Employee Benefits

Fidelity maintains various benefit plans for its employees. The Company maintains a 401(k) defined contribution retirement savings plan (the “Plan”) for employees age 21 or older. Employees’ contributions to the Plan are voluntary, and the Company matches 50% of the first 6% of participants’ contributions in the Company's common stock, which is immediately transferable. For the years ended December 31, 2017, 2016, and 2015, the Company contributed $2.4 million, $2.0 million, and $1.5 million, respectively, net of forfeitures, to the Plan.

The Fidelity Southern Corporation Equity Incentive Plan (the “2006 Incentive Plan”), as amended, permits the grant of stock options, stock appreciation rights, restricted stock, and other incentive awards. The maximum number of shares of common stock that may be issued under the 2006 Incentive Plan is 5,000,000 shares, all of which may be stock options, but not to exceed 1,000,000 shares other than stock options. Generally, no award shall be exercisable or become vested or payable more than 10 years after the date of grant. Options granted under the 2006 Incentive Plan vest ratably over the service period. As permissible under the 2006 Incentive Plan, shares are added back into the 2006 Incentive Plan if they have been forfeited, expired, or withheld for tax purposes. As of December 31, 2017, there were 1,851,866 shares available to be issued under the 2006 Incentive Plan, including 6,546 shares available to be issued for incentive awards other than stock options. The Company’s policy is to issue shares from the Company’s authorized and unissued shares to satisfy incentive awards.

Compensation expense related to share-based payments totaled $4.6 million, $3.5 million, and $1.5 million, for the years ended December 31, 2017, 2016, and 2015, respectively. The Company realized a tax benefit of $353,000, $170,000, and $366,000, from options exercised during the years ended December 31, 2017, 2016, and 2015, respectively. As of December 31, 2017, there was $9.6 million of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the 2006 Incentive Plan. The cost is expected to be recognized over a weighted average period of 2.0 years.

Stock Options

The fair value of each option award is estimated as of the grant date using the Black-Scholes option pricing model, which discounts the value of each option’s estimated future cash flow using certain assumptions outlined in the table below:



	For the Years Ended December 31,
	2017			2016			2015
Weighted average fair value per share of awards issued	$	4.97		$	4.72		$	6.20
Assumptions:
Expected volatility	28.65		%	29.41		%	52.70		%
Expected dividends	2.05		%	2.69		%	2.38		%
Risk-free rate	1.71		%	1.35		%	1.36		%
Expected term (years)	4.5			4.4			4.5
Expected forfeiture rate	—		%	—		%	5.00		%

The expected volatility assumption is based on the historical volatility of the Company’s common stock. The expected dividend yield is estimated using the current annual dividend level and the most recent stock price of the Company’s common stock at the date of grant. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term represents the period of time that the options granted are expected to be outstanding in years. Beginning January 1, 2016, the Company began accounting for forfeitures as incurred.

A summary of stock option activity for 2017, 2016, and 2015, is presented below:



	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value⁽¹⁾		Weighted Average Remaining Contractual Life (Years)
Outstanding at December 31, 2014	554,998		$	12.12
Granted	70,000		16.82
Exercised	(150,999	)	10.18		$	1,557
Forfeited or expired	(22,000	)	13.94
Outstanding at December 31, 2015	451,999		13.41
Granted	395,000		17.87
Exercised	(78,666	)	11.83		735
Forfeited or expired	(21,000	)	14.88
Outstanding at December 31, 2016	747,333		15.89
Granted	562,500		23.38
Exercised	(222,676	)	13.86		1,937
Forfeited or expired	(20,000	)	23.45
Outstanding at December 31, 2017	1,067,157		$	20.12	$	2,648	3.67

Exercisable at December 31, 2015	167,999		$	11.03
Exercisable at December 31, 2016	184,671		12.68
Exercisable at December 31, 2017	182,350		15.95		$	1,066	2.46

Vested and expected to vest at December 31, 2015	437,799		$	13.36
Vested and expected to vest at December 31, 2016	747,333		15.89
Vested and expected to vest at December 31, 2017	1,067,157		20.12		$	2,648	3.67

⁽¹⁾Aggregate intrinsic value is in thousands and is based on the market price as of the period ending date

The fair value of stock options vested in 2017, 2016, and 2015 was $764,000, $333,000, and $359,000, respectively.

Restricted Stock

A summary of the status of the Company’s restricted stock activity for 2017, 2016, and 2015 is presented below:



	Number of Shares		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2014	278,581		$	8.13
Granted	9,599		8.82
Vested	(125,297	)	7.79
Forfeited	(5,000	)	4.44
Outstanding at December 31, 2015	157,883		8.02
Granted	318,197		16.85
Vested	(113,580	)	7.76
Forfeited	(2,500	)	6.15
Outstanding at December 31, 2016	360,000		15.92
Granted	284,948		22.98
Vested	(155,496	)	13.47
Forfeited	(10,000	)	6.15
Outstanding at December 31, 2017	479,452		21.11

The shares of restricted stock granted under the 2006 Incentive Plan during the last three years were comprised of service-based shares, which were awarded to numerous individuals based on years of service, and shares issued for certain executives and senior managers. During the years ended December 31, 2017, 2016, and 2015, the Company awarded 5,494 shares, 18,197 shares, and 9,599 shares, respectively, for service awards which vested immediately.

The market price of the Company’s common stock at the date of grant is used to estimate the fair value of the restricted stock awards. Compensation expense for the restricted stock awards is generally equal to the fair value of the restricted stock awards and is amortized to compensation expense over the vesting period of each award.

The Company recorded compensation expense of $120,000, $115,000, and $85,000 during 2017, 2016, and 2015, respectively, associated with these shares. Dividends are paid on awarded, unvested restricted stock.

During the year ended December 31, 2017, the Company granted 279,454 restricted shares of common stock at an average fair value of $23.43 per share to certain executives and senior managers, which vest ratably over three years. During the year ended December 31, 2016, the Company granted 300,000 restricted shares of common stock at a fair value of $17.87 per share to certain executives and senior managers, which vest ratably over three years. There was no restricted stock granted to executives or senior managers during 2015.

The fair value of restricted stock vested in 2017, 2016, and 2015 was $2.2 million, $897,000, and $998,000, respectively.

Salary Continuation Agreements

On December 23, 2014, the Company entered into Salary Continuation Agreements ("SERP Agreements") with certain key officers, which became effective as of January 1, 2015. These agreements are unfunded, noncontributory and are nonqualified under Section 401 of the Internal Revenue Code. The SERP Agreements provide defined benefits based on years of service and salary and are subject to a vesting schedule. The benefits are entirely unvested until the tenth anniversary of employment and vest 20% per year thereafter.

The total liability associated with the SERP Agreements at December 31, 2017, and 2016 was $5.2 million and $3.4 million, respectively. Service and interest costs recognized in salaries and employee benefits in the Consolidated Statements of Comprehensive Income totaled $1.7 million for each of the years ended December 31, 2017, 2016, and 2015 . There were no cash payments under the SERP Agreements during 2017 or 2016. The plan is not currently funded.

The following table is an estimate of the benefits that will be paid in accordance with the SERP Agreements during the indicated time periods:



(in thousands)	Amount
2018	$	—
2019	—
2020	5,736
2021	—
2022	125
Thereafter	12,008
Total estimated benefit payments	$	17,869

At December 31, 2017 and 2016, the present value of the remaining SERP Agreements obligation was $11.5 million and $11.4 million and the discount rate to calculate the present value was 3.84% and 4.05%, respectively.