Fidelity Southern Corporation Reports Earnings For First Quarter Of $10.5 Million

ATLANTA, April 20, 2017 /PRNewswire/ -- Fidelity Southern Corporation ("Fidelity" or the "Company") (NASDAQ: LION), holding company for Fidelity Bank (the "Bank"), today reported financial results for the quarter ended March 31, 2017.

KEY RESULTS

• Net income of $10.5 million, or $0.40 per diluted share, an increase of $6.0 million, or 131.8%, year over year
• Total revenues of $75.0 million, an increase of $15.8 million, or 26.8%, year over year
• Loans, net of held-for-sale, grew by $52.7 million, or 1.6%
• Total assets of $4.5 billion increased by $141.4 million, or 3.2%
• Total deposits of $3.8 billion increased by $124.5 million, or 3.4%
• Loans serviced for others of $9.6 billion grew by $346.8 million, or 3.8%
• Tangible book value increased to $13.58, or 2.4%

Fidelity's Chairman and CEO, Jim Miller, said, "The current economy seems to be taking a pause, as reflected in interest rate volatility, though we still anticipate a gradual economic improvement given the worldwide economic environment. That means our effort to expand mortgage lending, particularly in Florida, will stay on track. Similarly our robust growth in Wealth Management's sales force means that department will be a net contributor to earnings by year end. Wealth Management also plans to offer life insurance products through a third party this year.  Construction lending is also robust while lending to business is still very competitive and depends on taking market share.

"As we approach the $five billion mark for assets on our books and the $10 billion mark for assets serviced for others, our attention is really focused on having the right systems, training, and personnel in place to best serve our customers.

"We are all gratified to have Palmer Proctor's leadership and look forward to his official start date of April 27 as the Bank's CEO."

BALANCE SHEET

Total assets of $4.5 billion at March 31, 2017, represent an increase of $141.4 million, or 3.2%, compared to December 31, 2016. The increase in total assets was driven by an increase in cash and cash equivalents which grew $200.8 million, or 134.1%, leading to an increase in total deposits of $124.5 million, or 3.4%, compared to December 31, 2016. Total assets were also impacted by a decrease of $104.2 million, or 22.4%, in loans held-for-sale due to fluctuations in the pipeline of loans to be sold. Loans held-for-investment increased $52.7 million, or 1.6%, due to new loan production during the quarter, as described below.

Loans

Total loans held for investment of $3.4 billion at March 31, 2017, represented an increase of $52.7 million, or 1.6%, compared to December 31, 2016, primarily in the residential mortgage and commercial portfolios, resulting in increases of $32.4 million, or 8.4%, and $18.2 million, or 2.3%. The Bank continues to generate organic new business as well as leverage its expansion through past acquisitions.

Loan Servicing Rights

Gross servicing rights increased by $5.7 million, or 5.8%, to $105.0 million at March 31, 2017. Cumulative production and sales of residential mortgage, SBA, and indirect auto loans continued to grow and generate a net increase of servicing rights.

Deposits

Total deposits at March 31, 2017, of $3.8 billion increased by $124.5 million, or 3.4%, during the quarter. Noninterest bearing demand deposits increased $40.5 million, or 4.2%, during the quarter. An increase in interest bearing deposits of $107.6 million, or 8.9%, in the demand and money market category was partially offset by decreases of $18.0 million and $5.5 million, in savings and time deposits, respectively. Deposit balances continue to grow with successful marketing efforts and the expansion of our geographical footprint.

INCOME STATEMENT

Net Income

Net income was $10.5 million for the quarter, an increase of $6.0 million, or 131.8%, compared to the first quarter of 2016. The primary driver of the increase in net income was an increase of $12.5 million, or 50.2%, in noninterest income, stemming from an additional $11.1 million of income from mortgage banking activities. In addition, the year over year increase in average earning assets of $430.9 million, or 11.8%, contributed an additional $2.9 million, in net interest income. These increases in net income were partially offset by an increase in the provision for loan losses of $1.6 million and an increase in noninterest expense of $4.0 million, due to increased salaries and employee benefits and commissions.

On a linked-quarter basis, net income decreased by $4.5 million, or 30.1%, as total revenue decreased by $10.4 million, or 12.2%, led by a $11.6 million, or 30.9%, decrease in noninterest income from mortgage banking activities, from less MSR impairment recovery and lower mortgage production, than the previous quarter. This decrease was partially offset primarily by a decrease of $3.6 million, or 6.6%, in noninterest expense. A decrease in net income, on a linked-quarter basis, was expected due to seasonality of home mortgage production and automobile purchases, as well as higher payroll related taxes.

Interest Income

Interest income was $37.6 million for the quarter, an increase of $3.4 million, or 9.8%, compared to the same period in the prior year. Average loans for the quarter increased by $347.6 million, or 10.3%, compared to the same quarter a year ago, which was the primary reason for the increase in interest income.

On a linked-quarter basis, interest income decreased by $645,000, or 1.7%. The decrease in interest income was primarily driven by a decrease of $56.7 million, or 1.5%, in average loans.

Interest Expense

Interest expense was $5.4 million for the quarter, an increase of $410,000, or 8.2%, compared to the same quarter a year ago, as a combination of organic growth and deposits added through the March 2016 AEB acquisition resulted in a year over year increase of $257.2 million, or 10.6%, in average interest-bearing deposits.

The increase in interest expense due to larger average deposit balances was partially offset by a decrease in the rate paid on interest-bearing accounts, primarily time deposits, of 7 basis points as compared to the same quarter a year ago.

On a linked-quarter basis, interest expense was relatively flat, increasing by $56,000, or 1.0%, due to an increase in average interest-bearing deposits of $100.1 million, or 3.7%.

Net Interest Margin

Net interest income (tax equivalent) rose to $32.4 million for the quarter, or 10.1%, as compared to $29.4 million for the same period in 2016, primarily due to a year over year increase of $430.9 million, or 11.8%, in average earning assets. This increase occurred primarily from organic loan growth, partially offset by an increase in interest expense from growth in average interest-bearing deposits which increased by $257.2 million or 10.6%.

The net interest margin was 3.21% for the quarter, a decrease of 3 basis points, compared to 3.24% for the same period in 2016.

On a linked-quarter basis, the net interest margin decreased by 4 basis points. These decreases in the net interest margin occurred primarily as a result of mix in interest earning assets with an increase in cash held at March 31, 2017 resulting from the deposit campaigns as well as late quarter sales of loans.

Provision for Loan Losses

The provision for loan losses was $2.1 million for the quarter, an increase of $1.6 million, as compared to the same period in 2016. The primary reason for the increase in the provision was the increase in net charge-offs for the quarter, primarily in the indirect auto loan portfolio, as compared to the same period in 2016.

On a linked-quarter basis, the provision for loan losses decreased by $385,000, as net charge-offs decreased compared to the previous quarter, mostly due to seasonal fluctuations, mainly in the level of net charge-offs of commercial and HELOC loans. Asset quality remained strong; the trend in low net charge-offs continued for most of our portfolio, with the exception of indirect automobile, which experienced an increase of $196,000, or 15.0%, over the prior quarter.

Noninterest Income

Noninterest income was $37.4 million for the quarter, an increase of $12.5 million, or 50.2%, as compared to the same period in 2016. The increase is primarily due to a net increase in noninterest income from mortgage banking activities of $11.1 million, or 75.6%, as compared to the same period in 2016.

Mortgage production income was $21.7 million for the quarter, a $3.5 million, or 19.4%, increase over the same period in 2016, due to increased loan originations on new loans and sales.

Mortgage servicing revenue increased by $849,000, or 18.9%, for the quarter, as compared to the same period in 2016, due to continued loan originations and sales, as the portfolio of mortgage loans serviced for others increased from $6.9 billion to $8.1 billion, or 17.0%, year over year.

The increase in market interest rates resulted in a net recovery of MSR impairment of $2.0 million during the quarter as compared to net MSR impairment of $4.7 million for the same period in 2016, driving $6.7 million of the increase in noninterest income from mortgage banking activities.

On a linked-quarter basis, noninterest income decreased by $9.8 million, or 20.7%, largely due to a net decrease in income from mortgage banking activities of $11.6 million, or 30.9%. The decrease was largely driven by an $11.2 million swing in MSR impairment recovery as a large net recovery of MSR impairment was recorded during the previous quarter due to an increase in interest rates, offset by higher noninterest income for indirect and SBA lending activities.

Noninterest Expense

Noninterest expense was $50.6 million for the quarter, an increase of $4.0 million, or 8.6%, as compared to the same period in 2016, mostly due to increased expenses associated with organic growth as well as the AEB acquisition. Increases were noted in salaries and employee benefits, commissions, and other noninterest expense, as discussed below.

Salaries and employee benefits increased by $2.4 million, or 10.3%, for the quarter, as compared to the same period in 2016. The approximate growth in the FTE count of 51 or 4.0%, at March 31, 2017, as compared to March 31, 2016, drove the majority of the increase in salaries. Also included in the increase is $683,000 of employer taxes and employee benefits, primarily resulting from the increase in both number of employees and the increased cost of employer-paid benefits, mainly medical premiums.

Commissions increased by $900,000, or 13.6%, for the quarter, as compared to the same period in 2016, primarily due to an increased tiered commission rates program, an increase in retail mortgage production, and an increase in guaranteed commissions paid to new mortgage loan originators. 

Other noninterest expense increased by $646,000, or 5.7%, for the quarter, as compared to the same period in 2016. The majority of this increase occurred due to increases in normal operating costs, ORE carrying costs, and services provided by third party vendors.

On a linked-quarter basis, total noninterest expense decreased by $3.6 million, or 6.6%, for the quarter. Decreases in commissions expense of $2.0 million, or 21.2%, due to lower mortgage loan production, decreases in occupancy expense of $733,000, or 15.0%, as lower amounts for hardware and software maintenance costs, real property taxes, and utility expenses were incurred, and decreases in other noninterest expense of $648,000, or 5.1%, primarily due to FDIC indemnification assets adjustments, accounting for the majority of the differences on a linked-quarter basis.

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. SBA, indirect automobile, and mortgage loans are provided throughout the South and parts of the Midwest. For additional information about Fidelity's products and services, please visit the web site 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 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 2016 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.

 

 

SOURCE Fidelity Southern Corporation