Fidelity Southern Corporation Reports Earnings For First Quarter Of $6.1 Million

ATLANTA, April 18, 2019 /PRNewswire/ -- Fidelity Southern Corporation ("Fidelity" or the "Company") (NASDAQ: LION), holding company for Fidelity Bank (the "Bank"), today reported net income of $6.1 million, or $0.22 per diluted share, for the first quarter of 2019, compared with $9.9 million, or $0.36 per diluted share, for the fourth quarter of 2018, and $11.8 million or $0.43 per diluted share for the first quarter of 2018.

FIRST QUARTER 2019 HIGHLIGHTS:

• The integrated planning process with Ameris Bancorp continues to proceed as expected.
• Although net interest income decreased by $1.4 million compared to the previous quarter, net interest margin improved by 2 basis points.
• Mortgage banking activities are down from the fourth quarter 2018 primarily due to a pre-tax mortgage servicing rights ("MSRs") impairment of $4.8 million as market rates have declined. This impairment had an effect of $0.14 per diluted share.
• Noninterest expense is below the fourth quarter by $2.6 million due to lower salaries and benefits, lower commissions as mortgage production decreased, and a reduction in other operating expenses due to merger related costs recorded in the fourth quarter.

BALANCE SHEET

Total assets increased by $56.1 million, or 1.2%, during the quarter to $4.8 billion at March 31, 2019, primarily due to an increase in investments of $33.7 million and an increase in loans held for sale of $24.4 million.  The increase in loans held for sale was primarily in mortgage loans, which increased $26.9 million, as seasonal production began to increase. The Bank continues to increase its available-for-sale investments portfolio as part of its strategy to reposition the balance sheet to higher yielding assets. Other assets also increased by $18.4 million, mainly due to the right of use lease asset of $15.5 million recorded during the quarter as a result of the implementation of the new lease standard.

Loans

Total loans increased by $15.7 million, or 0.4%, compared to December 31, 2018, as loans held for sale increased by $24.4 million, offset by an overall decrease in loans held for investment of $8.7 million. Loan growth in loans held for investment was experienced in all loan categories, excluding indirect auto, specifically in commercial, SBA and construction of $76.3 million and $31.3 million in mortgage. These increases were offset by a reduction of $114.5 million in indirect loans.

Asset Quality

Asset quality remained strong as nonperforming assets, excluding the guaranteed portion of government loans and acquired loans ("adjusted NPA's", a non-GAAP measure), remained flat during the quarter. Credit quality trend performance remains consistent and strong as net charge-offs were 0.10% of average loans for the quarter.

Fair Value Adjustments

Loan servicing rights decreased by $3.7 million, or 3.0%, during the quarter to $116.7 million at March 31, 2019, compared to $120.4 million at December 31, 2018. Mortgage servicing rights ("MSRs"), the primary component of loan servicing rights, contributed the majority of the change, decreasing by 2.7% to $108.4 million at March 31, 2019. The current estimated fair market value of MSRs was $113.6 million at March 31, 2019.

At March 31, 2019, fair value adjustments recorded on the balance sheet for loans held for sale, interest rate lock commitments ("IRLCs"), and hedge items were $12.4 million, a $3.7 million, or 42.1% increase, from December 31, 2018. The gross pipeline of interest rate lock commitments was $132.0 million higher at quarter end, compared to December 31, 2018, due to an increase in seasonal production.

Deposits

Core deposits decreased by $19.3 million during the quarter to $3.0 billion with decreases in money market and savings of $30.6 million and noninterest bearing demand deposits of $11.4 million, offset by increases in interest-bearing demand deposits of $22.7 million. The decrease in core deposits was offset by an increase in time deposits of $20.2 million during the quarter, mainly due to an increase of $30.0 million in brokered deposits, resulting in an increase in total deposits of $955,000, or 0.02%.

INCOME STATEMENT

Net Income

Net income was $6.1 million, or a $3.8 million decrease over the previous quarter, primarily due to  a decrease in noninterest income of $7.1 million driven by MSRs impairment of $4.8 million during the quarter. Net income was $5.7 million lower compared to the same quarter a year ago, due to a $13.2 million decrease in noninterest income, primarily mortgage banking activities, offset by an increase in net interest income of $3.4 million, a decrease in noninterest expense of $1.3 million and a decrease in income tax expense of $1.7 million.

Interest Income

Interest income of $47.0 million was lower by $1.2 million, compared to the prior quarter, driven by a decrease in loan income of $1.4 million. Average loan balances decreased by $105.5 million for the quarter, $86.3 million of this was due to a decrease in lower yielding indirect loans, which were partially replaced in the portfolio mix with higher yielding commercial and SBA loans. Average mortgage loans also decreased by $35.0 million for the quarter. These decreases were offset by an increase in average investment securities of $40.6 million and in the average balances of commercial, SBA and construction loans. The yield on total average interest-bearing assets also increased 7 basis points from the previous quarter.

Interest Expense

Interest expense of $8.9 million increased slightly by $186,000, or 2.1%, for the quarter, primarily due to a 6 basis points increase in deposit costs although average balances for total interest-bearing deposits decreased by $24.5 million. As compared to the first quarter of the prior year, interest expense increased by $2.1 million, or 31.0%. Rising market rates paid on money market deposits and CD's drove the increase.

Net Interest Margin

The net interest margin was 3.56% for the quarter compared to 3.54% in the previous quarter, a slight  increase of 2 basis points. The yield on total average interest-bearing liabilities increased by only 6 basis points while the yield on total average interest-earning assets increased by 7 basis points from 4.32% to 4.39%. Average loans decreased by $105.5 million, of which $86.3 million was a decrease in lower yielding indirect auto loans. Higher yielding investment securities increased by $40.6 million as the Bank's strategy to reposition its balance sheet continues to occur.

Average total interest-bearing liabilities decreased by $41.3 million as average deposits decreased by $24.5 million and average borrowings decreased by $16.8 million.

As compared to the same period a year ago, the net interest margin for the quarter increased by 27 basis points to 3.56% from 3.29%, primarily due to a 46 basis point increase in the yield on total average interest-earning assets of $4.4 billion, offset by an increase of 29 basis points in the yield on total average interest-bearing liabilities of $3.0 billion. Average earning assets increased by $62.7 million, primarily due to an increase in average investment securities over the year, offset by a decrease in average loans, primarily indirect auto loans. Average interest-bearing liabilities decreased by $42.9 million, primarily driven by a decrease in average borrowings of $74.4 million, offset by an increase in average interest-bearing deposits of $31.4 million.

Noninterest Income

On a linked-quarter basis, noninterest income decreased by $7.1 million, or 23.0%, largely due to a decrease of $4.9 million, or 22.6%, in mortgage banking activities, primarily due to the previously mentioned MSRs impairment of $4.8 million for the quarter.  SBA lending activities also decreased by $2.1 million as gains on SBA sales were seasonally lower for the quarter due to lower sales.

Compared to the same period a year ago, noninterest income for the quarter decreased by $13.2 million, primarily due to a decrease in mortgage banking activities stemming from a change in MSRs impairment of $9.4 million.

Noninterest Expense

On a linked-quarter basis, total noninterest expense decreased by $2.6 million, or 4.7%, mainly due to  a decrease in other expenses of $1.5 million, of which $1.2 million were merger related expenses, from the previous quarter. Salaries and employee benefits also decreased by $1.1 million, or 3.9%. Compared to the prior year quarter, noninterest expense of $53.5 million decreased slightly by $1.3 million, or 2.3%. Lower commissions accounted for  $534,000 of the decrease due to lower mortgage production in the current quarter compared to the first quarter of 2018.

Income Taxes

On a linked-quarter basis, income tax expense decreased by $2.3 million, primarily due to a decrease of $6.1 million in pre-tax income during the quarter. The effective tax rate also decreased to 20.4% from 28.0%. Compared to the first quarter of 2018, income tax expense decreased by $1.7 million.

OTHER NEWS

On March 15, 2019, Fidelity opened a new branch in Macon, GA, which brings the total number of retail branches to 70.

On May 6, 2019, Fidelity will hold a special shareholders meeting to vote on a proposal to approve the merger with Ameris Bancorp previously announced in December 2018.

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 2018 Annual Report filed on Form 10-K with the Securities and Exchange Commission ("SEC"). Additional information and other factors that could affect future financial results are included in Fidelity's subsequent filings with the SEC.

IMPORTANT ADDITIONAL INFORMATION

Ameris filed a registration statement on Form S-4 with the SEC on March 22, 2019, to register the shares of Ameris Common Stock that will be issued to Fidelity's shareholders in connection with the Merger.  The registration statement, which became effective on March 25, 2019, includes a joint proxy statement/prospectus and other relevant materials in connection with the transaction.  BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER.  Investors and security holders may obtain free copies of these documents and other documents filed with the SEC on its website at http://www.sec.gov.  Investors and security holders may also obtain free copies of the documents filed with the SEC by Fidelity on its website at www.FidelitySouthern.com and by Ameris on its website at http://www.AmerisBank.com.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.  Before making any voting or investment decision, investors and security holders of Fidelity and Ameris are urged to read carefully the entire registration statement and joint proxy statement/prospectus, including any amendments thereto, because they contain important information about the Merger.  Free copies of these documents may be obtained as described above.

Participants in the Solicitation

Fidelity and Ameris, and certain of their respective directors, executive officers and other members of management and employees, may be deemed to be participants in the solicitation of proxies from Fidelity's shareholders and Ameris's shareholders in respect of the Merger.  Information regarding such persons who may be deemed participants in the solicitation of proxies from Fidelity's shareholders and Ameris's shareholders is included in the joint proxy statement/prospectus for Fidelity's meeting of shareholders and Ameris's meeting of shareholders, which was filed by Ameris on Form S-4 on March 22, 2019 and declared effective on March 25, 2019.  Information about Fidelity's directors and executive officers and their ownership of Fidelity Common Stock can also be found in Part III of Fidelity's 2018 Annual Report on Form 10-K filed on March 13, 2019, and other documents subsequently filed by Fidelity with the SEC.  Information about Ameris's directors and executive officers and their ownership of Ameris Common Stock can also be found in Ameris's definitive proxy statement filed in connection with its 2019 annual meeting of shareholders on April 1, 2019, and other documents subsequently filed by Ameris with the SEC. Information regarding the interests of such participants is included in the joint proxy statement/prospectus and other relevant documents regarding the Merger filed with the SEC.