Note 23 - Share-based Compensation

General Description of Share-based Plans

Synovus has a long-term incentive plan under which the Compensation Committee of the Board of Directors has the authority to grant share-based awards to Synovus employees. The 2013 Omnibus Plan authorizes 8,571,429 common share equivalents available for grant, where grants of options count as one share equivalent and grants of full value awards (e.g., restricted share units, market restricted share units, and performance share units) count as two share equivalents. Any restricted share units that are forfeited and options that expire unexercised will again become available for issuance under the Plan. At December 31, 2016, Synovus had a total of 6,432,798 common share equivalents of its authorized but unissued common stock reserved for future grants under the 2013 Omnibus Plan. The Plan permits grants of share-based compensation including stock options, restricted share units, market restricted share units, and performance share units. The grants generally include vesting periods ranging from three to five years and contractual terms of ten years. As further discussed below, market restricted share units and performance share units are granted at a defined target level and are compared annually to required market and performance metrics to determine actual units vested and compensation expense. Synovus has historically issued new shares to satisfy share option exercises and share unit conversions. Dividend equivalents are paid on outstanding restricted share units, market restricted share units, and performance share units in the form of additional restricted share units that vest over the same vesting period or the vesting period left on the original restricted share unit grant.

During 2016, Synovus awarded 350,458 restricted share units to employees and non-employee directors and granted 93,913 market restricted share units and 83,529 performance share units to senior management. The weighted average grant date fair value of the awarded restricted share units, market restricted share units, and performance share units was $26.43, $26.93, and $25.95, per share, respectively. During 2015, Synovus awarded 321,874 restricted share units to employees and non-employee directors and granted 82,152 market restricted share units and 82,152 performance share units to senior management. The weighted average grant date fair value of the awarded restricted share units, market restricted share units, and performance share units was $28.09, $29.39, and $28.06, per share, respectively, for 2015. During 2014, Synovus awarded 407,374 restricted share units to employees and non-employee directors and granted 90,117 market restricted share units and 67,157 performance share units to senior management. The weighted average grant date fair value of the awarded restricted share units, market restricted share units, and performance share units was $23.69, $24.30, and $23.47, per share, respectively, for 2014. The restricted share units and the market restricted share units granted during 2016, 2015, and 2014 contain a service-based vesting period of three years with most awards vesting pro-rata over three years.

Share-based Compensation Expense

Total share-based compensation expense was $13.6 million, $12.6 million, and $10.2 million for 2016, 2015, and 2014, respectively. The total income tax benefit recognized in the consolidated statements of income for share-based compensation arrangements was approximately $5.0 million, $4.6 million, and $3.9 million for 2016, 2015, and 2014, respectively. No share-based compensation costs have been capitalized for the years ended December 31, 2016, 2015, and 2014. As of December 31, 2016, unrecognized compensation cost related to the unvested portion of share-based compensation arrangements involving shares of Synovus stock was approximately $15.0 million.

Stock Options

There were no stock option grants in 2016, 2015, or 2014. A summary of stock option activity and changes during the years ended December 31, 2016, 2015, and 2014 is presented below.



Stock Options
	2016				2015				2014
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at beginning of year	1,741,975		$	37.88	2,550,046		$	45.11	3,220,110		$	49.00
Option rounding due to reverse stock split on May 16, 2014	—		—		—		—		841		49.00
Options exercised	(297,225	)	17.35		(338,808	)	16.72		(178,176	)	17.14
Options forfeited	(1,597	)	17.64		(12,825	)	17.17		(30,146	)	15.79
Options expired/canceled	(469,792	)	92.62		(456,438	)	94.56		(462,583	)	84.88
Options outstanding at end of year	973,361		$	17.76	1,741,975		$	37.88	2,550,046		$	45.11
Options exercisable at end of year	973,361		$	17.76	1,504,783		$	41.08	1,870,516		$	55.40

The aggregate intrinsic value for outstanding and exercisable stock options at December 31, 2016 was $23.2 million. As of December 31, 2016, the weighted average remaining contractual life was 5.21 years for options outstanding and exercisable.

The intrinsic value of stock options exercised during the years ended December 31, 2016, 2015, and 2014 was $4.7 million, $4.4 million, and $1.3 million, respectively. Cash received from option exercises of common stock for the years ended December 31, 2016, 2015, and 2014 was $5.2 million, $5.6 million, and $3.0 million, respectively. The total grant date fair value of stock options vested during 2016, 2015, and 2014 was $7.4 million, $6.5 million, and $4.9 million, respectively. During 2016, 317,524 stock options with a weighted average exercise price of $93.62 and contractual expiration dates in 2017 and 2018 were canceled without replacement awards. The cancellation resulted in a deferred tax asset write-off totaling $1.7 million, which was recorded as a reduction of additional paid-in capital. Due to the implementation of ASU 2016-09 effective January 1, 2017, if the canceled stock options had remained outstanding through their original contractual expiration dates, the corresponding deferred tax asset write-off totaling $1.7 million would have been recorded as a component of income tax expense during the years ending December 31, 2017 and 2018.

Restricted Share Units, Market Restricted Share Units, and Performance Share Units

Compensation expense is measured based on the grant date fair value of restricted share units, market restricted share units, and performance share units. The fair value of restricted share units and performance share units is equal to the market price of common stock on the grant date. The fair value of market restricted share units granted was estimated on the date of grant using a Monte Carlo simulation model with the following weighted average assumptions:



	2016		2015		2014
Risk-free interest rate	0.81	%	1.05	%	0.70	%
Expected stock price volatility	25.7		26.4		39.2
Dividend yield	1.8		1.4		1.2
Simulation period	3.0 years		3.0 years		3.0 years

The stock price expected volatility was based on Synovus' historical and implied volatility. The Monte Carlo model estimates fair value based on 100,000 simulations of future share price using a theoretical model of stock price behavior.

A summary of restricted share units outstanding and changes during the years ended December 31, 2016, 2015, and 2014 is presented below (excluding market restricted and performance share units).



Restricted Share Units
	Share Units		Weighted-Average grant date Fair Value
Outstanding at December 31, 2013	581,677		$	16.38
Share unit rounding due to reverse stock split on May 16, 2014	258		16.38
Granted	407,374		23.69
Dividend equivalents granted	8,805		24.09
Vested	(64,725	)	15.45
Forfeited	(50,566	)	17.92
Outstanding at December 31, 2014	882,823		19.81
Granted	321,874		28.09
Dividend equivalents granted	9,810		28.09
Vested	(428,121	)	17.48
Forfeited	(23,619	)	24.60
Outstanding at December 31, 2015	762,767		24.57
Granted	350,458		26.43
Dividend equivalents granted	11,105		26.43
Vested	(406,496	)	23.10
Forfeited	(12,067	)	23.96
Outstanding at December 31, 2016	705,767		$	26.38

The total fair value of restricted share units vested during 2016, 2015, and 2014 was $11.4 million, $12.3 million, and $1.6 million, respectively. As of December 31, 2016, total unrecognized compensation cost related to the foregoing restricted share units was approximately $9.7 million. This cost is expected to be recognized over a weighted average remaining period of 1.42 years.

Synovus granted market restricted share units to senior management during the years ended December 31, 2016, 2015, and 2014. The market restricted share units have a three-year service-based vesting component as well as a total shareholder return multiplier. The number of market restricted share units that will ultimately vest ranges from 75% to 125% of a defined target based on Synovus' total shareholder return (TSR). The total fair value of market restricted share units vested during 2016, 2015, and 2014 was $2.6 million, $1.4 million, and $398 thousand, respectively. At December 31, 2016, total unrecognized compensation cost related to market restricted share units was approximately $2.8 million with a weighted average remaining period of 1.48 years. A summary of market restricted share units outstanding and changes during the years ended December 31, 2016, 2015, and 2014 is presented below.



Market Restricted Share Units
	Share Units		Weighted-Average grant date Fair Value
Outstanding at December 31, 2013	40,512		$	24.43
Share unit rounding due to reverse stock split on May 16, 2014	4		24.43
Granted	90,117		24.30
Dividend equivalents granted	1,231		24.09
Quantity change by TSR factor	1,518		24.43
Vested	(15,196	)	24.43
Outstanding at December 31, 2014	118,186		24.33
Granted	82,152		29.39
Dividend equivalents granted	2,221		29.05
Quantity change by TSR factor	4,838		24.33
Vested	(49,149	)	24.34
Outstanding at December 31, 2015	158,248		27.02
Granted	93,913		26.93
Dividend equivalents granted	3,095		26.93
Quantity change by TSR factor	9,970		26.93
Vested	(82,817	)	26.40
Outstanding at December 31, 2016	182,409		$	27.25

Synovus granted performance share units to senior management during the years ended December 31, 2016, 2015, and 2014. These units vest upon meeting certain service and performance conditions. Return on average assets (ROAA) performance is evaluated each year over a three-year performance period, with share distribution determined at the end of the three years. The number of performance share units that will ultimately vest ranges from 0% to 150% of a defined target based on Synovus' three-year weighted average ROAA (as defined). At December 31, 2016, total unrecognized compensation cost related to performance share units was approximately $2.4 million with a weighted average remaining period of 1.41 years. A summary of performance share units outstanding and changes during the years ended December 31, 2016, 2015, and 2014 is presented below.



Performance Share Units
	Share Units	Weighted-Average grant date Fair Value
Outstanding at December 31, 2013	—	$	—
Granted	67,157	23.47
Dividend equivalents granted	518	24.09
Outstanding at December 31, 2014	67,675	23.47
Granted	82,152	28.06
Dividend equivalents granted	1,740	28.06
Outstanding at December 31, 2015	151,567	26.01
Granted	83,529	25.95
Dividend equivalents granted	3,384	25.95
Outstanding at December 31, 2016	238,480	$	25.99

Other Information

During 2014, Synovus granted 44,527 salary stock units to senior management, which vested and were expensed immediately upon grant. Compensation expense was initially determined based on the number of salary stock units granted and the market price of common stock at the grant date. Subsequent to the grant date, compensation expense was recorded for changes in common stock market price. The total fair value of salary stock units granted during 2014 was $1.2 million. The salary stock units granted during 2014 were classified as liabilities and were settled in cash on January 15, 2015.

Cash paid for taxes due on vesting of employee restricted share units and market restricted share units where restricted share units were withheld to cover taxes was $5.0 million, $5.1 million, $692 thousand for the years ended December 31, 2016, 2015, and 2014, respectively.

During 2016, Synovus recognized a share-based compensation net tax deficiency of $790 thousand associated primarily with expired and canceled stock options. The net deficiency was recorded as a reduction of additional paid-in capital within shareholders' equity. During 2015, Synovus recognized a net tax benefit of $1.7 million associated with vesting of restricted share units, exercises of stock options, and expired stock options. The net tax benefit was recorded as an increase of additional paid-in capital. During 2014, Synovus recognized a net tax deficiency of $3.2 million associated primarily with expired stock options. The deficiency was recorded as a reduction of additional paid-in capital.

The following table provides aggregate information regarding grants under all Synovus equity compensation plans through December 31, 2016.



Plan Category	(a) Number of Securities to be Issued Upon Vesting of Restricted Share Units, Market Restricted Share Units, and Performance Share Units⁽¹⁾	(b) Number of Securities to be Issued Upon Exercise of Outstanding Options	(c) Weighted-Average Exercise Price of Outstanding Options in Column (b)		(d) Number of Shares Remaining Available for Issuance Excluding Shares Reflected in Columns (a) and (b)
Shareholder approved equity compensation plans for shares of Synovus stock	1,126,656	973,361	$	17.76	6,432,798

⁽¹⁾Market restricted and performance share units included at defined target levels. Actual shares issued upon vesting may differ based on actual TSR and ROAA over the measurement period.