Note 14 - Fair Value Accounting

Synovus carries various assets and liabilities at fair value based on the fair value accounting guidance under ASC 820, Fair Value Measurements, and ASC 825, Financial Instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Synovus has implemented controls and processes for the determination of the fair value of financial instruments. The ultimate responsibility for the determination of fair value rests with Synovus. Synovus has established a process that has been designed to ensure there is an independent review and validation of fair values by a function independent of those entering into the transaction. This includes specific controls to ensure consistent pricing policies and procedures that incorporate verification for both market and derivative transactions. For all financial instruments where fair values are determined by reference to externally quoted prices or observable pricing inputs to models, independent price determination or validation is utilized. Where the market for a financial instrument is not active, fair value is determined using a valuation technique or pricing model. These valuation techniques and models involve a degree of estimation, the extent of which depends on each instrument's complexity and the availability of market-based data.

The most frequently applied pricing model and valuation technique utilized by Synovus is the discounted cash flow model. Discounted cash flows determine the value by estimating the expected future cash flows from assets or liabilities discounted to their present value. Synovus may also use a relative value model to determine the fair value of a financial instrument based on the market prices of similar assets or liabilities or an option pricing model such as binomial pricing that includes probability-based techniques. Assumptions and inputs used in valuation techniques and models include benchmark interest rates, credit spreads and other inputs used in estimating discount rates, bond and equity prices, price volatilities and correlations, prepayment rates, probability of default, and loss severity upon default.

Synovus refines and modifies its valuation techniques as markets develop and as pricing for individual financial instruments become more or less readily available. While Synovus believes its valuation techniques are appropriate and consistent with other market participants, the use of different methodologies or assumptions could result in different estimates of fair value at the balance sheet date. In order to determine the fair value, where appropriate, management applies valuation adjustments to the pricing information. These adjustments reflect management's assessment of factors that market participants would consider in setting a price, to the extent that these factors have not already been included in the pricing information. Furthermore, on an ongoing basis, management assesses the appropriateness of any model used. To the extent that the price provided by internal models does not represent the fair value of the financial instrument, management makes adjustments to the model valuation to calibrate it to other available pricing sources. Where unobservable inputs are used, management may determine a range of possible valuations based upon differing stress scenarios to determine the sensitivity associated with the valuation. As a final step, management considers the need for further adjustments to the modeled price to reflect how market participants would price the financial instrument.

Fair Value Hierarchy

Synovus determines the fair value of its financial instruments based on the fair value hierarchy established under ASC 820-10, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the financial instrument's fair value measurement in its entirety. There are three levels of inputs that may be used to measure fair value. The three levels of inputs of the valuation hierarchy are defined below:



Level 1	Quoted prices (unadjusted) in active markets for identical assets and liabilities for the instrument or security to be valued. Level 1 assets include marketable equity securities, Treasury securities, and mutual funds.
Level 2	Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or model-based valuation techniques for which all significant assumptions are derived principally from or corroborated by observable market data. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined by using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. U.S. Government sponsored agency securities, mortgage-backed securities issued by GSEs and agencies, obligations of states and municipalities, collateralized mortgage obligations issued by GSEs, and mortgage loans held for sale are generally included in this category. Certain private equity investments that invest in publicly traded companies are also considered Level 2 assets.
Level 3	Unobservable inputs that are supported by little, if any, market activity for the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow models and similar techniques, and may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. These methods of valuation may result in a significant portion of the fair value being derived from unobservable assumptions that reflect Synovus' own estimates for assumptions that market participants would use in pricing the asset or liability. This category primarily consists of collateral-dependent impaired loans, other real estate, certain equity investments, and private equity investments.

Fair Value Option

Synovus has elected the fair value option for mortgage loans held for sale primarily to ease the operational burdens required to maintain hedge accounting for these loans. Synovus is still able to achieve effective economic hedges on mortgage loans held for sale without the time and expense needed to manage a hedge accounting program.

Valuation Methodology by Product

Following is a description of the valuation methodologies used for the major categories of financial assets and liabilities measured at fair value.

Trading Account Assets and Investment Securities Available for Sale

The fair values of trading securities and investment securities available for sale are primarily based on actively traded markets where prices are based on either quoted market prices or observed transactions. Management employs independent third-party pricing services to provide fair value estimates for Synovus' investment securities available for sale and trading securities. Fair values for fixed income investment securities are typically determined based upon quoted market prices, broker/dealer quotations for identical or similar securities, and/or inputs that are observable in the market, either directly or indirectly, for substantially similar securities. Level 1 securities are typically exchange quoted prices and include financial instruments such as U.S. Treasury securities, marketable equity securities, and mutual fund investments. Level 2 securities are typically matrix priced by the third-party pricing service to calculate the fair value. Such fair value measurements consider observable data such as relevant broker/dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and the respective terms and conditions for debt instruments. The types of securities classified as Level 2 within the valuation hierarchy primarily consist of collateralized mortgage obligations, mortgage-backed securities, debt securities of GSEs and agencies, corporate debt, and state and municipal securities.

When there is limited activity or less transparency around inputs to valuation, Synovus develops valuations based on assumptions that are not readily observable in the marketplace; these securities are classified as Level 3 within the valuation hierarchy. The majority of the balance of Level 3 investment securities available for sale consists primarily of trust preferred securities issued by financial institutions. Synovus also carries non-marketable common equity securities within this category. Synovus accounts for the non-marketable common equity securities in accordance with ASC 325-20, Investments-Other-Cost Method Investments, which requires these investments to be carried at cost. To determine the fair value of the trust preferred securities, management uses a measurement technique to reflect one that utilizes credit spreads and/or credit indices available from a third-party pricing service. In addition, for each trust preferred security, management projects non-credit adjusted cash flows, and discounts those cash flows to net present value incorporating a relevant credit spread in the discount rate. Other inputs to calculating fair value include potential discounts for lack of marketability.

Management uses various validation procedures to confirm the prices received from pricing services and quotations received from dealers are reasonable. Such validation procedures include reference to relevant broker/dealer quotes or other market quotes and a review of valuations and trade activity of comparable securities. Consideration is given to the nature of the quotes (e.g., indicative or firm) and the relationship of recently evidenced market activity to the prices provided by the third-party pricing service. Further, management also employs the services of an additional independent pricing firm as a means to verify and confirm the fair values of the primary independent pricing firms.

Mortgage Loans Held for Sale

Synovus elected to apply the fair value option for mortgage loans originated with the intent to sell to investors. When loans are not committed to an investor at a set price, fair value is derived from a hypothetical bulk sale model used to estimate the exit price of the loans in a loan sale. The bid pricing convention is used for loan pricing for similar assets. The valuation model is based upon forward settlements of a pool of loans of similar coupon, maturity, product, and credit attributes. The inputs to the model are continuously updated with available market and historical data. As the loans are sold in the secondary market and primarily used as collateral for securitizations, the valuation model represents the highest and best use of the loans in Synovus’ principal market. Mortgage loans held for sale are classified within Level 2 of the valuation hierarchy.

Private Equity Investments

Private equity investments consist primarily of equity method investments in venture capital funds, which are classified as Level 3 within the valuation hierarchy. The valuation of these investments requires significant judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such investments. Based on these factors, the ultimate realizable value of these investments could differ significantly from the value reflected in the accompanying audited consolidated financial statements. For ownerships in publicly traded companies held in the funds, valuation is based on the closing market price at the balance sheet date, with such investments being classified as Level 1 or 2 within the valuation hierarchy. The valuation of marketable securities that have trading restrictions is discounted until the securities can be freely traded. The private equity investments in which Synovus holds a limited partnership interest consist of funds that invest in privately held companies. For privately held companies in the funds, the general partner estimates the fair value of the company in accordance with GAAP, as clarified by ASC 820, and guidance specific to investment companies. The estimated fair value of the company is the estimated fair value as an exit price the fund would receive if it were to sell the company in the marketplace. The fair value of the fund's underlying investments is estimated through the use of valuation models such as option pricing or a discounted cash flow model. Valuation factors, such as a company's operational performance against budget or milestones, last price paid by investors, with consideration given on whether financing is provided by insiders or unrelated new investors, public market comparables, liquidity of the market, industry and economic trends, and changes in management or key personnel, are used in the determination of fair value.

Also, Synovus holds an interest in an investment fund that invests in publicly traded financial services companies. Although the fund holds investments in publicly traded entities, the fair value of this investment is classified as Level 2 in the valuation hierarchy because there is no actively traded market for the fund itself, and the value of the investment is based on the aggregate fair value of the publicly traded companies that are held in the fund for investment.

Mutual Funds Held in Rabbi Trusts

Mutual funds held in rabbi trusts primarily invest in equity and fixed income securities. Shares of mutual funds are valued based on quoted market prices, and are therefore classified within Level 1 of the fair value hierarchy.

Salary Stock Units

Salary stock units represent fully vested stock awards that have been granted to certain key employees of Synovus. The salary stock units are classified as liabilities and are settled in cash, as determined by the average closing common stock price on the 20 trading days preceding the date of settlement and the number of salary stock units being settled. Accordingly, salary stock units are classified as Level 1 within the fair value hierarchy.

Derivative Assets and Liabilities

As part of its overall interest rate risk management activities, Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risk. With the exception of one derivative contract discussed herein, Synovus' derivative financial instruments are all Level 2 financial instruments. The majority of derivatives entered into by Synovus are executed over-the-counter and consist of interest rate swaps. The fair values of these derivative instruments are determined based on an internally developed model that uses readily observable market data, as quoted market prices are not available for these instruments. The valuation models and inputs depend on the type of derivative and the nature of the underlying instrument, and include interest rates, prices and indices to generate continuous yield or pricing curves, volatility factors, and customer credit related adjustments. The principal techniques used to model the value of these instruments are an income approach, discounted cash flows, and Black-Scholes or binomial pricing models. The sale of TBA mortgage-backed securities for current month delivery or in the future and the purchase of option contracts of similar duration are derivatives utilized by Synovus, and are valued by obtaining prices directly from dealers in the form of quotes for identical securities or options using a bid pricing convention with a spread between bid and offer quotations. Interest rate swaps, floors, caps and collars, and TBA mortgage-backed securities are classified as Level 2 within the valuation hierarchy.

Synovus enters into interest rate lock commitments related to expected funding of residential mortgage loans at specified times in the future. Interest rate lock commitments that relate to the origination of mortgage loans that will be held-for-sale are considered derivative instruments under applicable accounting guidance. As such, Synovus records its interest rate lock commitments and forward loan sales commitments at fair value, determined as the amount that would be required to settle each of these derivative financial instruments at the balance sheet date. In the normal course of business, Synovus enters into contractual interest rate lock commitments to extend credit at a fixed interest rate and with fixed expiration dates. The commitments become effective when the borrowers "lock-in" a specified interest rate within the established time frames. Market risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing interest rate lock commitments to borrowers, Synovus enters into best efforts forward sales contracts with third-party investors. The forward sales contracts lock in a price for the sale of loans similar to the specific interest rate lock commitments. Both the interest rate lock commitments to the borrowers and the forward sales contracts to the investors are derivatives, and accordingly, are marked to fair value through earnings. In estimating the fair value of an interest rate lock commitment, Synovus assigns a probability to the interest rate lock commitment based on an expectation that it will be exercised and the loan will be funded. The fair value of the interest rate lock commitment is derived from the fair value of related mortgage loans, which is based on observable market data and includes the expected net future cash flows related to servicing of the loans. The fair value of the interest rate lock commitment is also derived from inputs that include guarantee fees negotiated with the agencies and private investors, buy-up and buy-down values provided by the agencies and private investors, and interest rate spreads for the difference between retail and wholesale mortgage rates. Management also applies fall-out ratio assumptions to the interest rate lock commitments in anticipation of those mortgage loans which will not close. The fall-out ratio assumptions are based on Synovus' historical experience, conversion ratios for similar loan commitments, and market conditions. While fall-out tendencies are not exact predictions of which loans will or will not close, historical performance review of loan-level data provides the basis for determining the appropriate hedge ratios. In addition, on a periodic basis, Synovus performs analyses of actual rate lock fall-out experience to determine the sensitivity of the mortgage pipeline to interest rate changes from the date of the commitment through loan origination. The expected fall-out ratios (or conversely the "pull-through" percentages) are applied to the determined fair value of the mortgage pipeline. Changes to the fair value of interest rate lock commitments are recognized based on interest rate changes, changes in the probability that the commitment will be exercised, and the passage of time. The fair value of the forward sales contracts to investors considers the market price movement of the same type of security between the trade date and the balance sheet date. These instruments are classified as Level 2 within the valuation hierarchy.

In November 2009, Synovus sold certain Visa Class B shares to another Visa USA member financial institution. The sales price was based on the Visa stock conversion ratio in effect at the time for conversion of Visa Class B shares to Visa Class A unrestricted shares at a future date. In conjunction with the sale, Synovus entered into a derivative contract with the purchaser (the Visa derivative), which provides for settlements between the parties based upon a change in the ratio for conversion of Visa Class B shares to Visa Class A shares. The fair value of the Visa derivative is determined based on management's estimate of the timing and amount of the Covered Litigation settlement and the resulting payments due to the counterparty under the terms of the contract. Since this estimation process requires application of judgment in developing significant unobservable inputs used to determine the fair value of the Visa derivative, this derivative has been classified as Level 3 within the valuation hierarchy. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 17 - Visa Shares and Related Agreements" of this Report for additional discussion on the Visa derivative and related litigation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents all financial instruments measured at fair value on a recurring basis as of December 31, 2015 and 2014, according to the valuation hierarchy included in ASC 820-10. For equity and debt securities, class was determined based on the nature and risks of the investments. Transfers between levels for the years ended December 31, 2015 and 2014 were inconsequential.



	December 31, 2015
(in thousands)	Level 1		Level 2	Level 3	Total Assets and Liabilities at Fair Value
Assets
Trading securities:
Mortgage-backed securities issued by U.S. Government agencies	$	—	2,922	—	2,922
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises	—		1,078	—	1,078
State and municipal securities	—		1,097	—	1,097
Total trading securities	—		5,097	—	5,097
Mortgage loans held for sale	—		59,275	—	59,275
Investment securities available for sale:
U.S. Treasury securities	43,357		—	—	43,357
U.S. Government agency securities	—		13,623	—	13,623
Securities issued by U.S. Government sponsored enterprises	—		126,909	—	126,909
Mortgage-backed securities issued by U.S. Government agencies	—		210,004	—	210,004
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		2,630,419	—	2,630,419
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		529,597	—	529,597
State and municipal securities	—		4,434	—	4,434
Equity securities	9,672		—	—	9,672
Other investments⁽¹⁾	3,073		14,985	1,745	19,803
Total investment securities available for sale	56,102		3,529,971	1,745	3,587,818
Private equity investments	—		870	27,148	28,018
Mutual funds held in rabbi trusts	10,664		—	—	10,664
Derivative assets:
Interest rate contracts	—		25,580	—	25,580
Mortgage derivatives⁽²⁾	—		1,559	—	1,559
Total derivative assets	—		27,139	—	27,139
Liabilities
Trading account liabilities	—		1,032	—	1,032
Derivative liabilities:
Interest rate contracts	—		26,030	—	26,030
Visa derivative	—		—	1,415	1,415
Total derivative liabilities	$	—	26,030	1,415	27,445



	December 31, 2014
(in thousands)	Level 1		Level 2	Level 3	Total Assets and Liabilities at Fair Value
Assets
Trading securities:
Mortgage-backed securities issued by U.S. Government agencies	—		145	—	145
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises	—		2,449	—	2,449
State and municipal securities	—		1,976	—	1,976
All other mortgage-backed securities	—		2,483	—	2,483
Other investments	—		6,810	—	6,810
Total trading securities	—		13,863	—	13,863
Mortgage loans held for sale	—		63,328	—	63,328
Investment securities available for sale:
U.S. Treasury securities	42,826		—	—	42,826
U.S. Government agency securities	—		27,324	—	27,324
Securities issued by U.S. Government sponsored enterprises	—		82,042	—	82,042
Mortgage-backed securities issued by U.S. Government agencies	—		179,816	—	179,816
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		2,261,681	—	2,261,681
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		417,076	—	417,076
State and municipal securities	—		5,206	—	5,206
Equity securities	6,748		—	—	6,748
Other investments⁽¹⁾	2,035		15,007	1,645	18,687
Total investment securities available for sale	51,609		2,988,152	1,645	3,041,406
Private equity investments	—		995	27,367	28,362
Mutual funds held in rabbi trusts	11,252		—	—	11,252
Derivative assets:
Interest rate contracts	—		30,904	—	30,904
Mortgage derivatives ⁽²⁾	—		1,213	—	1,213
Total derivative assets	—		32,117	—	32,117
Liabilities
Trading account liabilities	—		2,100	—	2,100
Salary stock units	1,206		—	—	1,206
Derivative liabilities:
Interest rate contracts	—		31,398	—	31,398
Mortgage derivatives ⁽²⁾			753		753
Visa derivative	—		—	1,401	1,401
Total derivative liabilities	$	—	32,151	1,401	33,552

^{(1 )}Based on an analysis of the nature and risks of these investments, Synovus has determined that presenting these investments as a single asset class is appropriate.

^{(2 )}Mortgage derivatives consist of customer interest rate lock commitments that relate to the potential origination of mortgage loans, which would be classified as held for sale and forward loan sales commitments with third-party investors.

Fair Value Option

The following table summarizes the difference between the fair value and the unpaid principal balance of mortgage loans held for sale measured at fair value and the changes in fair value of these loans. Mortgage loans held for sale are initially measured at fair value with subsequent changes in fair value recognized in earnings. Changes in fair value were recorded as a component of mortgage banking income in the consolidated statements of income. An immaterial portion of these changes in fair value was attributable to changes in instrument-specific credit risk.



	Twelve Months Ended December 31,
(in thousands)	2015			2014	2013
Changes in fair value included in net income:
Mortgage loans held for sale	$	(742	)	1,399	(5,566	)
Mortgage loans held for sale:
Fair value	59,275			63,328	45,384
Unpaid principal balance	58,177			61,488	44,943
Fair value less aggregate unpaid principal balance	1,098			1,840	441

Changes in Level 3 Fair Value Measurements

As noted above, Synovus uses significant unobservable inputs (Level 3) in determining the fair value of assets and liabilities classified as Level 3 in the fair value hierarchy. The table below includes a roll-forward of the amounts on the consolidated balance sheet for the year ended December 31, 2015 and 2014 (including the change in fair value), for financial instruments of a material nature that are classified by Synovus within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis. Transfers between fair value levels are recognized at the end of the reporting period in which the associated changes in inputs occur. During 2015 and 2014, Synovus did not have any transfers between levels in the fair value hierarchy.



	2015
(in thousands)	Investment Securities Available for Sale			Private Equity Investments		Visa Derivative
Beginning balance, January 1,	$	1,645		27,367		(1,401	)
Total gains (losses) realized/unrealized:
Included in earnings	—			(219	)	(1,464	)
Unrealized gains (losses) included in other comprehensive income	100			—		—
Purchases	—			—		—
Sales	—			—		—
Issuances	—			—		—
Settlements	—			—		1,450
Amortization of discount/premium	—			—		—
Transfers in and/or out of Level 3	—			—		—
Ending balance, December 31,	$	1,745		27,148		(1,415	)
Total net gains (losses) for the year included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at December 31,	$	100		(219	)	(1,464	)

	2014
(in thousands)	Investment Securities Available for Sale			Private Equity Investments		Visa Derivative
Beginning balance, January 1,	$	2,350		27,745		(2,706	)
Total gains (losses) realized/unrealized:
Included in earnings	(88		)	(378	)	(3,041	)
Unrealized gains (losses) included in other comprehensive income	(77		)	—		—
Purchases	—			—		—
Sales	—			—		—
Issuances	—			—		—
Settlements	(540		)	—		4,346
Amortization of discount/premium	—			—		—
Transfers in and/or out of Level 3	—			—		—
Ending balance, December 31,	$	1,645		27,367		(1,401	)
Total net gains (losses) for the year included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at December 31,	$	(88	)	(378	)	(3,041	)

Assets Measured at Fair Value on a Non-recurring Basis

Certain assets are recorded at fair value on a non-recurring basis. These non-recurring fair value adjustments typically are a result of the application of lower of cost or fair value accounting or a write-down occurring during the period. For example, if the fair value of an asset in these categories falls below its cost basis, it is considered to be at fair value at the end of the period of the adjustment. The following table presents assets measured at fair value on a non-recurring basis as of the dates indicated for which there was a fair value adjustment during the period.



	As of December 31, 2015					Fair Value Adjustments for the Year Ended December 31, 2015
(in thousands)	Level 1		Level 2	Level 3		Fair Value Adjustments for the Year Ended December 31, 2015
Impaired loans*	$	—	—	$	11,264	4,144
Other loans held for sale	—		—	425		31
Other real estate	—		—	23,519		4,927
Other assets held for sale	—		—	3,425		1,322

	As of December 31, 2014					Fair Value Adjustments for the Year Ended December 31, 2014
	Level 1		Level 2	Level 3		Fair Value Adjustments for the Year Ended December 31, 2014
Impaired loans*	$	—	—	$	28,588	13,716
Other loans held for sale	—		—	3,411		6,833
Other real estate	—		—	32,046		7,769
Other assets held for sale	—		—	3,718		2,076

* Impaired loans that are collateral-dependent.

Collateral-dependent impaired loans are evaluated for impairment in accordance with the provisions of ASC 310-10-35 using the fair value of the collateral less costs to sell. For loans measured using the estimated fair value of collateral securing these loans less costs to sell, fair value is generally determined based upon appraisals performed by a certified or licensed appraiser using inputs such as absorption rates, capitalization rates, and market comparables, adjusted for estimated selling costs. Management also considers other factors or recent developments, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management's plans for disposition, which could result in adjustments to the collateral value estimates indicated in the appraisals. Estimated costs to sell are based on actual amounts for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Collateral-dependent impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above.

Loans are transferred to other loans held for sale at fair value when Synovus makes the determination to sell specifically identified loans. The fair value of the loans is primarily determined by analyzing the underlying collateral of the loan and the anticipated market prices of similar assets less estimated costs to sell, as well as consideration of the market for loan sales versus the sale of collateral. At the time of transfer, if the estimated fair value is less than the carrying amount, the difference is recorded as a charge-off against the allowance for loan losses. Decreases in the fair value subsequent to the transfer, as well as gains/losses realized from the sale of these assets, are recorded as losses on other loans held for sale, net, as a component of non-interest expense on the consolidated statements of income.

ORE consists of properties obtained through a foreclosure proceeding or through an in-substance foreclosure in satisfaction of loans. The fair value of ORE is determined on the basis of current appraisals, comparable sales, and other estimates of fair value obtained principally from independent sources, adjusted for estimated selling costs. At foreclosure, ORE is recorded at the lower of cost or fair value less the estimated cost to sell, which establishes a new cost basis. Subsequent to foreclosure, ORE is evaluated quarterly and reported at fair value less estimated costs to sell, not to exceed the new cost basis, determined on the basis of current appraisals, comparable sales, and other estimates of fair value obtained principally from independent sources, adjusted for estimated selling costs. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in an adjustment to lower the fair value estimates indicated in the appraisals. Internally adjusted valuations are considered Level 3 measurements as management uses assumptions that may not be observable in the market.

Other assets held for sale consist of certain premises and equipment held for sale, including those related to the efficiency initiatives discussed in "Note 3 - Restructuring Charges" of this Report. These assets are classified as held for sale and recorded at the lower of their amortized cost or fair value, less costs to sell, consistent with ASC 360-10, Impairment and Disposal of Long-Lived Assets. The fair value of these assets is determined primarily on the basis of appraisals or BOV, as circumstances warrant, adjusted for estimated selling costs. Both techniques engage licensed or certified professionals that use inputs such as absorption rates, capitalization rates, and market comparables; these valuations are considered Level 3 measurements since assumptions or inputs may not be observable in the market.

Quantitative Information about Level 3 Fair Value Measurements

The tables below provide an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure financial instruments that are classified within Level 3 of the valuation hierarchy. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the identified financial instruments. The tables below present both the total balance as of the dates indicated for assets measured at fair value on a recurring basis and the assets measured at fair value on a non-recurring basis for which there was a fair value adjustment during the period.



December 31, 2015
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a recurring basis

Investment Securities Available for Sale

Other investments:

Trust preferred securities	$	1,745	Discounted cash flow analysis	Credit spread embedded in discount rate	427-527 bps (477 bps)
				Discount for lack of marketability⁽²⁾	0%-10% (0%)

Private equity investments	27,148		Individual analysis of each investee company	Multiple factors, including but not limited to, current operations, financial condition, cash flows, evaluation of business management and financial plans, and recently executed financing transactions related to the investee companies ⁽²⁾	N/A

Visa derivative liability	1,415		Internal valuation	Estimated future cumulative deposits to the litigation escrow for settlement of the Covered Litigation, and estimated future monthly fees payable to the derivative counterparty	N/A



December 31, 2015
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans	$	11,264	Third-party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-100% (51%) 0%-10% (7%)

Other loans held for sale	425		Third-party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-11% (7%) 0%-10% (7%)

Other real estate	23,519		Third-party appraised value less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-20% (7%) 0%-10% (7%)

Other assets held for sale	3,425		Third-party appraised value less estimated selling costs or BOV	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-75% (42%) 0%-10% (7%)

⁽¹⁾ The range represents management's best estimate of the high and low end of the value that would be assigned to a particular input. For assets measured at fair value on a non-recurring basis, the weighted average is the measure of central tendencies; it is not the value that management is using for the asset or liability.

⁽²⁾ Represents management's estimate of discount that market participants would require based on the instrument's lack of liquidity.

⁽³⁾ Synovus also makes adjustments to the values of the assets listed above for various reasons, including age of the appraisal, information known by management about the property, such as occupancy rates, changes to the physical conditions of the property, pending sales, and other factors.



December 31, 2014
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a recurring basis

Investment Securities Available for Sale

Other investments:

Trust preferred securities	$	1,645	Discounted cash flow analysis	Credit spread embedded in discount rate	600-675 bps (639 bps)
				Discount for lack of marketability⁽²⁾	0%-10% (0%)

Private equity investments	27,367		Individual analysis of each investee company	Multiple factors, including but not limited to, current operations, financial condition, cash flows, evaluation of business management and financial plans, and recently executed financing transactions related to the investee companies ⁽²⁾	N/A

Visa derivative liability	1,401		Internal valuation	Estimated future cumulative deposits to the litigation escrow for settlement of the Covered Litigation, and estimated future monthly fees payable to the derivative counterparty	N/A



December 31, 2014
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans	$	28,588	Third-party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-100% (46%) 0%-10% (7%)

Other loans held for sale	3,411		Third-party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-11% (7%) 0%-10% (7%)

Other real estate	32,046		Third-party appraised value less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-61% (16%) 0%-10% (7%)

Other assets held for sale	3,718		Third-party appraised value less estimated selling costs or BOV	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-100% (49%) 0%-10% (7%)

⁽²⁾ Represents management's estimate of discount that market participants would require based on the instrument's lack of liquidity.

Sensitivity Analysis of Level 3 Unobservable Inputs Measured on a Recurring Basis

Included in the fair value estimates of financial instruments carried at fair value on the consolidated balance sheet are those estimated in full or in part using valuation techniques based on assumptions that are not supported by observable market prices, rates, or other inputs. Unobservable inputs are assessed carefully, considering the current economic environment and market conditions. However, by their very nature, unobservable inputs imply a degree of uncertainty in their determination, because they are supported by little, if any, market activity for the related asset or liability.

Investment Securities Available for Sale

The significant unobservable inputs used in the fair value measurement of the corporate obligations in Level 3 assets are the credit spread embedded in the discount rate and the discount for lack of liquidity. Generally, a change in one or more assumptions, and the degree or sensitivity of the change used, can have a significant impact on fair value. With regard to the trust preferred securities in Level 3 assets, raising the credit spread, and raising the discount for lack of liquidity assumptions will result in a lower fair value measurement.

Private Equity Investments

In the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of private equity investments, significant judgment is required to value these investments. The significant unobservable inputs used in the fair value measurement of private equity investments include current operations, financial condition and cash flows, comparables and private sales, when available, and recently executed financing transactions related to investee companies. Significant increases or decreases in any of these inputs in isolation would result in a significantly lower or higher fair value measurement.

Visa Derivative Liability

The fair value of the Visa derivative is determined based on management's estimate of the timing and amount of the Covered Litigation settlement and the resulting payments due to the counterparty under the terms of the contract. Significant changes in any of these inputs could result in a significantly higher (lower) valuation of the Visa derivative liability. Also, additional funding into the escrow generally results in a proportional increase in our derivative liability.

Fair Value of Financial Instruments

The following table presents the carrying and fair values of financial instruments at December 31, 2015 and 2014. The fair values represent management’s best estimates based on a range of methodologies and assumptions. For financial instruments that are not recorded at fair value on the balance sheet, such as loans, interest bearing deposits (including brokered deposits), and long-term debt, the fair value amounts should not be taken as an estimate of the amount that would be realized if all such financial instruments were to be settled immediately.

Cash and cash equivalents, interest bearing funds with the Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements are repriced on a short-term basis; as such, the carrying value closely approximates fair value. Since these amounts generally relate to highly liquid assets, these are considered a Level 1 measurement.

Loans, net of deferred fees and costs, are recorded at the amount of funds advanced, less charge-offs, and an estimation of credit risk represented by the allowance for loan losses. The fair value estimates for disclosure purposes differentiate loans based on their financial characteristics, such as product classification, loan category, pricing features, and remaining maturity. The fair value of loans is estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial, mortgage, home equity, credit card, and other retail loans. Commercial loans are further segmented into certain collateral code groupings. The fair value of the loan portfolio is calculated, in accordance with ASC 825-10, by discounting contractual cash flows using estimated market discount rates, which reflect the credit and interest rate risk inherent in the loan. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820-10 and generally produces a higher value than the exit price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally estimated using appraisals of the collateral. Collateral values are monitored and additional write-downs are recognized if it is determined that the estimated collateral values have declined further. Estimated costs to sell are based on current disposal costs for similar assets. Carrying value is considered to reflect fair value for these loans. Loans are considered a Level 3 fair value measurement.

The fair value of deposits with no stated maturity, such as non-interest bearing demand accounts, interest bearing demand deposits, money market accounts, and savings accounts, is estimated to be equal to the amount payable on demand as of that respective date. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The value of long-term relationships with depositors is not taken into account in estimating fair values. Synovus has developed long-term relationships with its customers through its deposit base and, in the opinion of management, these customer relationships add significant value to Synovus. Synovus has determined that the appropriate classification for deposits is Level 2 due to the ability to reasonably measure all inputs to valuation based on observable market variables. Short-term and long-term debt is also considered a Level 2 valuation, as management relies on market prices for bonds or debt that is similar, but not necessarily identical, to the debt being valued. Short-term debt that matures within ten days is assumed to be at fair value, and is considered a Level 1 measurement. The fair value of other short-term and long-term debt with fixed interest rates is calculated by discounting contractual cash flows using market discount rates for bonds or debt that is similar but not identical.

The carrying and estimated fair values of financial instruments, as well as the level within the fair value hierarchy, as of December 31, 2015 and 2014 are as follows:



	December 31, 2015
(in thousands)	Carrying Value		Fair Value	Level 1	Level 2	Level 3
Financial Assets
Cash and cash equivalents	$	367,092	367,092	367,092	—	—
Interest bearing funds with Federal Reserve Bank	829,887		829,887	829,887	—	—
Interest earning deposits with banks	17,387		17,387	17,387	—	—
Federal funds sold and securities purchased under resale agreements	69,819		69,819	69,819	—	—
Trading account assets	5,097		5,097	—	5,097	—
Mortgage loans held for sale	59,275		59,275	—	59,275	—
Other loans held for sale	425		425	—	—	425
Investment securities available for sale	3,587,818		3,587,818	56,102	3,529,971	1,745
Private equity investments	28,018		28,018	—	870	27,148
Mutual funds held in rabbi trusts	10,664		10,664	10,664	—	—
Loans, net of deferred fees and costs	22,429,565		22,192,903	—	—	22,192,903
Derivative assets	27,139		27,139	—	27,139	—
Financial Liabilities
Trading account liabilities	1,032		1,032	—	1,032	—
Non-interest bearing deposits	6,732,970		6,732,970	—	6,732,970	—
Interest bearing deposits	16,509,691		16,516,222	—	16,516,222	—
Federal funds purchased, other short-term borrowings and other short-term liabilities	177,025		177,025	177,025	—	—
Long-term debt	2,186,893		2,244,376	—	2,244,376	—
Derivative liabilities	$	27,445	27,445	—	26,030	1,415



	December 31, 2014
(in thousands)	Carrying Value		Fair Value	Level 1	Level 2	Level 3
Financial assets
Cash and cash equivalents	$	485,489	485,489	485,489	—	—
Interest bearing funds with Federal Reserve Bank	721,362		721,362	721,362	—	—
Interest earning deposits with banks	11,810		11,810	11,810	—	—
Federal funds sold and securities purchased under resale agreements	73,111		73,111	73,111	—	—
Trading account assets	13,863		13,863	13,863	—	—
Mortgage loans held for sale	63,328		63,328	—	63,328	—
Other loans held for sale	3,606		3,606	—	—	3,606
Investment securities available for sale	3,041,406		3,041,406	51,609	2,988,152	1,645
Private equity investments	28,362		28,362	—	995	27,367
Mutual funds held in Rabbi Trusts	11,252		11,252	11,252	—	—
Loans, net of deferred fees and costs	21,097,699		20,872,939	—	—	20,872,939
Derivative assets	32,117		32,117	—	32,117	—
Financial liabilities
Trading account liabilities	$	2,100	2,100	—	2,100	—
Non-interest bearing deposits	6,228,472		6,228,472	—	6,228,472	—
Interest bearing deposits	15,303,228		15,299,372	—	15,299,372	—
Federal funds purchased, other short-term borrowings, and other short-term liabilities	126,916		126,916	126,916	—	—
Salary stock units	1,206		1,206	1,206	—	—
Long-term debt	2,140,319		2,191,279	—	2,191,279	—
Derivative liabilities	33,553		33,553	—	32,151	1,401