Fidelity Southern Corporation Earns $5.3 Million, a 189% Increase, in First Quarter

ATLANTA, April 19, 2012 /PRNewswire/ -- Fidelity Southern Corporation ("Fidelity" or the "Company") (NASDAQ: LION), holding company for Fidelity Bank (the "Bank"), reported net income of $5.3 million for the first quarter of 2012 compared to $1.8 million for the first quarter of 2011 and $3.8 million for the fourth quarter of 2012.  After accounting for the TARP preferred dividend, basic and diluted earnings per share for the first quarter of 2012 were $.32 and $.29, respectively which compared to basic and diluted earnings per share of $.09 and $.08 in the first quarter of 2011 and $.23 and $.21 in the fourth quarter of 2011, respectively.

The FDIC-assisted acquisition of Decatur First Bank, which was initiated in the fourth quarter of 2011, was completed in the first quarter of 2012 with transition of all accounts to Fidelity Bank systems.  This transaction was accretive to the first quarter 2012 results acquisition contributing approximately $846,000 after taxes to net income, or $.06 to diluted earnings per share. 

Fidelity's Chairman, Jim Miller, said "The quarter saw several positive steps for Fidelity.  There were significant improvements in credit metrics which reflects improving conditions in real estate.  The integration of Decatur First has been successful and we are glad to have been able to broaden our market outreach in our home market of Decatur.  We continue to expand our physical presence with branches in Cumming, Johns Creek, Ponce de Leon in Atlanta, Baymeadows in Jacksonville, and a new Powers Ferry relocation in Cobb County.  We also opened mortgage offices in Loudoun County, Virginia, and Savannah and Kennesaw, Georgia.  Feedback from our customers tells us the economy is indeed improving which leads directly to our improvement in core earnings despite the difficult banking environment of artificially low interest rates and somewhat unrestrained competition." 

ASSET QUALITY

Fidelity continued to experience improvement in asset quality exclusive of covered loans, as nonperforming loans, classified loans and provision expense all decreased for the quarter when compared to prior quarter and the same quarter prior year.

Net charge-offs were $2.4 million in the first quarter of 2012 compared to $6.7 million in the fourth quarter of 2011 and $4.2 million in the first quarter of 2011.  The ratio of net charge-offs to average loans outstanding was .59% for the three months ended March 31, 2012, compared to 1.19% for the same period in 2011 and 1.56% for the fourth quarter of 2011.  Provision expense was $3.8 million for the first quarter of 2012, compared to $5.8 million during the same period in 2011 and $5.3 million during the fourth quarter 2011. 

Loans and other real estate acquired in the FDIC-assisted transaction of Decatur First Bank are covered under loss sharing agreements with the FDIC ("Loss Share Agreements") and are collectively referred to as covered assets.  Under the Loss Share Agreements, the FDIC has agreed to reimburse us for 80% of all losses incurred in connection with those assets for a period of 10 years for residential mortgage loans and a period of five years for commercial loans.

Excluding covered loans, the allowance for loan losses at March 31, 2012 was $29.3 million, or 1.84% of total loans, compared to an allowance of $28.0 million, or 1.81% of total loans, at December 31, 2011, and $29.7 million, or 2.07% of total loans, at March 31, 2011.

The following table presents certain credit quality metrics of Fidelity's loan portfolio, inclusive and exclusive of covered loans.  Nonperforming assets include nonaccrual loans, net repossessions and other real estate. Classified assets include loans having a risk rating of substandard or worse, both accrual and nonaccrual, net repossessions and other real estate.

The following table provides a comparison of the activity affecting the allowance for loan loss.  Net charge-offs were $70,000 and provision expense was $94,000 for covered loans and during the first quarter of 2012.  There were no charge-offs or provision expense for covered loans during the fourth quarter of 2011.

ORE decreased $4.8 million to $25.7 million at March 31, 2012, compared to $30.5 million at December 31, 2011.  During the first quarter of 2012, $7.5 million of ORE assets were sold while $2.5 million were added to ORE.  Excluding covered assets, ORE additions were $1.2 million and sales were $4.2 million for the quarter. 

REAL ESTATE

New residential construction loan advances made during the quarter totaled $8.8 million, while the payoffs of construction loans totaled $16.6 million.  Excluding covered loans, construction and A&D loans totaled $90.6 million at March 31, 2012, compared to $89.1 million at December 31, 2011.  Excluding covered loans there were 374 houses and 985 lots financed at March 31, 2012, compared to 313 houses and 1,106 lots at December 31, 2011.

CAPITAL

The Company's capital position remained well above industry requirements at March 31, 2012, with a leverage capital ratio of 10.0%, a tier one ratio of 11.9%, and a total capital ratio of 13.7%, compared to 9.8%, 11.9%, and 13.1% respectively, at December 31, 2011.

At March 31, 2012, the Bank had a leverage ratio of 9.3%, a tier one ratio of 11.0%, and a total capital ratio of 12.8% compared to a leverage ratio of 9.1%, a tier one ratio of 11.0%, and a total capital ratio 12.7% at December 31, 2011. 

DEPOSITS

Total deposits of $1.868 billion at March 31, 2012 reflect the success of the Bank's strategy to increase and maintain core deposits.  Total deposits have increased from $1.678 billion as of March 31, 2011, due to the acquisition of Decatur First Bank in the fourth quarter of 2011 of approximately $135 million in deposits and the Bank's continued efforts to aggressively pursue core deposits. 

NET INTEREST MARGIN

Net interest margin increased 4 basis points to 3.86% in the first quarter of 2012 compared to 3.82% in the first quarter of 2011, and increased 14 basis points from 3.72% for the fourth quarter of 2011.  Excluding covered loans and the accretion of the loan discount, the net interest margin was 3.63% for the first quarter of 2012 compared to 3.69% for the fourth quarter of 2011.  Net interest income for the first quarter of 2012 increased $2.5 million or 14.6% when compared to the same period in 2011 and increased $575,000 or 3.0% when compared to the fourth quarter of 2011.  On a linked-quarter basis, the increase in net interest income is due to a greater reduction in the cost of funds than the decrease in the yield on earning assets.  On a year-to-date basis, the increase in net interest income is due to an increase in the average balance of interest-earning assets combined with a decrease in the cost of interest-bearing liabilities.

INTEREST INCOME

Total interest income for the first quarter of 2012 increased $817,000 or 3.5% compared to the same period in 2011.  Average interest-earning assets for the first quarter of 2012 increased nearly $230 million or 12.5%, but was somewhat offset by a 45 basis point decrease in the yield on average interest-earning assets due primarily to the Bank offering competitive rates in the marketplace.

In a linked-quarter comparison, interest income remained stable, increasing only $56,000 as average earning assets and the yield on earning assets each increased approximately 1%.

INTEREST EXPENSE

Interest expense for the first quarter of 2012 decreased $1.7 million or 26.6% compared to the same period in 2011.  The decrease in interest expense was attributable to a 52 basis point decrease in the cost of interest-bearing liabilities somewhat offset by an increase in average interest-bearing liabilities of $137.8 million or 8.6%.  In addition to the general decrease in deposit rates, the Bank's shift in deposit mix toward noninterest-bearing accounts, which made up 13.2% of total deposits at March 31, 2012 compared to 10.5% at March 31, 2011, contributed to the reduction in the cost of funds.

On a linked-quarter basis, interest expense decreased $519,000 or 10.1%.  The decrease in interest expense was attributable to an 11 basis point decrease in the cost of interest-bearing liabilities. 

NONINTEREST INCOME

On a year over year basis, noninterest income increased $6.0 million or 51.5% to $17.7 million for the quarter ended March 31, 2012, compared to noninterest income of $11.7 million for the same period in 2011.  The increase in noninterest income was the result of a $6.1 million or 102.8% increase in mortgage banking activities.  Income from mortgage lending increased due to a 101% increase in the March 31, 2012 pipeline to over $330.5 million, total funded loan volume for the quarter of $400.7 million representing an 89% increase over the year ago quarter and a $1.1 million MSR impairment recovery recognized in the current quarter. 

On a linked-quarter basis, noninterest income increased $2.0 million or 12.9% from $15.7 million recognized during the fourth quarter of 2011.  A $4.1 million increase in mortgage banking income was partially offset by a $1.0 million decrease in SBA lending activities and a $1.0 million decrease in other operating income.  Mortgage banking increased due to a 57% increase in the period ended loan pipeline along with a $1.1 million MSR impairment recovery recorded in current quarter compared to a $0.6 million impairment provision recorded in the prior quarter.  The increase was partially offset due to a $1.0 million decline in SBA loan sales gains from the prior quarter and a $1.5 million purchase accounting gain related to the acquisition of Decatur First Bank recorded in the fourth quarter 2011.

NONINTEREST EXPENSE

Noninterest expense for the first quarter of 2012 increased $4.9 million or 24.0% to $25.4 million compared to $20.5 million for the same period in 2011.  The increase was driven by a $4.0 million increase in salaries and employee benefits expense due to higher commission expense related to the increased mortgage banking volume as well as increased number of employees due to the fourth quarter acquisition.  Also contributing to the increase was a $950,000 or 79.6% increase in professional service fees, of which $119,000 was related to the Decatur First acquisition. 

On a linked-quarter basis, noninterest expense increased $1.7 million or 7.4%.  The increase was primarily due to a $1.4 million increase in salaries and employee benefits. 

Fidelity Southern Corporation, through its operating subsidiaries Fidelity Bank and LionMark Insurance Company, provides banking services and credit-related insurance products through 26 branches in Atlanta, Georgia, a branch in Jacksonville, Florida, and an insurance office in Atlanta, Georgia.  SBA, indirect automobile, and mortgage loans are provided through employees located throughout the Southeast.  For additional information about Fidelity's products and services, please visit the website at www.FidelitySouthern.com.

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 some factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled "Forward Looking Statements" on page 3 of Fidelity Southern Corporation's 2011 Annual Report filed on Form 10-K with the Securities and Exchange Commission.

SOURCE Fidelity Southern Corporation