Fidelity Southern Corporation Reports Earnings For Second Quarter Of $9.4 Million

News provided by

Fidelity Southern Corporation

Jul 19, 2018, 12:36 ET

ATLANTA, July 19, 2018 /PRNewswire/ -- Fidelity Southern Corporation ("Fidelity" or the "Company") (NASDAQ: LION), holding company for Fidelity Bank (the "Bank"), today reported net income of $9.4 million, or $0.34 per diluted share, for the second quarter of 2018, compared with $11.8 million, or $0.43 per diluted share, for the first quarter of 2018, and with $8.9 million or $0.33 per diluted share for the second quarter of 2017. For the year to date ended June 30, 2018, the Company reported net income of $21.2 million, or $0.78 per diluted share, compared with $19.4 million, or $0.73 per diluted share, for the same period in 2017.

Fidelity's Chairman, Jim Miller, said, "Our quarterly results reflect the ongoing strategy of growing our top-line revenue, continued growth in low-cost deposits, and enhancing our core infrastructure. It also became very apparent during the quarter that the market pressures in indirect auto required us to exit all remaining states outside of our existing branch footprint in Georgia and Florida. We remain committed to the indirect auto business as we have generated significant shareholder value from this line of business over the past 25 years."

President Palmer Proctor added, "We are pleased with the continued momentum of growth from our commercial lines of business and growing higher yielding assets. This momentum has also been a key factor in adding new commercial services and deposits. Our investments in SBA and mortgage have also contributed to increased production in a rising rate environment. With the recent change in indirect auto, we anticipate a reduction of approximately 5% per quarter in indirect auto balances that will optimize liquidity and capital, decrease costs, and better position our balance sheet for future growth."

BALANCE SHEET
Total assets grew by $80.7 million, or 1.7%, during the quarter, to $4.9 billion at June 30, 2018. Loan growth totaled $98.0 million, primarily driven by commercial and mortgage loans. Investments also increased by $23.2 million and servicing rights increased by $6.2 million. The Bank has increased the investment securities available for sale portfolio as part of its strategy to carry higher yielding assets, reposition the balance sheet, and reduce its reliance on "gain on sale" income. Cash balances decreased by $42.9 million, from a decrease in fed funds sold as funds were placed into higher yielding investments. Other assets decreased by $4.2 million, of which $4.5 million was a decrease in FHLB stock, as FHLB borrowings were reduced over the quarter.

Asset growth for the quarter was funded by $101.9 million in core deposit growth and a $67.3 million increase in time deposits. Due to the strong deposit growth, short term borrowings were decreased by $99.9 million.

Loans
Total loans, including loans held for sale, increased during the quarter by $98.0 million, or 2.4%, to $4.2 billion at June 30, 2018.This increase was driven by increases of $47.4 million in commercial and SBA and $89.7 million in mortgage. The commercial loan production momentum that began in the fourth quarter of 2017 continues to be strong while we implement strategies to grow our commercial bank.  Partially offsetting these increases was a decrease of $45.8 million in indirect loans, which included $25.0 million of indirect loan portfolio held for sale that reflects lower expected sales in the third and fourth quarters to align our indirect auto operating model to current market conditions. Applications are no longer accepted in Texas, Oklahoma and Arkansas, Louisiana, Virginia, North Carolina, South Carolina, Alabama, Mississippi, and Tennessee. As a result, production of indirect auto loans decreased by $74.9 million compared to the previous quarter. Fidelity will continue to serve the needs of our existing auto loan customers in all states, and will remain active in Georgia and Florida.   

Asset Quality
Asset quality remained strong as nonperforming assets, excluding the guaranteed portion of government loans ("adjusted NPA's") and acquired loans, decreased during the quarter. Adjusted NPA's, a non-GAAP measure, decreased by $4.5 million during the quarter. The decrease was mainly due to decreases in nonaccrual loans, repossessions and real estate owned. Credit quality trend performance remains consistent and strong as net charge-offs were 0.17% of average loans for the quarter.

Fair Value Adjustments
Loan servicing rights increased by $6.2 million, or 5.1%, during the quarter, to $125.7 million at June 30, 2018, compared to $119.6 million at March 31, 2018. Mortgage servicing rights ("MSRs"), the primary component of loan servicing rights, contributed the majority of the change, increasing by 6.3%, to $114.8 million at June 30, 2018.  MSRs increased as mortgage loans sold with servicing retained increased by $250.2 million, or 58.0%, from the previous quarter, as a result of seasonally high production. The current estimated fair market value of MSRs was $121.1 million at June 30, 2018.

At June 30, 2018, fair value adjustments recorded on the balance sheet for loans held for sale, interest rate lock commitments ("IRLCs"), and hedge items were $14.8 million, a $2.1 million, or 16.6% increase, from March 31, 2018. The gross pipeline of interest rate lock commitments was slightly lower at quarter end due to inventory, interest rates, and market competition.

Deposits
Core deposit growth was strong for the quarter as demand and money market deposits grew by $101.9 million, or 3.4%, to $3.1 billion.  Money market account promotions in Georgia and Florida and new deposit accounts from commercial loan relationships contributed to the growth. Time deposits also increased by $67.3 million during the quarter, due to an increase in brokered deposits of  $69.5 million, resulting in a total increase in deposits of $169.2 million, or 4.3%.

INCOME STATEMENT
Net Income
Net income was $9.4 million, or $2.4 million less than the previous quarter, as net interest income increased by $1.7 million and noninterest income remained relatively flat as the MSRs impairment recovery was $3.9 million lower than the previous quarter. Noninterest expense increased by $4.1 million as a 48.2% increase in mortgage loan production drove higher mortgage commissions.

Net income was $498,000 higher compared to the same quarter a year ago.

Interest Income
Interest income of $44.7 million was higher by $3.2 million, compared to the previous quarter.  An increase in average loans of $245.0 million and average investment securities of $19.4 million drove higher interest income, while the yield on total average interest-bearing assets increased 2 basis points from the previous quarter.

As compared to the same period in the prior year, interest income increased by $5.2 million as average loans increased by $486.3 million and the yield on total average interest-bearing assets increased by 20 basis points, as market interest rates increased year over year.

Interest Expense
Interest expense of $8.3 million increased by $1.5 million for the quarter due to a 5 basis point increase in total interest-bearing deposits. The yield paid on short-term borrowings increased 27 basis points as average FHLB borrowings increased by $159.7 million during the quarter. FHLB borrowings were reduced by quarter end.

As compared to the same period in the prior year, interest expense increased by $2.4 million. Growth in average deposits and borrowings balances, as well as rising market rates, drove the increase.

Net Interest Margin
The net interest margin was 3.22% for the quarter compared to 3.29% in the previous quarter, a decrease of 7 basis points. Loan coupon yields, excluding fees, SBA discount accretion, and accretable yields, increased faster than deposit costs during the quarter. The increase was offset by higher usage of short term borrowings to help fund loan growth during the quarter.

The yield on total interest bearing liabilities increased by 12 basis points while the yield on average earning assets increased by 2 basis points from 3.93% to 3.95%. Average loans increased by $245.0 million while the yield remained flat at 4.07% for both periods. The loan coupon yields increased by 7 basis points which was offset by a decrease in accretable loan-related income of $878,000 during the quarter which caused the overall loan yield to remain flat.

Average interest-bearing liabilities increased by $195.4 million, as average borrowings grew by $159.7 million during the quarter to help fund loan growth. Average interest-bearing deposits also increased by $35.7 million for the quarter.

As compared to the same period a year ago, the net interest margin for the quarter increased by 2 basis points to 3.22% from 3.20%, primarily due to a 20 basis point increase in the yield on total average interest-earning assets of $4.5 billion, offset by an increase of 27 basis points in the yield on total average interest-bearing liabilities of $3.3 billion. Average earning assets increased by $299.1 million, primarily due to an increase in average loans over the year. Average interest-bearing liabilities increased by $126.0 million, primarily driven by an increase in average borrowings of $151.9 million, offset by a decrease in average interest-bearing deposits of $26.0 million.

Noninterest Income
Noninterest income remained flat on a linked-quarter basis. Gross mortgage revenue increased by $4.6 million during the quarter, offset by a decrease of $3.9 million in the MSRs impairment recovery for the quarter. While mortgage production increased by $295.4 million during the quarter, the gain on sale margins narrowed due to competitive pressures. Income from indirect lending activities decreased by $878,000, as indirect loans sales decreased by $56.7 million. Income from SBA lending activities remained flat on a linked-quarter basis due to a higher concentration of construction loan production that are sold when fully funded. The SBA loan pipeline increased by approximately 43% on a linked quarter-basis.

Compared to the same period a year ago, noninterest income for the quarter of $37.0 million increased by $1.9 million, or 5.5%, primarily due to an increase in mortgage banking income of $2.4 million, an increase in SBA lending income of $536,000, and an increase of $334,000 in trust and wealth management income, offset by a decrease in income from indirect lending activities of $2.4 million, due to a decrease in loan sales over the year as investor demand declined.

Noninterest Expense
On a linked-quarter basis, total noninterest expense increased by $4.1 million due to an increase in commissions expense of $3.7 million from higher mortgage loan originations and $654,000 in salaries and employee benefits expense, offset by decreases in all other noninterest expense categories. The increase in salaries and benefits resulted from an increase in headcount from mortgage and retail delivery and branches.

Compared to the second quarter of 2017, noninterest expense of $58.9 million increased by $4.3 million.  Salaries, commissions and employee benefits expense increased by $4.2 million due primarily to an increase in headcount of 42, primarily in the mortgage and retail delivery and branches, as well as higher cost of benefits.

Income Taxes
On a linked-quarter basis, income tax expense decreased by $341,000, primarily due to the decrease in pre-tax income for the quarter.

Compared to the second quarter of 2017, income tax expense decreased by $1.7 million as the effective tax rate decreased from 34.1% to 23.7% primarily the result of the Tax Cuts and Jobs Act enacted on December 22, 2017 which included, among other things, a reduction in the federal corporate income tax rate from 35% to 21% from the beginning of the tax year 2018 going forward.

OTHER NEWS
On June 27, 2018, the Bank entered into an agreement with the Federal Deposit Insurance Corporation (the "FDIC") to terminate the loss share agreements entered into with the FDIC. Fidelity made a payment of approximately $632,000 to the FDIC as consideration for the early termination of the agreements. The Bank entered into the loss share agreements in 2011 and 2012 in connection with the Bank's acquisition of substantially all of the assets and assumption of substantially all of the deposits and certain liabilities of two failed banks in FDIC-assisted transactions.

On June 29, 2018, Fidelity signed a letter of intent with a third party for the sale of certain residential mortgage servicing rights on a portfolio with a total principal balance of $1.18 billion, or approximately 12.5% percent of Fidelity's total residential servicing portfolio as of the end of second quarter 2018. This sale will help optimize and increase regulatory capital while reducing future amortization expense and impairment risk of the MSRs asset. The sale is anticipated to close by the end of the third quarter of 2018.

On July 9, 2018, Fidelity hired Ross Creasy as the Chief Information Officer ("CIO") to lead the Company's information technology efforts. Mr. Creasy recently spent over two years with E-Trade and the prior 15 years with Capital One. The CIO is a new position for the Company and was added to align with its strategic initiative of improving our technology and infrastructure.

On July 12, 2018, Fidelity opened a new branch in Sugar Hill, Georgia which brings the total number of retail branches to 69.

ABOUT FIDELITY SOUTHERN CORPORATION
Fidelity Southern Corporation, through its operating subsidiaries, Fidelity Bank and LionMark Insurance Company, provides banking services and Wealth Management services and credit-related insurance products through branches in Georgia and Florida, and an insurance office in Atlanta, Georgia. Indirect auto loans are provided in Georgia and Florida and mortgage loans are provided throughout the South, while SBA loans are originated nationwide. For additional information about Fidelity's products and services, please visit the website at www.FidelitySouthern.com.

NON-GAAP FINANCIAL MEASURES
This release contains certain non-GAAP financial measures. The "GAAP TO NON-GAAP RATIO RECONCILIATION" tables included below reconcile GAAP to non-GAAP ratios. The non-GAAP ratios contain financial information determined by methods other than in accordance with GAAP. Management uses these "non-GAAP" financial measures in its analysis of the Company's performance. Management believes that presentation of these non-GAAP financial measures provides useful supplemental information that allows better comparability with prior periods, as well as with peers in the industry and provides a greater understanding of the asset quality of the Company's loan portfolio exclusive of the indirect auto, government-guaranteed and acquired loan portfolios. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

SAFE HARBOR
This news release contains forward-looking statements, as defined by Federal Securities Laws, including statements about financial outlook and business environment. These statements are provided to assist in the understanding of future financial performance and such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled "Forward Looking Statements" from Fidelity Southern Corporation's 2017 Annual Report filed on Form 10-K with the Securities and Exchange Commission. Additional information and other factors that could affect future financial results are included in Fidelity's filings with the Securities and Exchange Commission.

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(UNAUDITED)


As of or for the Quarter Ended

As of or for the Six Months Ended

($ in thousands, except per share data)

June 30,
 2018

March 31,
 2018

June 30,
 2017

June 30,
 2018

June 30,
 2017

INCOME STATEMENT DATA:









Interest income

$

44,740

$

41,562

$

39,578


$

86,302

$

77,220

Interest expense

8,268

6,794

5,832


15,062

11,240

Net interest income

36,472

34,768

33,746


71,240

65,980

Provision for loan losses

2,286

2,130

750


4,416

2,850

Noninterest income

36,977

37,133

35,056


74,110

72,426

Noninterest expense

58,852

54,742

54,551


113,594

105,122

Net income before income taxes

12,311

15,029

13,501


27,340

30,435

Income tax expense

2,921

3,262

4,609


6,183

11,015

Net income

9,390

11,767

8,892


21,157

19,419

PERFORMANCE:









Earnings per common share - basic

$

0.35

$

0.44

$

0.34


$

0.78

$

0.74

Earnings per common share - diluted

0.34

0.43

0.33


0.78

0.73

Total revenues

81,717

78,695

74,634


160,412

149,646

Book value per common share

15.48

15.19

14.21


15.48

14.21

Tangible book value per common share(1)

15.05

14.75

13.72


15.05

13.72

Cash dividends paid per common share

0.12

0.12

0.12


0.24

0.24

Dividend payout ratio

34.29

%

27.27

%

35.29

%

30.77

%

32.43

%

Return on average assets

0.77

%

1.03

%

0.78

%

0.90

%

0.87

%

Return on average shareholders' equity

9.06

%

11.83

%

9.58

%

10.42

%

10.87

%

Equity to assets ratio

8.60

%

8.54

%

8.23

%

8.60

%

8.23

%

Net interest margin

3.22

%

3.29

%

3.20

%

3.25

%

3.20

%

END OF PERIOD BALANCE SHEET SUMMARY:









Total assets

$

4,892,369

$

4,811,659

$

4,609,280


$

4,892,369

$

4,609,280

Earning assets

4,549,315

4,466,249

4,267,358


4,549,315

4,267,358

Loans, excluding loans held-for-sale

3,792,886

3,714,308

3,332,132


3,792,886

3,332,132

Total loans

4,237,572

4,139,608

3,726,842


4,237,572

3,726,842

Total deposits

4,069,630

3,900,407

3,899,796


4,069,630

3,899,796

Shareholders' equity

420,962

410,744

379,399


420,962

379,399

Assets serviced for others

10,632,607

10,367,564

9,877,434


10,632,607

9,877,434

ASSET QUALITY RATIOS:









Net charge-offs to average loans

0.17

%

0.11

%

0.09

%

0.14

%

0.13

%

Allowance to period-end loans

0.83

%

0.83

%

0.91

%

0.83

%

0.91

%

Nonperforming assets to total loans, ORE and repossessions

1.96

%

2.04

%

1.68

%

1.96

%

1.68

%

Adjusted nonperforming assets to loans, ORE and repossessions(2)

0.99

%

1.14

%

1.15

%

0.99

%

1.15

%

Allowance to nonperforming loans, ORE and repossessions

0.42x

0.41x

0.54x


0.42x

0.54x

SELECTED RATIOS:









Loans to total deposits

93.20

%

95.23

%

85.44

%

93.20

%

85.44

%

Average total loans to average earning assets

92.90

%

92.71

%

87.99

%

92.81

%

89.50

%

Noninterest income to total revenue

50.34

%

51.64

%

50.95

%

50.99

%

52.33

%

Leverage ratio

8.43

%

8.74

%

8.36

%

8.43

%

8.36

%

Common equity tier 1 capital

8.45

%

8.41

%

8.61

%

8.45

%

8.61

%

Tier 1 risk-based capital

9.50

%

9.47

%

9.76

%

9.50

%

9.76

%

Total risk-based capital

11.99

%

11.98

%

12.47

%

11.99

%

12.47

%

Mortgage loan production

$

908,754

$

613,314

$

800,426


$

1,522,068

$

1,353,423

Total mortgage loan sales

800,084

496,484

689,073


1,296,568

1,255,076

Indirect automobile production

183,675

258,560

249,716


442,235

566,257

Total indirect automobile sales

29,275

86,000

151,996


115,275

344,431
















(1)   Non-GAAP financial measure. See non-GAAP reconciliation table for the comparable GAAP.

(2)  Excludes acquired loans and net of government guarantees. See non-GAAP reconciliation table for the comparable GAAP.

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

($ in thousands)

June 30,
 2018

March 31,
 2018

June 30,
 2017

ASSETS





Cash and cash equivalents

$

157,586

$

200,496

$

430,547

Investment securities available-for-sale

148,155

124,576

130,371

Investment securities held-to-maturity

20,984

21,342

15,593

Loans held-for-sale

444,686

425,300

394,710







Loans

3,792,886

3,714,308

3,332,132

Allowance for loan losses

(31,623)

(30,940)

(30,425)

Loans, net of allowance for loan losses

3,761,263

3,683,368

3,301,707







Premises and equipment, net

90,246

88,624

87,253

Other real estate, net

6,834

7,668

9,382

Bank owned life insurance

72,703

72,284

71,027

Servicing rights, net

125,704

119,553

108,216

Other assets

64,208

68,448

60,474

Total assets

$

4,892,369

$

4,811,659

$

4,609,280







LIABILITIES





Deposits





Noninterest-bearing demand deposits

$

1,225,657

$

1,152,315

$

1,082,966

Interest-bearing deposits





  Demand and money market

1,597,145

1,505,766

1,436,005

  Savings

300,315

363,099

336,695

  Time deposits

946,513

879,227

1,044,130

  Total deposits

4,069,630

3,900,407

3,899,796







Short-term borrowings

237,886

337,795

164,896

Subordinated debt, net

120,653

120,620

120,521

Other liabilities

43,238

42,093

44,668

  Total liabilities

4,471,407

4,400,915

4,229,881







SHAREHOLDERS' EQUITY





Common stock

223,771

219,234

208,699

Accumulated other comprehensive (loss) income, net

(1,096)

(631)

959

Retained earnings

198,287

192,141

169,741

  Total shareholders' equity

420,962

410,744

379,399

Total liabilities and shareholders' equity

$

4,892,369

$

4,811,659

$

4,609,280

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



For the Quarter Ended

For the Six Months Ended

($ in thousands, except per share data)

June 30,
 2018

March 31,
 2018

June 30,
 2017

June 30,
 2018

June 30,
 2017

INTEREST INCOME










Loans, including fees

$

42,845

$

39,849

$

37,560


$

82,694

$

73,643

Investment securities

1,354

1,175

1,170


2,529

2,378

Other

541

538

848


1,079

1,199

Total interest income

44,740

41,562

39,578


86,302

77,220

INTEREST EXPENSE










Deposits

4,823

4,313

3,891


9,136

7,340

Other borrowings

1,812

910

502


2,722

894

Subordinated debt

1,633

1,571

1,439


3,204

3,006

Total interest expense

8,268

6,794

5,832


15,062

11,240

Net interest income

36,472

34,768

33,746


71,240

65,980

Provision for loan losses

2,286

2,130

750


4,416

2,850

Net interest income after provision for loan losses

34,186

32,638

32,996


66,824

63,130

NONINTEREST INCOME










Service charges on deposit accounts

1,468

1,472

1,481


2,940

2,936

Other fees and charges

2,449

2,235

2,006


4,684

3,863

Mortgage banking activities

29,383

28,562

26,956


57,945

52,825

Indirect lending activities

1,270

2,148

3,640


3,418

8,066

SBA lending activities

1,217

1,157

681


2,374

2,499

Trust and wealth management services

574

532

240


1,106

529

Other

616

1,027

52


1,643

1,708

Total noninterest income

36,977

37,133

35,056


74,110

72,426

NONINTEREST EXPENSE










Salaries and employee benefits

28,215

27,561

25,852


55,776

51,290

Commissions

11,242

7,506

9,384


18,748

16,882

Occupancy and equipment

4,541

4,932

4,700


9,473

8,864

Professional and other services

4,635

4,798

5,052


9,433

9,119

Other

10,219

9,945

9,563


20,164

18,967

Total noninterest expense

58,852

54,742

54,551


113,594

105,122

Income before income tax expense

12,311

15,029

13,501


27,340

30,434

Income tax expense

2,921

3,262

4,609


6,183

11,015

NET INCOME

$

9,390

$

11,767

$

8,892


$

21,157

$

19,419












EARNINGS PER COMMON SHARE:










Basic

$

0.35

$

0.44

$

0.34


$

0.78

$

0.74

Diluted

$

0.34

$

0.43

$

0.33


$

0.78

$

0.73

Weighted average common shares outstanding-basic

27,093

27,011

26,433


27,053

26,384

Weighted average common shares outstanding-diluted

27,222

27,121

26,547


27,165

26,512

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

LOANS BY CATEGORY

(UNAUDITED)

($ in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Commercial

$

938,203

$

897,297

$

811,199

$

789,788

$

796,699

SBA

146,508

140,308

141,208

142,989

145,311

Total commercial and SBA loans

1,084,711

1,037,605

952,407

932,777

942,010











Construction loans

269,330

265,780

248,317

243,600

248,926











Indirect automobile

1,698,879

1,719,670

1,716,156

1,609,678

1,531,761

Installment loans and personal lines of credit

31,807

28,716

25,995

26,189

31,225

Total consumer loans

1,730,686

1,748,386

1,742,151

1,635,867

1,562,986

Residential mortgage

555,636

512,673

489,721

452,584

433,544

Home equity lines of credit

152,523

149,864

148,370

144,879

144,666

Total mortgage loans

708,159

662,537

638,091

597,463

578,210

Loans

3,792,886

3,714,308

3,580,966

3,409,707

3,332,132











Loans held-for-sale:









Residential mortgage

399,630

355,515

269,140

257,325

279,292

SBA

20,056

19,785

13,615

8,004

15,418

Indirect automobile

25,000

50,000

75,000

75,000

100,000

Total loans held-for-sale

444,686

425,300

357,755

340,329

394,710

Total loans

$

4,237,572

$

4,139,608

$

3,938,721

$

3,750,036

$

3,726,842











DEPOSITS BY CATEGORY

(UNAUDITED)


For the Quarter Ended

June 30, 2018

March 31, 2018

December 31, 2017

September 30, 2017

June 30, 2017

($ in thousands)

Average
Amount

Rate

Average
Amount

Rate

Average
Amount

Rate

Average
Amount

Rate

Average
Amount

Rate

Noninterest-bearing
   demand deposits

$

1,172,298

—

%

$

1,120,562

—

%

$

1,124,759

—

%

$

1,103,414

—

%

$

1,027,909

—

%

Interest-bearing demand
   deposits

489,051

0.14

%

461,614

0.14

%

453,714

0.11

%

447,348

0.12

%

437,034

0.11

%

Money market and
   savings deposits

1,349,447

0.61

%

1,345,905

0.55

%

1,381,207

0.53

%

1,341,189

0.49

%

1,284,329

0.45

%

Time deposits

906,133

1.16

%

901,394

1.04

%

958,790

0.94

%

1,021,563

0.92

%

1,049,248

0.90

%

Total average deposits

$

3,916,929

0.49

%

$

3,829,475

0.46

%

$

3,918,470

0.43

%

$

3,913,514

0.42

%

$

3,798,520

0.41

%

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NONPERFORMING AND CLASSIFIED ASSETS

(UNAUDITED)

($ in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

NONPERFORMING ASSETS








Nonaccrual loans (2)(6)

$

58,027

$

58,706

$

47,012

$

41,408

$

37,894

Loans past due 90 days or more and still accruing

8,278

7,728

6,313

6,534

7,210

Repossessions

1,303

1,853

2,392

2,040

1,779

Other real estate (ORE)

6,834

7,668

7,621

8,624

9,382

Nonperforming assets

$

74,442

$

75,955

$

63,338

$

58,606

$

56,265










ASSET QUALITY RATIOS








Loans 30-89 days past due

$

6,514

$

15,695

$

22,079

$

10,193

$

7,181

Loans 30-89 days past due to loans

0.17

%

0.42

%

0.62

%

0.30

%

0.22

%

Loans past due 90 days or more and still accruing to loans

0.22

%

0.21

%

0.18

%

0.19

%

0.22

%

Nonperforming loans as a % of loans

1.75

%

1.79

%

1.49

%

1.41

%

1.35

%

Nonperforming assets to loans, ORE, and repossessions

1.96

%

2.04

%

1.76

%

1.71

%

1.68

%

Adjusted nonperforming assets to adjusted loans, ORE and
   repossessions(8)

0.99

%

1.14

%

1.06

%

1.05

%

1.17

%

Nonperforming assets to total assets

1.52

%

1.58

%

1.38

%

1.30

%

1.22

%

Adjusted nonperforming assets to total assets(8)

0.73

%

0.84

%

0.79

%

0.75

%

0.79

%

Classified Asset Ratio(4)

21.84

%

21.70

%

20.70

%

20.59

%

20.14

%

ALL to nonperforming loans

47.69

%

46.57

%

55.83

%

64.04

%

67.46

%

Net charge-offs, annualized to average loans

0.17

%

0.11

%

0.11

%

0.13

%

0.09

%

ALL as a % of loans

0.83

%

0.83

%

0.83

%

0.90

%

0.91

%

Adjusted ALL as a % of adjusted loans(7)

1.16

%

1.15

%

1.16

%

1.29

%

1.30

%

ALL as a % of loans, excluding acquired loans(5)

0.87

%

0.88

%

0.88

%

0.96

%

0.98

%










CLASSIFIED ASSETS








Classified loans(1)

$

87,688

$

83,867

$

77,679

$

75,033

$

71,040

ORE and repossessions

8,137

9,521

10,013

10,664

11,161

Total classified assets(3)

$

95,825

$

93,388

$

87,692

$

85,697

$

82,201










(1) Amount of SBA guarantee included in classified loans

$

4,870

$

2,879

$

2,930

$

2,755

$

7,458

(2) Amount of repurchased government-guaranteed loans, primarily
residential mortgage loans, included in nonaccrual loans

$

27,220

$

26,091

$

19,478

$

15,450

$

12,502

(3) Classified assets include loans having a risk rating of substandard or worse, both accrual and nonaccrual, repossessions and ORE, net of loss share and purchase discounts (for periods prior to 2018)

(4) Classified asset ratio is defined as classified assets as a percentage of the sum of Tier 1 capital plus allowance for loan losses

(5) Allowance calculation excludes the recorded investment of acquired loans, due to valuation calculated at acquisition

(6) Excludes purchased credit impaired (PCI) loans which are not removed from their accounting pool

(7) Excludes indirect and acquired loans. See non-GAAP reconciliation table for a reconciliation to the comparable GAAP measure

(8) Excludes acquired loans and net of government guarantees. See non-GAAP reconciliation table for a reconciliation to the comparable GAAP measure

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

INCOME FROM INDIRECT LENDING ACTIVITIES

(UNAUDITED)













For the Quarter Ended

(in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Loan servicing revenue

$

1,690

$

1,769

$

2,158

$

2,130

$

2,199

Gain on sale of loans

22

442

532

263

1,074

Gain on capitalization of servicing rights

196

569

406

182

1,020

Ancillary loan servicing revenue

166

183

247

172

204

    Gross indirect lending revenue

2,074

2,963

3,343

2,747

4,497

Less:









Amortization of servicing rights, net

(804)

(815)

(777)

(846)

(857)

Total income from indirect lending
   activities

$

1,270

$

2,148

$

2,566

$

1,901

$

3,640

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

ANALYSIS OF INDIRECT LENDING

(UNAUDITED)















As of or for the Quarter Ended

($ in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Average loans outstanding(1)

$

1,771,665

$

1,784,982

$

1,748,179

$

1,627,946

$

1,675,644

Loans serviced for others

$

932,915

$

1,018,743

$

1,056,509

$

1,114,710

$

1,216,296

Past due loans:










Amount 30+ days past due

2,407

2,257

3,423

2,965

1,535

Number 30+ days past due

217

197

283

255

143

30+ day performing delinquency rate(2)

0.14

%

0.13

%

0.19

%

0.18

%

0.09

%

Nonperforming loans

1,526

1,539

1,916

1,405

1,363

Nonperforming loans as a percentage of
   period end loans(2)

0.09

%

0.09

%

0.11

%

0.08

%

0.08

%

Net charge-offs

$

864

$

1,147

$

798

$

1,047

$

1,332

Net charge-off rate(3)

0.20

%

0.27

%

0.19

%

0.27

%

0.35

%

Number of vehicles repossessed during
   the period

132

140

107

132

147

Quarterly production weighted average
   beacon score

779

781

783

776

758
















(1)

Includes held-for-sale

(2)

Calculated by dividing loan category as of the end of the period by period-end loans including held for sale for the specified loan portfolio

(3)

Calculated by dividing annualized net charge-offs for the period by average loans held for investment during the period for the specified loan category

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

ANALYSIS OF INDIRECT LENDING

(UNAUDITED)

















As of or for the Quarter Ended

($ in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Production by state:










Alabama (3)

$

9,920

$

12,239

$

19,216

$

13,587

$

10,399

Arkansas (3)

4,488

20,322

30,732

26,997

26,569

North Carolina (3)

15,580

23,383

28,912

16,545

14,110

South Carolina (3)

11,065

12,322

16,559

10,959

11,232

Florida

52,645

65,786

87,750

51,723

49,976

Georgia

38,322

38,288

45,571

31,266

28,091

Mississippi (3)

22,605

24,785

32,141

24,535

20,136

Tennessee (3)

11,098

13,509

17,635

10,931

10,012

Virginia (3)

—

3,620

6,495

8,223

6,292

Texas (2)

—

—

—

13,312

26,542

Louisiana (3)

17,952

44,306

60,021

47,576

45,306

Oklahoma (2)

—

—

—

430

1,051


Total production by state

$

183,675

$

258,560

$

345,032

$

256,084

$

249,716













Loan sales

$

29,275

$

86,000

$

59,681

$

27,115

$

151,996

Portfolio yield (1)

3.02

%

2.98

%

2.98

%

2.92

%

2.84

%


(1)

Includes held-for-sale

(2)

Fidelity exited the Oklahoma and Texas markets in Q3 2017

(3)

Fidelity exited the Alabama, Arkansas, North Carolina, South Carolina, Mississippi, Tennessee, Virginia, and Louisiana markets in 2018

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

INCOME FROM MORTGAGE BANKING ACTIVITIES

(UNAUDITED)















As of or for the Quarter Ended

(in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Marketing gain, net

$

20,330

$

17,575

$

16,683

$

19,713

$

21,355

Origination points and fees

5,495

3,647

3,482

3,815

4,189

Loan servicing revenue

6,206

6,221

5,851

5,616

5,379

Gross mortgage revenue

$

32,031

$

27,443

$

26,016

$

29,144

$

30,923

Less:









MSR amortization

(3,331)

(3,426)

(3,609)

(3,560)

(3,331)

MSR recovery/(impairment), net

683

4,545

(1,476)

(544)

(636)

Total income from mortgage
   banking activities

$

29,383

$

28,562

$

20,931

$

25,040

$

26,956












FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

ANALYSIS OF MORTGAGE LENDING

(UNAUDITED)















As of or for the Quarter Ended

($ in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Production by region:










Georgia

$

545,951

$

368,739

$

423,876

$

490,323

$

519,497

Florida

136,990

109,034

103,490

95,010

95,983

Alabama/Tennessee

2,433

2,709

4,609

7,299

7,294

Virginia/Maryland

148,970

91,842

106,398

129,774

143,885

North and South Carolina

74,410

40,990

31,360

30,448

33,767

Total production by region

$

908,754

$

613,314

$

669,733

$

752,854

$

800,426












% for purchases

91.6

%

85.1

%

82.9

%

86.3

%

89.6

%

% for refinance loans

8.4

%

14.9

%

17.1

%

13.7

%

10.4

%











Portfolio Production:

$

75,990

$

44,554

$

66,236

$

56,072

$

46,902











Funded loan type (UPB):










Conventional

63.8

%

65.9

%

62.0

%

62.0

%

62.5

%

FHA/VA/USDA

20.7

%

22.1

%

21.5

%

23.3

%

24.6

%

Jumbo

15.5

%

12.0

%

16.5

%

14.7

%

12.9

%












Gross pipeline of locked loans to be
   sold (UPB)

$

354,735

$

382,386

$

203,896

$

265,444

$

360,551

Loans held for sale (UPB)

$

389,858

$

348,797

$

262,315

$

250,960

$

271,714












Total loan sales (UPB)

$

800,084

$

496,484

$

602,171

$

731,595

$

689,073

Conventional

70.7

%

69.1

%

64.3

%

63.0

%

63.6

%

FHA/VA/USDA

21.3

%

27.2

%

25.0

%

27.1

%

26.6

%

Jumbo

8.0

%

3.7

%

10.7

%

9.9

%

9.8

%












Average loans outstanding(1)

$

913,430

$

725,444

$

701,932

$

698,068

$

664,099












(1) Includes held-for-sale

















































FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

THIRD PARTY MORTGAGE LOAN SERVICING

(UNAUDITED)















As of or for the Quarter Ended

($ in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Loans serviced for others (UPB)

$

9,450,326

$

9,097,869

$

8,917,117

$

8,715,198

$

8,357,934

Average loans serviced for others
   (UPB)

$

9,244,175

$

9,038,568

$

8,896,305

$

8,657,475

$

8,304,065











MSR book value, net of amortization

$

119,372

$

113,217

$

110,497

$

107,434

$

102,549

MSR impairment

(4,590)

(5,274)

(9,818)

(8,343)

(7,799)

MSR net carrying value

$

114,782

$

107,943

$

100,679

$

99,091

$

94,750











MSR carrying value as a % of period
   end UPB

1.21

%

1.19

%

1.13

%

1.14

%

1.13

%












Delinquency % loans serviced for
   others

1.28

%

1.24

%

1.87

%

1.41

%

1.02

%












MSR revenue multiple(1)

4.52

4.31

4.29

4.38

4.38












(1) MSR carrying value (period end) to period end loans serviced for others divided by the ratio of annualized mortgage loan servicing revenue to
     average mortgage loans serviced for others.

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

AVERAGE BALANCE AND YIELDS

(UNAUDITED)


For the Quarter Ended

June 30, 2018

March 31, 2018

June 30, 2017

Average

Yield/

Average

Yield/

Average

Yield/

($ in thousands)

Balance

Rate

Balance

Rate

Balance

Rate

Assets










Interest-earning assets:










  Commercial

$

920,995

4.71

%

$

864,992

4.83

%

$

818,952

5.10

%

  SBA

154,459

7.16

%

153,731

8.08

%

155,819

8.25

%

  Construction

267,125

6.51

%

258,072

6.54

%

243,067

6.00

%

  Indirect automobile

1,771,665

3.02

%

1,784,982

2.98

%

1,670,576

2.85

%

  Installment loans and personal lines of credit

44,033

2.69

%

41,468

2.95

%

44,638

3.50

%

  Residential mortgage

912,700

4.15

%

724,684

3.99

%

662,664

3.93

%

  Home equity lines of credit

151,363

4.92

%

149,399

4.92

%

140,310

4.51

%

Total loans, net of unearned income (1)

4,222,340

4.07

%

3,977,328

4.07

%

3,736,026

4.04

%

Investment securities (1)

175,314

3.14

%

155,920

3.11

%

164,037

2.97

%

Other earning assets

147,405

1.47

%

156,751

1.39

%

345,891

0.98

%

Total interest-earning assets

4,545,059

3.95

%

4,289,999

3.93

%

4,245,954

3.75

%

Noninterest-earning assets:










Cash and due from banks

36,117



36,370



44,132


Allowance for loan losses

(31,174)



(30,002)



(30,116)


Premises and equipment, net

90,030



88,732



87,332


Other real estate

7,383



7,606



10,907


Other assets

243,119



233,677



221,322


Total noninterest-earning assets

345,475



336,383



333,577


   Total assets

$

4,890,534



$

4,626,382



$

4,579,531


Liabilities and shareholders' equity










Interest-bearing liabilities:










Demand deposits

$

489,051

0.14

%

$

461,614

0.14

%

$

437,034

0.11

%

Money market and savings deposits

1,349,447

0.61

%

1,345,905

0.55

%

1,284,329

0.45

%

Time deposits

906,133

1.16

%

901,394

1.04

%

1,049,248

0.90

%

Total interest-bearing deposits

2,744,631

0.70

%

2,708,913

0.65

%

2,770,611

0.56

%

Other short-term borrowings

395,215

1.84

%

235,519

1.57

%

243,359

0.83

%

Subordinated debt

120,637

5.43

%

120,604

5.28

%

120,505

4.79

%

Total interest-bearing liabilities

3,260,483

1.02

%

3,065,036

0.90

%

3,134,475

0.75

%

Noninterest-bearing liabilities and shareholders' equity:





Demand deposits

1,172,298



1,120,562



1,027,909


Other liabilities

42,081



37,336



44,824


Shareholders' equity

415,672



403,448



372,323


Total noninterest-bearing liabilities and
   shareholders' equity

1,630,051



1,561,346



1,445,056


   Total liabilities and shareholders' equity

$

4,890,534



$

4,626,382



$

4,579,531


Net interest spread

2.93

%


3.03

%


3.00

%

Net interest margin

3.22

%


3.29

%


3.20

%












(1)   Interest income includes the effect of taxable-equivalent adjustment using a 21% tax rate for the quarters ended June 30, 2018 and March 31, 2018 and a 35% tax rate for the quarter ended June 30, 2017.

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

GAAP TO NON-GAAP RATIO RECONCILIATION

(UNAUDITED)


For the Quarter Ended

($ in thousands)

June 30,
 2018

March 31,
 2018

December 31,
 2017

September 30,
 2017

June 30,
 2017

Reconciliation of nonperforming assets to adjusted nonperforming assets:

Nonperforming assets (GAAP)

$

74,442

$

75,955

$

63,338

$

58,606

$

56,265

Less: repurchased government-guaranteed mortgage
   loans included on nonaccrual

(27,220)

(26,091)

(19,478)

(15,450)

(12,502)

Less: SBA guaranteed loans included on nonaccrual

(3,639)

(1,541)

(1,652)

(2,145)

(2,949)

Less: Nonaccrual acquired loans

(7,648)

(7,890)

(6,242)

(7,366)

(4,544)

Adjusted nonperforming assets, excluding acquired
   loans and government-guaranteed loans (non-GAAP)

$

35,935

$

40,433

$

35,966

$

33,645

$

36,270




















Reconciliation of total loans, ORE and repossessions to total loans, ORE and repossessions, less acquired loans:

Loans, excluding Loans Held-for-Sale

$

3,792,886

$

3,714,308

$

3,580,966

$

3,409,707

$

3,332,132

Add: ORE

6,834

7,668

7,621

8,624

9,382

Add: repossessions

1,303

1,853

2,392

2,040

1,779

Total loans, ORE, and repossessions (GAAP)

3,801,023

3,723,829

3,590,979

3,420,371

3,343,293

Less: acquired loans

(165,303)

(178,496)

(196,567)

(216,994)

(230,256)

Adjusted loans, ORE, and repossessions, less acquired
   loans (non-GAAP)

$

3,635,720

$

3,545,333

$

3,394,412

$

3,203,377

$

3,113,037

Nonperforming assets to loans, ORE, and repossessions
   (GAAP)

1.96

%

2.04

%

1.76

%

1.71

%

1.68

%

Adjusted nonperforming assets to adjusted loans, ORE,
   and repossessions (non-GAAP)

0.99

%

1.14

%

1.06

%

1.05

%

1.17

%

Nonperforming assets to total assets (GAAP)

1.52

%

1.58

%

1.38

%

1.30

%

1.22

%

Adjusted nonperforming assets to total assets (non-
   GAAP)

0.73

%

0.84

%

0.79

%

0.75

%

0.79

%















Reconciliation of allowance to adjusted allowance:








Allowance for loan losses (GAAP)

$

31,623

$

30,940

$

29,772

$

30,703

$

30,425

Less: allowance allocated to indirect auto loans

(9,210)

(9,888)

(10,258)

(10,116)

(9,767)

Less: allowance allocated to acquired loans

(134)

(134)

(209)

(159)

(284)

Adjusted allowance for loan losses (non-GAAP)

$

22,279

$

20,918

$

19,305

$

20,428

$

20,374










Reconciliation of period end loans to adjusted period end loans:

Loans, excluding Loans Held-for-Sale

$

3,792,886

$

3,714,308

$

3,580,966

$

3,409,707

$

3,332,132

Less: indirect auto loans

(1,698,879)

(1,719,670)

(1,716,156)

(1,609,678)

(1,531,761)

Less: acquired loans

(165,303)

(178,496)

(196,567)

(216,994)

(230,256)

Adjusted total loans (non-GAAP)

$

1,928,704

$

1,816,142

$

1,668,243

$

1,583,035

$

1,570,115

Allowance to total loans (GAAP)

0.83

%

0.83

%

0.83

%

0.90

%

0.91

%

Adjusted allowance to adjusted total loans (non-GAAP)

1.16

%

1.15

%

1.16

%

1.29

%

1.30

%















Reconciliation of book value per common share to tangible book value per common share:

Shareholders' equity

$

420,962

$

410,744

$

401,632

$

388,068

$

379,399

Less: intangible assets

(11,751)

(12,028)

(12,306)

(12,625)

(12,966)

Tangible shareholders' equity

$

409,211

$

398,716

$

389,326

$

375,443

$

366,433

End of period common shares outstanding

27,191,787

27,034,255

27,019,201

26,815,287

26,702,665

Book value per common share (GAAP)

 

$

15.48

 

$

15.19

 

$

14.86

 

$

14.47

 

$

14.21

Tangible book value per common share (non-GAAP)

15.05

14.75

14.41

14.00

13.72

Contacts: 
Martha Fleming, Charles D. Christy
Fidelity Southern Corporation (404) 240-1504

SOURCE Fidelity Southern Corporation

Related Links

http://www.FidelitySouthern.com

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