credit card fees increased 19.3% to $9.6 million over the third quarter of 2004. Financial management services revenues increased 8.3% to $55.1 million and 13.9% to $16.5 million for the nine and three months ended September 30, 2005, respectively. Growth in financial management services revenues was led by increases in fiduciary and asset management fees as well as brokerage and investment banking revenue. These increases were partially offset by a decline in insurance revenues. Mortgage banking income was up 10.6% to $21.6 million for the first nine months of 2005 and was up 20.6% to $6.9 million for the third quarter as compared to the same periods in 2004. Secondary marketing gains were the primary driver for the increase in mortgage banking income, but were offset in part by a decline in origination fees which resulted from lower mortgage production. On a sequential quarter basis, credit card fees grew by 2.9% and mortgage banking income grew by 11.4%, while financial management services revenues grew 3.2%.

Transaction Processing Services:

TSYS’ revenues are derived from providing electronic payment processing and related services to financial and non-financial institutions, generally under long-term processing contracts. TSYS’ services are provided primarily through its cardholder systems, TS2 and TS1, to financial institutions and other organizations throughout the United States, Mexico, Canada, Honduras, Puerto Rico, and Europe. TSYS currently offers merchant services to financial institutions and other organizations through its wholly owned subsidiary, Vital, and its majority owned subsidiary, GP Network Corporation (GP Net).

Due to the somewhat seasonal nature of the credit card industry, TSYS’ revenues and results of operations have generally increased in the fourth quarter of each year because of increased

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transaction and authorization volumes during the traditional holiday shopping season. Furthermore, growth or declines in card portfolios of existing clients, the conversion of cardholder accounts of new clients to the TSYS processing platforms, and the loss of cardholder accounts impact the results of operations from period to period. Another factor which may affect TSYS’ revenues and results of operations from time to time, is the sale by a client of its business, its card portfolio or a segment of its accounts to a party which processes cardholder accounts internally or uses another third-party processor. Consolidation in either the financial services or retail industries, a change in the economic environment in the retail sector, or a change in the mix of payments between cash and cards could favorably or unfavorably impact TSYS’ financial position, results of operations and cash flows in the future.

Processing contracts with large clients, representing a significant portion of TSYS’ total revenues, generally provide for discounts on certain services based on the size and activity of clients’ portfolios. Therefore, electronic payment processing revenues and the related margins are influenced by the client mix relative to the size of client card portfolios, as well as the number and activity of individual cardholder accounts processed for each client. Consolidation among financial institutions has resulted in an increasingly concentrated client base, which results in a changing client mix toward larger clients and increasing pressure on TSYS’ operating profit margins.

Accounts on File

TSYS provides services to its clients including processing consumer, retail, commercial, government services, stored-value and debit cards. Average accounts on file for the nine months ended September 30, 2005 were 389.4 million, an increase of 34.6% over the average of 289.3 million for the same period in 2004. Total accounts on file at September 30, 2005 were 430.1 million, a 36.4% increase compared to the 315.3 million accounts on file at September 30, 2004. The change in accounts on file from September 2004 to September 2005 included the deconversion and purging of 9.0 million accounts, the addition of approximately 44.5 million accounts attributable to the internal growth of existing clients, and approximately 79.3 million accounts from new clients.

Major Customer

A significant amount of TSYS’ revenues is derived from long-term contracts with large clients, including its major customer, Bank of America. TSYS derives revenues from providing various processing and other services to this customer, including processing of consumer and commercial accounts, as well as revenues for reimbursable items. With the consolidation of Vital beginning March 1, 2005, TSYS’ 2005 revenues also include revenues derived from providing merchant processing services to Bank of America. Refer to Note 7 in the notes to the unaudited consolidated financial statements for more information on Vital.

At the end of the second quarter, Bank of America announced its planned acquisition of MBNA. Bank of America is currently evaluating the various consumer credit card processing alternatives available to it and MBNA. TSYS and Bank of America are in discussions to determine TSYS’ future role in providing consumer credit card processing to Bank of America. TSYS cannot predict the outcome of its discussions with Bank of America or of the evaluation process Bank of America is conducting. TSYS’ processing agreement with Bank of America provides that Bank of America may terminate the agreement for consumer credit card services upon the payment to TSYS of a termination fee. The loss of Bank of America, or any significant client, could have a material adverse effect on TSYS’ and Synovus’ financial position, results of operations and cash flows.

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For the three months ended September 30, 2005, Bank of America accounted for approximately 21.7%, or $91.5 million, of TSYS’ total revenues. This amount consists of processing revenues for consumer, commercial and merchant services as well as reimbursable items. Of this $91.5 million, approximately $32.0 million, or 34.9%, was derived from Bank of America for reimbursable items. For the three months ended September 30, 2005, Bank of America accounted for approximately $59.5 million, or 17.4% of TSYS’, and 8.9% of Synovus’ revenues before reimbursable items, respectively. For the three months ended September 30, 2004, Bank of America accounted for 18.1%, or $55.3 million, of TSYS’ total revenues.

For the nine months ended September 30, 2005, Bank of America accounted for approximately 22.1%, or $261.5 million, of TSYS’ total revenues. Of this $261.5 million, approximately $91.8 million, or 35.1%, was derived from Bank of America for reimbursable items. For the nine months ended September 30, 2005, Bank of America accounted for approximately $169.8 million, or 17.8% of TSYS’, and 8.9% of Synovus’ revenues before reimbursable items, respectively. For the nine months ended September 30, 2004, Bank of America accounted for 18.5%, or $162.5 million, of TSYS’ total revenues.

The majority of the increase in revenues derived from Bank of America for 2005, as compared to 2004, is the result of including Vital’s revenues for merchant services from Bank of America.

On January 25, 2005, TSYS announced that it had extended its agreement with Bank of America to process its consumer and commercial credit card accounts for an additional five years through 2014. Additionally, during the third quarter of 2005, Vital announced the renewal of its agreement to provide merchant processing services to Bank of America.

Electronic Payment Processing Services

Revenues from electronic payment processing services increased $25.3 million, or 12.8%, for the three months ended September 30, 2005, and increased $85.9 million, or 15.4%, for the nine months ended September 30, 2005 compared to the same periods in 2004. Electronic payment processing revenues are generated primarily from charges based on the number of accounts on file, transactions and authorizations processed, statements mailed, cards embossed and mailed, and other processing services for cardholder accounts on file. Cardholder accounts on file include active and inactive consumer credit, retail, debit, stored value, government services and commercial card accounts. Due to the number of cardholder accounts processed by TSYS and the expanding use of cards as well as increases in the scope of services offered to clients, revenues relating to electronic payment processing services have continued to grow.

On March 3, 2003, TSYS announced that Bank One had selected TSYS to upgrade its credit card processing. Under the long-term software licensing and services agreement, TSYS is to provide electronic payment processing services to Bank One’s credit card accounts for at least two years starting in 2004 (excluding statement and card production services). Following the provision of processing services, TSYS will license a modified version of its TS2 consumer and commercial software to Bank One through a perpetual license with a six-year payment term. This agreement has been superseded by the agreement with J.P. Morgan Chase and Co. (Chase) described below. TSYS used the percentage-of-completion accounting method for its agreement with Bank One and recognized revenues in proportion to costs incurred. TSYS’ revenues from Bank One were less than 10% of TSYS’ total revenues for the three and nine months ended September 30, 2005.

On July 1, 2004, Bank One and Chase merged under the name Chase. On October 13, 2004, TSYS finalized a definitive agreement with Chase to service the combined card portfolios of Chase Card Services and to upgrade its card-processing technology. The agreement extends a

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relationship that started with TSYS and the former Bank One Corp. in March 2003. Pursuant to the revised agreement, the first phase of the project was executed successfully and Bank One’s remaining accounts were converted to a modified version of the TS2 processing platform during the fourth quarter of 2004, according to the project’s original schedule. Chase converted its consumer accounts to the modified version of TS2 in July 2005. TSYS expects to maintain the card-processing functions of Chase Card Services for at least two years. Chase Card Services then has the option to either extend the processing agreement for up to five additional two-year periods or migrate the portfolio in-house, under a perpetual license of a modified version of TS2 with a six-year payment term.

As a result of the new agreement with Chase, TSYS discontinued its use of the percentage-of- completion accounting method for the original agreement with Bank One. The revised agreement is accounted for in accordance with Financial Accounting Standards Board’s (FASB’s) Emerging Issues Task Force Issue No. 00-21 (EITF 00-21), “Accounting for Revenue Arrangements with Multiple Deliverables”, and other applicable guidance.

On March 31, 2004, Bank of America acquired FleetBoston. In connection with the extended agreement with Bank of America, TSYS converted the FleetBoston card portfolio to TSYS’ system in March 2005.

In July 2003, Sears and Citigroup announced an agreement for the sale by Sears to Citigroup of the Sears credit card and financial services businesses. For the three and nine months ended September 30, 2005, TSYS’ revenues from the TSYS/Sears agreement represented less than 10% of TSYS’ consolidated revenues. The TSYS/Sears agreement granted to Sears the one-time right to market test TSYS’ pricing and functionality after May 1, 2004, which right was exercised by Citigroup. In June 2005, TSYS announced that Citigroup will move the Sears consumer MasterCard and private-label accounts from TSYS in a deconversion that is expected to occur in the second quarter of 2006. TSYS expects to continue supporting commercial card accounts for Citibank, as well as Citibank’s California Commerce consumer accounts, according to the terms of the existing agreements for those portfolios. TSYS’ management believes that the loss of revenues from the Sears portfolio for the months of 2006 subsequent to the expected deconversion, combined with decreased expenses from the reduction in hardware and software and the redeployment of personnel, should not have a material adverse effect on TSYS’ financial position, results of operations, or cash flows for the year ending December 31, 2006.

On August 2, 2004, TSYS completed the acquisition of Clarity Payment Solutions, Inc. (Clarity) for $53.0 million in cash and had direct acquisition costs in the amount of $515,000. Clarity was renamed TSYS Prepaid, Inc. (TSYS Prepaid). For the three and nine months ended September 30, 2005, electronic payment processing services revenues include $6.4 million and $12.9 million, respectively, of TSYS Prepaid’s revenues.

Merchant Services

Merchant services revenues are derived from electronic transaction processing services primarily to large financial institutions and other merchant acquirers. Revenues from merchant services include processing all payment forms including credit, debit, electronic benefit transfer and check truncation for merchants of all sizes across a wide array of retail market segments. Merchant services’ products and services include: authorization and capture of electronic transactions; clearing and settlement of electronic transactions; information reporting services related to electronic transactions; merchant billing services; and point of sale terminal sales and service.

Revenues from merchant services consist of revenues generated by TSYS’ wholly owned subsidiary, Vital, and its majority owned subsidiary, GP Net. Merchant services revenue for the

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three and nine months ended September 30, 2005 was $74.2 million and $170.0 million, compared to $6.5 million and $19.8 million for the same periods last year. The increase is attributable to the consolidation of Vital’s results effective March 1, 2005. Prior to the acquisition of Vital, TSYS’ revenues included fees TSYS charged to Vital for back-end processing support.

Other Services

Revenues from TSYS’ other services consist primarily of revenues generated by TSYS’ wholly owned subsidiaries not included in electronic payment processing services or merchant services, as well as TSYS’ business process management services. Revenues from other services increased $0.5 million, or 1.1%, for the three months and $11.7 million, or 9.3%, for the nine months ended September 30, 2005, compared to the same periods in 2004. Other services revenues increased primarily due to increased loyalty services and from new customers added since last year for business process management.

Equity in Income from Joint Ventures

TSYS’ share of income from its equity in joint ventures was $991,000 and $6.9 million for the three months ended September 30, 2005 and 2004, respectively. TSYS’ share of income from its equity in joint ventures was $5.3 million and $19.2 million for the nine months ended September 30, 2005 and 2004, respectively. The decrease for the quarter and the first nine months is primarily attributable to the purchase of the remaining 50% of Vital on March 1, 2005 and the consolidation of Vital’s operating results into TSYS’ statement of income effective March 1, 2005. These amounts are reflected as a component of other operating income in the consolidated statements of income.

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Non-Interest Expense

For the nine months ended September 30, 2005, total non-interest expense increased $240.0 million, or 20.2%, over the same period in 2004. Total non-interest expense for the third quarter of 2005 increased $99.7 million, or 24.6%, over the third quarter of 2004. Excluding reimbursable items, the increase was 18.1% and 21.9% for the nine months and three months ended September 30, 2005, respectively, over the same periods in the prior year. Management analyzes non-interest expense in two separate components: Financial Services and Transaction Processing Services.

The following table summarizes non-interest expense for the nine months ended September 30, 2005 and 2004.

	Nine months ended				Nine months ended
	September 30, 2005(*)				September 30, 2004(*)
			Transaction				Transaction
	Financial		Processing		Financial		Processing
(In thousands)	Services		Services		Services		Services
Salaries and other personnel expense	$	274,552		338,078		281,913		274,883
Net occupancy and equipment expense		65,972		208,280		60,851		183,799
Other operating expenses		136,216		193,830		124,329		105,345
Reimbursable items		—		228,653		—		173,140
Total non-interest expense	$	476,740		968,841		467,093		737,167

The following table summarizes non-interest expense for the three months ended September 30, 2005 and 2004.

	Three months ended				Three months ended
	September 30, 2005(*)				September 30, 2004(*)
			Transaction				Transaction
	Financial		Processing		Financial		Processing
(In thousands)	Services		Services		Services		Services
Salaries and other personnel expense	$	93,085		120,859		93,631		101,220
Net occupancy and equipment expense		22,713		76,063		21,156		58,920
Other operating expenses		45,356		72,892		42,764		36,294
Reimbursable items		—		79,870		—		56,560
Total non-interest expense	$	161,154		349,684		157,551		252,994

(*) The added totals are greater than the consolidated totals due to inter-segment balances which are eliminated in consolidation.

Financial Services:

Financial Services’ non-interest expense increased by 2.1% for the first nine months of 2005, and by 2.3% for the third quarter of 2005 compared to the same periods in the previous year. This moderate increase reflects the impact of the change in methodology for loan origination costs, which was implemented on a prospective basis on October 18, 2004 as described above in the section titled “Earning Assets, Sources of Funds, and Net Interest Income”. The increase for the

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first nine months of 2005, excluding the impact of the change in loan origination costs methodology and the impact of acquisitions and divestitures, was 9.0%. Key drivers of the increase in non-interest expense include increased employment expenses associated with annual compensation adjustments, higher levels of incentive compensation, and higher employee insurance costs. Additionally, investment in additional branch locations, incremental expenses associated with our retail strategy, amortization of our S-Link platform as well as increased professional fees contributed to the increase.

Total headcount for the Financial Services segment at September 30, 2005 was 6,527 compared to 6,450 at December 31, 2004 and 6,432 at September 30, 2004.

Transaction Processing Services:

Total non-interest expense increased 38.2% for the three months and 31.4% for the nine months ended September 30, 2005, compared to the same periods in 2004. Excluding reimbursable items, total non-interest expense increased 37.4% for the three months, and 31.2% for the nine months ended September 30, 2005, compared to the same periods in 2004. The increases are due to changes in each of the expense categories as described below.

Salaries and other personnel expenses increased $19.6 million, or 19.4%, for the three months ended September 30, 2005 compared to the same period in 2004. For the nine months ended September 30, 2005, salaries and other personnel expenses increased $63.2 million, or 23.0%, compared to the same period in 2004. Of the $19.6 million and $63.2 million increases for the third quarter and first nine months of 2005, respectively, $16.9 million and $42.5 million are the result of employee related expenses of Vital and TSYS Prepaid. In addition, the change in employment expenses is associated with normal salary increases and related benefits, offset in part by higher levels of employment costs capitalized as software development and contract acquisition costs. The growth in employment expenses included an increase in the accrual for performance-based incentive benefits.

At September 30, 2005, TSYS had 6,522 employees compared to 5,631 at September 30, 2004. During the first nine months of 2005, TSYS added 789 employees associated with the acquisition of Vital. At September 30, 2005, TSYS had 94 employees associated with the TSYS Prepaid acquisition.

Net occupancy and equipment expense increased $17.1 million, or 29.1%, and $24.5 million, or 13.3%, for the three and nine months, respectively, ended September 30, 2005 over the same periods in 2004. The comparison of 2005 periods to 2004 is impacted by the acquisitions of TSYS Prepaid and Vital in August 2004 and March 2005, respectively, by expenses associated with the new data centre in Europe, which became operational in August 2004, and by impairment losses on developed software. Occupancy and equipment related expenses for the three and nine months ended September 30, 2005 included $8.0 million and $16.7 million, respectively, for Vital and TSYS Prepaid combined. TSYS recognized impairment losses on developed software of $482,000 in the third quarter of 2005, $3.1 million in the first quarter of 2005 and $10.1 million in the second quarter of 2004. Excluding the impact of acquisitions and impairment losses, net occupancy and equipment expenses increased by 14.7% and 8.2% for the three and nine months ended September 30, 2005 as compared to the same periods in 2004.

Other operating expenses for the three months ended September 30, 2005 increased $36.6 million, or 100.8% as compared to the same period in 2004. Of the $36.6 million increases, $32.4 million is the result of other operating related expenses of Vital and TSYS Prepaid

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combined. Other operating expenses for the first nine months of 2005 increased by $88.5 million, or 84.0%, over the first nine months of 2004. Of the $88.5 million, $77.4 million is the result of other operating expenses of Vital and TSYS Prepaid combined.

Other operating expenses include, among other things, amortization of conversion costs, costs associated with delivering merchant services, professional advisory fees and court costs associated with TSYS’ debt collection business.

Other operating expenses also include charges for processing errors, contractual commitments and bad debt expense. Management’s evaluation of the adequacy of its transaction processing reserves and allowance for doubtful accounts is based on a formal analysis which assesses the probability of losses related to contractual contingencies, processing errors and uncollectible accounts. Increases and decreases in transaction processing provisions and charges for bad debt expense are reflected in other operating expenses.

Income Tax Expense

For the nine months ended September 30, 2005, income tax expense was $226.5 million compared to $185.7 million for the same period in 2004. For the third quarter of 2005, income tax expense was $81.9 million compared to $64.3 million for the same period in 2004. The effective tax rate for the three and nine months ended September 30, 2005 was 37.9% and 37.4%, compared to 37.1% and 36.8% for the same periods in 2004.

Legal Proceedings

TSYS received notification from the United States Attorneys’ Office for the Northern District of California that the United States Department of Justice was investigating whether TSYS and/or one of its large credit card processing clients violated the False Claims Act, 31 U.S.C. §§3729-33, in connection with mailings made on behalf of the client from July 1997 through November 2001. The subject matter of the investigation related to the U.S. Postal Service’s Move Update Requirements. In general, the Postal Service’s Move Update Requirements are designed to reduce the volume of mail that is returned to sender as undeliverable as addressed. TSYS produced documents and information in response to a subpoena that it received from the Office of the Inspector General of the United States Postal Service and otherwise cooperated with the Department of Justice during the investigation. The involved parties agreed to a settlement of the matter without any party admitting liability. The matter was settled during the third quarter of 2005 for amounts that were not material to TSYS’ financial condition, results of operations, or cash flows.

Recently Issued Accounting Standards

In December 2003, the AICPA’s Accounting Standards Executive Committee (AcSEC) issued Statement of Position No. 03-3 (SOP No. 03-3), “Accounting for Certain Loans or Debt Securities Acquired in a Transfer.” SOP No. 03-3 provides guidance on accounting for loans and associated loss reserves acquired in a transfer or business combination. Certain loans may be required to be transferred net of reserves where there are differences between contractual and expected cash flows which are attributable, at least in part, to credit quality. SOP No. 03-3 is effective for loans acquired after December 31, 2004. Synovus has not determined the impact that SOP No. 03-3 will have on its financial statements and believes that such determination will not be meaningful until Synovus enters into a business combination with a financial institution and/or acquires a future loan portfolio.

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On November 13, 2003, the Emerging Issues Task Force (EITF) issued EITF Issue No. 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” This guidance was to be applied in other-than-temporary impairment evaluations performed in reporting periods beginning after June 15, 2004. Disclosures were effective in annual financial statements for fiscal years ended after December 15, 2003, for investments accounted for under Financial Accounting Standards Board (FASB) Statements No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and No. 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations.” The disclosure requirements for all other investments were effective in annual financial statements for fiscal years ended after June 15, 2004. In September 2004, the FASB issued FASB Staff Position (FSP) EITF Issue 03-1-1 which sets aside the measurement and recognition guidance set forth in paragraphs 10-20 of EITF Issue No. 03-1. The FASB has indicated that new measurement and recognition guidance will not be issued, however, a new FSP, which will clarify existing guidance is expected. Synovus expects that adoption of the effective provisions of EITF Issue No. 03-1 will not have a material impact on its financial statements.

In December 2004, the FASB issued Statement No. 123R (SFAS No. 123R), “Share-Based Payment.” SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award.

SFAS No. 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. Compensation cost will be recognized on or after the required effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated under SFAS No. 123 for either recognition or pro forma disclosures.

On April 14, 2005, the SEC amended Rule 4-01(a) of Regulation S-X that amended the compliance date for SFAS No. 123R. The SEC’s new rule allows companies to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period that begins after June 15, 2005. Synovus has determined that it will now adopt SFAS No. 123R effective January 1, 2006.

Synovus estimates that the adoption of SFAS No. 123R will result in an additional expense in 2006 of approximately $12 million, net of tax, relating to the expensing of unvested stock options estimated to be outstanding at January 1, 2006. Additionally, Synovus will incur an additional after-tax expense of approximately $1.4 million in 2005 and $1.2 million in 2006, in conjunction with new restricted stock awards that were granted during the first quarter of 2005. While stock options have been the primary method of equity-based compensation historically, going forward, restricted stock awards are expected to be Synovus’ primary method of equity-based compensation.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154 (SFAS No. 154), “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 replaces Accounting Principles Board Opinion No. 20, “Accounting Changes,” and Statement of Financial Accounting Standards No. 3, “Reporting

36

Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle by requiring retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Synovus does not expect the impact of SFAS No. 154 on its financial position, results of operations or cash flows to be material.

Forward-Looking Statements

Certain statements contained in this filing which are not statements of historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act (the “Act”). These forward-looking statements include, among others, management’s expectation that loans will grow at a low double-digit rate for the full year; management’s expectation that the net charge-off ratio for the year will be approximately 0.30%; management’s belief with respect to the existence of sufficient collateral for past due loans, the impact of the resolution of certain loan delinquencies on non-performing assets and the inclusion of all material loans in which doubt exists as to collectibility in non-performing assets; any decision that might arise out of the evaluation process Bank of America is conducting; TSYS’ expectation that it will maintain the card processing functions of Chase Card Services for at least two years; the expected deconversion by TSYS of the Sears consumer MasterCard and private-label accounts in the second quarter of 2006; TSYS’ expectation that it will continue supporting commercial card accounts for Citibank, as well as Citibank’s California Commerce consumer accounts; TSYS’ belief with respect to the financial impact of the loss of the Sears accounts for 2006; Synovus’ expected growth in earnings per share for 2005; the expected financial impact of expensing stock options and the assumptions underlying such statements, including, with respect to Synovus’ expected increase in earnings per share for 2005, short-term interest rates will increase modestly; the credit environment will remain favorable with a net charge-off ratio of approximately 0.30%; and TSYS’ net income growth will be in the 25% — 28% range. In addition, certain statements in future filings by Synovus with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of Synovus which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure, efficiency ratios and other financial terms; (ii) statements of plans and objectives of Synovus or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “estimates,” “projects,” “plans,” “may,” “could,” “should,” “would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying these statements.

These 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 the forward-looking statements. A number of factors could cause actual results to differ 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: (i) competitive pressures arising from aggressive competition from other financial service providers; (ii) factors that affect the delinquency rate of Synovus’ loans and the rate at which Synovus’ loans are charged off; (iii) 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

37

such markets; (iv) TSYS’ inability to achieve its net income goals for 2005; (v) the strength of the U.S. economy in general and the strength of the local economies in which operations are conducted may be different than expected; (vi) the effects of and changes in trade, monetary and fiscal policies, and laws, including interest rate policies of the Federal Reserve Board; (vii) inflation, interest rate, market and monetary fluctuations; (viii) the timely development of and acceptance of new products and services and perceived overall value of these products and services by users; (ix) changes in consumer spending, borrowing, and saving habits; (x) technological changes are more difficult or expensive than anticipated; (xi) acquisitions are more difficult to integrate than anticipated; (xii) the ability to increase market share and control expenses; (xiii) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which Synovus and its subsidiaries must comply; (xiv) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, the Financial Accounting Standards Board, or other authoritative bodies; (xv) changes in Synovus’ organization, compensation, and benefit plans; (xvi) the costs and effects of litigation or adverse facts and developments related thereto; (xvii) a deterioration in credit quality or a reduced demand for credit; (xviii) Synovus’ inability to successfully manage any impact from slowing economic conditions or consumer spending; (xix) TSYS does not maintain the card-processing functions of Chase for at least two years as expected; (xx) the merger of TSYS clients with entities that are not TSYS clients or the sale of portfolios by TSYS clients to entities that are not TSYS clients; (xxi) successfully managing the potential both for patent protection and patent liability in the context of rapidly developing legal framework for expansive software patent protection; (xxii) no material breach of the security of any of our systems; (xxiii) the impact on Synovus’ business, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts; and (xxiv) the success of Synovus at managing the risks involved in the foregoing.

These forward-looking statements speak only as of the date on which such statements are made, and 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 unanticipated events.

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ITEM 3 — QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

During the first nine months of 2005, Synovus has maintained a moderately asset sensitive interest rate risk position. This position has been maintained in anticipation of a continued rising interest rate environment. This asset sensitivity has decreased modestly from December 31, 2004. The decrease is due to several factors including a moderate increase in the rate sensitivity of our funding base. Deposit growth has been led by more rate sensitive money market accounts, which has increased the rate sensitivity of the core deposit base. Asset sensitivity has also been modestly impacted by the addition of fixed rate assets, primarily investment securities.

Synovus measures its sensitivity to changes in market interest rates through the use of a simulation model. Synovus uses this simulation model to determine a baseline net interest income forecast and the sensitivity of this forecast to changes in interest rates. These simulations include all of Synovus’ earning assets, liabilities, and derivative instruments. Forecasted balance sheet changes, primarily reflecting loan and deposit growth forecasts prepared by each banking affiliate, are included in the periods modeled.

Synovus models its baseline net interest income forecast assuming an unchanged or flat interest rate environment. Synovus has modeled the impact of a gradual increase and decrease in short-term rates of 100 basis points to determine the sensitivity of net interest income for the next twelve months. In the gradual 100 basis point decrease scenario, net interest income is expected to decrease by approximately 1.8%, as compared to an unchanged interest rate environment. In the gradual 100 basis point increase scenario, net interest income is expected to increase by approximately 1.6%, as compared to an unchanged interest rate environment. While these estimates are reflective of the general interest rate sensitivity of Synovus, local market conditions and their impact on loan and deposit pricing would be expected to have a significant impact on the realized level of net interest income. Actual realized balance sheet growth and mix would also impact the realized level of net interest income.

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ITEM 4 — CONTROLS AND PROCEDURES

We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report as required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended. This evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer and chief financial officer. Based on this evaluation, these officers have concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to Synovus (including its consolidated subsidiaries) required to be included in our periodic SEC filings. No change in Synovus’ internal control over financial reporting occurred during the period covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     On April 14, 2003, the Synovus board of directors approved a $200 million share repurchase plan. During the term of the plan, which expired on April 14, 2005, 5.5 million shares were purchased at a total cost of $112.7 million. There were no share repurchases under this plan in 2005.

The following table sets forth information regarding Synovus’ purchases of its common stock on a monthly basis during the three months ended September 30, 2005:

							Maximum
					Total Number of		Number of Shares
					Shares Purchased		That May Yet Be
					as Part of		Purchased Under
	Total Number of		Average Price Paid		Announced Plans		the Plans or
Period	Shares Purchased		per Share		or Programs		Programs
July 2005		—	$	—		—		—	(1)
August 2005		—		—		—		—	(1)
September 2005		—		—		—		—	(1)
Total		—	$	—		—		—	(1)

(1) Amount is now zero as the aforementioned share repurchase plan expired on April 14, 2005.

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ITEM 6 — EXHIBITS

(a) Exhibits	Description
(31.1)	Certification of Chief Executive Officer
(31.2)	Certification of Chief Financial Officer
(32)	Certification of Periodic Report

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SYNOVUS FINANCIAL CORP.
Date: November 4, 2005		BY:	/s/ Thomas J. Prescott
			Thomas J. Prescott
			Executive Vice President and
			Chief Financial Officer

43

INDEX TO EXHIBITS

Exhibit Number	Description
31.1	Certification of Chief Executive Officer
31.2	Certification of Chief Financial Officer
32	Certification of Periodic Report

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EX-31.1

                                                                    EXHIBIT 31.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Richard E. Anthony, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Synovus Financial
      Corp.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, 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;

      (c)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and


      (d)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant's board of directors (or persons performing the equivalent
      functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: November 4, 2005                            BY: /s/ Richard E. Anthony
                                                      ------------------------
                                                      Richard E. Anthony
                                                      Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Thomas J. Prescott, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Synovus Financial
      Corp.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, 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;

      (c)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and


      (d)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant's board of directors (or persons performing the equivalent
      functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: November 4, 2005                   BY: /s/ Thomas J. Prescott
                                             ----------------------
                                             Thomas J. Prescott
                                             Chief Financial Officer

EX-32

                                                                      EXHIBIT 32

                        CERTIFICATION OF PERIODIC REPORT

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350, Richard E. Anthony, the Chief Executive Officer of Synovus Financial Corp.
(the "Company"), and Thomas J. Prescott, the Chief Financial Officer of the
Company, hereby certify that, to the best of their knowledge:

(1) The Company's Quarterly Report on Form 10-Q for the period ended September
30, 2005 (the "Report") fully complies with the requirements of section 13(a) or
section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

Dated: November 4, 2005                           BY:  /s/ Richard E. Anthony
       ----------------                                ----------------------
                                                       Richard E. Anthony
                                                       Chief Executive Officer

Dated: November 4, 2005                           BY:  /s/ Thomas J. Prescott
       ----------------                                ----------------------
                                                       Thomas J. Prescott
                                                       Chief Financial Officer

This certification "accompanies" the Form 10-Q to which it relates, is not
deemed filed with the SEC and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (whether made before or after the
date of the Form 10-Q, irrespective of any general incorporation contained in
such filing.)