Fidelity Southern Corporation, holding company for Fidelity Bank (the "Bank"), today reported financial results for the quarter and year ended December 31, 2015.

KEY RESULTS

• Net income of $6.8 million and $39.1 million, or $0.28 and $1.64 per diluted share, for the quarter and year ended December 31, 2015

• Net interest margin increased 7 basis points during the quarter to 3.23%

• Total assets at December 31, 2015 of $3.8 billion increased 10.0% in the fourth quarter and 24.8% in 2015

• Loan portfolio increased by $313.3 million, or 10.5%, during the quarter and $672.5 million, or 25.6%, year over year, to $3.3 billion

• Loans serviced for others grew by $255.6 million, or 3.3%, during the quarter and $1.5 billion, or 22.4%, year over year, to $8.0 billion

• Total deposits increased by $267.5 million or 9.2%, during the quarter and $721.5 million, or 29.4%, year over year, to $3.2 billion

• Total revenues of $61.7 million and $244.7 million for the quarter and year ended December 31, 2015

• Return on Average Assets of 0.72% and 1.16% for the quarter and year ended December 31, 2015

• On October 2, 2015, the Bank acquired approximately $281 million in assets, including $145 million in loans, and assumed approximately $266 million in customer deposits of The Bank of Georgia under an FDIC-assisted transaction

• On October 26, 2015, the Company announced a Purchase and Assumption agreement with American Enterprise Bankshares, Inc. in which the Company will acquire all of the common stock of AEB. The transaction is expected to close in the first quarter of 2016. As of September 30, 2015, AEB reported approximately $205 million in assets, $156 million in loans, and $177 million in deposits

Fidelity's Chairman, Jim Miller, said, "We are optimistic about 2016.  We are taking market share so earnings have remained strong, even in an economy which seems mostly fueled by real estate, and also with help from the consumer.  Diversity of product has certainly helped as has expansion of our service teams with more branches and locations around the Southeast, which lets us offer our relationship banking to more companies and individuals.  Build-out of Trust Services continues and will contribute this year.  As we focus on profitability, more branching is planned, as well as growth of our recent acquisitions."

BALANCE SHEET

Total assets at December 31, 2015, grew to $3.8 billion, an increase of $349.6 million, or 10.0%, compared to September 30, 2015, and $763.9 million, or 24.8%, compared to December 31, 2014. These increases are primarily attributable to acquisitions made during the quarter and year, as well as organic growth in the indirect and mortgage loan portfolios held for investment.

On October 2, 2015, the Bank acquired substantially all the assets and liabilities of The Bank of Georgia in a Purchase and Assumption agreement with the FDIC. The Bank received $266 million in deposits, $144.7 million in loans at fair value, $2.2 million in core deposit intangible, $9.0 million in premises and equipment, and $6.4 million in other real estate. The transaction was accounted for under the acquisition method of accounting. Assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. Fair values are subject to refinement for up to one year after the closing date of the acquisition.

Loans

Total loans held for investment at December 31, 2015, grew to $2.9 billion, an increase of $255.1 million, or 9.7%, compared to September 30, 2015, and $643.6 million, or 28.6%, compared to December 31, 2014. The quarter and year over year increase includes the $144.7 million in loans acquired from The Bank of Georgia in the fourth quarter.

Indirect loans grew by $49.5 million and $230.2 million, or 3.5% and 18.9%, respectively, as the Bank continued to expand in the auto loan market. Mortgage loans increased by $59.2 million and $179.1 million, or 16.5% and 75.3%, respectively, compared to September 30, 2015 and December 31, 2014. $31.3 million of this increase related to organic growth, with the remaining $27.9 million added as part of The Bank of Georgia FDIC-assisted transaction. Commercial loans increased by $124.0 million and $179.1 million, or 21.4% and 34.2%, respectively, compared to September 30, 2015 and December 31, 2014. $31.8 million of the increase in commercial loans for the quarter was related to organic growth, with the remaining $92.2 million added as part of The Bank of Georgia FDIC-assisted transaction.

Total loans held for sale at December 31, 2015, grew to $397.8 million, an increase of $58.2 million, or 17.1%, compared to September 30, 2015, and $28.9 million, or 7.8%, compared to December 31, 2014. The quarter and year over year increases are due to increased production in indirect and mortgage loans held for sale.

Servicing rights showed steady growth as well, growing to $84.9 million at December 31, 2015, a net increase of $2.3 million, or 2.8%, compared to September 30, 2015, and $20.0 million, or 30.9%, compared to December 31, 2014, as residential mortgage, SBA, and indirect loan sales continue to grow.

Asset Quality

Nonaccrual loans increased $5.0 million for the quarter, to $34.3 million. This increase was primarily due to nonaccrual loans acquired as part of The Bank of Georgia FDIC-assisted transaction of $6.4 million, offset by a decrease in the existing nonaccrual loan portfolio of $1.4 million.

Other real estate increased $4.0 million for the quarter, to $18.7 million. This increase was primarily due to other real estate acquired as part of The Bank of Georgia FDIC-assisted transaction of $6.4 million, offset by a decrease in the existing other real estate portfolio of $2.4 million.

Classified loans increased $36.2 million for the quarter, to $84.1 million. This increase was primarily due to classified loans acquired as part of The Bank of Georgia FDIC-assisted transaction of $47.5 million, offset by a decrease in the existing classified loan portfolio of $11.3 million.

Deposits

Total deposits at December 31, 2015, of $3.2 billion increased $267.5 million, or 9.2%, compared to September 30, 2015, and $721.5 million, or 29.4%, compared to December 31, 2014.

The year over year net increase occurred primarily due to organic growth of $253.8 million, as well as the acquisition of deposits from The Bank of Georgia FDIC-assisted transaction during October 2015 of $278.2 million, eight branches in Florida during September 2015 of $151.3 million, and one branch in Florida during January 2015 of $38.2 million.

Average core deposits, including noninterest-bearing demand deposits, grew by $284.3 million, or 15.2%, during the quarter and $476.4 million, or 28.4%, year over year, increasing to $2.2 billion, particularly in commercial accounts and through the acquisition of branch deposits discussed above.

Borrowings

Other borrowings increased by $72.5 million, or 52.9%, during the quarter and decreased $81.4 million, or 27.9%, year over year. The quarterly and year over year fluctuations occurred due to changes in short-term borrowings. The Bank manages short-term liquidity needs through short-term FHLB advances and Fed funds purchased.

Subordinated debt increased by $74.0 million year over year due to the issuance of $75 million in subordinated notes, net of issuance costs, during May 2015. The additional subordinated debt was issued to support general corporate purposes and acquisitions.

INCOME STATEMENT

Interest Income

Interest income was $33.0 million and $116.6 million for the quarter and year ended December 31, 2015, respectively, an increase of $6.4 million and $15.0 million, or 24.1% and 14.7%, respectively, as compared to the same periods in 2014. The increase was primarily due to a year over year increase in average loans of $611.6 million, or 26.8%, mainly in the indirect and mortgage portfolios, while the yield on loans decreased by 9 basis points, from 4.02% to 3.93%, as new loans, on average, were originated at lower yields over the previous twelve months.

On a linked-quarter basis, interest income increased by $3.4 million, or 10 basis points, primarily due to a $230.0 million increase in average loans. This increase was primarily due to an organic growth of $52.8 million, as well as the acquisition of $144.7 million in loans from The Bank of Georgia in the fourth quarter of 2015, and $30.2 million in loans from First Bank late in the third quarter of 2015.

Interest Expense

Interest expense was $4.9 million and $15.8 million for the quarter and year ended December 31, 2015, an increase of $1.9 million and $4.6 million, or 62.3% and 40.8%, respectively, as compared to the same periods in 2014. These increases occurred primarily due to an increase in average subordinated debt of $74.0 million and $44.0 million for the quarter and year ended December 31, 2015, compared to the same periods in 2014, due to the addition of $75 million in subordinated debt in May 2015, as well as an increase in average interest bearing deposits of $535.9 million and $364.9 million for the quarter and year ended December 31, 2015, compared to the same periods in 2014. Part of this increase in average interest bearing deposits was due to acquisitions, with $208.2 million in interest bearing deposits added in the fourth quarter from The Bank of Georgia, and $365.8 million added through the year from all acquisitions.

On a linked-quarter basis, interest expense increased by $437,000, or 9.8%, primarily due to the increase in the average balance of interest bearing deposits of $330.2 million for the quarter. This increase includes $208.2 million in interest-bearing deposits acquired from The Bank of Georgia FDIC-assisted transaction during the fourth quarter of 2015, and $124.5 million in interest-bearing deposits acquired from First Bank late in the third quarter of 2015.

Provision for Loan Losses

The provision for loan losses was $3.1 million and $4.4 million for the quarter and year ended December 31, 2015, an increase of $2.5 million and $3.8 million, respectively, as compared to the same periods in 2014. These increases are due to the net growth in the total loan portfolio, excluding acquired loans, which increased $487.2 million compared to December 31, 2014, to $2.7 billion.

Net Interest Margin

The net interest margin was 3.23% and 3.24% for the quarter and year ended December 31, 2015, compared to 3.47% and 3.62% for the same periods in 2014. The decrease was primarily attributable to a decrease in the yield on total loans as new loans were originated at lower yields in 2015. Although the net interest margin decreased year over year, net interest income (tax equivalent) rose to $28.3 million and $101.2 million for the quarter and year ended December 31, 2015, compared to $23.7 million and $90.8 million for the same periods in 2014. These increases were due primarily to an increase of 27.8% and 24.3% in interest earning assets for the quarter and year ended December 31, 2015 compared to the same periods in 2014, due to a combination of organic growth and acquisitions previously described.

On a linked-quarter basis, the net interest margin increased 7 basis points. This increase is primarily due to loans acquired in The Bank of Georgia FDIC-assisted transaction in the fourth quarter of 2015 having higher yields than the existing portfolio.

Noninterest Income

Noninterest income was $28.7 million and $128.0 million for the quarter and year ended December 31, 2015, an increase of $4.0 million and $32.7 million, or 16.0% and 34.3%, respectively, as compared to the same periods in 2014. The increases were primarily related to increases in mortgage banking income as compared to the prior year.

Noninterest income from mortgage banking activities increased by $3.3 million and $29.8 million for the quarter and year, respectively, as compared to the same periods in 2014. Gains on mortgage loan sales increased $3.3 million and $26.7 million for the quarter and year, respectively, as compared to the same periods in 2014. Quarterly mortgage loan production increased by $52.4 million, or 10.2%, to $567.9 million while quarterly mortgage loan sales increased by $44.8 million, or 9.4%, to $520.7 million, as compared to the same periods in 2014. Year over year mortgage loan production increased by $739.2 million, or 38.2%, to $2.7 billion while year over year mortgage loan sales increased by $696.4 million, or 39.0%, to $2.5 billion.

On a linked-quarter basis, noninterest income decreased by $1.9 million, or 6.3%, primarily attributable to a decrease in income from mortgage banking activities of $2.0 million, due to lower gain on sale of mortgage servicing in the fourth quarter of 2015. See "Analysis of Mortgage Lending" tables below. This decrease was partially offset by an increase in service charges and other fees of $479,000, or 18.7%, as a result of growth in loan and deposit accounts.

Noninterest Expense

Noninterest expense was $43.2 million and $163.1 million for the quarter and year ended December 31, 2015, an increase of $6.6 million and $24.3 million, or 18.0% and 17.5%, respectively, as compared to the same periods in 2014.

During the quarter, Fidelity Bank continued its strategy of increasing its footprint across a larger geographic area, and increasing production as well. The Bank of Georgia FDIC-assisted transaction in October 2015 was the primary reason for increased noninterest expense in many areas. Salaries, benefits and commissions for the quarter and year increased $3.2 million and $17.2 million, or 13.8% and 19.8%, compared to the same periods in 2014. Occupancy expense for the quarter and year increased $1.3 million and $3.0 million, or 37.1% and 23.4%, compared to the same periods in 2014. Other noninterest expense for the quarter and year ended December 31, 2015 increased by $1.9 million and $3.6 million, or 22.4% and 10.4%, compared to the same periods in 2014, which is primarily due to increases associated with acquisitions and new locations.

On a linked-quarter basis, noninterest expense increased by $3.2 million, or 8.0%, primarily due to a $1.6 million increase in salaries, benefits and commissions, primarily due to The Bank of Georgia FDIC-assisted transaction in the fourth quarter of 2015 and First Bank branch acquisition late in the third quarter of 2015 increasing the Bank's headcount, along with an increase of $541,000 in occupancy costs due to the increased number of locations due to acquisition and expansion.