Stock on the Run: Fidelity Southern Corporation (NASDAQ: LION)

ATLANTA, June 26, 2019 – Shares of Fidelity Southern Corporation (NASDAQ: LION) inclined 0.50% to $30.35. The stock traded total volume of 66.420K shares lower than the average volume of 99.45K shares.

Fidelity Southern Corporation (LION), holding company for Fidelity Bank, recently reported net income of $6.10M, or $0.22 per diluted share, for the first quarter of 2019, contrast with $9.90M, or $0.36 per diluted share, for the fourth quarter of 2018, and $11.80M or $0.43 per diluted share for the first quarter of 2018.

BALANCE SHEET

Total assets increased by $56.10M, or 1.2%, during the quarter to $4.80B at March 31, 2019, mainly because of a boost in investments of $33.70M and a boost in loans held for sale of $24.40M.  The increase in loans held for sale was mainly in mortgage loans, which increased $26.90M, 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 $18.40M, mainly because of the right of use lease asset of $15.50M recorded during the quarter as a result of the implementation of the new lease standard.

Loans:

Total loans increased by $15.70M, or 0.4%, contrast to December 31, 2018, as loans held for sale increased by $24.40M, offset by an overall decrease in loans held for investment of $8.70M. Loan growth in loans held for investment was practiced in all loan categories, excluding indirect auto, specifically in commercial, SBA and construction of $76.30M and $31.30M in mortgage. These increases were offset by a reduction of $114.50M in indirect loans.

Fair Value Adjustments:

Loan servicing rights reduced by $3.70M, or 3.0%, during the quarter to $116.70M at March 31, 2019, contrast to $120.40M 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 $108.40M at March 31, 2019. The current estimated fair market value of MSRs was $113.60M at March 31, 2019.

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Deposits:

Core deposits reduced by $19.30M during the quarter to $3.00B with decreases in money market and savings of $30.60M and noninterest bearing demand deposits of $11.40M, offset by increases in interest-bearing demand deposits of $22.70M. The decrease in core deposits was offset by a boost in time deposits of $20.20M during the quarter, mainly because of a boost of $30.00M in brokered deposits, resulting in a boost in total deposits of $955.0K, or 0.02%.

INCOME STATEMENT

Net Income:

Net income was $6.10M, or a $3.80M decrease over the previous quarter, mainly because of  a decrease in noninterest income of $7.10M driven by MSRs impairment of $4.80M during the quarter. Net income was $5.70M lower contrast to the same quarter a year ago, because of a $13.20M decrease in noninterest income, mainly mortgage banking activities, offset by a boost in net interest income of $3.40M, a decrease in noninterest expense of $1.30M and a decrease in income tax expense of $1.70M.

Interest Income:

Interest income of $47.00M was lower by $1.20M, contrast to the prior quarter, driven by a decrease in loan income of $1.40M. Average loan balances reduced by $105.50M for the quarter, $86.30M of this was because of 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 reduced $35.00M for the quarter. These decreases were offset by a boost in average investment securities of $40.60M 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 $8.90M increased slightly by $186.0K, or 2.1%, for the quarter, mainly because of a 6 basis points increase in deposit costs although average balances for total interest-bearing deposits reduced by $24.50M. As contrast to the first quarter of the prior year, interest expense increased by $2.10M, or 31.0%. Rising market rates paid on money market deposits and CD’s drove the increase.

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Noninterest Income:

On a linked-quarter basis, noninterest income reduced by $7.10M, or 23.0%, mostly because of a decrease of $4.90M, or 22.6%, in mortgage banking activities, mainly because of the formerly mentioned MSRs impairment of $4.80M for the quarter.  SBA lending activities also reduced by $2.10M as gains on SBA sales were seasonally lower for the quarter because of lower sales.

Noninterest Expense:

On a linked-quarter basis, total noninterest expense reduced by $2.60M, or 4.7%, mainly because of  a decrease in other expenses of $1.50M, of which $1.20Mwere merger related expenses, from the previous quarter. Salaries and employee benefits also reduced by $1.10M, or 3.9%. Contrast to the prior year quarter, noninterest expense of $53.50M reduced slightly by $1.30M, or 2.3%. Lower commissions accounted for $534.0K of the decrease because of lower mortgage production in the current quarter contrast to the first quarter of 2018.

Income Taxes:

On a linked-quarter basis, income tax expense reduced by $2.30M, mainly because of a decrease of $6.10M in pre-tax income during the quarter. The effective tax rate also reduced to 20.4% from 28.0%. Contrast to the first quarter of 2018, income tax expense reduced by $1.70M.

LION has the market capitalization of $842.21M and its EPS growth ratio for the past five years was 5.80%. The return on assets ratio of the Company was 0.80% while its return on investment ratio stands at 23.00%. Price to sales ratio was 4.51 while 69.00% of the stock was owned by institutional investors.

Jack Dawkins

Finance and Tech Contributor


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