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. On April 25, 2013, the Synovus shareholders approved the 2013 Omnibus Plan, replacing the 2007 Omnibus Plan. The 2013 Omnibus Plan authorizes 60,000,000 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) count as 2 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, 2013, Synovus had a total of 57,126,291 shares 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, 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. 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 2013, Synovus granted 1,488,620 restricted share units to key employees and non-employee directors. Synovus also granted 283,584 market restricted share units to senior management during 2013. The restricted share units and the market restricted share units contain a service-based vesting period of three years with most awards vesting pro-rata over three years and some awards vesting at the end of three years. The weighted average grant-date fair value of the awarded restricted share units and market restricted share units was $2.80 and $3.49, respectively. During 2013, Synovus also granted 6,003,250 stock options with a weighted average exercise price of $2.52 and service-based vesting pro-rata over three years. During 2012, Synovus awarded an aggregate amount of 3,330,293 restricted share units. 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 pro-rata over three years. 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 service-based vesting pro-rata over three years. During 2011, Synovus granted 3,815,942 restricted share units with a weighted average grant-date fair value of $2.65 and a service-based vesting period of two years.

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 income. 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 $7.5 million, $9.4 million, and $6.0 million for 2013, 2012, and 2011, respectively. The total income tax benefit recognized in the consolidated statements of income for share-based compensation arrangements was approximately $2.9 million for 2013 and $3.6 million for 2012. No income tax benefit was recognized in the consolidated statements of income for share-based compensation arrangements for 2011. No share-based compensation costs have been capitalized for the years ended December 31, 2013, 2012, and 2011.

As of December 31, 2013, unrecognized compensation cost related to the unvested portion of share-based compensation arrangements involving shares of Synovus stock was approximately $12.4 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.



	2013		2012		2011
Risk-free interest rate	1.11	%	1.23	%	NA
Expected stock price volatility	50.0		65.0		NA
Dividend yield	1.6		2.0		NA
Expected life of options	6.0 years		6.0 years		NA

The expected volatility for awards granted in 2013 was based on Synovus' historical and implied volatility. The expected volatility for awards granted in 2012 was based on Synovus’ historical stock price volatility. The expected life for stock options granted during 2013 and 2012 was calculated using the “simplified” method as prescribed by SAB No. 110. The weighted average grant-date fair value of stock options granted in 2013 and 2012 was $1.03.

A summary of stock option activity and changes during the years ended December 31, 2013, 2012, and 2011 is presented below.



Stock Options
	2013				2012				2011
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at beginning of year	19,289,705		$	8.40	17,886,318		$	10.63	21,723,381		$	10.81
Options granted	6,003,250		2.52		4,586,666		2.05		—		—
Options exercised	(455,767	)	2.47		—		—		—		—
Options forfeited	(364,075	)	2.35		(174,842	)	2.38		(471,386	)	10.72
Options expired	(1,932,345	)	8.98		(3,008,437	)	12.36		(3,365,677	)	11.75
Options outstanding at end of year	22,540,768		$	7.00	19,289,705		$	8.40	17,886,318		$	10.63
Options exercisable at end of year	13,994,362		$	9.82	13,296,595		$	10.94	14,365,773		$	12.06

The aggregate intrinsic value for outstanding stock options at December 31, 2013 was $14.9 million and the aggregate intrinsic value for options exercisable at December 31, 2013 was $4.4 million. As of December 31, 2013, the weighted average remaining contractual life was 5.37 years for options outstanding and 3.26 years for options exercisable.

The intrinsic value of stock options exercised during the year ended December 31, 2013 was $367 thousand. The total grant date fair value of stock options vested during 2013, 2012, and 2011 was $4.3 million, $2.9 million, and $1.5 million, respectively. At December 31, 2013, total unrecognized compensation cost related to non-vested stock options was approximately $5.6 million. This cost is expected to be recognized over a weighted-average remaining period of 1.43 years.

Restricted Share Units and Market Restricted Share Units

Compensation expense is measured based on the grant date fair value of restricted share units and market restricted share units. The fair value of restricted share units is equal to the market price of Common Stock on the grant date. The fair value of market restricted share units granted during 2013 was estimated on the date of grant using a Monte Carlo simulation model with the following assumptions: risk-free interest rate of 0.63%, expected stock price volatility of 40%, dividend yield of 1.19%, and a simulation period of 3 years. The 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 stochastic model of stock price behavior. The weighted-average grant-date fair value of restricted share units granted during 2013 was $2.80 and the grant date fair value of the market restricted share units granted during 2013 was $3.49. The weighted-average grant-date fair value of restricted share units granted during 2012 was $2.07 and the weighted-average grant date fair value of restricted share units granted during 2011 was $2.65. The total fair value of restricted share units vested during 2013, 2012, and 2011 was $9.8 million, $3.5 million, and $356 thousand, respectively. The total fair value of restricted share units vested during 2013 of $9.8 million included $5.0 million from restricted share units that vested upon repayment of Synovus' Series A Preferred Stock on July 26, 2013.

Synovus granted 283,584 market restricted share units to senior management during the year ended December 31, 2013 with a grant date fair value of $3.49. The number of market restricted share units that will ultimately vest ranges from 75% to 125% of target based on Synovus' total shareholder return. At December 31, 2013, total unrecognized compensation cost related to market restricted share units was approximately $990 thousand with a weighted average remaining period of 1.50 years.

A summary of restricted share units outstanding and changes during the years ended December 31, 2013, 2012, and 2011 is presented below (excluding market restricted share units described above).



Restricted Share Units	Share Units		Weighted-Average Grant-date Fair Value
Outstanding at January 1, 2011	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
Granted	1,488,620		2.80
Dividend equivalents granted	74,820		3.00
Vested	(3,816,081	)	2.56
Forfeited	(118,599	)	2.07
Outstanding at December 31, 2013	4,071,739		$	2.34

As of December 31, 2013, total unrecognized compensation cost related to the foregoing restricted share units was approximately $5.8 million. This cost is expected to be recognized over a weighted-average remaining period of 1.54 years.

During 2013 and 2012, Synovus also granted 490,102 and 770,573, respectively, salary stock units to senior management, which vested and were expensed immediately upon grant. Compensation expense is 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 is recorded for changes in Common Stock market price. The total fair value of salary stock units granted during 2013 and 2012 was $1.8 million and $1.9 million, respectively. Additionally, Synovus recorded compensation expense of $200 thousand during 2013 related to salary stock units granted during 2012 that were settled on February 15, 2013. The salary stock units granted during 2013 are classified as liabilities and were settled in cash on January 15, 2014.

Cash received from option exercises of Common Stock for the year ended December 31, 2013 was $1.0 million. Cash paid for taxes due on vesting of employee restricted share units where restricted share units were withhold to cover taxes was $3.6 million for the year ended December 31, 2013.

During 2013, Synovus recognized a net tax benefit of $317 thousand associated with vesting of restricted share units and expired stock options to additional paid-in capital within shareholders' equity. 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, Synovus recorded a tax deficiency of $677 thousand 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, 2013.



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	4,071,739	22,437,168	$	6.96	57,126,291	⁽²⁾
Non-shareholder approved equity compensation plans	—	—	—		—
Total	4,071,739	22,437,168	$	6.96	57,126,291

⁽¹⁾ Does not include information for equity compensation plans assumed by Synovus in mergers. A total of 103,600 shares of Common Stock were issuable upon exercise of options granted under plans assumed in mergers and outstanding at December 31, 2013. The weighted average exercise price of all options granted under plans assumed in mergers and outstanding at December 31, 2013 was $8.53. Synovus cannot grant additional awards under these assumed plans.

⁽²⁾ Includes 57,126,291 shares available for future grants as share awards under the 2013 Omnibus Plan.