Share-based Compensation

General Description of Share-based Plans

Synovus has a long-term incentive plan under which the Compensation Committee of the Board of Directors has the authority to grant share-based awards to Synovus employees. At December 31, 2012, Synovus had a total of 23,855,801 shares of its authorized but unissued Common Stock reserved for future grants under the 2007 Omnibus Plan. The Plan permits grants of share-based compensation including stock options, non-vested shares, and restricted share units. The grants generally include vesting periods ranging from two to five years and contractual terms of ten years. Stock options are granted at exercise prices which equal the fair market value of a share of common stock on the grant-date. Non-vested shares and restricted share units are awarded at no cost to the recipient upon their grant. Synovus has historically issued new shares to satisfy share option exercises and share unit conversions. Dividend equivalents are paid on outstanding restricted 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 2012, Synovus awarded an aggregate amount of 3,330,293 restricted share units to key employees and non-employee directors. The majority of the awards contain a service-based vesting period of three years with some awards vesting at the end of three years and some awards vesting one-third of the total grant amount on each anniversary of the grant-date over the three year period. The weighted average grant-date fair value of the awarded restricted share units in 2012 was $2.07 per share. During 2012, Synovus also granted 4,586,666 stock options with a weighted average exercise price of $2.05 and a service-based vesting period of three years to key employees throughout the Synovus organization. The stock options granted during 2012 vest over a three-year period, with one-third of the total grant amount vesting on each anniversary of the grant-date. During 2011, Synovus granted 3,815,942 restricted share units to key employees throughout the Synovus organization. The majority of the awards contain a service-based vesting period of two years. The weighted average grant-date fair value of the awarded restricted share units in 2011 was $2.65 per share. During 2010, Synovus granted 3,442,586 stock options with an exercise price of $2.80 to key employees across the Synovus organization. These stock options have a three year vesting schedule with one-half of the total grant vesting after two years of service and the remaining one-half vesting after three years of service. During 2010, Synovus also granted 844,205 restricted share units to senior management. In addition to a service vesting requirement, the vesting of the restricted share units made to senior management during 2012, 2011, and 2010 is contingent upon the repayment of its Series A Preferred Stock and achievement of certain profitability requirements. Due to multiple vesting requirements of certain awards, the date Synovus expects all vesting criteria to be met is reviewed quarterly to ensure expense is amortized over the appropriate time period.

Share-based Compensation Expense

Synovus’ share-based compensation costs associated with employee grants are recorded as a component of salaries and other personnel expense in the consolidated statements of operations. Share-based compensation costs associated with grants made to non-employee directors of Synovus are recorded as a component of other operating expenses. Share-based compensation expense for service-based awards is recognized net of estimated forfeitures for plan participants on a straight-line basis over the vesting period. Total share-based compensation expense was $9.4 million, $6.0 million, and $7.2 million for 2012, 2011, and 2010, respectively. The total income tax benefit recognized in the consolidated statements of operations for share-based compensation arrangements was approximately $3.6 million for 2012. No income tax benefit was recognized in the consolidated statements of operations for share-based compensation arrangements for 2011 and $128 thousand was recognized for 2010. No share-based compensation costs have been capitalized for the years ended December 31, 2012, 2011, and 2010.

As of December 31, 2012, unrecognized compensation cost related to the unvested portion of share-based compensation arrangements involving shares of Synovus stock was approximately $9.0 million.

Stock Options

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



	2012		2011	2010
Risk-free interest rate	1.23	%	NA	2.8
Expected stock price volatility	65.0		NA	63.0
Dividend yield	2.0		NA	1.4
Expected life of options	6.0 years		NA	6.25 years

The expected volatility for awards granted in 2012 and 2010 was based on Synovus’ historical stock price volatility. The expected life for stock options granted during 2012 and 2010 was calculated using the “simplified” method as prescribed by SAB No. 110. The weighted average grant-date fair value of stock options granted in 2012 and 2010 was $1.03 and $1.50, respectively.

A summary of stock option activity and changes during the years ended December 31, 2012, 2011, and 2010 is presented below.



Stock Options
	2012				2011				2010
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at beginning of year	17,886,318		$	10.63	21,723,381		$	10.81	28,167,011		$	10.94
Options granted	4,586,666		2.05		—		—		3,442,586		2.80
Options exercised	—		—		—		—		(430	)	2.21
Options forfeited	(174,842	)	2.38		(471,386	)	10.72		(150,003	)	2.80
Options expired	(3,008,437	)	12.36		(3,365,677	)	11.75		(9,735,783	)	8.48
Options outstanding at end of year	19,289,705		$	8.40	17,886,318		$	10.63	21,723,381		$	10.81
Options exercisable at end of year	13,296,595		$	10.94	14,365,773		$	12.06	16,879,440		$	12.14

The aggregate intrinsic value for outstanding stock options at December 31, 2012 was $1.8 million and the aggregate intrinsic value for options exercisable at December 31, 2012 was $31 thousand. As of December 31, 2012, the weighted average remaining contractual life was 4.69 years for options outstanding and 2.95 years for options exercisable.

The total grant date fair value of stock options vested during 2012, 2011, and 2010 was $2.9 million, $1.5 million, and $2.3 million, respectively. At December 31, 2012, the total unrecognized compensation cost related to non-vested stock options was approximately $3.3 million. This cost is expected to be recognized over a weighted-average remaining period of 1.54 years.

Non-vested Shares and Restricted Share Units

Compensation expense is measured based on the grant date fair value of non-vested shares and restricted share units. The fair value of non-vested shares and restricted share units is equal to the market price of Synovus’ Common Stock on the grant date. The weighted-average grant-date fair value of restricted share units granted during 2012 was $2.07. The weighted-average grant-date fair value of restricted share units granted during 2011 was $2.65 and the weighted-average grant date fair value of restricted share units granted during 2010 was $2.80. The total fair value of non-vested shares and restricted share units vested during 2012, 2011, and 2010 was $3.5 million, $356 thousand, and $5.1 million, respectively.

A summary of non-vested shares outstanding (excluding the performance-vesting shares described below) and changes during the years ended December 31, 2012, 2011, and 2010 is presented below.



Non-vested Shares	Shares		Weighted-Average Grant-date Fair Value
Outstanding at January 1, 2010	188,233		$	26.75
Granted	—		—
Vested	(163,924	)	28.28
Forfeited	(7,349	)	25.81
Outstanding at December 31, 2010	16,960		12.41
Granted	—		—
Vested	(16,000	)	12.40
Forfeited	(960	)	12.50
Outstanding at December 31, 2011	—		—

A summary of restricted share units outstanding and changes during the years ended December 31, 2012, 2011, and 2010 is presented below.



Restricted Share Units	Share Units		Weighted-Average Grant-date Fair Value
Outstanding at January 1, 2010	74,815		$	12.01
Granted	844,205		2.80
Dividend equivalents granted	10,082		2.60
Vested	(45,406	)	12.45
Forfeited	(3,295	)	12.89
Outstanding at December 31, 2010	880,401		3.05
Granted	3,815,942		2.65
Dividend equivalents granted	86,494		1.64
Vested	(25,534	)	6.15
Forfeited	(229,328	)	2.91
Outstanding at December 31, 2011	4,527,975		2.67
Granted	3,330,293		2.07
Dividend equivalents granted	112,616		2.19
Vested	(1,314,063	)	2.70
Forfeited	(213,842	)	2.49
Outstanding at December 31, 2012	6,442,979		$	2.35

As of December 31, 2012, total unrecognized compensation cost related to the foregoing restricted share units was approximately $5.7 million. This cost is expected to be recognized over a weighted-average remaining period of 1.43 years.

Synovus authorized a total grant of 63,386 shares of non-vested stock to a key executive with a performance-vesting schedule (performance-vesting shares) in 2005 that fully vested during 2010. The total fair value of performance-vesting shares vested during 2010 was $269 thousand.

During 2012, Synovus also granted 770,573 salary stock units to senior management, which vested and were expensed immediately upon grant. Compensation expense is determined based on the number of salary stock units granted and the market price of Synovus' Common Stock at the grant date. The total fair value of salary stock units granted during 2012 was $1.9 million. The salary stock units are classified as liabilities and were settled in cash on February 15, 2013.

During 2012, Synovus recognized a tax deficiency of $715 thousand associated with vesting of restricted share units and expired stock options to additional paid-in capital within shareholders' equity. During 2011 and 2010, Synovus recorded a tax deficiency of $677 thousand and $3.0 million, respectively, associated with vesting of non-vested shares and restricted share units and expired stock options to the deferred tax asset valuation allowance. Synovus' future stock price will determine if a tax benefit is realized on outstanding stock options. If a tax benefit is not realized on outstanding stock options then the deferred tax asset associated with the outstanding stock options will be reduced with a corresponding tax deficiency recorded to additional paid-in capital.

The following table provides aggregate information regarding grants under all Synovus equity compensation plans through December 31, 2012.



Plan Category⁽¹⁾	(a) Number of securities to be issued upon vesting of restricted share units	(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	6,442,979	19,103,267	$	8.41	23,855,801	⁽²⁾
Non-shareholder approved equity compensation plans	—	—	—		—
Total	6,442,979	19,103,267	$	8.41	23,855,801

⁽¹⁾ Does not include information for equity compensation plans assumed by Synovus in mergers. A total of 186,438 shares of Common Stock were issuable upon exercise of options granted under plans assumed in mergers and outstanding at December 31, 2012. The weighted average exercise price of all options granted under plans assumed in mergers and outstanding at December 31, 2012 was $7.46. Synovus cannot grant additional awards under these assumed plans.

⁽²⁾ Includes 23,855,801 shares available for future grants as share awards under the 2007 Omnibus Plan.