Fidelity Southern Corporation Reports First Quarter Net Income and Decreased Nonperforming Assets

ATLANTA, April 15 /PRNewswire-FirstCall/ -- Fidelity Southern Corporation ("Fidelity" or "the Company") (Nasdaq:LION), holding company for Fidelity Bank (the "Bank"), reported net income of $195,000 for the first quarter of 2010 compared to a net loss of $3.4 million for the first quarter of 2009.  After accounting for the TARP preferred dividend, basic and diluted loss per share for the first quarter of 2010 were each $.06 compared to a loss per share of $.42 for the first quarter of 2009.  

We show core operating earnings which remove income taxes, provision for loan losses, cost of operation of ORE, and security gains because we believe that helps show a view of more normalized net revenues.  The measure allows better comparability with prior periods, as well as with peers in the industry who also provide a similar presentation.

Chairman James B. Miller, Jr. said, "As we implemented our Strategic Plan, Fidelity continued the steady improvement seen in 2009, helped by an improving economy.  We are building momentum in generating business.  So far this year, we hired an additional thirty-three people for business development and we continued to attract and acquire business from other banks.  We increased deposits and improved the deposit mix, even as we decreased deposit rates.  On the credit side, we reduced our exposure to construction, lot, and land loans to 10% of total loans.  Our exposure to speculative commercial real estate remains quite limited.  Nonperforming loans and all classified loans continued to decline.  Though still conservative, the required loan loss provision declined.  This year looks to be one of opportunity for our Company."

ALLOWANCE AND PROVISION

The provision for loan losses for the first quarter of 2010 was $4.0 million compared to $9.6 million for the same period in 2009; there were no surprises.  The decrease in the provision was due to a continued trend of decreased net charge-offs and nonperforming assets.  In the first quarter of 2010, non-performing assets continued to decrease from the 2009 levels.

Net charge-offs were $4.6 million in the first quarter of 2010 compared to $7.8 million in the first quarter of 2009 and were at the lowest level since the second quarter of 2008.  The ratio of net charge-offs to average loans outstanding was 1.45% for the quarter ended March 31, 2010, compared to 2.32% for March 31, 2009.  Fidelity reported an allowance for loan losses of $29.5 million or 2.30% of total loans at March 31, 2010, compared to $30.1 million or 2.33% at December 31, 2009 and $35.5 million or 2.66% of total loans at March 31, 2009.  The decrease was a result of lower loans outstanding and improving nonaccrual and nonperforming trends in the consumer portfolio.  

NONPERFORMING ASSETS

Nonperforming loans, repossessions and other real estate ("ORE") totaled $88.4 million at the end of the first quarter of 2010, a decrease of $4.6 million from December 31, 2009, and a decrease of $35.2 million from March 31, 2009.

Nonperforming residential construction and development loans at March 31, 2010, included 111 houses and 353 lots and land totaling approximately $44.0 million.  During the first quarter, approximately $4.7 million of nonperforming construction loans were paid down by our customers while approximately $1.4 million in construction loans were moved to nonperforming.

During the first quarter, $2.3 million of ORE assets were sold while $5.5 million were added to ORE.  ORE consists of 71 houses, representing 39% of the total ORE balance, 340 lots and four commercial properties.  ORE increased $3.2 million to $25.0 million at March 31, 2010, compared to $21.8 million at December 31, 2009.  ORE was $16.5 million at March 31, 2009.  

Nonperforming and foreclosed SBA loans, including the SBA guaranteed amounts, totaled $16.7 million at the end of the first quarter of 2010 and $8.1 million at the end of the first quarter of 2009.

REAL ESTATE

New residential construction loan advances made during the quarter totaled $3.7 million, while the payoffs of construction loans totaled $19.7 million.  Residential construction and A&D loans totaled $137.7 million at March 31, 2010, which was down 35.7% from $214.2 million at March 31, 2009.  There were 321 houses and 1,495 lots financed at March 31, 2010 compared to 495 houses and 1,908 lots at March 31, 2009.

Total residential and commercial construction and land loans decreased to $133.6 million or 10.4% of loans at March 31, 2010, from $154.8 million or 12.0% of loans at December 31, 2009, and $228.6 million or 17.1% of loans at March 31, 2009, and as a percentage of capital decreased from 77% at December 31, 2009, to 67% at March 31, 2010.  The regulatory guideline is a maximum of 100%.

All real estate loans, excluding owner-occupied properties, as a percentage of capital decreased to 135% at March 31, 2010, from 144% at December 31, 2009.  The regulatory guideline is a maximum of 300%.  

CAPITAL

Fidelity reported a total risk based capital ratio for the Bank of 13.51% at March 31, 2010, compared to 12.50% at March 31, 2009.  The Leverage Capital ratio at the Bank was 9.31% at March 31, 2010, compared to 9.27% at March 31, 2009.  Both ratios exceeded required regulatory minimums for well-capitalized institutions.  At March 31, 2010, the total risk based capital ratio and the leverage ratio increased seven basis points from December 31, 2009.

DEPOSITS

Total deposits were $1.566 billion at March 31, 2010, compared to $1.531 billion at March 31, 2009.  The designed change to the deposit mix and reduction in the interest rate paid on deposit accounts during the period demonstrates the Company's commitment to improved net interest margin and liquidity.

Pure deposits are all transactional and savings deposits (excludes all time deposits) and Core deposits are transactional, savings, and time deposits under $100,000.  The Bank continued to aggressively market its non-certificate of deposit products in the first quarter of 2010.  As a result, demand, money market and savings accounts increased $33.3 million or 3.9% compared to December 31, 2009.

NET INTEREST INCOME

Net interest income for the first quarter of 2010 increased $3.6 million or 32.5% when compared to the same period in 2009.  Net interest margin increased 69 basis points to 3.40% in the first quarter of 2010 compared to 2.71% in the first quarter of 2009; and increased nine basis points from 3.31% for the fourth quarter of 2009.  In addition, average total interest earning assets increased $88.9 million or 5.4% for the quarter ended March 31, 2010, compared to the same quarter in 2009.  The increase in net interest income for the quarter is a result of a greater reduction in the cost of funds than the decrease in the yield on earning assets and the increase in earning assets.

INTEREST INCOME

Total interest income for the first quarter of 2010 was nearly unchanged compared to the same period in 2009.  The decrease of 32 basis points in the yield on average interest-earning assets was offset by growth in average interest-earning assets for the first quarter 2010, which increased $88.9 million or 5.4%.  The decrease in yield was primarily the result of a decrease in the yield on interest bearing deposits of 127 basis points and a decrease in the yield on investment securities of 63 basis points.  These decreases were somewhat offset by a 19 basis point increase in the yield on loans to 6.13%.

INTEREST EXPENSE

Interest expense for the first quarter of 2010 decreased $3.7 million or 29.7% compared to the same period in 2009.  The decrease in interest expense was attributable to a 111 basis point decrease in the cost of interest-bearing liabilities somewhat offset by an increase in average interest-bearing liabilities of $72.3 million or 4.9%.  In addition to the general decrease in deposit rates, the Bank's shift in deposit mix toward core demand and savings accounts contributed to the reduction in the cost of funds.  During the first quarter of 2010, management continued to allow high cost time deposits to mature and be replaced by lower cost core deposits.  While brokered deposits decreased $90.0 million compared to March 31, 2009, management did take the opportunity to lock in historically low interest rates on longer term brokered deposits during the first quarter of 2010 increasing the total outstanding by $9.9 million compared to December 31, 2009, representing only 7% of total deposits.  

NONINTEREST INCOME

Noninterest income decreased $308,000 or 4.5% to $6.5 million for the quarter ended March 31, 2010, compared to the same period in 2009.  This decrease in noninterest income was a result of lower mortgage banking activities which decreased to $3.3 million for the first quarter ended March 31, 2010, compared to $3.6 million for the same period in 2009.  The decrease is primarily the result of lower mark to market gains.  Mortgage production increased from $85 million in the first quarter of 2009 to $176 million for the same period in 2010.  Indirect lending income also decreased $108,000 due to fewer sales in the secondary market.  Partially offsetting these decreases was an increase of $133,000 in other income to $226,000 in the first quarter of 2010 compared to the same period in 2009.  The increase was due to gains on sale of ORE in 2010 compared to losses in 2009.

NONINTEREST EXPENSE

Noninterest expense for the first quarter of 2010 increased $3.0 million or 21.2% to $17.0 million compared to the same period in 2009.  The increase was due to higher cost of operation of other real estate, which increased $1.4 million or 189.6% to $2.2 million due primarily to writedowns related to ORE, and higher foreclosure expenses.  In addition, salaries and employee benefits increased $992,000 or 12.6% to $8.9 million as the Bank increased the number of employees as a result of the expansion of the mortgage division which occurred midway through the first quarter of 2009 and an increase in lenders in the SBA, Commercial, Private Banking and Indirect Auto Lending divisions.  FDIC insurance premiums increased $563,000 or 174.3% compared to 2009 as a result of higher premiums and deposit growth.

LIQUIDITY

The Company's net liquid asset ratio, defined as federal funds sold, investments maturing within 30 days, unpledged securities, available unsecured federal funds lines of credit, FHLB borrowing capacity and available brokered certificates of deposit divided by total assets increased from 15.8% at March 31, 2009, to 20.5% at March 31, 2010.  The Company's net liquid asset ratio was 18.8% at December 31, 2009.

Fidelity Southern Corporation, through its operating subsidiaries Fidelity Bank and LionMark Insurance Company, provides banking services and credit related insurance products through 23 branches in Atlanta, Georgia, a branch in Jacksonville, Florida, and an insurance office in Atlanta, Georgia.  SBA 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 2009 Annual Report filed on Form 10-K with the Securities and Exchange Commission.

SOURCE Fidelity Southern Corporation