10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005

Commission File Number 000-22374

Fidelity Southern Corporation

(Exact name of registrant as specified in its charter)

Georgia	58-1416811
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
3490 Piedmont Road, Suite 1550
Atlanta, Georgia	30305
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (404) 240-1504

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, without stated par value

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes o        No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13n Section 15(d) of the Act.    Yes o        No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ        No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.    o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer o        Accelerated filer þ        Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes o        No þ

     The aggregate market value of the common equity held by non-affiliates of the registrant (assuming for these purposes, but without conceding, that all executive officers and directors are “affiliates” of the registrant) as of June 30, 2005 (based on the average bid and ask price of the Common Stock as quoted on the NASDAQ National Market System on June 30, 2005), was $90,743,704.

     At March 10, 2006, there were 9,257,034 shares of Common Stock outstanding, without stated par value.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant’s Annual Report to Shareholders for the fiscal year ended December 31, 2005, are incorporated by reference into Parts I and II. Portions of the registrant’s definitive Proxy Statement for the 2006 Annual Meeting of Shareholders are incorporated by reference into Part III.

TABLE OF CONTENTS

		Pages
PART I
Item 1.	Business		3
Item 1A.	Risk Factors		13
Item 1B.	Unresolved Staff Comments		21
Item 2.	Properties		21
Item 3.	Legal Proceedings		21
Item 4.	Submission of Matters to a Vote of Security Holders		21
PART II
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities		21
Item 6.	Selected Financial Data		23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		55
Item 8.	Financial Statements and Supplementary Data		56
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		90
Item 9A.	Controls and Procedures		90
Item 9B.	Other Information		92
PART III
Item 10.	Directors and Executive Officers of Registrant		92
Item 11.	Executive Compensation		92
Item 12.	Security Ownership of Certain Beneficial Owners and Management		92
Item 13.	Certain Relationships and Related Transactions		92
Item 14.	Principal Accountant Fees and Services		92
PART IV
Item 15.	Exhibits, Financial Statement Schedules		93
EX-3(B) BY-LAWS
EX-10.(D) EMPLOYMENT AGREEMENT, JAMES B. MILLER
EX-10.(J) DIRECTOR COMPENSATION ARRANGEMENTS
EX-10.(K) NAMED EXECUTIVE OFFICER COMPENSATION ARRANGEMENTS
EX-13 ANNUAL REPORT TO SHAREHOLDERS
EX-21 SUBSIDIARIES OF FIDELITY SOUTHERN CORPORATION
EX-23 CONSENT OF ERNST & YOUNG LLP
EX-24 POWER OF ATTORNEY
EX-31.1 SECTION 302 CERTIFICATION OF MR. MILLER
EX-31.2 SECTION 302 CERTIFICATION OF MR. GRIFFITH
EX-32.1 SECTION 906 CERTIFICATION OF MR. MILLER
EX-32.2 SECTION 906 CERTIFICATION OF MR. GRIFFITH

PART I

Item 1. Business

General

      Fidelity Southern Corporation (“FSC”) is a registered bank holding company headquartered in Atlanta, Georgia. We conduct operations primarily though Fidelity Bank, a state chartered wholly owned subsidiary bank (the “Bank” or “FB”). The Bank was first organized as a national banking corporation in 1973 and converted to a Georgia chartered state bank in 2003. LionMark Insurance Company (“LIC”) is a wholly owned subsidiary of FSC and is an insurance agency offering a consumer credit related insurance product. FSC also owns four subsidiaries established to issue trust preferred securities. Fidelity (or the “Company”), as used herein, includes FSC and its subsidiaries, unless the context otherwise requires.

      At December 31, 2005, we had total assets of $1,406 million, total loans of $1,130 million, total deposits of $1,124 million, and shareholders’ equity of $87 million.

Forward-Looking Statements

      This report on Form 10-K may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect Fidelity’s current expectations relating to present or future trends or factors generally affecting the banking industry and specifically affecting Fidelity’s operations, markets and services. Without limiting the foregoing, the words “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon assumptions Fidelity believes are reasonable and may relate to, among other things, the adequacy of the allowance for loan losses, changes in interest rates, and litigation results. These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those projected for many reasons, including without limitation, changing events and trends that have influenced our assumptions. These trends and events include:

(i) changes in the interest rate environment, which may reduce margins;

(ii) non-achievement of expected growth;

(iii) less favorable than anticipated changes in the national and local business environment and securities markets;

(iv) adverse changes in regulatory requirements affecting us;

(v) greater competitive pressures among financial institutions in our market;

(vi) changes in fiscal, monetary, regulatory, and tax policies;

(vii) changes in political, legislative, and economic conditions;

(viii) inflation; and

(ix) greater loan losses than previously experienced.

      This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included herein and are not intended to represent a complete list of all risks and uncertainties in our business. Investors are encouraged to read the risks discussed under “Item 1A. — Risk Factors.”

Market Area, Products and Services

      The Bank provides an array of financial products and services for business and retail customers primarily through 19 branches in Fulton, Dekalb, Cobb, Clayton, and Gwinnett counties in Georgia and an Internet branch at www.lionbank.com. Our customers are primarily individuals and small and medium

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sized businesses located in Georgia. Indirect automobile lending (the purchase of consumer automobile installment sales contracts from automobile dealers) and residential construction and mortgage lending are also conducted through our Jacksonville, Florida, offices and two offices in Georgia. Small Business Administration (“SBA”) lending is conducted through an office in Conyers, Georgia.

      The Bank is primarily engaged in attracting deposits from individuals and businesses and using these deposits and borrowed funds to originate direct and indirect automobile and home equity loans, secured and unsecured installment loans, construction and residential real estate loans, commercial loans, including SBA loans, and commercial loans secured by real estate. We also directly provide international trade services. Trust services, credit card loans, and merchant services activities are provided through agreements with third parties. Investment services are provided through an agreement with an independent broker-dealer.

      We have grown our assets, deposits, and profits internally by building on our lending products, opening de novo branches, and hiring experienced bankers with existing customer relationships in our market.

Deposits

      We offer a full range of depository accounts and services to both individuals and businesses. As of December 31, 2005, deposits totaled approximately $1,124 million, consisting of (dollars in millions):

Noninterest-bearing demand deposits	$	121
Interest-bearing demand deposits and money market accounts		225
Savings deposits		177
Time deposits, including brokered deposits (less than $100,000)		376
Time deposits ($100,000 or more)		225
Total	$	1,124

      On November 30, 2005, the Bank hired the marketing firm of Austin & Williams to oversee our efforts to increase the number and volume of our personal and business demand deposit accounts. The program was launched on January 27, 2006, with the goals of building relationships with existing customers, adding new customers, increasing transaction accounts, and helping manage our rising cost of funds.

Lending

      Our primary lending activities include consumer loans (primarily indirect automobile loans), real estate loans, construction loans, SBA sponsored loans, and commercial loans to small and medium sized businesses. Secured construction loans to home builders and developers and residential mortgages are primarily made in the Atlanta, Georgia, and Jacksonville, Florida, metropolitan areas. The loans are generally secured by first and second real estate mortgages. We offer direct installment loans to consumers on both a secured and unsecured basis. Commercial lending consists of the extension of credit for business purposes, primarily in the Atlanta metropolitan area. SBA loans, typically originated in the Atlanta metropolitan area, are primarily made through our SBA loan production office in Conyers, Georgia.

      As of December 31, 2005, Fidelity had total loans outstanding, including loans held-for-sale, consisting of (dollars in millions):

Consumer installment loans	$	581	(1)
Real estate — mortgage loans		241	(2)
Real estate — construction loans		207
Commercial loans		101	(3)
Total	$	1,130

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(1)	Includes $572 million of indirect automobile loans financed for individuals, of which $26 million was held-for-sale.
(2)	Includes $47 million of pre-sold residential construction loans in various stages of completion, $108 million of commercial loans secured by real estate, and $1 million in originated residential mortgage loans held-for-sale.
(3)	Includes $16 million of indirect automobile loans financed for businesses and $4 million in SBA loans held-for-sale.

      As noted, the loan categories in the above schedule are based on certain regulatory definitions and classifications. Certain of the following discussions are in part based on Fidelity defined loan portfolios and may not conform to the above classifications.

Consumer Lending

      Our consumer lending activity primarily consists of indirect automobile lending. Fidelity also makes direct consumer loans (including direct automobile loans), home equity loans, and personal loans.

Indirect Automobile Lending

      Fidelity purchases, on a nonrecourse basis, consumer installment contracts secured by new and used vehicles purchased by consumers from franchised motor vehicle dealers and selected independent dealers located primarily in Georgia, Florida, and North Carolina. A portion of the indirect automobile loans we originate are sold. At December 31, 2005, we were servicing $260 million in loans we had previously sold.

      During 2005, we produced $453 million of indirect automobile loans, while selling $135 million to third parties with servicing retained. The balances in indirect automobile loans held-for-sale fluctuate from month to month as pools of loans are developed for sale.

Real Estate Mortgage Lending

      At December 31, 2005, our real estate mortgage loans consisted of $108 million in commercial real estate mortgage loans, $84 million in residential mortgage loans, and $49 million in home equity loans and lines of credit.

      Our residential mortgage loan business focuses on one-to-four family properties. We offer Federal Housing Authority (“FHA”), Veterans Administration (“VA”), and conventional and non-conforming residential mortgage loans (those with balances over $417,000). In addition, loans are purchased from independent mortgage companies located in the Southeast. We operate our residential mortgage banking business from four locations in the Atlanta metropolitan area and a loan production office in Jacksonville, Florida. Fidelity is an approved originator and servicer for the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal National Mortgage Association (“FNMA”), and is an approved originator for loans insured by the Department of Housing and Urban Development (“HUD”).

      The balances in mortgage loans held-for-sale fluctuate due to economic conditions, interest rates, the level of real estate activity, and seasonal factors. During 2005, we originated approximately $2 million in loans to be held in our portfolio. We primarily process brokered loans and sell originated residential mortgage loans, servicing released, to investors. We do not service mortgage loans for third parties.

Commercial Real Estate Lending

      We engage in commercial real estate lending through direct originations. Our commercial real estate portfolio loans are made primarily to small and medium sized, owner occupied, businesses to provide diversification and to generate assets that are sensitive to fluctuations in interest rates. Commercial real estate loans are generally prime-based floating-rate loans or shorter-term (one to five year) fixed-rate loans.

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Real Estate Construction Lending

      We originate real estate construction loans that consist primarily of 1-4 family residential construction and development loans made to builders, developers, and retail mortgage customers. Loan disbursements are closely monitored by management to ensure that funds are being used strictly for the purposes agreed upon in the loan covenants. We employ both internal staff and external engineering company experts to ensure that loan disbursements are substantiated by regular inspections and reviews. Construction and development loans are similar to all residential loans in that borrowers are underwritten according to their adequacy of repayment sources at the time of approval. Unlike conventional residential lending, however, signs of deterioration in a construction loan or development loan customer’s ability to repay the loan are measured throughout the life of the loan and not only at origination or when the loan becomes past due. In most instances, loan amounts are limited to 80% of the appraised value upon completion of the construction project. We operate our real estate construction loans through our Atlanta, Georgia, and Jacksonville, Florida, production offices.

Commercial and Industrial Lending

      We originate commercial and industrial loans, which include all SBA loans, that are generally secured by property such as inventory, equipment and finished goods. All commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any deterioration in the ability of the borrower to repay the loan. In most instances, collateral is required to provide an additional source of repayment in the event of default by the borrower. The structure of the collateral varies from loan to loan depending on the financial strength of the borrower, the amount and terms of the loan, and the collateral available to be pledged.

Brokerage Services

      We offer a full array of brokerage products through an agreement with an independent full service broker-dealer.

International Trade Services

      We provide services to individuals and business clients to meet their international business requirements. Letters of credit, foreign currency drafts, foreign and documentary collections, export finance, and international wire transfers represent some of the services provided.

Investment Securities

      At December 31, 2005, we owned investment securities totaling $169 million. Investment securities may include obligations of the U.S. Treasury, agencies of the U.S. Government, including mortgage backed securities, and other investments required by law, regulation, or contract.

Significant Operating Policies

Lending Policy

      The Board of Directors of the Bank has delegated lending authority to our management, which in turn delegates lending authority to our loan officers, each of whom is limited as to the amount of secured and unsecured loans he or she can make to a single borrower or related group of borrowers. As our lending relationships are important to our success, the Board of Directors of our Bank has established review committees and written guidelines for lending activities. In particular, the Officers’ Credit Committee reviews all lending relationships with a total exposure exceeding $250,000. In addition, the Officers’ Credit Committee must approve all commercial loan relationships up to $5 million and all residential construction loan relationships up to $10 million. The Loan and Discount Committee must approve all commercial loan relationships of $5 million and above and all residential construction loan relationships of $10 million and above.

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      The Bank’s written guidelines for lending activities require, among other things, that:

•  secured loans, except indirect loans which are generally secured by the vehicle purchased, be made only to persons and companies which are well-established and have net worth, collateral, and cash flow to support the loan;

•  real estate loans be secured by real property located primarily in Georgia or Florida;

•  unsecured loans be made to persons who maintain depository relationships with the Bank and have significant financial strength;

•  loan renewal requests be reviewed in the same manner as an application for a new loan; and

•  working capital loans be repaid out of conversion of assets or current earnings of the commercial borrower and that such loans be secured by the assets of the commercial borrower.

      Residential construction loans are made through the use of officer guidance lines, which are approved, when appropriate, by the Bank’s Officers Credit Committee or the Loan and Discount Committee. These guidance lines are approved for established builders and developers with track records and adequate financial strength to support the credit being requested. Loans may be for speculative starts or for pre-sold residential property to specific purchasers.

      Inter-agency guidelines adopted by Federal banking regulators require that financial institutions establish real estate lending policies. The guidelines also establish certain maximum allowable real estate loan-to-value standards. The Bank has adopted policies and standards which are in compliance with Federal and state regulatory requirements.

Loan Review and Nonperforming Assets

      The Bank’s Credit Review Department reviews the Bank’s loan portfolios to identify potential deficiencies and recommends appropriate corrective actions. The Credit Review Department reviews more than 30% of the commercial and construction loan portfolios and reviews 10% of the consumer loans originated annually. The results of the reviews are presented to the Bank’s Loan and Discount Committee on a monthly basis.

      We maintain an allowance for loan losses, which is established and maintained through provisions charged to operations. Such provisions are based on management’s evaluation of the loan portfolio, including loan portfolio concentrations, current economic conditions, the economic outlook, past loan loss experience, adequacy of underlying collateral, and such factors which, in management’s judgment, deserve consideration in estimating losses. Loans are charged off when, in the opinion of management, such loans are deemed to be uncollectible. Subsequent recoveries are added to the allowance.

Asset/ Liability Management

      Our Asset/ Liability Committee (“ALCO”) manages Fidelity’s assets and liabilities. ALCO attempts to manage asset growth, liquidity, and capital in order to maximize income and reduce interest rate risk. ALCO directs our overall acquisition and allocation of funds and reviews and sets rates on deposits, loans, and fees.

Investment Portfolio Policy

      Our investment portfolio policy is designed to maximize income consistent with liquidity, asset quality, regulatory constraints, and asset/liability objectives. The policy is reviewed at least annually by the Boards of Directors of FSC and the Bank. The Boards of Directors are provided information on a regular basis concerning significant purchases and sales of investment securities, including, resulting gains or losses. They are also provided information related to average maturity, Federal taxable equivalent yield, and appreciation or depreciation by investment categories.

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Supervision and Regulation

General

      The following is a brief summary of the regulatory environment in which FSC and the Bank operate and is not intended to be a complete discussion of all statutes and regulations affecting such operations, or of those statutes and regulations that are specifically mentioned herein. Changes in the laws and regulations applicable to FSC and the Bank can affect the operating environment in substantial and unpredictable ways. FSC cannot accurately predict whether legislation will ultimately be enacted, and, if such legislation were enacted, FSC cannot accurately predict the ultimate effect that it or implementing regulations would have on its or its subsidiaries’ financial condition or results of operations. It should also be noted that supervision, regulation, and examination of FSC and the Bank are intended primarily for the protection of depositors, not security holders.

      FSC is a bank holding company subject to regulation by the Federal Reserve Board (“Federal Reserve” or “FRB”) under the Bank Holding Company Act of 1956, as amended (“Holding Company Act”). FSC is required to file financial information with the Federal Reserve periodically and is subject to periodic examination by the Federal Reserve.

      The Bank is subject to regulation by the Georgia Department of Banking and Finance (the “GDBF”) and the Federal Deposit Insurance Corporation (the “FDIC”), the Bank’s primary Federal regulator.

Holding Company Regulations

      The Holding Company Act requires a bank holding company to obtain prior approval from the Federal Reserve (i) before it may acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank that it does not control; (ii) before it or its subsidiaries, other than a bank, acquire all or substantially all of the assets of a bank; and (iii) before it merges or consolidates with any other bank holding company. In addition, a bank holding company is generally prohibited from engaging in non-banking activities or acquiring direct or indirect control of voting shares of any company engaged in such activities. This prohibition does not apply to activities determined by the Federal Reserve, by order or regulation, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the nonbanking activities that the Federal Reserve has determined by regulation or order to be closely related to banking are: making or servicing loans and certain types of leases; performing certain data processing services; acting as fiduciary or investment or financial advisor; providing securities brokerage services; and making investments in corporations or projects designed primarily to promote community welfare.

Bank Regulations

      The GDBF and the FDIC regulate and supervise the Bank’s operations and activities, including reserves, loans, mergers, issuances of securities, payments of dividends, interest rates, deposits, and the establishment of branches. Interest and certain other charges collected or contracted for by our Bank are also subject to state usury laws and certain Federal laws concerning interest rates.

      The Bank’s deposits are insured by the FDIC subject to the limits provided by applicable law. The major functions of the FDIC with respect to insured banks include paying depositors to the extent provided by law if an insured bank is closed without adequate provision having been made to pay claims of depositors, acting as a receiver of state banks placed in receivership when appointed receiver by state authorities, and preventing the development or continuance of unsafe and unsound banking practices. The FDIC has the authority to examine all insured banks and is empowered to place into receivership or require the sale of a bank to another institution when the bank’s tangible equity to total assets ratio is 2% or less and take other actions with respect to banks which do not meet the applicable capital ratio.

      Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), the FDIC has implemented a risk-based assessment system whereby banks are assessed deposit insurance premiums on a sliding scale, depending on their placement in nine separate supervisory categories. The

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FDIC’s assessment rate schedule ranges from no assessment for the healthiest banks up to $.27 per $100 of deposits for less healthy institutions. Because of the Bank’s rating, the Bank paid no FDIC deposit insurance premiums in 2005. All banks are required to pay the Financing Corporation (“FICO”) debt service assessment. The FICO rates are determined quarterly and are not tied to the FDIC risk assessment. In 2005, the FICO Assessment paid by the Bank was approximately $.134 per $1,000 of deposits.

      FDICIA imposes other substantial auditing and reporting requirements and increases the role of independent accountants and outside directors of banks having assets of $500 million or more. FDICIA also provides for a ban on the acceptance of brokered deposits except by well capitalized institutions and adequately capitalized institutions with the permission of the FDIC, and for restrictions on the activities engaged in by state banks and their subsidiaries as principal, including insurance underwriting, to the same activities permissible for national banks and their subsidiaries, unless the state bank is well capitalized and a determination is made by the FDIC that the activities do not pose a significant risk to the insurance fund.

      The Bank is also subject to limitations and restrictions under Federal law with respect to transactions with its affiliates. Since FSC is an affiliate of the Bank, the Bank is subject to limitations and restrictions on transactions with FSC, including (i) loans by the Bank to FSC, (ii) investments in the stock or securities of FSC by the Bank, (iii) the Bank’s accepting the stock or securities of FSC from a borrower as collateral for loans, and (iv) the purchase of assets from FSC by the Bank.

Capital Requirements

      Information regarding Fidelity’s capital requirements is contained in Note 2 of the Notes to Consolidated Financial Statements under the heading “Regulatory Matters”.

Interstate Banking

      Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking Act”), bank holding companies in any state may acquire banks located in any other state, subject to certain conditions, including concentration limits. In addition, banks may merge with banks in other states, and thereby establish branches in other states, subject to certain limitations.

      The authority of a bank to establish and operate branches within a state continues to be subject to applicable state branching laws. Under Georgia law, new or additional branches may be established anywhere in the state by a Georgia bank, or an out of state bank that operates one or more branches in Georgia, with the approval of the appropriate regulators.

The Gramm-Leach-Bliley Act

      Financial modernization legislation known as the Gramm-Leach-Bliley Act (“Gramm-Leach”) was signed into law in November 1999. Among other things, Gramm-Leach (i) establishes a comprehensive framework to permit affiliations among commercial banks, insurance companies, and securities firms; (ii) broadens the activities that may be conducted by subsidiaries of national banks and state banks; (iii) provides an enhanced framework for protecting the privacy of information gathered by financial institutions regarding their customers and consumers; and (iv) addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions, including the functional regulation of bank securities and insurance activities. In addition, in a change from the prior law, bank holding companies are in a position to be owned, controlled, or acquired by any company engaged in financially related activities.

      The Holding Company Act generally limits a bank holding company’s activities to managing or controlling banks, furnishing services to, or performing services for its subsidiaries, and engaging in other activities that the FRB determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is permissible, the FRB must

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consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition, and gains in efficiency. Possible adverse effects include undue concentration of resources, decreased or unfair competition, conflicts of interest, and unsound banking practices.

      Gramm-Leach expanded the range of permitted activities of a bank holding company which elects to become a financial holding company. These permitted activities include the offering of any service that is financial in nature or incidental thereto, including securities underwriting, insurance (both underwriting and agency), merchant banking, acquisitions of and combinations with insurance companies and securities firms, and additional activities that the FRB, in consultation with the Secretary of the Treasury, determines to be financial in nature or incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. FSC has elected to date not to become a financial holding company.

Safeguarding Customer Information

      The Federal banking agencies issued regulations implementing the provisions of Gramm-Leach relating to the protection of customer information. The regulations provide for administrative, technical, and physical safeguards to protect customer records and information. These safeguards are intended to: (i) ensure the security and confidentiality of customer records and information; (ii) protect against any anticipated threats or hazards to the security or integrity of such records or information; (iii) protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer; and (iv) ensure the proper disposal of such records and information.

Regulation of Mortgage Banking

      The Bank’s mortgage banking operations are subject to various rules and regulations with respect to such items as originating, processing, underwriting, selling, securitizing, and servicing residential mortgage loans.

Bank Secrecy Act and USA PATRIOT Act

      The Bank Secrecy Act (the “BSA”), together with its implementing regulations, is a tool that the U.S. Government uses to fight drug trafficking, money laundering and other crimes. Under the BSA, financial institutions are required to file certain reports, including suspicious activity reports, with the U.S. Financial Crimes Enforcement Network under certain circumstances. Financial institutions are also required to have policies and procedures in place to ensure compliance with the BSA. If a financial institution fails to timely file a report or fails to implement its BSA policies and procedures, it could subject the institution to enforcement action or civil money penalties.

      On October 26, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) was signed into law. The USA PATRIOT Act amended the BSA and broadened the application of anti-money laundering regulations to apply to additional types of financial institutions, such as broker-dealers, and strengthened the ability of the U.S. Government to detect and prosecute international money-laundering and the financing of terrorism. The principal provisions of Title III of the USA PATRIOT Act require that financial institutions: (i) establish an anti-money laundering program that includes training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain verification and certification of money-laundering risk for their foreign correspondent banking relationships. The USA PATRIOT Act also requires the Federal bank regulatory agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and bank holding company acquisitions. In addition, the USA PATRIOT Act increased the penalties for violation of anti-money laundering regulations. Failure of a financial institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for

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the institution. FSC has adopted policies, procedures and controls to address compliance with the requirements of the USA PATRIOT Act.

Dividends

      FSC is a legal entity separate and distinct from its subsidiaries, including the Bank. There are various legal and regulatory limitations on the extent to which FSC’s subsidiaries can, among other things, finance, or otherwise supply funds to, FSC. Specifically, dividends from the Bank are the principal source of FSC’s cash funds, and there are certain legal restrictions under Georgia law on the payment of dividends by Georgia state banks. The relevant regulatory agencies also have authority to prohibit FSC and the Bank from engaging in acts or omissions that, in the opinion of such regulatory agency, constitute an unsafe or unsound banking practice. Depending upon the financial condition of FSC and the Bank, the payment of dividends could be deemed to constitute such an unsafe or unsound practice.

Sarbanes-Oxley Act of 2002

      The Sarbanes-Oxley Act of 2002 comprehensively revised the laws affecting corporate governance, accounting obligations, and corporate reporting for companies, such as Fidelity, with equity or debt securities registered under the Securities Exchange Act of 1934. In particular, the Sarbanes-Oxley Act established: (i) new requirements for audit committees, including independence, expertise, and responsibilities; (ii) additional responsibilities regarding financial statements for the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) new standards for auditors and regulation of audits; (iv) increased disclosure and reporting obligations for the reporting company and its directors and executive officers; and (v) new and increased civil and criminal penalties for violation of the securities laws. The incremental current year and ongoing costs, including the requirements of management and employee time, is substantial and difficult to quantify.

Competition

      The banking business is highly competitive. We compete for traditional bank business with numerous other commercial banks and thrift institutions in Fulton, DeKalb, Cobb, Clayton, and Gwinnett counties, Georgia, our primary market area other than for residential construction and development loans, residential mortgages, and indirect automobile loans. We also compete for loans with insurance companies, regulated small loan companies, credit unions, and certain governmental agencies. We compete with independent brokerage and investment companies, as well as state and national banks and their affiliates and other financial companies. Many of the companies with whom we compete have greater financial resources.

      The indirect automobile financing and mortgage banking industries are also highly competitive. In the indirect automobile financing industry, the Bank competes with specialty consumer finance companies, including automobile manufacturers’ captive finance companies, in addition to banks. The residential mortgage banking business competes with independent mortgage banking companies, state and national banks and their subsidiaries, as well as thrift institutions and insurance companies.

Employees and Executive Officers

      As of December 31, 2005, we had 356 full-time equivalent employees. We are not a party to any collective bargaining agreement. We believe that our employee relations are good. The Company affords its employees a variety of competitive benefit programs including a retirement plan and group health, life and other insurance programs. The Company also supports training and educational programs designed to ensure that employees have the types and levels of skills needed to perform at their best in their current positions and to help them prepare for positions of increased responsibility.

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Executive Officers of the Registrant

Name	Age		Since		Position
James B. Miller, Jr.		65		1979	Chairman of the Board, President and Chief Executive Officer of FSC since 1979; Chairman of the Bank since 1998; President of the Bank from 1977 to 1997 and from December 2003 through September 2004; and Chief Executive Officer of the Bank from 1977 to 1997, and from December 2003 until present. Chairman of LionMark Insurance Company, a wholly owned subsidiary since November 2004.
H. Palmer Proctor, Jr.		38		1996	Senior Vice President of FSC since January 2006; Vice President of FSC from 1996 through 2005; President of the Bank since October 2004 and Senior Vice President of the Bank from 1996 through September 2004. Secretary/ Treasurer of LionMark Insurance Company, a wholly owned subsidiary, since November 2004.
David Buchanan		48		1995	Vice President of FSC since 1999; Executive Vice President of the Bank since October 2004; and Senior Vice President of the Bank from 1995 through September 2004.
M. Howard Griffith, Jr.		63		1994	Principal Accounting Officer of FSC and Chief Financial Officer of FSC and the Bank since February 1994.

Available Information

      Fidelity files annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet web site that contains reports, proxy and information statements, and other information regarding issuers, including Fidelity, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

      We also make available free of charge on or through our Internet web site (http://www.lionbank.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as well as Section 16 reports on Forms 3, 4, and 5 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

      We also provide a copy of our Annual Report via mail, at no cost, upon receipt of a written request to the following address:

Investor Relations

Fidelity Southern Corporation

P. O. Box 105075

Atlanta, Georgia 30348

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ITEM 1A. RISK FACTORS

      The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may adversely impact our business operations. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected.

RISKS RELATED TO OUR BUSINESS

We could encounter difficulties in maintaining our growth.

      Over the last two years our assets have increased $314 million, or 28.7%, from $1,092 million at December 31, 2003, to $1,406 million at December 31, 2005, primarily due to increases in real estate, construction, commercial and consumer loans. We expect to continue to experience growth in the amount of our assets, the level of our deposits and the scale of our operations. Achieving our growth targets requires us to attract customers that currently bank at other financial institutions in our markets, thereby increasing our share of the market. Our ability to successfully grow will depend on a variety of factors, including the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas, and our ability to manage our growth. While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance that growth opportunities will be available or that we will successfully manage our growth. If we do not manage our growth effectively, we may not be able to achieve our business plan, and our business and prospects could be harmed.

Our recent results may not be indicative of our future operating results.

      We have achieved significant growth in earnings per share in recent years. For example, net income per share from continuing operations (diluted) grew from $.18 for the year ended December 31, 2001, to $1.12 for the year ended December 31, 2005. Our strong performance during this time period was, in part, the result of resolving regulatory issues, reducing the Company’s risk profile, improving asset quality, and managing expenses while growing earning assets. In the future, we will not have all of these earnings improvement opportunities and we may not have the benefit of a favorable interest rate environment or a strong residential mortgage market. Various factors, such as economic conditions, regulatory and legislative considerations, and competition may also impede or restrict our ability to increase earnings at a similar rate.

Fluctuations in interest rates could reduce our profitability and affect the value of our assets.

      Like other financial institutions, our earnings and cash flows are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. We expect that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities and the relationships of various interest rates to each other. Over any defined period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice versa. In addition, the individual market interest rates underlying our loan and deposit products (e.g., prime versus competitive market deposit rates) may not change to the same degree over a given time period. In any event, if market interest rates should move contrary to our position, our earnings may be negatively affected. In addition, loan volume and quality and deposit volume and mix can be affected by market interest rates. Changes in levels of market interest rates could materially adversely affect our net interest spread, asset quality, origination volume and overall profitability.

      Interest rates have until recently been at historically low levels. However, from June 30, 2004, through December 31, 2005, the Federal Reserve increased its target for the Federal funds rate 13 times, from 1.00% to 4.25%. While these short-term market interest rates (which we use as a guide to price our deposits) have increased, longer-term market interest rates (which we use as a guide to price our longer-

13

term loans) have not. This “flattening” of the market yield curve has had a negative impact on our interest rate spread and net interest margin to date. If short-term interest rates continue to rise, and if rates on our deposits and borrowing continue to reprice upwards faster than the rates on our long-term loans and investments, we would experience further compression of our interest rate spread and net interest margin, which would have a negative effect on our profitability.

      Income could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

      We principally manage interest rate risk by managing our volume and the mix of our earning assets and funding liabilities. In a changing interest rate environment, we may not be able to manage this risk effectively. If we are unable to manage interest rate risk effectively, our business, financial condition, and results of operations could be materially harmed.

      Changes in the level of interest rates also may negatively affect our ability to originate real estate loans, the value of our assets, and our ability to realize gains from the sale of our assets, all of which ultimately affect our earnings.

Increases in longer-term interest rates may reduce our income from mortgage banking activities which would negatively impact our noninterest income and which would negatively impact our net interest income.

      Our mortgage banking operations have historically provided a significant portion of our noninterest income. We generate mortgage revenues primarily from gains on the sale of loans to investors on a servicing released basis. In a rising or higher interest rate environment, our originations of mortgage loans may decrease, resulting in fewer loans that are available to be sold to investors. This would result in a decrease in mortgage revenues and a corresponding decrease in noninterest income. In addition, our results of operations are affected by the amount of noninterest expenses associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment, data processing expenses, and other operating costs. During periods of reduced loan demand, such as we experienced in 2004 and 2005, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations.

A significant portion of our loan portfolio is secured by real estate loans in the Atlanta, Georgia, metropolitan area and in eastern and northern Florida markets, and a downturn in real estate market values in those areas may adversely affect our business.

      Currently, our lending and other businesses are concentrated in the Atlanta, Georgia, metropolitan area and eastern and northern Florida. Our real estate mortgage and construction loans, which accounted for 39.6% of our total loan portfolio as of December 31, 2005, are similarly concentrated. Therefore, conditions in these markets will strongly affect the level of our nonperforming loans and our results of operations and financial condition. Real estate values and the demand for mortgages and construction loans are affected by, among other things, changes in general and local economic conditions, changes in governmental regulation, monetary and fiscal policies, interest rates and weather. Declines in our real estate markets could adversely affect the demand for new real estate loans, and the value and liquidity of the collateral securing our existing loans. Adverse changes in our markets could also reduce our growth rate, impair our ability to collect loans, and generally affect our financial condition and results of operations.

We may be unable to maintain and service our relationships with automobile dealers and we are subject to their willingness and ability to provide high quality indirect automobile loans.

      Our indirect automobile lending operation depends in large part upon our ability to maintain and service our relationships with automobile dealers, the strength of new and used automobile sales, the loan rate and other incentives offered by the automobile manufacturers and their captive finance companies, and the continuing ability of the consumer to qualify for and make payments on high quality automobile

14

loans. There can be no assurance we will be successful in maintaining such dealer relationships or increasing the number of dealers with which we do business, or that our existing dealer base will continue to generate a volume of finance contracts comparable to the volume historically generated by such dealers.

FSC’s profitability depends significantly on economic conditions in the Atlanta metropolitan area.

      The Company’s success depends primarily on the general economic conditions of the Atlanta metropolitan area and the specific local markets in which we operate. Unlike larger national or regional banks that are more geographically diversified, we provide banking and financial services to customers primarily in the Atlanta metropolitan areas including Fulton, Dekalb, Cobb, Clayton, and Gwinnett counties. The local economic conditions in these areas have a significant impact on the demand for our products and services as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources. A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, outbreak of hostilities, or other international or domestic occurrences, unemployment, changes in securities markets, or other factors could impact these local economic conditions and, in turn, have a material adverse effect on our financial condition and results of operations.

FSC is subject to consumer and debtor protection laws.

      We are subject to numerous Federal and state consumer protection laws that impose requirements related to offering and extending credit. Federal and state governmental authorities may enact new laws and amend existing laws to regulate further the consumer credit industry or to reduce finance charges or other fees or charges that can be applicable to consumer loan accounts. Such laws, as well as any new regulations or rulings which may be adopted, may adversely affect our ability to collect on account balances or maintain existing levels of fees and charges with respect to the accounts. Any failure by us to comply with such legal requirements also could adversely affect our ability to collect the full amount of the account balances. Changes in Federal and state bankruptcy and debtor relief laws could adversely affect our results of operations and financial condition if such changes result in, among other things, additional administrative expenses and accounts being written off as uncollectible.

      Our activities are currently subject to a variety of statutes and regulations that are designed to protect consumers and include provisions that:

•  limit the interest and other charges collected or contracted for by the Bank;

•  govern the Bank’s disclosures of credit terms to consumer borrowers;

•  require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the community it serves;

•  prohibit the Bank from discriminating on the basis of race or other prohibited factors when it makes decisions to extend credit;

•  require that the Bank safeguard the nonpublic personal information of its customers, provide annual notices to consumers regarding the usage and sharing of such information, and limit disclosure of such information to third parties except under specific circumstances; and

•  govern the manner in which the Bank may collect consumer debts.

      The deposit operations of the Bank are also subject to laws and regulations that:

•  require the Bank to adequately disclose the interest rates and other terms of consumer deposit accounts;

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•  impose a duty on the Bank to maintain the confidentiality of consumer financial records and prescribe procedures for complying with administrative subpoenas of financial records; and

•  govern automatic deposits to and withdrawals from deposit accounts with the Bank and the rights and liabilities of customers who use automated teller machines and other electronic banking services.

FSC is subject to extensive governmental regulation.

      As discussed previously, we are subject to extensive supervision and regulation by Federal and state governmental agencies, including the FRB, the GDBF and the FDIC. Future legislation, regulations, and government policy could adversely affect Fidelity and the financial institution industry as a whole, including the cost of doing business. Although the impact of such legislation, regulations, and policies cannot be predicted, future changes may alter the structure of, and competitive relationships among, financial institutions and the cost of doing business.

FSC is subject to environmental liability risk associated with lending activities.

      A significant portion of the Company’s loan portfolio is secured by real property. During the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although the Company has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

We operate in a highly competitive industry and market area.

      The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and community banks within the markets in which we operate. Additionally, various out-of-state banks continue to enter or have announced plans to enter the market area in which we currently operate. We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes, and continued consolidation. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services, as well as better pricing for those products and services.

      Our ability to compete successfully depends on a number of factors, including, among other things:

•  the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets;

•  the ability to expand our market position;

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•  the scope, relevance and pricing of products and services offered to meet customer needs and demands;

•  the rate at which we introduce new products and services relative to our competitors;

•  customer satisfaction with our level of service; and

•  industry and general economic trends.

      Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

The allowance for loan losses may be insufficient.

      We maintain an allowance for loan losses, which is established and maintained through provisions charged to operations. Such provisions are based on management’s evaluation of the loan portfolio, including loan portfolio concentrations, current economic conditions, the economic outlook, past loan loss experience, adequacy of underlying collateral, and such other factors which, in management’s judgment, deserve consideration in estimating loan losses. Loans are charged off when, in the opinion of management, such loans are deemed to be uncollectible. Subsequent recoveries are added to the allowance.

      The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires management to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review the Company’s allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the estimated charge-offs utilized in determining the sufficiency of the allowance for loan losses, we will need additional provisions to increase the allowance. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations. See “Allowance for Loan Losses” in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located elsewhere in this report for further discussion related to our process for determining the appropriate level of the allowance for loan losses.

Our continued pace of growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.

      We are required by Federal regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate our capital resources will satisfy our capital requirements for the foreseeable future. We may at some point, however, need to raise additional capital to support our continued growth. If we raise capital through the issuance of additional shares of our common stock or other securities, it would dilute the ownership interest of our current shareholders and may dilute the per share book value of our common stock. New investors may also have rights, preferences and privileges senior to our current shareholders, which may adversely impact our current shareholders.

      Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we cannot assure you of our ability to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth or acquisitions could be materially impaired.

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The building of market share through our branching strategy could cause our expenses to increase faster than revenues.

      We intend to continue to build market share in the greater Atlanta metropolitan area through our branching strategy. We are planning four new branches that we intend to open within the next 24 months. There are considerable costs involved in opening branches and new branches generally require a period of time to generate sufficient revenues to offset their costs, especially in areas in which we do not have an established presence.

      Accordingly, any new branch can be expected to negatively impact our earnings for some period of time until the branch reaches certain economies of scale. Our expenses could be further increased if we encounter delays in the opening of any of our new branches. Finally, we have no assurance that our new branches will be successful, even after they have been established.

The Company’s controls and procedures may fail or be circumvented.

      Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the Company’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition.

New lines of business or new products and services may subject us to additional risks.

      From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations, and financial condition.

We may not be able to attract and retain skilled people.

      Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in most activities engaged in by the Company can be intense and we may not be able to hire people or to retain them. The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our market, years of industry experience, and the difficulty of promptly finding qualified replacement personnel. We currently have employment agreements and non-compete agreements with certain of our senior officers.

Our information systems may experience an interruption or breach in security.

      We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems. While we have policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of our information systems could damage our reputation, result in a loss

18

of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

We may be unable to keep pace with technological change.

      The financial services industry is continually undergoing rapid technological change, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business, financial condition, and results of operations.

We are subject to claims and litigation.

      From time to time, customers make claims and take legal action pertaining to the Company’s performance of our responsibilities. Whether customer claims and legal action related to the Company’s performance of our responsibilities are founded or unfounded, or if such claims and legal actions are not resolved in a manner favorable to the Company, they may result in significant financial liability and/or adversely affect the market perception of the Company and our products and services, as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Severe weather, natural disasters, acts of war or terrorism, and other external events could significantly impact our business.

      Severe weather, natural disasters, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. While we have never been affected by severe weather or natural disaster, acts of war or terrorism, or other adverse external events, we may be affected in the future. Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

RISKS RELATED TO FSC’S COMMON STOCK

Our stock price can be volatile.

      Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Our stock price can fluctuate significantly in response to a variety of factors including, among other things:

•  actual or anticipated variations in quarterly results of operations;

•  recommendations by securities analysts;

•  operating and stock price performance of other companies that investors deem comparable to us;

•  news reports relating to trends, concerns and other issues in the financial services industry;

•  perceptions in the marketplace regarding the Company and/or our competitors;

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•  new technology used, or services offered, by competitors;

•  significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or our competitors;

•  failure to integrate acquisitions or realize anticipated benefits from acquisitions;

•  changes in government laws and regulation; and

•  geopolitical conditions such as acts or threats of terrorism or military conflicts.

      General market fluctuations, industry factors, and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause our stock price to decrease, regardless of operating results.

FSC’s common stock trading volume is less than that of other larger financial services companies.

      Although FSC’s common stock is listed for trading on NASDAQ, the trading volume in our common stock is less than that of larger financial services companies. A public trading market having the desired characteristics of depth, liquidity, and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the lower trading volume of FSC’s common stock, significant sales of our common stock, or the expectation of these sales, could cause our stock price to fall.

An investment in FSC’s common stock is not an insured deposit.

      FSC’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or by any other public or private entity. Investment in FSC’s common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this Report. As a result, if you acquire FSC’s common stock, you may lose some or all of your investment.

RISKS ASSOCIATED WITH THE COMPANY’S INDUSTRY

The earnings of financial services companies are significantly affected by general business and economic conditions.

      The Company’s operations and profitability are impacted by general business and economic conditions in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, and the strength of the U.S. economy and the local economies in which we operate, all of which are beyond our control. A deterioration in economic conditions could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, among other things, any of which could have a material adverse impact on our financial condition and results of operations.

Financial services companies depend on the accuracy and completeness of information about customers and counterparties.

      In deciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports, and other financial information. We may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

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Consumers may decide not to use banks to complete their financial transactions.

      Technology and other changes are allowing parties to complete financial transactions that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

Item 1B. Unresolved Staff Comments

      None

Item 2. Properties

      Our principal executive offices consist of 19,175 square feet of leased space in Atlanta, Georgia. Our operations are principally conducted from 65,897 square feet of leased space located at 3 Corporate Square, Atlanta, Georgia. The Bank has 19 branch offices located in Fulton, Dekalb, Cobb, Clayton, and Gwinnett Counties, Georgia, of which 12 are owned and seven are leased. In addition, Fidelity acquired a branch site in late 2004 and is building a branch facility on that site, scheduled to open in the second quarter of 2006. Fidelity leases residential construction, residential loan, and indirect automobile loan production offices in Jacksonville, Florida, and a SBA loan production office in Conyers, Georgia.

Item 3. Legal Proceedings

      We are a party to claims and lawsuits arising in the course of normal business activities. Although the ultimate outcome of all claims and lawsuits outstanding as of December 31, 2005, cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on our results of operations or financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of security holders during the fourth quarter of 2005.

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

      The information required by Item 5, other than as set forth below, is incorporated herein by reference to the information that appears under the heading “Corporate and Shareholder Information” in our Annual Report to Shareholders.

Dividends

      FSC has declared and paid the following dividends per common share in the past two fiscal years:

	Dividend
	2005		2004
Fourth Quarter	$	.07	$	.05
Third Quarter		.07		.05
Second Quarter		.07		.05
First Quarter		.07		.05

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      See Note 13 to the consolidated financial statements in Item 8 for a discussion of the restrictions on the ability of the Company to pay dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

      The following table presents information as of December 31, 2005, with respect to shares of common stock of Fidelity that may be issued under equity compensation plans. The equity compensation plans of Fidelity consist of the Stock Option Plan and the 401(k) tax qualified savings plan.

					Number of
					Securities
					Remaining Available
					for Future Issuance
	Number of				Under Equity
	Securities to be				Compensation Plans
	Issued upon		Weighted Average		(Excluding
	Exercise of		Exercise Price of		Securities Reflected
Plan Category	Outstanding Options		Outstanding Options		in Column A)
Equity Compensation Plans Approved by Shareholders(1)		70,905	$	11.19		78,095
Equity Compensation Plans Not Approved by Shareholders(2)		N/A		N/A		N/A
Total		70,905	$	11.19		78,095

(1)	1997 Stock Option Plan
(2)	Excludes shares issued under the 401(k) plan.

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Item 6. Selected Financial Data

SELECTED FINANCIAL DATA

		Years Ended December 31,
		2005			2004			2003			2002			2001
		(Dollars in thousands except per share data)
Interest income		$	74,129		$	59,700		$	56,718		$	57,784		$	63,925
Interest expense			34,684			23,961			23,838			27,539			39,584
Net interest income			39,445			35,739			32,880			30,245			24,341
Provision for loan losses			2,900			4,800			4,750			6,668			2,007
Noninterest income, including securities gains			14,226			14,550			13,756			19,623			20,207
Securities gains, net			32			384			331			300			600
Noninterest expense			35,001			34,070			36,791			38,648			40,381
Income from continuing operations			10,326			7,632			3,753			3,179			1,603
Income from discontinued operations			—			—			78			8,216			907
Net income			10,326			7,632			3,831			11,395			2,510
Dividends declared — common			2,567			1,799			1,774			1,767			1,756
Per Share Data:
Income from continuing operations:
	Basic earnings	$	1.13		$	.85		$	.42		$	.36		$	.18
	Diluted earnings		1.12			.84			.42			.36			.18
Net income:
	Basic earnings		1.13			.85			.43			1.29			.29
	Diluted earnings		1.12			.84			.43			1.28			.29
Book value			9.39			8.64			8.01			7.99			6.64
Dividends declared			.28			.20			.20			.20			.20
Dividend payout ratio			24.86	%		23.56	%		47.27	%		55.57	%		109.62	%
Average common shares outstanding			9,176,771			9,003,626			8,865,059			8,832,309			8,781,628
Profitability Ratios:
Return on average assets			.79	%		.66	%		.36	%		.34	%		.18	%
Return on average shareholders’ equity			12.59			10.29			5.29			5.10			2.76
Net interest margin			3.17			3.22			3.35			3.43			2.93
Efficiency ratio			65.22			67.75			78.89			77.50			90.65
Asset Quality Ratios:
Net charge-offs to average loans			.23	%		.29	%		.54	%		.38	%		.41	%
Allowance to period-end loans			1.15			1.27			1.25			1.25			.82
Nonperforming assets to total loans and repossessions			.25			.29			.49			.92			1.18
Allowance to nonperforming loans and repossessions			4.50	x		5.53	x		3.14	x		2.03	x		1.32x

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		Years Ended December 31,
		2005			2004			2003			2002			2001
		(Dollars in thousands except per share data)
Liquidity Ratios:
Total loans to total deposits			100.51	%		97.93	%		93.81	%		87.12	%		87.65	%
Net loans to total deposits			97.79			94.57			89.61			83.21			80.38
Average total loans to average earning assets			86.48			82.78			84.26			85.78			85.89
Capital Ratios:
Leverage			8.64	%		8.74	%		9.03	%		8.42	%		8.08	%
Risk-based capital
	Tier 1		9.60			9.88			10.33			10.38			9.05
	Total		11.97			11.91			12.74			12.55			11.72
Average equity to average assets			6.29			6.38			6.86			6.16			5.94
Balance Sheet Data (At End of Period):
Assets		$	1,405,703		$	1,223,717		$	1,091,919		$	1,065,727		$	993,412
Earning assets			1,343,743			1,170,534			1,043,543			1,003,950			841,907
Total loans			1,129,777			995,289			833,029			789,402			717,088
Total deposits			1,124,013			1,016,377			887,979			906,095			818,081
Long-term debt			94,908			70,598			80,925			61,008			67,334
Shareholders’ equity			86,739			78,809			71,126			70,774			58,270
Daily Average:
Assets, net of discontinued operations		$	1,304,090		$	1,162,651		$	1,034,527		$	937,452		$	891,176
Earning assets			1,248,811			1,115,149			986,485			882,947			832,530
Total loans			1,080,025			923,103			831,243			757,430			715,099
Total deposits			1,072,695			969,815			865,182			845,619			814,477
Long-term debt			81,817			80,205			46,906			61,360			63,021
Shareholders’ equity			82,002			74,137			70,967			62,317			58,038

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONSOLIDATED FINANCIAL REVIEW

      The following management discussion and analysis address important factors affecting the results of operations and financial condition of FSC and its subsidiaries for the periods indicated. The consolidated financial statements and accompanying notes should be read in conjunction with this review.

Business Overview

      FSC is a bank holding company headquartered in Atlanta, Georgia, and is the parent company of its wholly-owned subsidiaries, Fidelity Bank (“the Bank”) and LionMark Insurance Company. With over $1.4 billion in assets, the Bank provides an array of personal and electronic financial services including traditional deposit, lending, mortgage, and international trade services to our commercial and retail customers. Internet banking, including on-line bill pay, and Internet cash management services are available to individuals and businesses, respectively. Brokerage, credit card, trust, and merchant processing services and products are provided through partnering arrangements with third parties. Fidelity currently conducts full-service banking and residential mortgage lending businesses through 19 locations in the metropolitan Atlanta area and our internet branch at www.lionbank.com. Fidelity conducts indirect automobile lending (the purchase of consumer automobile installment sales contracts from automobile dealers) in Georgia, Florida, Tennessee, and North Carolina through two Atlanta, Georgia, loan production

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offices, and our Jacksonville, Florida, indirect loan production office. Residential mortgage lending and residential construction lending are conducted through certain of our Atlanta offices and from a loan production office in Jacksonville, Florida. SBA lending is conducted through our Conyers, Georgia, loan production office.

      LionMark Insurance Company currently provides a credit related insurance product to our indirect automobile customers through our Atlanta, Georgia, office.

      Our profitability, as with most financial institutions, is primarily dependent upon net interest income, which is the difference between interest received on interest-earning assets, such as loans and securities, and the interest paid on interest-bearing liabilities, principally deposits and borrowings. Results of operations are also affected by the provision for loan losses; noninterest income, such as service charges on deposit accounts and fees on other services, income from indirect and SBA lending activities, mortgage banking, brokerage activities, and bank owned life insurance; as well as noninterest expenses such as salaries and employee benefits, occupancy, furniture and equipment, professional and other services, and other expenses, including income taxes.

      Economic conditions, competition, and the monetary and fiscal policies of the Federal government significantly affect financial institutions including FSC. Beginning in 2004 and throughout 2005, the Federal government’s monetary and fiscal policy was marked by a steady pattern of increases to short-term interest rates. Our lending activities are also significantly influenced by the local economic environments in Atlanta, Georgia, and Jacksonville, Florida. These factors include the demand for and supply of housing, competition among lenders, interest rate conditions, and prevailing rates for competing investments and deposit products in our primary market area.

      We are about building value. FSC’s mission is “to continue growth, improve earnings and increase shareholder value; to treat customers, employees, community and shareholders according to the Golden Rule; and to operate within a culture of strong internal controls.” Fidelity Bank is Atlanta’s Community Bank. We are about building relationships with a locally oriented, community based focus. We provide a broad array of sophisticated products delivered with quality personal service.

      Our banking franchise spans five counties in the metropolitan Atlanta market. Atlanta’s economy appears to be sound and growing based on improving economic trends, and management is optimistic regarding growth and profitability opportunities for 2006.

      Strategic initiatives completed over the past few years were designed to position ourselves to focus on the core banking business while expanding product offerings, reducing product delivery risk, reducing product credit risk, improving profitability, and strengthening capital.

      Our focus for 2006 is on the continuing profitable growth of our core banking business, building on our improved performance in 2005, when loans and total assets grew significantly, when income increased 35% over the prior year, and when asset quality and operating results reflected continued improvement. We define our core banking business as that of providing quality products, services, and delivery systems at the community banking level to both consumers and small to medium sized businesses.

      During 2005, we grew shareholder value by growing the core bank and increasing profits, while we focused on the future by taking initiatives that should contribute to FSC’s value. These initiatives focus on increasing our transaction deposit base and increasing noninterest income.

      We took the initiative to grow shareholder value by increasing personal and business transaction accounts to expand current customer relationships, add new customers, and increase the number and volume of lower cost transaction account deposits. To prepare for this initiative, we strengthened our retail banking staff, commenced construction of a new branch, began market studies to identify several other potential branch sites, and hired a marketing firm to oversee the launch of our Totally Free business and personal checking account program. This program was launched in January 2006, with a full array of new, simplified deposit products.

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      Also in the third quarter of 2005, we took steps to significantly increase our noninterest income by expanding our SBA lending department. By year-end 2005, we had established a complete team of experienced professional SBA lenders and support staff hired from one of our competitors.

      Finally, in 2005 we began operations in LionMark Insurance Company, an insurance agency offering a credit related insurance product to our customers, thereby enhancing our noninterest income.

Critical Accounting Policies

      Our accounting and reporting policies are in accordance with United States generally accepted accounting principles and conform to general practices within the banking industry. Our financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the application of these policies, or conditions significantly different from certain assumptions, could result in material changes in our consolidated financial position or consolidated results of operations. The more critical accounting and reporting policies include those related to the allowance for loan losses, the capitalization of excess servicing assets and their amortization, loan related revenue recognition, and income taxes. Our accounting policies are fundamental to understanding our consolidated financial position and consolidated results of operations. Accordingly, our significant accounting policies are discussed in detail in Note 1 in the “Notes to Consolidated Financial Statements.” Significant accounting policies have been periodically discussed and reviewed with and approved by the Audit Committee of the Board of Directors and the Board of Directors.

      The following is a summary of our significant accounting policies that are highly dependent on estimates, assumptions, and judgments.

Allowance for Loan Losses

      The allowance for loan losses is established and maintained through provisions charged to operations. Such provisions are based on management’s evaluation of the loan portfolio, including loan portfolio concentrations, current economic conditions, the economic outlook, past loan loss experience, adequacy of underlying collateral, and such other factors which, in management’s judgment, deserve consideration in estimating loan losses. Loans are charged off when, in the opinion of management, such loans are deemed to be uncollectible. Subsequent recoveries are added to the allowance.

      A formal review of the allowance for loan losses is prepared quarterly to assess the credit risk inherent in the loan portfolio, including concentrations, and to determine the adequacy of the allowance for loan losses. For purposes of the quarterly management review, the consumer loan portfolio is separated by loan type and each loan type is treated as a homogeneous pool. The level of allowance required for each loan type is determined in part based upon historical charge-off experience. Every commercial, commercial real estate, and construction loan is assigned a risk rating using established credit policy guidelines. A projected loss allocation factor is determined for each significant loan category based on historical charge-off experience, current trends, the economic outlook, and other factors. All nonperforming commercial, commercial real estate, SBA, and construction loans, and loans deemed to have greater than normal risk characteristics are reviewed monthly by Credit Review to determine the level of additional allocation for loan losses required to be specifically assigned to these loans. The amounts so determined are then added to the previously allocated allowance by category to determine the required allowance for commercial, commercial real estate, SBA, residential real estate, consumer, and construction loans. Methodologies for assessing the adequacy of the allowance for loan losses have been relatively consistent for the past several years.

Capitalized Servicing Assets

      Indirect automobile loan pools and certain SBA loans are sold with servicing retained. When the contractual servicing fees on loans sold servicing retained exceed the estimated costs to service those loans,

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the excess servicing fees (servicing rights) are capitalized and amortized over the expected lives of the serviced loans utilizing the interest method. Management makes certain estimates and assumptions related to costs to service varying types of loans and pools of loans, the projected lives of loans and pools of loans sold servicing retained, and discount factors used in calculating the present values of excess servicing fees projected to be received.

      No less frequently than quarterly, management reviews the status of all loans and pools of loans sold with related capitalized excess servicing assets to determine if there is any impairment to those assets due to such factors as earlier than estimated repayments or significant prepayments. Any impairment identified in these assets will result in reductions in their carrying values and a corresponding reduction in operating revenues.

Loan Related Revenue Recognition

      Loans are reported at principal amounts outstanding net of deferred fees and costs. Interest income and ancillary fees from loans are a primary source of revenue. Interest income is recognized in a manner that results in a level yield on principal amounts outstanding. Rate related loan fee income, loan origination, and commitment fees, and certain direct origination costs are deferred and amortized as an adjustment of the yield over the contractual lives of the related loans, taking into consideration assumed prepayments. The accrual of interest is discontinued when, in management’s judgment, it is determined that the collectibility of interest or principal is doubtful.

      For commercial, SBA, construction, and real estate loans, the accrual of interest is discontinued and the loan categorized as non-accrual when, in management’s opinion, due to deterioration in the financial position of the borrower, the full repayment of principal and interest is not expected, or principal or interest has been in default for a period of 90 days or more, unless the obligation is both well secured and in the process of collection. Commercial, SBA, construction, and real estate secured loans may be returned to accrual status when management expects to collect all principal and interest and the loan has been brought current. Interest received on well collateralized nonaccrual loans is recognized on the cash basis. If the commercial, construction or real estate secured loan is not well collateralized, payments are applied to reduce principal.

      Consumer loans are placed on nonaccrual upon becoming 90 days past due or sooner if, in the opinion of management, the full repayment of principal and interest is not expected. On consumer loans, any payment received on a loan on which the accrual of interest has been suspended is applied to reduce principal.

      When a well collateralized commercial, SBA, construction, or real estate secured loan is placed on nonaccrual, accrued interest is not reversed and future payments of interest are recognized as interest income when received. For other loans, interest accrued during the current accounting period is reversed and interest accrued in prior periods, if significant, is charged off and adjustments to principal are made if the collateral related to the loan is deficient.

Income Taxes

      Fidelity files consolidated Federal income tax returns, as well as tax returns in several states. Taxes are accounted for in accordance with FAS No. 109, “Accounting for Income Taxes.” Under the liability method of FAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Deferred tax assets are reviewed annually to assess the probability of realization of benefits in future periods or whether valuation allowances are appropriate. Under FAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The calculation of the income tax provision is complex and requires the use of judgments and estimates in its determination.

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Obligations

      The following schedule provides a summary of our financial commitments to make future payments, primarily to fund loan and other credit obligations, long-term debt, and rental commitments primarily for the lease of branch facilities, the operations center, and the commercial lending, construction lending, and executive offices as of December 31, 2005. Payments for borrowings do not include interest. Payments related to leases are based on actual payments specified in the underlying contracts. Loan commitments, lines of credit, and letters of credit are presented at contractual amounts; however, since many of these commitments are “revolving” commitments as discussed below and many are expected to expire unused or partially used, the total amount of these commitments do not necessarily reflect future cash requirements.

	Commitment Maturity or Payment Due by Period
	Commitments or				More Than 1 Year		3 Years or
	Long-term		1 Year or		but Less Than		More but Less		5 Years
	Borrowings		Less		3 Years		Than 5 Years		or More
	(Dollars in thousands)
Home equity lines	$	48,651	$	749	$	2,867	$	10,091	$	34,944
Construction		138,593		137,068		1,525		—		—
Acquisition and development		19,773		4,943		14,830		—		—
Commercial		67,680		43,098		14,248		2,843		7,491
Mortgage		3,444		3,444		—		—		—
Letters of Credit		4,649		4,110		314		225		—
Lines of Credit		3,140		1,776		103		1		1,260
Federal funds sold line		500		500		—		—		—
Total financial commitments(1)		286,430		195,688		33,887		13,160		43,695
Subordinated debt(2)		46,908		—		—		—		46,908
Long-term borrowings(3)		48,000		—		23,000		25,000		—
Rental commitments(4)		13,842		2,282		4,425		4,042		3,093
Total commitments and long-term borrowings	$	395,180	$	197,970	$	61,312	$	42,202	$	93,696

(1)	Financial commitments include both secured and unsecured obligations to fund. Certain residential construction and acquisition and development commitments relate to “revolving” commitments whereby payments are received as individual homes or parcels are sold; therefore, the outstanding balances at any one time will be less than the total commitment. Construction loan commitments in excess of one year have provisions to convert to term loans at the end of the construction period.
(2)	Subordinated debt is comprised of four trust preferred security issuances in 2000, 2003 and 2005. We have no obligations related to the trust preferred security holders other than to remit periodic interest payments and to remit principal and interest due at maturity. Each trust preferred security provides us the opportunity to prepay the securities at specified dates from inception, the fixed rate issues with declining premiums based on the time outstanding or at par after designated periods for all issues.
(3)	All long-term borrowings are collateralized with investment grade securities or with pledged real estate loans.
(4)	Leases and other rental agreements typically have renewal options either at predetermined rates or market rates on renewal.

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Off-Balance Sheet Arrangements

      We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers and to reduce our own exposure to fluctuations in interest rates. These financial instruments, which include commitments to extend credit and letters of credit, involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. The contract or notional amounts of these instruments reflect the extent of involvement we have in particular classes of financial instruments.

      Our exposure to credit loss, in the event of nonperformance by customers for commitments to extend credit and letters of credit, is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for recorded loans. Loan commitments and other off-balance sheet exposures are evaluated by Credit Review quarterly and reserves are provided for risk as deemed appropriate.

      Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the agreement. Substantially all of our commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. We minimize our exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. Thus, we will deny funding a commitment if the borrower’s financial condition deteriorates during the commitment period, such that the customer no longer meets the pre-established conditions of lending. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

      Standby and import letters of credit are commitments issued by us to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans or lines of credit to customers. We hold collateral supporting those commitments as deemed necessary.

Financial Overview

      Since our inception, we have pursued managed profitable growth, primarily through internal expansion built on providing quality financial services in selected market areas. During 2005, as the economy continued to improve, most core loan portfolios grew at an accelerated rate and management and staffing improvements were put in place to drive profitable growth.

      We made great strides in 2005 in terms of growth, improvements in asset quality, expanded products, and improved operations. Net income for 2005 was $10.3 million, an increase of 35.3% when compared to the $7.6 million earned in 2004. Net income per diluted share was $1.12 for 2005, compared to $.84 for 2004. Key factors impacting our financial conditions and results of operations for 2005 are summarized below:

•  Total assets increased $182 million to $1,406 million at the end of 2005 or 14.9% compared to $1,224 million at year end 2004. This increase was primarily due to the 14.8% increase in earning assets which was driven by loan growth.

•  Net interest income increased $3.7 million or 10.4% in 2005 over 2004 to $39.4 million due primarily to strong organic loan growth. The net interest margin declined 5 basis points in 2005 to 3.17% from 3.22% in 2004 resulting from a 69 basis point increase in the cost of funds outpacing the 58 basis point increase in the yield on earning assets.

•  The provision for loan losses for 2005 was $2.9 million compared to $4.8 million in 2004. The lower provision is reflective of improving loan quality and lower inherent credit risk in the loan portfolio. Net charge-offs for 2005 were .23% of average loans outstanding compared to .29% for 2004. The

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	allowance for loan losses was 1.15% of outstanding loans and provided coverage of 630% of nonperforming loans.
•	Nonperforming assets declined to .20% of total assets at year-end 2005 compared to .23% at year-end 2004.

      The year ended December 31, 2005, was a year in which both profits and quality earning assets grew significantly. It was also a year in which we positioned FSC for significant growth in net interest and noninterest income for 2006.

Results of Operations

Net Income

      Our net income for the year ended December 31, 2005, was $10.3 million or $1.13 basic and $1.12 fully diluted earnings per share, respectively. Net income for the year ended December 31, 2004, was $7.6 million or $.85 basic and $.84 fully diluted earnings per share, respectively.

      The $2.7 million or 35.3% increase in net income in 2005 compared to 2004 was largely attributable to a $3.7 million or 10.4% increase in net interest income and a significant decline of $1.9 million or 39.6% in the provision for loan losses, offset in part by a $1.0 million or 2.7% increase in noninterest expenses. Net interest income increased during 2005 compared to 2004 as the average balance of interest-earning assets increased $134 million, offset in part by a 5 basis point decline in the net interest margin. The provision for loan losses during 2005 was significantly less than that for 2004 as most measures of asset quality improved significantly, including reduced net charge-offs during 2005 compared to 2004. Noninterest income declined slightly in 2005 compared to 2004 due primarily to decreases in mortgage banking activities, indirect lending activities, SBA lending activities, service charges on deposit accounts, and reduced securities gains, offset in part by increases in other fees and charges, brokerage activities and increases in the cash surrender value of bank owned life insurance. Noninterest expense increased somewhat in 2005 compared to 2004 primarily due to increases in salaries and employee benefits and professional and other services, offset in part by declines in most other categories of noninterest expense.

      Net income for the year ended December 31, 2004, was $7.6 million or $.85 and $.84 basic and fully diluted earnings per share, respectively. Net income for the year ended December 31, 2003, was $3.8 million or $.43 basic and fully diluted earnings per share.

      The 99.2% increase in net income in 2004 compared to 2003 was attributable to a significant increase in net interest income, an increase in noninterest income, and a significant decrease in noninterest expenses. Net interest income increased significantly during 2004 compared to 2003 as the average balance of interest-earning assets increased substantially, offset in part by a decline in the net interest margin. The provision for loan losses during 2004 was comparable to that for 2003 and would have been less except for significant loan growth in 2004, as most measures of asset quality improved significantly, including reduced net charge-offs during 2004 compared to 2003. Noninterest income grew in 2004 compared to 2003 due to increases in indirect lending activities, SBA lending activities, brokerage activities, and increases in the cash surrender value of bank owned life insurance, offset in part by declines in mortgage banking activities and revenues from service charges on deposit accounts. Noninterest expense declined significantly in 2004 compared to 2003 due to declines in most expense categories, including salaries and employee benefits, professional and other services, and other operating expenses.

Net Interest Income/ Margin

      Taxable-equivalent net interest income was $39.6 million in 2005 compared to $35.9 million in 2004, an increase of $3.7 million or 10.2%. The $14.4 million or 24.2% increase in interest income for 2005 compared to 2004 was attributable to the net growth of $134 million or 12.0% in average interest-earning assets and a 58 basis point increase in the yield on interest-earning assets. The growth in average interest-earning assets in 2005 was driven primarily by growth in all loan categories except loans held-for-sale, as average loan balances grew $157 million, offset in part by a decrease in average investment securities

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balances, which declined $23 million, as principal payments on mortgage backed securities were utilized to fund higher yielding loan growth. The increase in the yield on interest-earning assets was due to increases in yields on all loan portfolios and the decrease in average balances in lower yielding investment securities. A 61 basis point increase in yields on average loan balances was in large part attributable to a steadily increasing short-term interest rate environment during the second half of 2004 and throughout 2005.

      The $10.7 million or 44.8% increase in interest expense was attributable to a $125 million growth in average interest-bearing liability balances, exacerbated by a 69 basis point increase in the cost of interest-bearing liabilities due to increasing market rates of interest and increasing competition for deposits. Average total interest-bearing deposits increased $97 million or 11.3% to $955 million during 2005 compared to 2004, while average borrowings increased $28 million or 24.9% to $142 million. The increase in average total interest-bearing deposits was due in part to an advertised program to attract time deposits and savings accounts during the first half of 2005.

      Average interest-earning assets increased in 2005 to $1,249 million, a 12.0% increase when compared to 2004. Average interest-bearing liabilities increased to $1,097 million, a 12.9% increase. The net interest rate margin decreased by 5 basis points to 3.17% in 2005 when compared to 2004.

      Taxable-equivalent net interest income was $35.9 million in 2004 compared to $33.0 million in 2003, an increase of $2.9 million or 8.8%. The $3.0 million increase in interest income for 2004 compared to 2003 was attributable to the net growth of $129 million in average interest-earning assets, offset in part by a 40 basis point decline in the yield on interest-earning assets. The growth in average interest-earning assets in 2004 was driven primarily by growth in commercial, construction, and indirect automobile lending as average loan balances grew $92 million, and by average investment securities balances, which grew $44 million. The decline in the yield on interest-earning assets was primarily due to the declines in yields on the indirect automobile, installment, and mortgage loan portfolios and the significant increase of average balances in lower yielding investment securities. The 49 basis point decline in yields on loans was directly attributable to strong competition for quality loans and the flat to declining interest rate environment during 2004.

      The minimal increase in interest expense was attributable to a $120 million growth in average interest-bearing liability balances offset by a 33 basis point decrease in the cost of interest-bearing liabilities. Average total interest-bearing deposits increased $98 million or 13.0% to $858 million during 2004 compared to 2003, while average Federal funds purchased and short-term borrowings decreased $12 million or 26.9% to $33 million. The increase in average total interest-bearing deposits was due in part to an advertised program to attract transaction accounts during 2004. Average subordinated debt and long-term debt increased $33 million or 71.0% to $80 million during 2004.

      Average interest-earning assets increased in 2004 to $1,115 million, a 13.0% increase when compared to 2003. Average interest-bearing liabilities increased to $971 million, a 14.0% increase. The net interest rate margin decreased by 13 basis points to 3.22% in 2004 when compared to 2003.

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Average Balances, Interest and Yields Table 1

			For the Years Ended December 31,
			2005								2004								2003
			Average			Income/		Yield/			Average			Income/		Yield/			Average			Income/		Yield/
			Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
			(Dollars in thousands)
ASSETS
Interest-Earning Assets:
Loans, net of unearned income(1)(2)
	Taxable		$	1,073,127		$	65,778		6.13	%	$	915,360		$	50,479		5.51	%	$	824,850		$	49,623		6.02	%
	Tax-exempt(3)			6,898			484		7.02			7,743			553		7.15			6,393			441		6.89
		Total loans		1,080,025			66,262		6.14			923,103			51,032		5.53			831,243			50,064		6.02
Investment securities — taxable				158,248			7,670		4.82			181,053			8,726		4.82			137,458			6,610		4.86
Interest-bearing deposits				1,033			32		3.12			1,268			15		1.20			3,501			40		1.13
Federal funds sold				9,505			315		3.31			9,725			116		1.18			14,283			155		1.08
		Total interest-earning assets		1,248,811			74,279		5.95			1,115,149			59,889		5.37			986,485			56,869		5.77
Noninterest-Earnings Assets:
Cash and due from banks				21,775								21,251								21,091
Allowance for loan losses				(12,913	)							(11,116	)							(10,477	)
Premises and equipment				13,539								13,389								14,420
Other real estate owned				528								457								2,085
Other assets				32,350								23,521								20,923
	Total assets		$	1,304,090							$	1,162,651							$	1,034,527
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-Bearing Liabilities:
Demand deposits			$	225,138			4,044		1.80		$	223,827			3,169		1.42		$	162,306			1,978		1.22
Savings deposits				153,700			4,575		2.98			118,566			2,069		1.75			116,463			2,006		1.72
Time deposits				576,326			19,329		3.35			515,499			13,559		2.63			480,655			14,834		3.09
	Total interest-bearing deposits			955,164			27,948		2.93			857,892			18,797		2.19			759,424			18,818		2.48
Federal funds purchased				6,340			223		3.51			4,327			79		1.80			2,370			33		1.41
Securities sold under agreements to repurchase				28,695			716		2.50			17,844			191		1.07			22,686			255		1.12
Other short-term borrowings				24,648			654		2.65			10,931			399		3.65			20,233			1,019		5.04
Subordinated debt				44,790			3,814		8.52			36,598			3,084		8.34			8,589			789		9.19
Long-term debt(4)				37,027			1,329		3.59			43,607			1,411		3.31			38,317			2,924		7.63
	Total interest-bearing liabilities			1,096,664			34,684		3.16			971,199			23,961		2.47			851,619			23,838		2.80

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		For the Years Ended December 31,
		2005						2004						2003
		Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/
		Balance		Expense		Rate		Balance		Expense		Rate		Balance		Expense		Rate
		(Dollars in thousands)
Noninterest-Bearing Liabilities and Shareholders’ Equity:
Demand deposits			117,531						111,923						105,758
Other liabilities			7,893						5,392						6,183
Shareholders’ equity			82,002						74,137						70,967
	Total liabilities and shareholders’ equity	$	1,304,090					$	1,162,651					$	1,034,527
Net interest income/spread				$	39,595		2.79			$	35,928		2.90			$	33,031		2.97
Net interest rate margin							3.17						3.22						3.35

(1)	Fee income relating to loans is included in interest income.
(2)	Nonaccrual loans are included in average balances and income on such loans, if recognized, is recognized on a cash basis.
(3)	Interest income includes the effects of taxable-equivalent adjustments of $150,000, $189,000, and $151,000, for each of the three years ended December 31, 2005, 2004, and 2003, respectively, using a combined tax rate of 35%.

(4)  Long-term debt includes trust preferred securities in 2003, which are classified as subordinated debt in 2005 and 2004.

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Rate/ Volume Analysis Table 2

		2005 Compared to 2004 Variance									2004 Compared to 2003 Variance
		Attributed to(1)									Attributed to(1)
								Net									Net
		Volume			Rate			Change			Volume			Rate			Change
		(Dollars in thousands)
Net Loans:
Taxable		$	9,259		$	6,040		$	15,299		$	5,208		$	(4,353	)	$	855
Tax-exempt(2)			(59	)		(10	)		(69	)		95			17			112
Investment securities — taxable			(1,052	)		(4	)		(1,056	)		2,164			(48	)		2,116
Federal funds sold			(3	)		202			199			(53	)		14			(39	)
Interest-bearing deposits			(3	)		20			17			(26	)		2			(24	)
	Total interest-earning assets	$	8,142		$	6,248		$	14,390		$	7,388		$	(4,368	)	$	3,020
Interest-Bearing Deposits:
Demand		$	19		$	856		$	875		$	837		$	354		$	1,191
Savings			745			1,761			2,506			35			28			63
Time			1,731			4,039			5,770			1,030			(2,305	)		(1,275	)
	Total interest-bearing deposits		2,495			6,656			9,151			1,902			(1,923	)		(21	)
Federal funds purchased			48			96			144			34			11			45
Securities sold under agreements to repurchase			165			360			525			(53	)		(11	)		(64	)
Other short-term borrowings			391			(136	)		255			(388	)		(232	)		(620	)
Subordinated debt			667			63			730			2,343			(79	)		2,264
Long-term debt			(209	)		127			(82	)		359			(1,840	)		(1,481	)
	Total interest-bearing liabilities	$	3,557		$	7,166		$	10,723		$	4,197		$	(4,074	)	$	123

(1)	The change in interest due to both rate and volume has been allocated to the components in proportion to the relationship of the dollar amounts of the change in each.
(2)	Reflects fully taxable equivalent adjustments using a combined tax rate of 35%.

Provision for Loan Losses

      Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and decreased by charge-offs, net of recoveries.

      The provision for loan losses was $2.9 million in 2005 and $4.8 million in 2004 and 2003. Net charge-offs were $2.4 million in 2005 compared to $2.5 million in 2004 and $4.2 million in 2003. The ratio of net charge-offs to average loans outstanding was .23% in 2005 compared to .29% in 2004 and .54% in 2003. The decrease in net charge-offs in 2005 compared to 2004 was primarily due to improvement in overall loan quality. We significantly decreased the provision for loan losses during 2005 as a result of improving loan quality.

      The allowance for loan losses as a percentage of loans outstanding at the end of 2005, 2004, and 2003 was 1.15%, 1.27% and 1.25%, respectively.

      For additional information on asset quality, refer to the discussions regarding loans, credit quality, nonperforming assets, and the allowance for loan losses.

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Analysis of the Allowance for Loan Losses Table 3

			December 31,
			2005			2004			2003			2002			2001
			(Dollars in thousands)
Balance at beginning of year			$	12,174		$	9,920		$	9,404		$	5,405		$	6,128
Charge-offs:
	Commercial, financial and agricultural			385			384			1,398			340			659
	Real estate-construction			—			—			—			2			—
	Real estate-mortgage			160			454			305			63			65
	Consumer installment			2,890			2,770			3,145			2,782			2,666
		Total charge-offs		3,435			3,608			4,848			3,187			3,390
Recoveries:
	Commercial, financial and agricultural			284			456			82			4			37
	Real estate-construction			—			—			—			—			—
	Real estate-mortgage			41			66			41			3			5
	Consumer installment			679			540			491			511			618
		Total recoveries		1,004			1,062			614			518			660
Net charge-offs				2,431			2,546			4,234			2,669			2,730
Provision for loan losses				2,900			4,800			4,750			6,668			2,007
Balance at end of year			$	12,643		$	12,174		$	9,920		$	9,404		$	5,405
Allowance for loan losses as a percentage of loans				1.15	%		1.27	%		1.25	%		1.25	%		.82	%
Ratio of net charge-offs during period to average loans outstanding, net				.23			.29			.54			.38			.41

Noninterest Income

      Noninterest income for 2005 was $14.2 million compared to $14.6 million in 2004, a 2.2% decrease. Decreases in revenues from service charges on deposit accounts, mortgage banking activities, indirect automobile lending activities, SBA lending activities, and gains on sale of securities were offset in part by increases in revenues from other fees and charges, brokerage activities, bank owned life insurance, and other revenues.

      Our strategic plan calls for increasing noninterest income as a percentage of total revenues (net interest income plus noninterest income). A key driver of that growth in noninterest income is through revenue enhancement initiatives. An important source of noninterest revenue is our indirect automobile loan sales and indirect automobile loan servicing activity. We increased our indirect automobile loan production capability significantly in late 2003 with the opening of a new production office in metropolitan Atlanta and through the retention of several seasoned and productive indirect automobile loan buyers. In addition, several seasoned and productive indirect automobile loan buyers in Tennessee were retained in the first quarter of 2006 and are anticipated to add significantly to indirect loan production for the remainder of 2006. In 2005, indirect automobile loan production was $453 million and increased $5 million or 1.2% when compared to 2004 production. Sales of indirect automobile loans in 2005 approximated $135 million or a decrease of 8.9% when compared to sales of $148 million in 2004. Indirect automobile loans serviced for others totaled $260 million at December 31, 2005, compared to $233 million serviced at the end of 2004, an increase of 11.9%. Income from indirect automobile lending activities is heavily driven by current loan production and will vary with significant changes in automobile sales and manufacturers’ marketing packages in our markets, which are predominately Georgia and Florida. During the late fall of 2005, Florida was hit with several hurricanes, and automobile manufacturers aggressively promoted sales

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by offering rebates and lowering loan rates through their captive finance companies. Each of these negatively impacted our fourth quarter loan production compared to prior quarters, although fourth quarter 2005 loan production exceeded that for the same period in 2004. As a result of decreased indirect automobile loans sold with servicing retained and less gain on sales as production was sold into a rising interest rate market, offset in part by higher revenues from an increased balance of indirect automobile loans serviced providing servicing and ancillary fees, revenue from indirect loan activities for 2005 totaled $4.0 million compared to $4.3 million in 2004, a decrease of $326,000 or 7.5%.

      Service charges on deposit accounts declined approximately $395,000 or 8.9% to $4.1 million in 2005 compared to $4.5 million in 2004, primarily due to continuing competitive pressures to reduce fees and charges, because of an improving economy and modified customer behaviors, resulting in fewer insufficient funds charges and other charges, and higher market rates of interest, resulting in greater earnings credits offsetting activity changes on certain business checking accounts.

      Other fees and charges increased $358,000 or 31.5% to $1.5 million as revenues from debit card activities and credit card activities increased. Credit card activities for our customers are provided with branded credit cards issued through an agency relationship.

      Revenue from mortgage banking activities in 2005 totaled $1.2 million compared to $1.9 million in 2004, a decline of $671,000 or 35.0% due to a decline in the volume of residential mortgage loans originated and sold in 2005.

      Revenue from brokerage activities increased 39.0% to $949,000 for the year ended December 31, 2005, compared to $683,000 for 2004 primarily because of increased volume due to improving stock markets and the hiring of additional brokers.

      Revenue from SBA lending activities for 2005, which includes both gains from the sale of SBA loans and servicing and ancillary fees on loans sold with servicing retained, totaled $559,000 compared to $768,000 for 2004, primarily due to decreased SBA loan production and sales, although revenues from this activity increased in the fourth quarter of 2005 as a result of expanding that department substantially late in the third quarter of 2005 through the addition of several productive and seasoned SBA lenders. Revenue from this source is anticipated to increase significantly in 2006.

      Revenue from bank owned life insurance totaled $946,000 in 2005 and was $367,000 or 63.4% greater than in 2004 due in large part to $10 million in additional bank owned life insurance purchased in the first half of 2005.

      Other revenues increased to $948,000 in 2005 and were $638,000 or 205.8% greater than other revenues for 2004. This increased revenue was provided primarily by insurance commissions from our insurance agency subsidiary established in 2005 and by a gain of $241,000 from the sale of assets representing additional collateral obtained in 2001 from a loan relationship workout.

      Noninterest income for 2004 was $14.6 million compared to $13.8 million in 2003, a 5.8% increase. Increases in revenues from indirect automobile lending, SBA lending, and brokerage activities were offset in part by declines in revenues from mortgage banking activities and in service charges on deposit accounts.

      In 2004, indirect automobile loan production was $448 million and increased 33.3% or $112 million when compared to 2003 production. Also, sales of indirect automobile loans in 2004 approximated $149 million or an increase of 96.6% when compared to sales of $76 million in 2003. Indirect automobile loans serviced for others totaled $233 million at December 31, 2004, compared to $185 million serviced at the end of 2003, an increase of 25.9%. As a result of increased indirect automobile loans sold with servicing retained and an increased balance of indirect automobile loans serviced, revenue from indirect loan activities for 2004 totaled $4.3 million compared to $3.0 million in 2003, an increase of $1.3 million or 42.2%.

      Revenue from SBA lending activities for 2004 totaled $768,000 compared to $35,000 for 2003 primarily due to significantly increased SBA loan production and sales.

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      Revenue from brokerage activities increased 56.3% to $683,000 for the year ended December 31, 2004, compared to $437,000 for 2003 primarily due to increased volume, in part as the result of improving stock markets.

      Service charges on deposit accounts declined approximately $535,000 or 10.7% to $4.5 million in 2004 compared to $5.0 million in 2003, primarily due to competitive pressures to reduce fees and charges and because of an improving economy resulting in fewer insufficient funds charges and other charges.

      Revenue from mortgage banking activities in 2004 totaled $1.9 million compared to $2.8 million in 2003, a decline of $891,000 or 31.7% due to a decline in the volume of residential mortgage loans originated and sold in 2004. Interest rates rose in late 2003, reducing the volume of refinancings in 2004.

Noninterest Expense

      Noninterest expense during 2005 increased $931,000 or 2.7% to $35.0 million when compared to 2004, due primarily to increases in salaries and employee benefits and professional and other services, offset in part by minimal increases or modest declines in most other expense categories.

      Salaries and employee benefits increased $1.3 million or 7.2% to $19.2 million in 2005 compared to 2004 due in large part to the increase in staff as we expanded SBA lending activities and the branch sales and management team during the second half of 2005, exacerbated by increases in operations and support staff, annual salary increases, and increases in employee benefit costs. The number of full-time equivalent employees at December 31, 2005, was 356 compared to 335 full-time equivalent employees at December 31, 2004.

      Professional and other services expenses increased $508,000 or 21.7% to $2.8 million in 2005 compared to 2004 due to increases in legal fees, consulting and contract services expenses and in audit and accounting fees primarily associated with Sarbanes Oxley compliance.

      Other insurance expenses decreased $408,000 or 52.3% to $372,000 in 2005 when compared to 2004 due to a significant decline in the April 2005 through March 2006 renewal cost as a result of competitive pricing and followed the decline in the prior year annual renewal cost as a result of our improved risk profile resulting from the divestiture of certain lines of business in 2002 and the resolution of regulatory issues in 2003.

      Noninterest expense during 2004 declined $2.7 million or 7.4% to $34.1 million when compared to 2003, due primarily to declines in salaries and employee benefits, professional and other services, and other operating expenses.

      Salaries and employee benefits declined $879,000 or 4.7% to $17.9 million in 2004 compared to 2003 due primarily to the increase in deferred costs related to the large increase in the volume of loans produced in 2004. The number of full-time equivalent employees at December 31, 2004, was 335 compared to 332 full-time equivalent employees at December 31, 2003.

      Net occupancy expenses declined $275,000 or 7.1 to $3.6 million in 2004 compared to 2003 as an expiring lease at the end of 2003 on excess corporate office space was not renewed, offset in part by a $100,000 write-off of leasehold improvements on excess operations center office space as the result of renegotiating a lease agreement to eliminate that excess space as of December 31, 2004, which reduced occupancy expense related to that lease in 2005 and beyond.

      Professional and other services expenses decreased $703,000 or 23.1% to $2.3 million in 2004 compared to 2003 primarily due to the resolution of legal and regulatory issues and decreases in consulting and contract services expenses.

      Other insurance expenses decreased $279,000 or 26.4% to $780,000 in 2004 when compared to 2003 due to the decline in our risk profile resulting from the divestiture of certain lines of business in 2002 and the resolution of regulatory issues in 2003.

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      Other operating expenses declined $499,000 or 10.0% to $4.5 million in 2004 compared to 2003 due to declines in numerous expenses because of cost efficiency measures instituted in 2004, a reduction in regulatory fees as a result of the conversion of the Bank to a Georgia state charter and due to improved regulatory ratings, a reduction in other real estate costs, and reductions in many other expense categories as operational efficiencies were implemented, offset in part by an increase in advertising expense, an increase in Bank security expense, and relatively small increases in various other expenses.

Provision for Income Taxes

      The provision for income taxes consists of provisions for Federal and state income taxes. The provision for income taxes from continuing operations for 2005, 2004, and 2003 was $5.4 million, $3.8 million, and $1.3 million, respectively, with effective tax rates of 34.5%, 33.2%, and 26.3%, respectively. The effective tax rate for 2005 approximated statutory rates and exceeded that of 2004 and 2003, primarily because the significant growth in income from continuing operations before taxes in 2005 reduced the beneficial impact of nontaxable income relative to that of 2004 and 2003. Another factor impacting the 2005 effective tax rate was the additional 1% Federal tax imposed on pre-tax earnings in excess of $10 million.

Discontinued Operations

      Our credit card line of business was sold in December 2002 with servicing transferred to the acquirer in May of 2003; therefore, there was no revenue or expense related to this line of business in 2005 or 2004. Generally accepted accounting principles accepted in the United States require that income after taxes from discontinued operations be reported in the Statements of Income after net income from continuing operations for 2003.

      Income from discontinued operations after taxes in 2003 totaled $78,000 as revenue in 2003 was provided by servicing fees paid by the purchaser until the servicing was transferred in May 2003. The related noninterest income approximated $1.5 million, while noninterest expense was $1.3 million.

Financial Condition

      We manage our assets and liabilities to maximize long-term earnings opportunities while maintaining the integrity of our financial position and the quality of earnings. To accomplish this objective, management strives to effect efficient management of interest rate risk and liquidity needs. The primary objectives of interest-sensitivity management are to minimize the effect of interest rate changes on the net interest margin and to manage the exposure to risk while maintaining net interest income at acceptable levels. Liquidity is provided by carefully structuring the balance sheet and through unsecured and secured lines of credit with other financial institutions, the Federal Home Loan Bank of Atlanta (the “FHLB”), and the Federal Reserve Bank of Atlanta (the “FRB”).

      The Asset/ Liability Management Committee (“ALCO”) meets regularly to, among other things, review our interest rate sensitivity positions, our funding needs and sources, and our current and projected liquidity.

Market Risk

      Our primary market risk exposures are interest rate risk and credit risk and, to a lesser extent, liquidity risk. We have little or no risk related to trading accounts, commodities, or foreign exchange.

      Interest rate risk, which encompasses price risk, is the exposure of a banking organization’s financial condition and earnings ability to withstand adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value; however, excessive levels of interest rate risk can pose a significant threat to assets, earnings, and capital. Accordingly, effective risk management that maintains interest rate risk at prudent levels is essential to our success.

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      The ALCO, which includes senior management representatives, monitors and considers methods of managing the rate and sensitivity repricing characteristics of the balance sheet components consistent with maintaining acceptable levels of changes in portfolio values and net interest income with changes in interest rates. The primary purposes of the ALCO are to manage our interest rate risk, to effectively invest our capital, and to preserve the value created by our core business operations. Our exposure to interest rate risk compared to established tolerances is reviewed on at least a quarterly basis by the Board of Directors.

      Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the management process used to control interest rate risk and the organization’s quantitative levels of exposure. When assessing the interest rate risk management process, we seek to ensure that appropriate policies, procedures, management information systems, and internal controls are in place to maintain interest rate risk at prudent levels with consistency and continuity. Evaluating the quantitative level of interest rate risk exposure requires us to assess the existing and potential future effects of changes in interest rates on our consolidated financial condition, including capital adequacy, earnings, liquidity, and, where appropriate, asset quality.

      The Federal Reserve, together with the FDIC and other regulatory agencies, adopted a Joint Agency Policy Statement on Interest Rate Risk, effective June 26, 1996. The policy statement, focusing primarily on the impact of changes in economic value or net present value (equity at risk) as a result of interest rate changes, provides guidance to examiners and bankers on sound practices for managing interest rate risk, which provides a basis for ongoing evaluation of the adequacy of interest rate risk management at supervised institutions. The policy statement also outlines fundamental elements of sound management that have been identified in prior Federal Reserve guidance and discusses the importance of these elements in the context of managing interest rate risk.

      Interest rate sensitivity analysis is used to measure our interest rate risk by computing estimated changes in earnings and in the net present value of our cash flows from assets, liabilities, and off-balance sheet items in the event of a range of assumed changes in market interest rates. Net present value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. This analysis assesses the risk of loss in market risk sensitive instruments in the event of a sudden and sustained 200 basis point increase or decrease in market interest rates (equity at risk).

      We utilize a statistical research firm specializing in the banking industry to provide various quarterly analyses and special analyses, as requested, related to our current and projected financial performance, including rate shock analyses. Data sources for this and other analyses include quarterly FDIC Call Reports and the Federal Reserve Y-9C, management assumptions, industry norms and financial markets data. The standard algebraic formula for calculating present value is used. Present value is the future cash flows of a financial investment or a portfolio of financial instruments, discounted to the present. For purposes of evaluating rate shock, rate change induced sensitivity tables are used in determining the timing and volume of repayment, prepayment, and early withdrawals.

      The following schedule reflects an analysis of our assumed market value risk and earnings risk inherent in our interest rate sensitive instruments related to immediate and sustained interest rate variances of 200 basis points, both above and below current levels (rate shock analysis). Earnings and fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Assumptions have been made as to appropriate discount rates, prepayment speeds, expected cash flows, and other variables. Changes in assumptions significantly affect the estimates and, as such, the derived earnings and fair value may not be indicative of the value negotiated in an actual sale or comparable to that reported by other financial institutions. In addition, the fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business. The tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. Our policy states that a negative change in net present value (equity at risk) as a result of an immediate and sustained 200 basis point increase or decrease in interest rates should not exceed the lesser of 2% of

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total assets or 15% of total regulatory capital. It also states that a similar increase or decrease in interest rates should not negatively impact net interest income or net income by more than 5% or 15%, respectively.

      The following schedule reflects the effects on net interest income and net income over a one-year period and the effects on net present value of our assets, liabilities, and off-balance sheet items as a result of an immediate and sustained increase or decrease of 200 basis points in market rates of interest as of December 31, 2005 and 2004 (dollars in thousands):

Rate Shock Analysis

	December 31, 2005						December 31, 2004
Market Rates of Interest	+200 Basis Points			-200 Basis Points			+200 Basis Points			-200 Basis Points
Change in net present value	$	(7,744	)	$	2,881		$	(16,301	)	$	5,301
Change as a percent of total assets		(.55	)%		.20	%		(1.33	)%		.43	%
Change as a percent of regulatory equity		(5.28	)%		1.97	%		(12.85	)%		4.18	%
Percent change in net interest income		2.03	%		(3.02	)%		.70	%		(1.77	)%
Percent change in net income		3.77	%		(5.62	)%		1.43	%		(3.63	)%

      At December 31, 2005, the analysis indicated that an immediate and sustained 200 basis point increase in market rates of interest would have a negative impact of $7.7 million on the net present value (equity at risk) compared to the approved tolerances of the lesser of 2% of assets (or $28 million) or 15% of total regulatory equity (or $22 million). An immediate and sustained 200 basis point decrease in market rates of interest would have a positive impact of $2.8 million on the net present value of our financial assets and liabilities. An immediate and sustained decrease of 200 basis points in market rates of interest would have a negative impact of 3.02% on net interest income and a negative impact of 5.62% on net income compared to approved tolerances of 5.00% and 15.00%, respectively. An immediate and sustained increase of 200 basis points in market rates of interest would have a positive impact on net interest income of 2.03% and on net income of 3.77%. Thus, the rate shock analysis at December 31, 2005, indicated that the effects of an immediate and sustained increase or decrease of 200 basis points in market rates of interest would fall well within policy parameters and approved tolerances for equity at risk, net interest income and net income. The net interest sensitivity asset gap at 90 days and six months was 12.10% and 1.07%, respectively, at December 31, 2005, mitigated in part by a net sensitivity liability gap of 6.36% at one year.

      We have historically been asset sensitive to six months; however, we have been liability sensitive from six months to one year, largely mitigating the potential negative impact on net interest income and net income over a full year from a sudden and sustained decrease in interest rates. Likewise, historically the potential positive impact on net interest income and net income of a sudden and sustained increase in interest rates has been reduced over a one-year period as a result of our liability sensitivity in the six-month to one-year time frame.

      As discussed, the negative impact of an immediate and sustained 200 basis point increase in market rates of interest on the net present value (equity at risk) was well within established tolerances at December 31, 2005, and was significantly less than that at December 31, 2004, primarily because of the reduced duration in the investment portfolio. Also, the negative impact of an immediate and sustained 200 basis point decrease in market rates of interest on net interest income and net income was well within established tolerances and reflected an increase in interest rate sensitivity at December 31, 2005, compared

40

to year-end 2004, primarily because of an increased liability sensitivity in the three month to six month time frame, thus reducing the net sensitivity asset gap for that period and increasing the net sensitivity liability gap at one year. We follow FDIC guidelines for non-maturity deposits such as interest-bearing transaction and savings accounts in the interest rate sensitivity (gap) analysis; therefore, this analysis does not reflect the full impact of rapidly rising or falling market rates of interest on these accounts compared to the results of the rate shock analysis presented.

      At December 31, 2004, the analysis indicated that an immediate and sustained 200 basis point increase in market rates of interest would have a negative impact of $16 million on our net present value (equity at risk) compared to the approved tolerances of the lesser of 2% of assets (or $24 million) or 15% of total regulatory equity (or $19 million). An immediate and sustained 200 basis point decrease in market rates of interest would have a positive impact of $5 million on the net present value of our financial assets and liabilities. An immediate and sustained decrease of 200 basis points in market rates of interest would have a negative impact of 1.77% on net interest income and a negative impact of 3.63% on net income compared to approved tolerances of 5% and 15%, respectively. An immediate and sustained increase of 200 basis points in market rates of interest would have a positive impact on net interest income of ..70% and on net income of 1.43%. Thus, the rate shock analysis at December 31, 2004, indicated that the effects of an immediate and sustained increase or decrease of 200 basis points in market rates of interest would fall well within policy parameters and approved tolerances for equity at risk, net interest income, and net income. The net interest sensitivity asset gap at ninety days and six months was 11.88% and 6.05%, respectively, at December 31, 2004, mitigated in part by a net sensitivity liability gap of 2.99% at one year.

      Rate shock analysis provides only a limited, point in time view of interest rate sensitivity. The gap analysis also does not reflect factors such as the magnitude (versus the timing) of future interest rate changes and asset prepayments. The actual impact of interest rate changes upon earnings and net present value may differ from that implied by any static rate shock measurement. In addition, net interest income and net present value under various future interest rate scenarios are affected by multiple other factors not embodied in a static rate shock analysis, including competition, changes in the shape of the Treasury yield curve, divergent movement among various interest rate indices, and the speed with which interest rates change.

Interest Rate Sensitivity

      The major elements used to manage interest rate risk include the mix of fixed and variable rate assets and liabilities and the maturity and repricing patterns of these assets and liabilities. It is our policy not to invest in derivatives. We perform a quarterly review of assets and liabilities that reprice and the time bands within which the repricing occurs. Balances generally are reported in the time band that corresponds to the instrument’s next repricing date or contractual maturity, whichever occurs first. However, fixed rate indirect automobile loans, mortgage backed securities, and residential mortgage loans are primarily included based on scheduled payments with a prepayment factor incorporated. Through such analyses, we monitor and manage our interest sensitivity gap to minimize the negative effects of changing interest rates.

      The interest rate sensitivity structure within our balance sheet at December 31, 2005, indicated a cumulative net interest sensitivity liability gap of 6.36% when projecting out one year. In the near term, defined as 90 days, there was a cumulative net interest sensitivity asset gap of 12.10% at December 31, 2005. When projecting forward six months, there was a net interest sensitivity asset gap of 1.07%. This information represents a general indication of repricing characteristics over time; however, the sensitivity of certain deposit products may vary during extreme swings in the interest rate cycle (see “Market Risk”). Since all interest rates and yields do not adjust at the same velocity, the interest rate sensitivity gap is only a general indicator of the potential effects of interest rate changes on net interest income. Our policy states that the cumulative gap at six months and one year should generally not exceed 15% and 10%, respectively. Thus, we were well within established tolerances at December 31, 2005. Any interest rate risk associated with cumulative gap positions was mitigated in part in 2005 because of the net interest sensitivity asset gap in the near term and the net interest sensitivity liability gap at one year with a

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reduced net interest sensitivity asset position at six months. The interest rate shock analysis is generally considered to be a better indicator of interest rate risk.

      The following table illustrates our interest rate sensitivity at December 31, 2005, as well as the cumulative position at December 31, 2005 (dollars in thousands):

Interest Rate Sensitivity Analysis(1) Table 4

		Repricing Within
		0-30			31-60			61-90			91-120			121-150			151-180			181-365			Over One
		Days			Days			Days			Days			Days			Days			Days			Year			Total
Interest-Earning Assets:
Investment securities available for-sale		$	2,178		$	2,178		$	2,179		$	2,179		$	2,178		$	2,179		$	12,224		$	98,905		$	124,200
Investment securities held-to- maturity			530			530			529			529			529			529			3,166			36,909			43,251
Loans			439,810			24,046			24,346			24,976			21,958			23,232			152,664			388,137			1,099,169
Loans held-for-sale			4,608			26,000			—			—			—			—			—			—			30,608
Federal funds sold			44,177			—			—			—			—			—			—			—			44,177
Due from banks — interest-earning			929			—			—			—			—			—			—			—			929
	Total interest-earning assets		492,232			52,754			27,054			27,684			24,665			25,940			168,054			523,951			1,342,334
Interest-Bearing Liabilities:
Demand deposit accounts			6,049			6,049			6,049			6,049			6,049			6,049			36,291			48,388			120,973
Savings and NOW accounts			158,183			2,338			2,338			2,338			2,338			2,338			14,028			112,222			296,123
Money market accounts			5,257			5,257			5,257			5,257			5,257			5,257			31,544			42,059			105,145
Time deposits> $100,000			11,526			14,633			24,363			38,382			22,057			16,315			60,740			37,147			225,163
Time deposits< $100,000			8,738			8,077			38,979			60,635			20,735			27,380			114,122			97,944			376,610
Long-term debt			—			—			25,000			—			—			—			—			69,908			94,908
Short-term borrowings			81,488			—			—			—			—			—			11,000			—			92,488
	Total interest-bearing liabilities		271,241			36,354			101,986			112,661			56,436			57,339			267,725			407,668			1,311,410
Interest sensitivity gap		$	220,991		$	16,400		$	(74,932	)	$	(84,977	)	$	(31,771	)	$	(31,399	)	$	(99,671	)	$	116,283		$	30,924
Cumulative gap at 12/31/05		$	220,991		$	237,391		$	162,459		$	77,482		$	45,711		$	14,312		$	(85,359	)	$	30,924
Ratio of cumulative gap to total interest-earning assets at 12/31/05			16.46	%		17.68	%		12.10	%		5.77	%		3.41	%		1.07	%		(6.36	)%		2.30	%
Ratio of interest sensitive assets to interest sensitive liabilities at 12/31/05			181.47	%		145.11	%		26.53	%		24.57	%		43.70	%		45.24	%		62.77	%		128.52	%

(1)  We follow FDIC guidelines for non-maturity deposit accounts across multiple time bands. Savings and NOW accounts are equally distributed over 60 months with a limit of 40% of the total balance in the three to five year time frame, except for approximately $156 million in a special savings accounts with a guaranteed rate through December 31, 2005, at which time the rate will adjust to a market rate of interest. This balance is reflected in the 0-30 day maturity time band, as any change in the rate will be effective for all of the following three months. Demand deposits and money market accounts are distributed over 36 months with a limit of 40% of the total balance in the one to three year time frame.

Liquidity

      Market and public confidence in our financial strength and that of financial institutions in general will largely determine the access to appropriate levels of liquidity.

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      This confidence is significantly dependent on our ability to maintain sound credit quality and the ability to maintain appropriate levels of capital resources.

      Liquidity is defined as the ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis. Management measures the liquidity position by giving consideration to both on-balance sheet and off balance sheet sources of and demands for funds on a daily and weekly basis.

      Sources of liquidity include cash and cash equivalents, net of Federal requirements to maintain reserves against deposit liabilities; investment securities eligible for sale or pledging to secure borrowings from dealers and customers pursuant to securities sold under agreements to repurchase (“repurchase agreements”); loan repayments; loan sales; deposits and certain interest-sensitive deposits; brokered deposits; a collateralized contingent line of credit at the FRB Discount Window; a collateralized line of credit from the FHLB; and, borrowings under unsecured overnight Federal funds lines available from correspondent banks. In addition to interest rate-sensitive deposits, the principal demand for liquidity is new loans and anticipated fundings under credit commitments to customers.

      Maintaining appropriate levels of capital is an important factor in determining the availability of critical sources of liquidity. Critical providers of liquidity could terminate or suspend liquidity availability or require additional or higher quality collateral in the event of a capital adequacy issue. At December 31, 2005, capital ratios significantly exceeded the Federal regulatory levels required for a well-capitalized institution. The capital of the Bank also significantly exceeded the levels required by the GDBF.

      Management seeks to maintain a stable net liquidity position while optimizing operating results, as reflected in net interest income, the net yield on earning assets, and the cost of interest-bearing liabilities in particular. ALCO meets regularly to review the current and projected net liquidity positions and to review actions taken by management to achieve this liquidity objective. Levels of total liquidity, short-term liquidity, and short-term liquidity sources will be important in 2006 based on projected core loan growth and projected growth in both SBA and indirect automobile loan production and sales, with SBA loans held-for-sale balances and indirect automobile loans held-for-sale balances and individual loans and pools of loans sold anticipated to increase from time to time during the year.

      The consolidated statements of cash flows included in the accompanying consolidated financial statements present certain information about cash flows from operating, investing, and financing activities. Our principal cash flows primarily relate to investing and financing activities, rather than operating activities. While the statements present the periods’ net cash flows from lending and deposit activities, they do not reflect certain important aspects of our liquidity described above, including (i) anticipated liquidity requirements under new and outstanding credit commitments to customers, (ii) intra-period volatility of deposits, particularly fluctuations in the volume of commercial customers’ noninterest-bearing demand deposits, and (iii) unused borrowings available under unsecured Federal funds lines, secured or collateralized lines, repurchase agreements, brokered deposits, and other arrangements. Our principal source of operating cash flows is net interest income.

      Our holding company, FSC, has limited liquidity, and it relies primarily on equity, subordinated debt, and trust preferred securities, interest income, management fees, and dividends from the Bank as sources of liquidity. Interest and dividends from subsidiaries ordinarily provide a source of liquidity to a bank holding company. The Bank pays interest to FSC on the Bank’s subordinated debt and cash dividends on its preferred stock and common stock. Under the regulations of the GDBF, bank dividends may not exceed 50% of the prior year’s net earnings without approval from the GDBF. If dividends received from the Bank were reduced or eliminated, FSC’s ability to pay dividends to its shareholders would be adversely affected.

      Net cash flows from operating activities primarily result from net income adjusted for the following noncash items: the provision for loan losses, depreciation, amortization, loans held-for-sale, and the lower of cost or market adjustments, if any. Net cash flows provided by operating activities in 2005 were positively impacted primarily by net income of $10 million and a net decrease in loans held-for-sale of

43

$3 million. Net cash flows used in investing activities were negatively impacted primarily by an increase in loan balances of $139 million as a result of $284 million in loan production volume net of repayments, offset in part by proceeds from the sales of indirect automobile loans and to a lesser extent SBA loans of $145 million. In addition, the net cash flows used in investing activities were negatively impacted by net cash outflows from investment securities requiring $5 million and a $10 million investment in bank owned life insurance. Net cash flows provided by financing activities were positively impacted by increases in demand deposits, money market accounts and savings accounts and in time deposits of $28 million and $80 million, respectively, and an increase of $40 million and $24 million in short-term debt and long-term debt, respectively. Cash and cash equivalents increased $34 million as the significant net cash flows used in investing activities were more than offset by net cash flows provided by operating activities and more specifically by net cash flows provided by financing activities, particularly cash flows provided by short-term borrowings at year-end to meet GDBF liquidity thresholds.

      Net cash flows provided by operating activities in 2004 were positively impacted primarily by net income of $8 million and a net decrease in loans held-for-sale of $3 million, offset in part by a $3 million increase in other assets, principally related to purchases of bank owned life insurance. Net cash flows used in investing activities were negatively impacted primarily by an increase in loan balances of $166 million as a result of $320 million in loan production volume net of repayments, offset in part by proceeds from the sales of indirect automobile loans and to a lesser extent SBA loans of $154 million. The net cash flows used in investing activities were positively impacted by net cash flows from investment securities providing $25 million. Net cash flows provided by financing activities were positively impacted by increases in demand deposits, money market accounts and savings accounts, and time deposits of $83 million and $46 million, respectively, and an increase of $4 million in short-term debt, offset in part by a $10 million decline in long-term debt. Cash and cash equivalents declined only $6 million as the significant net cash flows used in investing activities were largely offset by net cash flows provided by operating activities and more specifically by net cash flows provided by financing activities.

      Net cash flows provided by operating activities in 2003 were positively impacted by net income and proceeds from sales of other real estate, offset by an increase in loans held-for-sale, a decrease in accrued interest payable, and a decrease in other liabilities. Net cash flows used in investing activities were negatively impacted by a net increase of $74 million in investment securities. This increase resulted from purchases as part of management’s plan to redeploy the proceeds from the 2002 sale of the credit card line of business in early 2003 and the purchase of securities in November and December of 2003, which purchases were offset in part by sales of securities and substantial prepayments of mortgage backed securities due to repayment of the underlying residential mortgage loans because of heavy volumes of home sales and refinancings during 2003. Also negatively impacting cash flows used in investing activities was an increase of $124 million in loans net of repayments, offset in part by $79 million in proceeds from the sale of loans. Net cash flows provided by financing activities were positively impacted by net increases in demand deposits, money market accounts, and savings accounts of $34 million, more than offset by a decrease of $52 million in time deposits as part of management’s plan to redeploy the proceeds from the 2002 sale of the credit card line of business and manage the net interest margin by offering lower rates on time deposits, resulting in a lower cost of funds and a runoff of time deposits, primarily from customers who had no other financial relationships with the Bank. Also positively impacting net cash flows provided by financing activities were increases of $31 million and $20 million in short-term and long-term debt, respectively. The increase in long-term debt was due to the obtaining of $45 million in laddered two year through five year maturity fixed rate debt in November and December of 2003 to fund in part the purchase of investment securities as part of management’s leveraging strategy to take advantage of a strong capital position and to mitigate the interest rate risk related to the purchases of fixed rate mortgage backed securities. Cash and cash equivalents declined $87 million for the year, primarily due to net cash flows used in investing activities.

      Except for the reduced levels of the commercial loan, mortgage loan and indirect automobile loan charge-offs, nonperforming assets, and concerns with certain commercial and construction portfolio loans,

44

there are no known trends, events, or uncertainties of which we are aware that may have or that are likely to have a material adverse effect on our liquidity, capital resources or operations.

Loans

      During 2005, total loans outstanding, which included loans held-for-sale, increased $134 million or 13.5% to $1,130 million when compared to 2004. The increase in total loans outstanding was attributable to portfolio growth in consumer installment loans, consisting primarily of indirect automobile loans, which increased $65 million or 13.2% to $555 million, real estate construction loans, which increased $45 million or 27.6% to $207 million, commercial loans, which increased $11 million or 13.3% to $97 million and real estate mortgage loans, including commercial loans secured by real estate, which increased $17 million or 7.7% to $240 million. Loans held-for-sale, consisting of indirect automobile, residential mortgage, and SBA loans, decreased by $3 million or 10.1% to $31 million, with the decreases of $4 million in indirect automobile and $3 million in residential mortgage loans held-for-sale offset in part by the $4 million increase in SBA loans held-for-sale.

      During 2004, total loans outstanding, which included loans held-for-sale, increased $162 million or 19.5% to $995 million when compared to 2003. The increase in total loans outstanding was attributable to growth in consumer installment loans, consisting primarily of indirect automobile loans, which increased $77 million or 18.7% to $490 million, real estate mortgage loans, including commercial loans secured by real estate, which increased $30 million or 15.8% to $223 million, real estate construction loans, which increased $42 million or 34.9% to $162 million and commercial loans, which increased $16 million or 22.5% to $86 million. Loans held-for-sale, consisting of consumer installment loans and originated residential mortgage loans, decreased $3 million or 8.7% to $34 million, with the decrease of $5 million in indirect automobile loans held-for-sale offset in part by the $2 million increase in residential mortgage loans held-for-sale.

Loans, by Category Table 5

		December 31,
		2005		2004		2003		2002		2001
		(Dollars in thousands)
Loans:
Commercial, financial and agricultural		$	89,655	$	79,597	$	61,953	$	72,751	$	61,685
Tax exempt commercial			7,572		6,245		8,144		967		1,043
	Total commercial		97,227		85,842		70,097		73,718		62,728
Real estate — construction			206,864		162,176		120,179		111,510		98,051
Real estate — mortgage			239,884		222,718		192,313		189,038		179,821
Consumer installment			555,194		490,490		413,149		379,669		316,991
	Loans		1,099,169		961,226		795,738		753,935		657,591
Allowance for loan losses			12,643		12,174		9,920		9,404		5,405
	Loans, net	$	1,086,526	$	949,052	$	785,818	$	744,531	$	652,186
Total Loans:
Loans		$	1,099,169	$	961,226	$	795,738	$	753,935	$	657,591
Loans Held-for-Sale:
Mortgage loans			1,045		4,063		2,291		17,967		14,996
Consumer installment			26,000		30,000		35,000		17,500		44,500
Commercial SBA loans			3,563
	Total loans held-for-sale		30,608		34,063		37,291		35,467		59,496
	Total loans	$	1,129,777	$	995,289	$	833,029	$	789,402	$	717,087

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Loan Maturity and Interest Rate Sensitivity Table 6

		December 31, 2005
		Within		One Through		Over Five
		One Year		Five Years		Years		Total
		(Dollars in thousands)
Loan Maturity:
Commercial, financial and agricultural		$	52,709	$	40,306	$	4,212	$	97,227
Real estate — construction			194,188		12,676		—		206,864
	Total	$	246,897	$	52,982	$	4,212	$	304,091
Interest Rate Sensitivity:
Selected loans with:
Predetermined interest rates:
	Commercial, financial and agricultural	$	4,499	$	40,306	$	4,212	$	49,017
	Real estate — construction		60		12,676		—		12,736
Floating or adjustable interest rates:
	Commercial, financial and agricultural		48,210		—		—		48,210
	Real estate — construction		194,128		—		—		194,128
	Total	$	246,897	$	52,982	$	4,212	$	304,091

Credit Quality

      Credit quality risk in the loan portfolio provides our highest degree of risk. We manage and control risk in the loan portfolio through adherence to standards established by senior management, combined with a commitment to producing quality assets, monitoring loan performance, developing profitable relationships, and meeting the strategic loan quality and growth targets. The credit policies establish underwriting standards, place limits on exposures, which include concentrations and commitments, and set other limits or standards as deemed necessary and prudent. Also included in the policy, primarily determined by the amount and type of loan, are various approval levels, ranging from the branch or department level to those which are more centralized. We maintain a diversified portfolio intended to spread risk and reduce exposure to economic downturns, which may occur in different segments of the economy or in particular industries. Industry and loan type diversification is reviewed quarterly.

      Management has taken numerous steps to reduce credit risk in the loan portfolio and to strengthen the credit risk management team and processes. As a result of this program, the average credit scores of indirect automobile loans in the loan portfolio have increased significantly over the years, to an average Beacon of 737 at December 31, 2005. In addition, all credit policies have been reviewed and revised as necessary, and experienced managers are in place and have strengthened commercial lending and Credit Administration. With the improved economy and the resulting positive impact on loan portfolio quality, the provision for loan losses for the year ended December 31, 2005, was $2.9 million compared to a $4.8 million provision for loan losses for the year ended December 31, 2004. Net charge-offs in 2005 declined to $2.4 million on a much larger loan portfolio compared to $2.5 million during 2004. The decline in net charge-offs was primarily the result of reduced gross charge-offs. The allowance for loan losses as a percentage of loans was reduced to 1.15% as of the end of 2005 from 1.27% at the end of 2004 due to increasing loan quality. The ratio of nonperforming assets at December 31, 2005, decreased to .25% compared to .29% at the end of 2004.

      Credit Review regularly reports to senior management and the Loan and Discount Committee of the Board regarding the credit quality of the loan portfolio, as well as trends in the portfolio and the adequacy of the allowance for loan losses. Credit Review monitors loan concentrations, production, and loan growth, as well as loan quality. Credit Review, independent from the lending departments, reviews risk ratings and tests credits approved for adherence to our lending standards. Finally, Credit Review also performs

46

ongoing, independent reviews of the risk management process and adequacy of loan documentation. The results of its examinations are reported to the Loan and Discount Committee of the Board. The consumer collection function is centralized and automated to ensure timely collection of accounts and consistent management of risks associated with delinquent accounts.

Nonperforming Assets

      Nonperforming assets consist of nonaccrual and restructured loans, if any, repossessions, and other real estate. Nonaccrual loans are loans on which the interest accruals have been discontinued when it appears that future collection of principal or interest according to the contractual terms may be doubtful. Restructured loans are those loans whose terms have been modified, because of economic or legal reasons related to the debtors’ financial difficulties, to provide for a reduction in principal, change in terms, or modification of interest rates to below market levels. Repossessions include vehicles and other personal property which have been repossessed as a result of payment defaults on indirect automobile loans and commercial loans.

      Nonperforming assets at December 31, 2005 and 2004, were $2.8 million and $2.9 million, respectively. During 2005, other real estate decreased $665,000 and at December 31, 2005, we held no other real estate. There was a $194,000 increase in repossessed assets and an increase of $415,000 in nonaccrual loans during 2005. Nonperforming assets declined to $2.9 million in 2004 from $4.1 million at December 31, 2003. The decline was due to decreases in other real estate, repossessions, and nonaccrual loans.

      The ratio of nonperforming assets to total loans and repossessed assets was .25% at December 31, 2005, compared to .29% and ..49% at December 31, 2004 and 2003, respectively. The ratio of loans past due 90 days and still accruing to total loans was .02% at December 31, 2003. There were no loans past due 90 days and still accruing at December 31, 2005 and an insignificant amount was reported at December 31, 2004.

      When a loan is classified as nonaccrual, to the extent collection is in question, previously accrued interest is reversed and interest income is reduced by the interest accrued in the current year. If any portion of the accrued interest was accrued in the previous year, accrued interest is reduced and a charge for that amount is made to the allowance for loan losses. For 2005, the gross amount of interest income that would have been recorded on nonaccrual loans, if all such loans had been accruing interest at the original contract rate, was approximately $71,000 compared to $50,000 and $76,000 during 2004 and 2003, respectively. The majority of interest income on nonaccrual loans was reversed and any payments applied to reduce the principal balance in 2005, 2004 and 2003. For additional information on nonaccrual loans see “Critical Accounting Policies — Allowance for Loan Losses.”

Nonperforming Assets Table 7

		December 31,
		2005			2004			2003			2002			2001
		(Dollars in thousands)
Nonaccrual loans		$	1,993		$	1,578		$	2,244		$	3,756		$	2,155
Repossessions			819			625			918			886			1,940
Other real estate			—			665			938			2,629			4,372
	Total nonperforming assets	$	2,812		$	2,868		$	4,100		$	7,271		$	8,467
Loans past due 90 days or more and still accruing		$	—		$	2		$	195		$	334		$	664
Ratio of loans past due 90 days or more and still accruing to total loans			—	%		—	%		.02	%		.04	%		.09	%
Ratio of nonperforming assets to total loans and repossessions			.25			.29			.49			.92			.18

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      Management is not aware of any potential problem loans other than those disclosed in the table above and certain commercial and construction loans having greater than normal risk characteristics, which would have a material adverse impact on asset quality. (See discussion regarding analyses of individual troubled loans in “Allowance for Loan Losses.”)

Allowance for Loan Losses

      As discussed in “Critical Accounting Policies — Allowance for Loan Losses,” the allowance for loan losses is established and maintained through provisions charged to operations. Such provisions are based on management’s evaluation of the loan portfolio including loan portfolio concentrations, current economic conditions, the economic outlook, past loan loss experience, adequacy of underlying collateral, and such other factors which, in management’s judgment, deserve consideration in estimating loan losses. Loans are charged off when, in the opinion of management, such loans are deemed to be uncollectible. Subsequently, recoveries are added to the allowance.

      The evaluation results in an allocation of the allowance for loan losses by loan category. For all loan categories, historical loan loss experience, adjusted for changes in the risk characteristics of each loan category, trends, and other factors, is used to determine the level of allowance required. Additional amounts are allocated based on the evaluation of the loss potential of individual troubled loans and the anticipated effect of economic conditions on both individual loans and loan categories. Since the allocation is based on estimates and subjective judgment, it is not necessarily indicative of the specific amounts or loan categories in which losses may ultimately occur.

      In determining the allocated allowance, the consumer portfolios are treated as homogenous pools. Specific consumer loan types include: direct and indirect automobile loans, other revolving lines of credit, residential first mortgage loans, and home equity loans. The allowance for loan losses is allocated to the consumer loan types based on historical net charge-off rates adjusted for any current or anticipated changes in these trends. The commercial, commercial real estate, and business banking portfolios are evaluated separately. Within this group, every nonperforming loan and loans having greater than normal risk characteristics are reviewed for a specific allocation. The allowance is allocated within the commercial portfolio based on a combination of historical loss rates, adjusted for those elements discussed in the preceding paragraph, and regulatory guidelines.

      In determining the appropriate level for the allowance, management ensures that the overall allowance appropriately reflects a margin for the imprecision inherent in most estimates of expected credit losses. This additional allowance, if any, is reflected in the unallocated portion of the allowance.

      At December 31, 2005, the allowance for loan losses was $12.6 million, or 1.15% of loans compared to $12.2 million, or 1.27% of loans at December 31, 2004. At December 31, 2003, Fidelity’s allowance for loan losses as a percentage of loans was 1.25%. Net charge-offs as a percent of average loans outstanding was .23% in 2005 compared to .29% for 2004 and .54% for 2003. The allowance allocated to commercial loans was $3.7 million at December 31, 2005 compared to $4.7 million at December 31, 2004. During 2005, commercial loan recoveries totaled $284,000 while gross charge-offs were $385,000. A decline in commercial loans included in adversely rated and problem loans at December 31, 2005, contributed to the $1.0 million decrease in the allocated allowance required for commercial loans at December 31, 2005, compared to December 31, 2004. The allocated allowance for real estate construction loans increased $290,000 to $2.3 million at December 31, 2005, when compared to 2004, reflecting portfolio growth and specific provisions on adversely rated loans. The unallocated allowance increased $791,000 to $1.1 million at December 31, 2005, compared to year-end 2004 based on management’s assessment of losses inherent in the loan portfolio and not reflected in specific allocations, in part related to the significant loan growth experienced over the past several years and for which no historical trends can be assessed. See “Provision for Loan Losses.”

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Allocation of the Allowance for Loan Losses Table 8

		December 31, 2005					December 31, 2004					December 31, 2003
		Allowance		%*			Allowance		%*			Allowance		%*
		(Dollars in thousands)
Commercial, financial and agricultural		$	3,717		8.85	%	$	4,703		8.93	%	$	2,768		8.81	%
Real estate — construction			2,331		18.82			2,041		16.87			1,777		15.10
Real estate — mortgage			610		21.82			588		23.17			292		24.17
Consumer installment			4,892		50.51			4,540		51.03			4,500		51.92
Unallocated			1,093		—			302		—			583		—
	Total	$	12,643		100.00	%	$	12,174		100.00	%	$	9,920		100.00	%

		December 31, 2002					December 31, 2001
		Allowance		%*			Allowance		%*
Commercial, financial and agricultural		$	3,575		9.78	%	$	1,211		9.54	%
Real estate — construction			1,665		14.79			259		14.91
Real estate — mortgage			189		25.07			228		27.35
Consumer installment			3,777		50.36			3,482		48.20
Unallocated			198		—			225		—
	Total	$	9,404		100.00	%	$	5,405		100.00	%

*  Percentage of respective loan type to loans.

Investment Securities

      The levels of taxable securities and short-term investments reflect our strategy of maximizing portfolio yields within overall asset and liability management parameters while providing for liquidity needs. Investment securities on an amortized cost basis totaled $171 million and $166 million at December 31, 2005 and 2004, respectively. The increase of $5 million in investments at December 31, 2005, compared to December 31, 2004, was attributable to purchases of investment securities totaling $37 million, less $30 million primarily in repayments and prepayments of principal on mortgage backed securities, as well as sales of securities totaling $2 million. The small increase in investment securities to current balances provides liquidity support and provides collateral for public deposits and other borrowings. As a state chartered non-member bank, we were required to redeem approximately $2 million in Federal Reserve Bank Stock during 2005.

      The estimated weighted average life of the securities portfolio was 5.5 years at December 31, 2005, compared to 6.0 years at December 31, 2004. The decrease in the estimated weighted average life was due primarily to the continued aging of the bulk of the investment portfolio, resulting in a reduced average remaining life. At December 31, 2005, approximately $127 million of investment securities were classified as available-for-sale, compared to $114 million at December 31, 2004. The net unrealized loss on these securities at December 31, 2005, was $2.3 million before taxes, compared to a net unrealized loss of $167,000 before taxes at December 31, 2004. However, all investment securities at December 31, 2005, other than required regulatory common stock and trust preferred common stock investments, were agency notes and agency pass-through mortgage backed securities and the unrealized loss positions resulted not from credit quality issues, but from market interest rate increases over the interest rates prevalent at the time the mortgage backed securities were purchased, and are considered temporary.

      At December 31, 2005 and 2004, Fidelity classified all but $45 million and $52 million, respectively, of its investment securities as available-for-sale. Fidelity maintains a relatively high percentage of its investment portfolio as available-for-sale for possible liquidity needs related primarily to loan production,

49

while held-to-maturity securities are utilized for pledging as collateral for public deposits and other borrowings.

Distribution of Investment Securities Table 9

		December 31,
		2005				2004				2003
		Amortized				Amortized				Amortized
		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
				(Dollars in thousands)
U.S. Treasury securities and obligations of U.S. Government corporations and agencies		$	9,997	$	9,940	$	—	$	—	$	—	$	—
Mortgage backed securities			154,850		151,931		160,558		160,728		186,619		187,300
Other investments			6,327		6,327		5,659		5,659		3,990		3,990
	Total	$	171,174	$	168,198	$	166,217	$	166,387	$	190,609	$	191,290

Maturity Distribution of Investment Securities and Average Yields(1) Table 10

			December 31, 2005							December 31, 2004
			Amortized				Average			Amortized				Average
			Cost		Fair Value		Yield(2)			Cost		Fair Value		Yield(2)
							(Dollars in thousands)
Available-for-Sale:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies:
		Due after one year through five years	$	9,997	$	9,940		5.01	%	$	—	$	—		—
	Mortgage backed securities			116,517		114,260		4.92			114,304		114,137		4.77	%
			$	126,514	$	124,200				$	114,304	$	114,137
Held-to-Maturity:
Mortgage backed securities			$	38,333	$	37,671		4.95	%	$	46,254	$	46,591		4.94	%

(1)

This table excludes equity investments in the Federal Reserve Bank of Atlanta in 2004 and the Federal Home Loan Bank of Atlanta totaling $4,919,000 and $4,561,000 at December 31, 2005 and 2004, respectively, which have no maturity date. Likewise, it excludes the $1,408,000 investment in the common stock of Fidelity’s trust preferred securities at December 31, 2005, and $1,098,000 at December 2004, respectively, as a result of deconsolidating those entities (see “Subordinated Debt and Other Long-Term Debt.”). These investments are included in the held-to-maturity portfolio.

(2)

Weighted average yields are calculated on the basis of the carrying value of the security.

Deposits and Funds Purchased

      Total deposits increased $108 million or 10.6% during 2005 to $1,124 million at December 31, 2005, from $1,016 million at December 31, 2004, due primarily to an increase in time deposits of $80 million or 15.3% to $602 million, an increase in savings deposits of $50 million or 39.4% to $177 million and an increase in noninterest-bearing demand deposits of $5 million or 3.9% to $121 million, offset in part by a

50

decrease in interest-bearing demand deposits of $27 million or 10.7% to $224 million. The decrease in interest-bearing demand deposits was attributable to a reduction in the rates paid on a premium rate demand deposit account, resulting in the transfer of a significant amount of these balances to higher-yielding Bank savings and time deposits.

      Average interest-bearing deposits during 2005 increased $97 million over 2004 average balances, primarily as a result of advertising for time deposits and savings accounts during the first half of 2005 and an increase in brokered deposits acquired through investment banking firms through master certificates. The average balance of time deposits increased $61 million to $576 million, and the average balance of savings deposits increased $35 million to $154 million, while the average balance of interest-bearing demand deposits increased $2 million to $225 million. Core deposits, obtained from a broad range of customers, and our largest source of funding, consist of all interest-bearing and noninterest-bearing deposits except time deposits over $100,000 and brokered deposits obtained through investment banking firms utilizing master certificates. Brokered deposits totaled $102 million and $62 million at December 31, 2005 and 2004, respectively, and are included in other time deposit balances in the consolidated balance sheets. The average balance of interest-bearing core deposits was $663 million and $619 million during 2005 and 2004, respectively.

      Total deposits as of December 31, 2004, increased $128 million or 14.5% to $1,016 million from $888 million as of December 31, 2003, due primarily to an increase in interest-bearing demand deposits of $82 million, and an increase in time deposits of $46 million. The increase is primarily attributable to successful advertising programs in 2004 offering premium yields on demand and time deposits. On an average balance basis, interest-bearing demand deposits increased $61 million, time deposits increased $35 million, and savings deposits increased $2 million.

      Noninterest-bearing deposits are comprised of certain business accounts, including correspondent bank accounts and escrow deposits, as well as individual accounts. Average noninterest-bearing demand deposits totaling $118 million represented 15.1% of average core deposits in 2005 compared to an average balance of $112 million or 15.3% in 2004. The average amount of, and average rate paid on, deposits by category for the periods shown are presented in the following table (dollars in thousands):

Selected Statistical Information for Deposits Table 11

		December 31,
		2005					2004					2003
		Average					Average					Average
		Amount		Rate			Amount		Rate			Amount		Rate
Noninterest-bearing demand deposits		$	117,531		—	%	$	111,923		—	%	$	105,758		—	%
Interest-bearing demand deposits			225,138		1.80			223,827		1.42			162,306		1.22
Savings deposits			153,700		2.98			118,566		1.75			116,463		1.72
Time deposits			576,326		3.35			515,499		2.63			480,655		3.09
	Total average deposits	$	1,072,695		2.93		$	969,815		2.19		$	865,182		2.48

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Maturity Distribution of Time Deposits

	December 31, 2005
			$100,000
	Other		or More		Total
	(Dollars in thousands)
Three months or less	$	54,918	$	50,521	$	105,439
Over three through six months		108,749		76,754		185,503
Over six through 12 months		114,143		60,740		174,883
Over one through two years		53,047		24,596		77,643
Over two through three years		26,268		5,568		31,836
Over three through four years		18,893		6,862		25,755
Over four through five years		591		121		712
Over five years		1		—		1
Total	$	376,610	$	225,162	$	601,772

Short-term Debt

      FHLB short-term borrowings totaled $30 million at December 31, 2005, and consisted of the amount drawn on a collateralized line maturing January 2, 2007, with a daily interest rate comparable to an overnight Federal funds purchased rate applied to the outstanding balance, which rate was 4.44% on December 31, 2005. Borrowings under this collateralized line may be repaid at any time without penalty. All FHLB advances are collateralized with certain residential, home equity, and commercial real estate mortgage loans and, from time to time, agency notes or agency mortgage backed securities. FHLB short-term borrowings totaled $14 million at December 31, 2004, consisting of the amount drawn on a collateralized line maturing November 23, 2005, with a daily rate of interest of 2.44% on December 31, 2004.

      Other short-term borrowings totaled approximately $62 million and $38 million, respectively, at December 31, 2005 and 2004, consisting in part of $15 million and $5 million, respectively, of unsecured overnight Federal funds purchased through lines provided by commercial banks with an average rate of 4.32% and 2.81%, respectively, on December 31, 2005 and 2004, and $36 million and $22 million, respectively, in overnight repurchase agreements primarily with commercial customers at an average rate of 1.51% and 1.16%. In addition, long-term fixed rate borrowings collateralized with mortgage backed securities totaling $11 million with an average rate of 2.98% and 2.36%, respectively, were within one year of maturity at December 31, 2005 and 2004, and included in short-term borrowings.

Schedule of Short-Term Borrowings(1) Table 12

	Maximum				Average					Weighted Average
	Outstanding at		Average		Interest Rate			Ending		Interest Rate at
Years Ended December 31	Any Month-End		Balance		During Year			Balance		Year-End
	(Dollars in thousands)
2005	$	103,202	$	59,683		2.67	%	$	92,488		3.09	%
2004		65,581		33,102		2.02			52,212		1.91
2003		56,656		45,289		2.89			47,896		2.96

(1)  Consists of Federal funds purchased, securities sold under agreements to repurchase, long-term borrowings within a year to maturity, and borrowings from the FHLB that mature either overnight or on a remaining fixed maturity not to exceed one year.

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Subordinated Debt and Other Long-Term Debt

      Fidelity had approximately $95 million and $71 million, respectively, of subordinated debt and other long-term debt outstanding at December 31, 2005 and 2004, consisting of approximately $47 million and $37 million, respectively, in trust preferred securities classified as subordinated debt, including approximately $1 million in subordinated debt incurred to acquire stock in the trust preferred subsidiaries, $23 million and $34 million, respectively, in long-term borrowings collateralized with mortgage backed securities, and $25 million at December 31, 2005, in a Federal Home Loan Bank European Convertible Advance.

      On November 3, 2005, we entered into a $25 million FHLB five-year European Convertible Advance maturing November 3, 2010, with interest at 4.38%, with a one-time Federal Home Loan Bank conversion option at the end of the second year. Under the provisions of the advance, the FHLB has the option to convert the advance into a three-month LIBOR-based floating rate advance effective November 3, 2007, at which time we may elect to terminate the agreement on any interest payment date without penalty. If the FHLB elects not to convert the advance, we have the option of paying a substantial prepayment fee and terminating on any interest payment date prior to maturity.

      On March 17, 2005, we issued $10 million in floating rate capital securities (“Capital Securities II”) of Fidelity Southern Statutory Trust II with a liquidation value of $1,000 per security. Interest is adjusted quarterly at a rate per annum equal to the three-month London Interbank Borrowing Rate (“LIBOR”) plus 1.89%. The Capital Securities II had an initial rate of 4.87% and a rate of 6.39% at December 31, 2005. The issuance has a final maturity of 30 years, but may be redeemed at any distribution payment date on or after March 17, 2010, at the redemption price of 100%.

      On June 26, 2003, we issued $15 million in Floating Rate Capital Securities (“Capital Securities”) of Fidelity Southern Statutory Trust I with a liquidation value of $1,000 per security. Interest is adjusted quarterly at a rate per annum equal to the 3-month London Interbank Borrowing Rate (“LIBOR”) plus 3.10%. The Capital Securities had an initial rate of 4.16%, with the provision that prior to June 26, 2008, the rate will not exceed 11.75%. The rate in effect on December 31, 2005 and 2004, was 7.62% and 5.65%, respectively. The issuance has a final maturity of 30 years, but may be redeemed at any distribution payment date on or after June 26, 2008, at the redemption price of 100%.

      On March 23, 2000, we issued $10.5 million of 10.875% Fixed Rate Capital Trust Pass-through Securities (“Trust Preferred Securities”) of FNC Capital Trust I with a liquidation value of $1,000 per share. On July 27, 2000, Fidelity issued $10.0 million of 11.045% Fixed Rate Capital Trust Preferred Securities (“TPS”) of Fidelity National Capital Trust I with a liquidation value of $1,000 per share. Both issues have 30 year final maturities and are redeemable in whole or in part after ten years at declining redemption prices to 100% after 20 years.

      The trust preferred securities were sold in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Act”) and were not registered under the Act. The trusts used the proceeds from the sales to purchase our Junior Subordinated Debentures. The proceeds of the trust preferred securities are included in Tier 1 capital by FSC in the calculation of regulatory capital, with any excess included in Tier 2 capital. The payment by us to the trust preferred securities holders are fully tax deductible.

      In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46”). FIN 46 addressed whether business enterprises would be required to consolidate the financial statements of entities know as “variable interest entities.” FIN 46 was revised in December 2003 (“FIN 46 (Revised)”) and the revised interpretations clarified that trust preferred securities such as those issued by us had to be deconsolidated for financial reporting purposes. We adopted FIN 46 (Revised) and, consequently, the $45.5 million and $35.5 million, respectively, of trust preferred securities issued by trusts established by us are, as of December 31, 2005 and 2004, no longer consolidated for financial reporting purposes. Thus, the equity investments in the subsidiaries created to issue the obligations, the obligations themselves, and related dividend income and interest

53

expense are reported on a deconsolidated basis, with the investments in the amount of $1.4 million and $1.1 million, respectively, at December 31, 2005 and 2004, reported as investments held-to-maturity and dividends included as investment interest income. The obligations, including the amount related to the equity investments, in the amount of $46.9 million and $36.6 million, respectively, are reported as subordinated debt, with related interest expense reported as interest on subordinated debt. This change had no material effect on the operations, financial condition, or regulatory capital ratios of Fidelity or the Bank. Financial statements for periods prior to 2004 were not restated to reflect the deconsolidation of the trust preferred issues.

      On March 1, 2005, the FRB announced the adoption of a rule entitled “Risk-Based Capital Standards: Trust Preferred Securities and the Definition of Capital” (“Rule”) regarding risk-based capital standards for bank holding companies (“BHCs”) such as FSC. The Rule provides for a five-year transition period, with an effective date of March 31, 2009, but requires BHCs not meeting the standards of the Rule to consult with the FRB and develop a plan to comply with the standards by the effective date.

      The Rule defines the restricted core capital elements, including trust preferred securities, which may be included in Tier 1 capital, subject to an aggregate 25% of Tier 1 capital net of goodwill limitation. Excess restricted core capital elements may be included in Tier 2 capital, with trust preferred securities and certain other restricted core capital elements subject to a 50% of Tier 1 capital limitation. The Rule requires that trust preferred securities be excluded from Tier 1 capital within five years of the maturity of the underlying junior subordinated notes issued and be excluded from Tier 2 capital within five years of that maturity at 20% per year for each year during the five-year period to the maturity. FSC’s first junior subordinated note matures in March 2030.

      FSC’s only restricted core capital elements consist of its trust preferred securities issues and FSC has no recorded goodwill; therefore, the Rule has minimal impact on FSC’s capital ratios, its financial condition, or its operating results. The trust preferred securities are eligible for FSC’s regulatory Tier I capital, with a limit of 25% of the sum of all core capital elements. All amounts exceeding the 25% limit are includable in FSC’s regulatory Tier 2 capital.

Shareholders’ Equity

      Shareholders’ equity at December 31, 2005 and 2004, was $87 million and $79 million, respectively, while realized shareholders’ equity was $88 million and $79 million, respectively. Realized shareholders’ equity is shareholders’ equity excluding accumulated other comprehensive (loss) gain, net of (tax benefit) tax. The increase in shareholders’ equity in 2005 was a result of net income plus common stock issued, net of dividends paid.

      FSC declared approximately $2.6 million, $1.8 million, and $1.8 million in dividends on common stock in 2005, 2004, and 2003, respectively. The following schedule summarizes per share common stock dividends declared for the last three years:

	Dividends Declared
	2005		2004		2003
First Quarter	$	.07	$	.05	$	.05
Second Quarter		.07		.05		.05
Third Quarter		.07		05		.05
Fourth Quarter		.07		.05		.05
For the Year	$	.28	$	.20	$	.20

Recent Accounting Pronouncements

      See Note 1 — “Summary of Significant Accounting Policies” in the accompanying Notes to Consolidated Financial Statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact, if any, on our operations and financial condition.

54

Quarterly Financial Information

      The following table sets forth, for the periods indicated, certain consolidated quarterly financial information. This information is derived from unaudited consolidated financial statements that include, in the opinion of management, all normal recurring adjustments which management considers necessary for a fair presentation of the results for such periods. The results for any quarter are not necessarily indicative of results for any future period. This information should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this report.

Consolidated Quarterly Financial Information (Unaudited) Table 13

	2005								2004
	Fourth		Third		Second		First		Fourth		Third		Second		First
	Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter
	(In thousands except per share date)
Interest income	$	20,556	$	18,967	$	18,060	$	16,546	$	15,972	$	15,294	$	14,291	$	14,143
Interest expense		10,230		9,191		8,331		6,932		6,379		6,035		5,766		5,781
Net interest income		10,326		9,776		9,729		9,614		9,593		9,259		8,525		8,362
Provision for loan losses		400		700		900		900		1,200		1,100		1,300		1,200
Noninterest income before securities gains		3,521		3,942		3,535		3,196		3,257		3,747		3,672		3,490
Securities gains		—		—		32		—		84		170		—		130
Total noninterest income		3,521		3,942		3,567		3,196		3,341		3,917		3,672		3,620
Noninterest expense		9,241		8,783		8,478		8,499		8,505		8,436		8,520		8,609
Income from continuing operations before income taxes		4,206		4,235		3,918		3,411		3,229		3,640		2,377		2,173
Income tax expense		1,439		1,470		1,359		1,176		1,068		1,273		728		718
Net income	$	2,767	$	2,765	$	2,559	$	2,235	$	2,161	$	2,367	$	1,649	$	1,455
Earnings per share:
Basic earnings per share	$	.31	$	.30	$	.28	$	.24	$	.24	$	.26	$	.19	$	.16
Diluted earnings per share	$	.30	$	.30	$	.28	$	.24	$	.24	$	.26	$	.18	$	.16
Weighted average shares outstanding		9,208		9,175		9,171		9,153		9,119		9,029		8,980		8,884

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      See Item 7, “Market Risk” and “Interest Rate Sensitivity” for a quantitative and qualitative discussion about our market risk.

55

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Fidelity Southern Corporation

      We have audited the accompanying consolidated balance sheets of Fidelity Southern Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fidelity Southern Corporation and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Fidelity Southern Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2006, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

March 10, 2006

Atlanta, Georgia

56

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

				December 31,
				2005			2004
				(Dollars in thousands)
ASSETS
Cash and due from banks				$	20,250		$	23,445
Interest-bearing deposits with banks					929			1,020
Federal funds sold					44,177			9,274
Investment securities available-for-sale (amortized cost of $126,514 and $114,304 at December 31, 2005 and 2004, respectively) — Note 4					124,200			114,137
Investment securities held-to-maturity (approximate fair value of $43,998 and $52,250 at December 31, 2005 and 2004, respectively) — Note 4					44,660			51,913
Loans held-for-sale					30,608			34,063
Loans — Note 5					1,099,169			961,226
Allowance for loan losses — Note 5					(12,643	)		(12,174	)
Loans, net					1,086,526			949,052
Premises and equipment, net — Note 6					14,068			13,512
Other real estate — Note 5					—			665
Accrued interest receivable					6,736			5,233
Bank owned life insurance					24,734			13,908
Other assets — Note 17					8,815			7,495
			Total assets	$	1,405,703		$	1,223,717
LIABILITIES
Deposits — Note 7
	Noninterest-bearing demand deposits			$	120,970		$	116,420
	Interest-bearing deposits:
		Demand and money market			224,511			251,308
		Savings			176,760			126,761
		Time deposits, $100,000 and over			225,162			201,780
		Other time deposits			376,610			320,108
			Total deposits		1,124,013			1,016,377
Federal funds purchased — Note 8					15,000			5,000
Other short-term borrowings — Note 8					77,488			47,212
Subordinated debt — Note 9					46,908			36,598
Other long-term debt — Note 9					48,000			34,000
Accrued interest payable					4,469			2,864
Other liabilities — Note 17					3,086			2,857
			Total liabilities		1,318,964			1,144,908
Commitments and contingencies — Notes 12 and 16
SHAREHOLDERS’ EQUITY  — Note 13
Preferred Stock, no par value. Authorized 10,000,000; no shares issued and outstanding					—			—
Common Stock, no par value. Authorized 50,000,000; issued 9,240,527 and 9,130,689; outstanding 9,237,727 and 9,120,135 in 2005 and 2004, respectively					44,178			42,725
Treasury stock					(17	)		(66	)
Accumulated other comprehensive loss, net of tax					(1,434	)		(103	)
Retained earnings					44,012			36,253
			Total shareholders’ equity		86,739			78,809
			Total liabilities and shareholders’ equity	$	1,405,703		$	1,223,717

See accompanying notes to consolidated financial statements.

57

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

		Years Ended December 31,
		2005		2004		2003
		(Dollars in thousands, except per
		share data)
Interest Income:
Loans, including fees		$	66,112	$	50,843	$	49,913
Investment securities			7,670		8,727		6,610
Federal funds sold and bank deposits			347		130		195
	Total interest income		74,129		59,700		56,718
Interest Expense:
Deposits			27,948		18,797		18,817
Short-term borrowings			1,593		669		1,307
Trust preferred securities			—		—		2,614
Subordinated debt			3,814		3,084		789
Other long-term debt			1,329		1,411		311
	Total interest expense		34,684		23,961		23,838
Net Interest Income			39,445		35,739		32,880
Provision for loan losses			2,900		4,800		4,750
Net Interest Income After Provision for Loan Losses			36,545		30,939		28,130
Noninterest Income:
Service charges on deposit accounts			4,059		4,454		4,989
Other fees and charges			1,492		1,134		1,159
Mortgage banking activities			1,246		1,917		2,808
Brokerage activities			949		683		437
Indirect lending activities			3,995		4,321		3,039
SBA lending activities			559		768		35
Bank owned life insurance			946		579		479
Securities gains, net			32		384		331
Other			948		310		479
	Total noninterest income		14,226		14,550		13,756
Noninterest Expense:
Salaries and employee benefits			19,170		17,876		18,755
Furniture and equipment			2,733		2,953		2,756
Net occupancy			3,368		3,616		3,891
Communication			1,392		1,375		1,433
Professional and other services			2,848		2,340		3,043
Stationery, printing and supplies			662		661		886
Insurance			372		780		1,059
Other			4,456		4,469		4,968
	Total noninterest expense		35,001		34,070		36,791
Income from continuing operations before income tax expense			15,770		11,419		5,095
Income tax expense			5,444		3,787		1,342
Income from continuing operations			10,326		7,632		3,753
Income from discontinued operations (net of income taxes of $37 for 2003)			—		—		78
Net Income		$	10,326	$	7,632	$	3,831
Earnings per share from continuing operations:
Basic earnings per share		$	1.13	$	.85	$	.42
Diluted earnings per share		$	1.12	$	.84	$	.42
Earnings per share:
Basic earnings per share		$	1.13	$	.85	$	.43
Diluted earnings per share		$	1.12	$	.84	$	.43
Weighted average shares outstanding — Basic			9,176,771		9,003,626		8,865,059
Weighted average shares outstanding — Fully Diluted			9,223,723		9,097,733		8,966,419

See accompanying notes to consolidated financial statements.

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

												Accumulated
												Other
		Common Stock				Treasury Stock						Comprehensive
												Income (Loss)			Retained
		Shares		Amount		Shares			Amount			Net of Tax			Earnings			Total
				(In thousands, except per share data)
Balance December 31, 2002			8,867	$	40,335		11		$	(69	)	$	2,146		$	28,362		$	70,774
Comprehensive income:
	Net income from continuing operations		—		—		—			—			—			3,753			3,753
	Net income from discontinued operations		—		—		—			—			—			78			78
	Other comprehensive loss, net of tax		—		—		—			—			(1,887	)		—			(1,887	)
	Comprehensive income		—		—		—			—			—			—			1,944
Common stock issued under:
	Employee benefit plans		20		158		—			—			—			—			158
	Dividend reinvestment plan		2		23		—			—			—			—			23
Common dividends declared ($.20 per share)			—		—		—			—			—			(1,773	)		(1,773	)
Balance December 31, 2003			8,889		40,516		11			(69	)		259			30,420			71,126
Comprehensive income:
	Net income		—		—		—			—			—			7,632			7,632
	Other comprehensive loss, net of tax		—		—		—			—			(362	)		—			(362	)
	Comprehensive income		—		—		—			—			—			—			7,270
Common stock issued under:
	Employee benefit plans		237		2,131		—			—			—			—			2,131
	Dividend reinvestment plan		5		78		(1	)		3			—			—			81
Common dividends declared ($.20 per share)			—		—		—			—			—			(1,799	)		(1,799	)
Balance December 31, 2004			9,131		42,725		10			(66	)		(103	)		36,253			78,809
Comprehensive income:
	Net income		—		—		—			—			—			10,326			10,326
	Other comprehensive loss, net of tax		—		—		—			—			(1,331	)		—			(1,331	)
	Comprehensive income		—		—		—			—			—			—			8,995
Common stock issued under:
	Employee benefit plans		110		1,370		—			—			—			—			1,370
	Dividend reinvestment plan		—		83		(7	)		49			—			—			132
Common dividends declared ($.28 per share)			—		—		—			—			—			(2,567	)		(2,567	)
Balance December 31, 2005			9,241	$	44,178		3		$	(17	)	$	(1,434	)	$	44,012		$	86,739

See accompanying notes to consolidated financial statements.

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Years Ended December 31,
			2005			2004			2003
			(Dollars in thousands)
Operating Activities:
Net income from continuing operations			$	10,326		$	7,632		$	3,753
Net income from discontinued operations				—			—			78
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for loan losses			2,900			4,800			4,750
	Depreciation and amortization of premises and equipment			1,980			2,011			2,063
	Securities gains, net			(32	)		(384	)		(331	)
	Gains on loan sales			(1,366	)		(2,058	)		(567	)
	Proceeds from sales of other real estate			442			489			1,658
	(Gain) loss on sale of other real estate			(28	)		(46	)		13
	Net decrease (increase) in loans held-for-sale			3,455			3,228			(1,824	)
	Net increase in accrued interest receivable			(1,503	)		(336	)		(1	)
	Net increase (decrease) in accrued interest payable			1,605			78			(1,515	)
	Net increase (decrease) in other liabilities			229			1,650			(5,016	)
	Net (increase) decrease in other assets			(2,146	)		(1,818	)		1,557
	Other, net			816			223			1,386
		Net cash flows provided by operating activities		16,678			15,469			6,004
Investing Activities:
Purchases of investment securities held-to maturity				(2,416	)		(12,258	)		(39,877	)
Maturities and calls of investment securities held-to-maturity				9,669			6,094			3,017
Sales of investment securities available-for-sale				1,592			9,442			7,761
Purchases of investment securities available-for-sale				(34,243	)		(5,746	)		(124,624	)
Maturities and calls of investment securities available-for-sale				20,473			27,245			79,948
Investment in bank owned life insurance				(10,000	)		(1,571	)		(1,614	)
Net increase in loans				(284,225	)		(319,990	)		(124,162	)
Purchases of premises and equipment				(2,537	)		(1,607	)		(1,235	)
Proceeds from sale of loans				145,469			153,844			78,712
Net cash used in discontinued operations				—			—			(1,189	)
	Net cash flows used in investing activities			(156,218	)		(144,547	)		(123,263	)
Financing Activities:
Net increase in demand deposits, money market accounts, and savings accounts				27,752			82,640			34,352
Net increase (decrease) in time deposits				79,884			45,758			(52,468	)
Proceeds from issuance of Common Stock				1,502			2,212			181
Issuance (repayment) of long-term debt				24,310			(10,327	)		19,918
Increase in short-term borrowings				40,276			4,317			30,570
Dividends paid				(2,567	)		(1,799	)		(2,216	)
	Net cash flows provided by financing activities			171,157			122,801			30,337
Net increase (decrease) in cash and cash equivalents				31,617			(6,277	)		(86,922	)
Cash and cash equivalents, beginning of year				33,739			40,016			126,938
Cash and cash equivalents, end of year			$	65,356		$	33,739		$	40,016
Supplemental disclosures of cash flow information:
Cash paid during the year for:
	Interest		$	33,079		$	23,883		$	25,353
	Income taxes		$	5,850		$	2,600		$	3,650
Non-cash transfers to other real estate			$	167		$	690		$	1,092

See accompanying notes to consolidated financial statements.

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

1. Summary of Significant Accounting Policies

Basis of Presentation

      The consolidated financial statements include the accounts of Fidelity Southern Corporation and its wholly-owned subsidiaries (collectively “Fidelity”). Fidelity Southern Corporation (“FSC”) owns 100% of Fidelity Bank (the “Bank”) and LionMark Insurance Company (“LIC”), an insurance agency offering a consumer credit related insurance product. FSC also owns four subsidiaries established to issue trust preferred securities, which entities are not consolidated for financial reporting purposes. Fidelity is a financial services company which offers traditional banking, mortgage, and investment services to its customers, who are typically individuals or small to medium sized businesses. All significant intercompany accounts and transactions have been eliminated in consolidation.

      The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles followed within the financial services industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the calculations of and the amortization of capitalized excess servicing rights and the valuation of real estate or other assets acquired in connection with foreclosures or in satisfaction of loans. In addition, the actual lives of certain amortizable assets and income items are estimates subject to change. Certain previously reported amounts have been reclassified to conform to current presentation.

      The credit card line of business was sold in December 2002 and servicing was transferred to the new owner in May 2003. In accordance with the requirements of Statement of Financial Accounting Standards (“SFAS”) 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the earnings of the credit card business are shown separately in the financial statements, notes, and supplemental schedules for 2003 and prior years. Accordingly, all information in the annual report reflects continuing operations only for those periods, unless otherwise noted. See Note 3 “Discontinued Operations.” Fidelity has four trust preferred subsidiaries which were deconsolidated for financial reporting purposes beginning in 2004 (see “Recent Accounting Pronouncements”). Fidelity principally operates in one business segment, which is community banking.

Cash and Cash Equivalents

      Cash and cash equivalents include cash, amounts due from banks, and Federal funds sold. Generally, Federal funds are purchased and sold within one-day periods.

Investment Securities

      In accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” Fidelity classifies its investment securities in one of the following three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Fidelity does not engage in that activity. Held-to-maturity securities are those designated as held-to-maturity when purchased, which Fidelity has the ability and positive intent to hold until maturity. All other debt securities not included in trading, held-to-maturity, and marketable equity securities are classified as available-for-sale.

      Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized gains and losses on trading securities are included in income. Unrealized gains and losses, net of related income

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

taxes, on available-for-sale securities are excluded from income and are reported as a separate component of shareholders’ equity. A decline in the fair value below cost of any available-for-sale or held-to-maturity security that is deemed other than temporary results in a charge to income and the establishment of a new cost basis for the security.

      Purchase premiums and discounts are amortized or accreted over the life of the related investment securities as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses for securities sold are included in income and are derived using the specific identification method for determining the cost of securities sold.

Loans and Interest Income

      Loans are reported at principal amounts outstanding net of deferred fees and costs. Interest income is recognized in a manner that results in a level yield on the principal amounts outstanding. Rate related loan fee income is included in interest income. Loan origination and commitment fees and certain direct origination costs are deferred and the net amount is amortized as an adjustment of the yield over the contractual lives of the related loans, taking into consideration assumed prepayments.

      For commercial, construction, and real estate loans, the accrual of interest is discontinued and the loan categorized as non-accrual when, in management’s opinion, due to deterioration in the financial position of the borrower, the full repayment of principal and interest is not expected or principal or interest has been in default for a period of 90 days or more, unless the obligation is both well secured and in the process of collection within 30 days. Commercial, construction, and real estate secured loans may be returned to accrual status when management expects to collect all principal and interest and the loan has been brought fully current. Interest received on well collateralized nonaccrual loans is recognized on the cash basis. If the nonaccrual commercial, construction, or real estate secured loans are not well collateralized, payments are applied to principal. Consumer loans are placed on nonaccrual upon becoming 90 days past due or sooner if, in the opinion of management, the full repayment of principal and interest is not expected. Any payment received on a loan on which the accrual of interest has been suspended and is not recognizable on the cash basis as a result of being well secured, is applied to reduce principal.

      When a well collateralized loan is placed on nonaccrual, accrued interest is not reversed. For other loans, interest accrued during the current accounting period is reversed. Interest accrued in prior periods, if significant, is charged off against the allowance and adjustments to principal made if the collateral related to the loan is deficient.

      Impaired loans are evaluated based on the present value of expected future cash flows discounted at the loan’s original effective interest rate, or at the loan’s observable market price, or the fair value of the collateral, if the loan is collateral dependent. Impaired loans are specifically reviewed loans for which it is probable that Fidelity will be unable to collect all amounts due according to the terms of the loan agreement. A specific valuation allowance is required to the extent that the estimated value of an impaired loan is less than the recorded investment. SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” does not apply to large groups of smaller balance, homogeneous loans, which are consumer installment loans, and which are collectively evaluated for impairment. Smaller balance commercial loans are also excluded from the application of the statement. Interest on impaired loans is reported on the cash basis as received when the full recovery of principal and interest is anticipated, or after full principal and interest has been recovered when collection of interest is in question.

Allowance for Loan Losses

      The allowance for loan losses is established and maintained through provisions charged to operations. Such provisions are based on management’s evaluation of the loan portfolio, including loan portfolio

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

concentrations, current economic conditions, the economic outlook, past loan loss experience, adequacy of underlying collateral, and such other factors which, in management’s judgment, deserve consideration in estimating loan losses. Loans are charged off when, in the opinion of management, such loans are deemed to be uncollectible. Subsequent recoveries are added to the allowance.

      A formal review of the allowance for loan losses is prepared quarterly to assess the probable credit risk inherent in the loan portfolio, including concentrations, and to determine the adequacy of the allowance for loan losses. For purposes of the quarterly management review, the consumer loan portfolio is separated by loan type and each loan type is treated as a homogeneous pool. In accordance with the Interagency Policy Statement on the Allowance for Loan and Lease Losses, the level of allowance required for each loan type is determined based upon trends in charge-off rates for each loan type, adjusted for changes in these pools, which includes current information on the payment performance of each loan type. A projected loss allocation factor is determined for all loan categories based on historic charge-off experience, current trends, economic conditions, and other factors. The risk factor, when multiplied times the dollar value of loans, results in the amount of the allowance for loan losses allocated to these loans. Additionally, every commercial, commercial real estate, and construction loan is assigned a risk rating using established credit policy guidelines. Every nonperforming commercial, commercial real estate, and construction loan 90 days or more past due and with outstanding balances exceeding $50,000, as well as certain other performing loans with greater than normal credit risks as determined by management and Credit Review, are reviewed monthly by Credit Review to determine the level of allowance required to be specifically allocated to these loans. The amounts so determined are then added to the previously allocated allowance by category to determine the required allowance for commercial, commercial real estate, and construction loans. Management reviews its allocation of the allowance for loan losses versus the actual performance of each of the portfolios and adjusts allocation rates to reflect the recent performance of the portfolio, as well as current underwriting standards and other factors which might impact the estimated losses in the portfolio.

      In determining the appropriate level for the allowance, management ensures that the overall allowance appropriately reflects a margin for the imprecision inherent in most estimates of expected credit losses. This additional allowance may be reflected in an unallocated portion of the allowance. Based on management’s periodic evaluation of the allowance for loan losses, a provision for loan losses is charged to operations if additions to the allowance are required.

      Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions or other factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review Fidelity’s allowance for loan losses. Such agencies may require Fidelity to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

      Additionally, contractually outstanding and undisbursed loan commitments and letters of credit have a loss factor applied similar to the outstanding balances of loan portfolios. Additions to the reserve for outstanding loan commitments are not included in the allowance for loan losses but, instead, are included in other liabilities, and are reported as other operating expenses and not included in the provision for loan losses.

      A substantial portion of Fidelity’s loans is secured by real estate located in the metropolitan Atlanta, Georgia, area. In addition, most of Fidelity’s other real estate and most consumer loans are located in this same market area. Accordingly, the ultimate collectibility of a substantial portion of the loan portfolio and the recovery of a substantial portion of the carrying amount of other real estate are susceptible to changes in market conditions in this market area.

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Loans Held-For Sale

      Loans held-for-sale include certain originated residential mortgage loans, certain Small Business Administration (“SBA”) loans, and certain indirect automobile loans at December 31, 2005 and 2004. Those loans held-for-sale are recorded at the lower of cost or market on an aggregate basis. For residential mortgage loans, this is determined by outstanding commitments from investors for committed loans and on the basis of current delivery prices in the secondary mortgage market for uncommitted loans, if any. For SBA loans, this is determined primarily based on loan performance and available market information. For indirect automobile loans, the lower of cost or market is determined based on evaluating the estimated market value of the pool selected for sale. Based upon loan performance, commitment pricing, and available market information, no valuation adjustment was required at December 31, 2005 or 2004, as the fair values or committed sales prices for such held-for-sale loans approximated or exceeded their carrying values. There are certain regulatory capital requirements which must be met in order to qualify to originate residential mortgage loans and these capital requirements are monitored to assure compliance.

      Gains and losses on sales of loans are recognized at the settlement date. Gains and losses are determined as the difference between the net sales proceeds, including the estimated value associated with excess or deficient servicing fees to be received, and the carrying value of the loans sold.

Capitalized Servicing Assets

      Indirect automobile loan pools and certain SBA loans are sold with servicing retained. When the contractual servicing fees on loans sold with servicing retained exceed the estimated costs to service those loans, the excess servicing fees (servicing rights) are capitalized and amortized over the expected lives of the serviced loans. Management makes certain estimates and assumptions related to costs to service varying types of loans and pools of loans, the projected lives of loans and pools of loans sold with servicing retained, and discount factors used in calculating the present values of excess servicing fees to be received.

      No less frequently than quarterly, management reviews the status of all loans and pools of loans sold with related capitalized excess servicing assets to determine if there is any impairment to those assets due to such factors as earlier than estimated repayments or significant prepayments. Any impairment identified in these assets will result in reductions in their carrying values and a corresponding reduction in operating revenues.

Premises and Equipment

      Premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the lease term or estimated useful life, whichever is shorter.

Other Real Estate

      Other real estate represents property acquired through foreclosure or deed in lieu of foreclosure in satisfaction of loans. Other real estate is carried at the lower of cost or fair value less estimated selling costs. Fair value is determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources and may include an undivided interest in the fair value of other repossessed assets. Any excess of the loan balance at the time of foreclosure or acceptance in satisfaction of loans over the fair value less selling costs of the real estate held as collateral is treated as a loan loss and charged against the allowance for loan losses. Gain or loss on sale and any subsequent adjustments to reflect changes in fair value and selling costs are recorded as a component of income. Based on appraisals, environmental tests, and other evaluations as necessary, superior liens, if any, may be

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

serviced or satisfied and repair or capitalizable expenditures may be incurred in an effort to maximize recoveries.

Income Taxes

      Fidelity files a consolidated Federal income tax return. Taxes are accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under the liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Earnings Per Common Share

      Earnings per share are presented in accordance with requirements of SFAS No. 128, “Earnings Per Share.” Any difference between basic earnings per share and diluted earnings per share is a result of the dilutive effect of stock options.

Stock Options

      Fidelity has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise prices of Fidelity’s stock options are equal to or greater than the market price of the underlying stock on the date of grant, no compensation expense is recognized (see “Recent Accounting Pronouncements”).

Recent Accounting Pronouncements

      In December 2004, FASB issued SFAS No. 123-R, “Share Based Payment (Revised 2004)” which is a revision of SFAS No. 123. SFAS No. 123-R supersedes APB No. 25 and amends SFAS No. 95, “Statement of Cash Flows” and establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of the equity instruments. This statement requires that the fair value of all share-based payments to employees be recognized in the Consolidated Statements of Income. In 2005, the FASB issued further guidance (SFAS No. 123-R) on the classification and measurement of freestanding financial instruments originally issued for employee service and application of grant date, and Fidelity is required to adopt these statements on January 1, 2006. Fidelity expects to adopt SFAS No. 123-R using the modified prospective method (“modified prospective application”), which will require the recognition of expense over the remaining vesting period for the portion of awards not fully vested as of January 1, 2006. Fidelity does not expect the adoption of SFAS No. 123-R to have a significant impact on its financial position or results of operations. Under modified prospective application, SFAS 123-R applies to new awards and to awards modified, repurchased, or cancelled after January 1, 2006. The attribution of compensation costs for earlier awards will be based on the same method and on the same grant-date fair values previously determined for the pro forma disclosures required for companies that did not adopt the fair value accounting method for stock-based employee compensation. Based on the stock-based compensation awards outstanding as of December 31, 2005, the adoption of SFAS 123-R will result in an annualized pre-tax expense of approximately $52,000 and have an insignificant effect on Fidelity’s operations and financial condition. Future levels of compensation costs recognized related to stock-based compensation awards (including the

65

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

aforementioned expected costs during the period of adoption) may be impacted by new awards and/or modifications, repurchases, and cancellations of existing awards before and after the adoption of the standard as well as possible future changes in the underlying valuation assumptions used in the Black-Scholes Option Pricing model.

      Emerging Issues Task Force (“EITF”) Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF 03-1”) issued by the FASB provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. If impairment is determined to be other-than-temporary, then an impairment loss should be recognized equal to the difference between the investment’s cost and its fair value. Certain disclosure requirements of EITF 03-1 were adopted in 2003 and Fidelity began presenting the new disclosure requirements in its consolidated financial statements for the year ended December 31, 2003. FASB Staff Position (FSP) No. 115-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments” was issued in November 2005. FSP 115-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. If, after consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary, then an impairment loss should be recognized equal to the difference between the investment’s cost and its fair value. FSP 115-1 nullifies certain provisions of EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” while retaining the disclosure requirements of EITF 03-1 which were adopted by Fidelity in 2003. FSP 115-1 is effective for reporting periods beginning after December 15, 2005. The adoption of this standard did not have a significant impact on the financial condition or results of operations of Fidelity.

      In July 2005, the FASB released an Exposure Draft of a proposed interpretation, “Accounting for Uncertain Tax Positions-an Interpretation of FASB Statement 109” (“Interpretation”). The Interpretation contains proposed guidance on the recognition and measurement of uncertain tax positions. Any initial de-recognition amounts will be reported as a cumulative effect of a change in accounting principle. In October 2005, the effective date of the Exposure Draft was delayed and in January 2006, the FASB staff concluded it will be effective as of the beginning of the first annual period beginning after December 15, 2006. A final Interpretation is expected to be issued during the first quarter of 2006. Fidelity has not yet evaluated the potential impact of the Interpretation on its consolidated financial statements.

      SFAS No. 154, “Accounting Changes and Error Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to a newly adopted accounting principle. Previously, most changes in accounting principle were recognized by including the cumulative effect of changing to the new accounting principle in net income of the period of the change. Under SFAS 154, retrospective application requires (i) the cumulative effect of the change to the new accounting principle on periods prior to those presented to be reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented, (ii) an offsetting adjustment, if any, to be made to the opening balance of retained earnings (or other appropriate components of equity) for that period, and (iii) financial statements for each individual prior period presented to be adjusted to reflect the direct period specific effects of applying the new accounting principle. Special retroactive application rules apply in situations where it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Indirect effects of a change in accounting principle are required to be reported in the period in which the accounting change is made. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Fidelity does not expect SFAS 154 to impact its financial statements upon its adoption on January 1, 2006.

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FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In December 2003, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” (“SOP 03-3”). SOP 03-3 requires acquired loans, including debt securities, to be recorded at the amount of the purchaser’s initial investment and prohibits carrying over valuation allowances from the seller for those individually evaluated loans that have evidence of deterioration in credit quality since origination, and it is probable all contractual cash flows on the loan will be unable to be collected. SOP 03-3 also requires the excess of all undiscounted cash flows expected to be collected at acquisition over the purchaser’s initial investment to be recognized as interest income on a level-yield basis over the life of the loan. Subsequent increases in cash flows expected to be collected are recognized prospectively through an adjustment of loans’ yield over its remaining life, while subsequent decreases are recognized as impairment. Loans carried at fair value, mortgage loans held-for-sale, and loans to borrowers in good standing under revolving credit agreements are excluded from the scope of SOP 03-3. Fidelity adopted the provisions of SOP 03-3 effective January 1, 2005. The adoption of this standard did not have a material impact on the financial condition, results of operations, or liquidity of Fidelity.

      In December 2005, the FASB issued FSP SOP No. 94-6-1, “Terms of Loan Products That May Give Rise to a Concentration of Credit Risk.” FSP SOP No. 94-6-1 requires additional disclosures for certain loan products that expose entities to higher risks than traditional loan products. The FSP requires a company to disclose additional information such as significant concentrations of credit risks resulting from these products, quantitative information about the market risks of financial instruments that is consistent with the way a company manages or adjusts those risks, concentrations in revenue from particular products if certain conditions are met, and the factors that influenced management’s judgment as it relates to the accounting policy for credit losses and doubtful accounts. This FSP is effective for the reporting period ended December 31, 2005. The adoption of this FSP did not require additional disclosures by Fidelity.

2. Regulatory Matters

      The Board of Governors of the Federal Reserve System (the “FRB”) is the primary regulator of FSC, a bank holding company. The Bank is a state chartered commercial bank subject to Federal and state statutes applicable to banks chartered under the banking laws of the State of Georgia and to banks whose deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”), the Bank’s primary Federal regulator. The Bank is a wholly-owned subsidiary of FSC. The FRB, the FDIC, and the Georgia Department of Banking and Finance (the “GDBF”) have established capital adequacy requirements as a function of their oversight of bank holding companies and state chartered banks. Each bank holding company and each bank must maintain certain minimum capital ratios.

      The Bank’s primary Federal regulator is the FDIC and the GDBF is its State regulator. The FDIC and the GDBF examine and evaluate the financial condition, operations, and policies and procedures of state chartered commercial banks, such as the Bank, as part of their legally prescribed oversight responsibilities. In 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) was enacted. Additional supervisory powers and regulations mandated by FDICIA include a “prompt corrective action” program based upon five regulatory categories for banks in which all banks are placed, largely based on their capital positions. Regulators are permitted to take increasingly harsh action as a bank’s financial condition declines. Regulators are also empowered to place in receivership or require the sale of a bank to another institution when a bank’s capital leverage ratio reaches 2%. Better capitalized institutions are subject to less onerous regulation and supervision than banks with lesser amounts of capital.

      To implement the prompt corrective action provisions of FDICIA, the FDIC has adopted regulations placing financial institutions in the following five categories based upon capitalization ratios: (i) a “well capitalized” institution has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based ratio of at

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least 6% and a leverage ratio of at least 5% and is not subject to an enforcement action requiring it to maintain a specific level of capital; (ii) an “adequately capitalized” institution has a total risk-based ratio of at least 8%, a Tier 1 risk-based ratio of at least 4% and a leverage ratio of at least 4% (or 3% if it received a CAMELS composite rating of 1 and is not experiencing significant growth); (iii) an “undercapitalized” institution has a total risk-based ratio of under 8%, a Tier 1 risk-based ratio of under 4% or a leverage ratio of under 4% ( or 3% in certain circumstances); (iv) a “significantly undercapitalized” institution has a total risk-based ratio of under 6%, a Tier 1 risk-based ratio of under 3% or leverage ratio of under 3%; and (v) a “critically undercapitalized” institution has a leverage ratio of 2% or less. Institutions in any of the three undercapitalized categories are prohibited from declaring dividends or making capital distributions. The regulations also establish procedures for “downgrading” an institution to a lower capital category based on supervisory factors other than capital.

      The Bank’s conversion from a national bank charter to a Georgia state bank charter took place as of the close of business on May 9, 2003, at which time the Bank became subject solely to the regulation of and supervision by the GDBF and the FDIC. At that time, the Bank’s name was changed from Fidelity National Bank to Fidelity Bank.

      Capital leverage ratio standards require a minimum ratio of Tier 1 capital to adjusted total assets (“leverage ratio”) for the Bank of 4.0%. Institutions experiencing or anticipating significant growth or those with other than minimum risk profiles may be expected to maintain capital above the minimum levels.

      The following table sets forth the capital requirements for the Bank under FDIC regulations and the Bank’s capital ratios at December 31, 2005 and 2004:

		FDIC Regulations
								December 31,
		Adequately			Well
Capital Ratios		Capitalized			Capitalized			2005			2004
Leverage			4.00	%		5.00	%		8.26	%		8.27	%
Risk-Based Capital:
	Tier 1		4.00			6.00			9.17			9.34
	Total		8.00			10.00			11.04			11.45

      The FRB, as the primary regulator of FSC, has established capital requirements as a function of its oversight of bank holding companies.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table depicts FSC’s capital ratios at December 31, 2005 and 2004, in relation to the minimum capital ratios established by the regulations of the FRB (dollars in thousands):

		December 31, 2005					December 31, 2004
		Amount		Percent			Amount		Percent
Tier 1 Capital:
	Actual	$	117,562		9.60	%	$	105,216		9.88	%
	Minimum		48,998		4.00			42,703		4.00
	Excess	$	68,564		5.60	%	$	62,513		5.88	%
Total Risk-Based Capital:
	Actual	$	146,588		11.97	%	$	126,845		11.91	%
	Minimum		97,996		8.00			85,406		8.00
	Excess	$	48,592		3.97	%	$	41,439		3.91	%
Tier 1 Capital Leverage Ratio:
	Actual				8.64	%				8.74	%
	Minimum				3.00					3.00
	Excess				5.64	%				5.74	%

      Set forth below are FSC’s pertinent capital ratios under FRB regulations as of December 31, 2005 and 2004:

		FRB Regulations
								December 31
		Adequately			Well
Capital Ratios		Capitalized			Capitalized			2005			2004
Leverage			3.00	%		5.00	%		8.64	%		8.74	%
Risk-Based Capital:
	Tier 1		4.00			6.00			9.60			9.88
	Total		8.00			10.00			11.97			11.91

      On March 1, 2005, the FRB announced the adoption of a rule entitled “Risk Based Capital Standards: Trust Preferred Securities and the Definition of Capital” (“Rule”) regarding risk-based capital standards for bank holding companies (“BHCs”) such as FSC. The Rule provides for a five-year transition period, with an effective date of March 31, 2009, but requires BHCs not meeting the standards of the Rule to consult with the FRB and develop a plan to comply with the standards by the effective date.

      The Rule defines the restricted core capital elements, including trust preferred securities, which may be included in Tier 1 capital, subject to an aggregate 25% of Tier 1 capital net of goodwill limitation. Excess restricted core capital elements may be included in Tier 2 capital, with trust preferred securities and certain other restricted core capital elements subject to a 50% of Tier 1 capital limitation. The Rule requires that trust preferred securities be excluded from Tier 1 capital within five years of the maturity of the underlying junior subordinated notes issued and be excluded from Tier 2 capital within five years of that maturity at 20% per year for each year during the five-year period to the maturity. FSC’s first junior subordinated note matures in March 2030.

      FSC’s only restricted core capital elements consist of its trust preferred securities issues and FSC has no recorded goodwill; therefore, the Rule has no impact on FSC’s capital ratios, its financial condition, or its operating results. The trust preferred securities are eligible for FSC’s regulatory Tier 1 capital, with a

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limit of 25% of the sum of all core capital elements. All amounts exceeding the 25% limit are includable in FSC’s regulatory Tier 2 capital.

3. Discontinued Operations

      In December 2002, Fidelity sold its credit card line of business, including all of its credit card accounts and outstanding balances. Fidelity serviced the credit card portfolio on a fee basis until May 15, 2003, at which time the servicing was transferred to the purchaser’s servicing systems. Substantially all operations and activities related to the credit card line of business ceased by June 30, 2003, and there has been no income or expense from discontinued operations classified as such since that date. Income from discontinued operations totaled approximately $1.5 million in 2003, while expenses totaled approximately $1.3 million.

      In accordance with accounting principles generally accepted in the United States, the earnings of the credit card business are shown separately in the Consolidated Statements of Income for 2003. Accordingly, all information in these consolidated financial statements reflects continuing operations only for that year, unless otherwise noted.

4. Investment Securities

      Investment securities at December 31, 2005 and 2004, are summarized as follows (dollars in thousands):

				Gross		Gross
		Amortized		Unrealized		Unrealized
		Cost		Gains		Losses			Fair Value
Securities available-for-sale at December 31, 2005:
	U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	9,997	$	—	$	(57	)	$	9,940
	Mortgage backed securities		116,517		90		(2,347	)		114,260
	Total	$	126,514	$	90	$	(2,404	)	$	124,200
Securities available-for-sale at December 31, 2004:
	Mortgage backed securities	$	114,304	$	509	$	(676	)	$	114,137
Securities held-to-maturity at December 31, 2005:
	Mortgage backed securities	$	38,333	$	18	$	(680	)	$	37,671
	Other securities		6,327		—		—			6,327
	Total	$	44,660	$	18	$	(680	)	$	43,998
Securities held-to-maturity at December 31, 2004:
	Mortgage backed securities	$	46,254	$	337	$	—		$	46,591
	Other securities		5,659		—		—			5,659
	Total	$	51,913	$	337	$	—		$	52,250

      Proceeds from sales of investment securities available-for-sale during 2005, 2004, and 2003 were $2 million, $9 million, and $8 million, respectively. Gross gains of $32,000, $384,000, and $331,000,

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respectively, were realized on those sales. Income tax expense related to the sale of securities was $12,000, $146,000, and $126,000 in 2005, 2004 and 2003, respectively. There were no investments held in trading accounts during 2005, 2004 or 2003.

      The following table depicts the amortized cost and estimated fair value of investment securities at December 31, 2005 and 2004. Expected maturities may differ from the contractual maturities of mortgage backed securities because the mortgage holders of the underlying mortgage loans have the right to prepay their mortgage loans without prepayment penalties. Also, other securities include Federal Home Loan Bank common stock totaling approximately $5 million and $3 million at December 31, 2005 and 2004, respectively, and the investments in the common stocks of Fidelity’s trust preferred securities subsidiaries totaling approximately $1 million at December 31, 2005 and 2004, respectively. Federal Reserve Bank Stock totaling approximately $2 million at December 2004, was redeemed during 2005, as state chartered non-member banks such as the Bank are not permitted to hold stock in the FRB. These investments are not included in the following table, as they have no stated maturities (dollars in thousands).

			December 31, 2005				December 31, 2004
			Amortized				Amortized
			Cost		Fair Value		Cost		Fair Value
Available-for-Sale
	U.S. Treasury securities and obligations of U.S. Government corporations and agencies due after one year through five years		$	9,997	$	9,940	$	—	$	—
	Mortgage backed securities			116,517		114,260		114,304		114,137
		Total	$	126,514	$	124,200	$	114,304	$	114,137
Held-to-Maturity
	Mortgage backed securities		$	38,333	$	37,671	$	46,254	$	46,591

      The following table reflects the gross unrealized losses and fair values of investment securities with unrealized losses at December 31, 2005 and 2004, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss and temporarily impaired position (dollars in thousands):

		12 Months or Less				More Than 12 Months
		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses
Available-for-Sale at December 31, 2005
	U.S. Government corporations and agencies	$	9,940	$	57	$	—	$	—
	Mortgage backed securities		54,312		980		34,822		1,367
	Total	$	64,252	$	1,037	$	34,822	$	1,367
Available-for-Sale at December 31, 2004
	Total mortgage backed securities	$	23,935	$	173	$	17,489	$	503
Held-to-Maturity at December 31, 2005
	Total mortgage backed securities	$	37,008	$	680	$	—	$	—
Held-to-Maturity at December 31, 2004		$	—	$	—	$	—	$	—

      Declines in fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-

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temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of Fidelity to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

      Certain individual investment securities were in a continuous unrealized loss position at December 31, 2005 and 2004, for 30 months and 18 months, respectively. However, all investment securities at December 31, 2005, other than required regulatory common stock and trust preferred common stock investments, were agency notes and agency pass-through mortgage backed securities and the unrealized loss positions resulted not from credit quality issues, but from market interest rate increases over the interest rates prevalent at the time the mortgage backed securities were purchased, and are considered temporary.

      Also, as of December 31, 2005, management had the ability and intent to hold the temporarily impaired securities for a period of time sufficient for a recovery of cost. Accordingly, as of December 31, 2005, management believes the impairments detailed in the table above are temporary and no impairment loss has been recognized in Fidelity’s Consolidated Statements of Income (see Note 1 — “Recent Accounting Pronouncements”).

      Investment securities with a carrying value aggregating approximately $141 million and $132 million at December 31, 2005 and 2004, respectively, were pledged as collateral for: (i) public deposits with pledged amounts totaling $59 million and $56 million, respectively; (ii) securities sold under overnight agreements to repurchase with pledged amounts totaling $43 million and $22 million, respectively; (iii) collateral for certain short-term and long-term fixed rate laddered maturity borrowings with pledged amounts totaling approximately $38 million and $50 million at December 31, 2005 and 2004, respectively, and (iv) for other purposes required by law with pledged amounts totaling $1 million at December 31, 2005, and $4 million at December 31, 2004.

5. Loans

      Loans outstanding, by classification, are summarized as follows, net of deferred loan fees of $102,000 and $191,000 at December 31, 2005 and 2004 (dollars in thousands):

		December 31,
		2005		2004
Real estate — mortgage		$	239,884	$	222,718
Real estate — construction			206,864		162,176
Commercial, financial and agricultural			97,227		85,842
Consumer installment			555,194		490,490
	Total loans		1,099,169		961,226
Less: Allowance for loan losses			12,643		12,174
	Loans, net	$	1,086,526	$	949,052

      Loans held-for-sale at December 31, 2005 and 2004, totaled $31 million and $34 million, respectively, of which $26 million and $30 million, respectively, were indirect automobile loans; $1 million and $4 million, respectively, were originated residential mortgage loans, and $4 million were SBA loans at December 31, 2005. Fidelity was servicing for others approximately 18,800 and 17,300 indirect automobile loans on December 31, 2005 and 2004, respectively, totaling $260 million and $233 million, respectively. Fidelity was also servicing 39 SBA loan participations totaling $10 million at December 31, 2005, and 44 SBA loan participations totaling $13 million at December 31, 2004.

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      Approximately $55 million and $37 million in commercial loans secured by real estate; $50 million and $44 million in home equity lines of credit and second mortgage loans on residential real estate; and $21 million and $23 million in residential first mortgage real estate loans were pledged to the Federal Home Loan Bank of Atlanta (the “FHLB”) at December 31, 2005 and 2004, respectively, as collateral for borrowings. Approximately $131 million and $128 million in indirect automobile loans were pledged to the Federal Reserve Bank of Atlanta at December 31, 2005 and 2004, respectively, as collateral for Discount Window contingent borrowings.

      Loans in nonaccrual status totaled approximately $2 million at December 31, 2005, 2004 and 2003. The average recorded investment in impaired loans during 2005, 2004, and 2003 was approximately $3 million, $3 million, and $4 million, respectively. If such impaired loans had been on a full accrual basis, interest income on these loans would have been approximately $71,000, $50,000, and $75,000, in 2005, 2004, and 2003, respectively.

      Loans totaling approximately $167,000, $690,000, and $1,092,000 were transferred to other real estate in 2005, 2004, and 2003, respectively. Various other real estate acquired through foreclosure or through deed in lieu of foreclosure in satisfaction of loans, which properties were subject to long-term first mortgages totaling approximately $425,000 at December 31, 2003, were included in other real estate and long-term debt. There was no other real estate subject to a long-term first mortgage at December 31, 2005 and 2004. In 2004 and 2003, Fidelity recorded write-downs of $40,000 and $29,000, respectively, on commercial and residential real estate owned properties as a result of impairment to their values. There were no write-downs on other real estate owned during 2005. There were proceeds from sales of approximately $442,000, $489,000 and $1,658,000 from other real estate owned by Fidelity in 2005, 2004, and 2003, respectively.

      Fidelity has loans outstanding to various executive officers, directors, and their related interests. Management believes that all of these loans were made in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other customers, and did not involve more than normal risks. The following is a summary of activity during 2005 for such loans (dollars in thousands):

Loan balances at January 1, 2005			$	1,029
	New loans			117
	Less:
		Loan repayments		78
Loan balances at December 31, 2005			$	1,068

      The following is a summary of activity in the allowance for loan losses (dollars in thousands):

	December 31,
	2005			2004			2003
Balance at beginning of year	$	12,174		$	9,920		$	9,404
Provision for loan losses		2,900			4,800			4,750
Loans charged off		(3,435	)		(3,608	)		(4,848	)
Recoveries on loans charged off		1,004			1,062			614
Balance at end of year	$	12,643		$	12,174		$	9,920

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Premises and Equipment

      Premises and equipment are summarized as follows (dollars in thousands):

	December 31,
	2005		2004
Land	$	4,546	$	4,546
Buildings and improvements		10,603		9,251
Furniture and equipment		15,276		15,285
		30,425		29,082
Less accumulated depreciation and amortization		16,357		15,570
Premises and equipment, net	$	14,068	$	13,512

      As of December 31, 2005, 2004, and 2003, Fidelity was lessee in a lease at market terms with a corporation which is controlled by a director of Fidelity. The lease is for a 2,240 square foot bank branch at an approximate annual rate of $12 per square foot, subject to pro rata increases for any increases in taxes and insurance. Payments under this lease totaled $28,444 in 2005 and $27,125 in 2004 and 2003, respectively. In addition, Fidelity was a lessee at market terms with a corporation, the chairman of which is a director of Fidelity. The lease is for 5,040 square feet for a branch location in an office building at an approximate annual rate of $22 per square foot. Payments under this lease totaled $109,905, $100,919, and $102,024 in 2005, 2004, and 2003, respectively.

7. Deposits

      Time deposits over $100,000 as of December 31, 2005 and 2004, were $225 million and $202 million, respectively. Maturities for time deposits over $100,000 as of December 31, 2005, in excess of one year are as follows: $25 million in one to two years, $6 million in two to three years, and $7 million in three to five years. Related interest expense was $7.4 million, $5.3 million, and $5.0 million for the years ended December 2005, 2004, and 2003, respectively. Included in demand and money market deposits were NOW accounts totaling $121 million, $132 million, and $76 million at December 31, 2005, 2004, and 2003, respectively.

      Brokered deposits obtained through investment banking firms under master certificates totaled $102 million, $62 million, and $50 million as of December 31, 2005, 2004, and 2003, respectively, and were included in other time deposits. Brokered deposits outstanding at December 31, 2005, were acquired in 2005 and 2004 and had original maturities of six to 60 months. Brokered deposits outstanding at December 31, 2004, were acquired in 2004 and 2003 and had original maturities of 12 to 30 months. Brokered deposits outstanding at December 31, 2003, were acquired in 2003 and had original maturities of 12 to 24 months. The weighted average cost of brokered deposits at December 31, 2005, 2004, and 2003, was 4.09%, 2.68%, and 2.05%, respectively, and related interest expense totaled $2.6 million, $1.0 million, and $.9 million during 2005, 2004, and 2003, respectively.

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8. Short-Term Borrowings

      Short-term debt is summarized as follows (dollars in thousands):

		December 31,
		2005		2004
Overnight repurchase agreements primarily with commercial customers at an average rate of 1.51% and 1.16% at December 31, 2005 and 2004, respectively		$	36,488	$	22,212
Unsecured overnight Federal funds purchased from commercial banks at an average rate of 4.32% and 2.81% at December 31, 2005 and 2004, respectively			15,000		5,000
FHLB collateralized borrowing with a daily rate of 4.44% and 2.44% at December 31, 2005 and 2004, respectively, and a maturity date of January 2, 2007, and November 23, 2005, respectively, and prepayable without penalty at any time			30,000		14,000
Fixed rate debt collateralized with mortgage backed securities with an interest rate of 3.03% and 2.39% maturing November 17, 2006 and 2005, respectively			6,000		6,000
Fixed rate debt collateralized with mortgage backed securities with an interest rate of 2.91% and 2.32% maturing December 11, 2006 and 2005, respectively			5,000		5,000
	Total	$	92,488	$	52,212

      Short-term borrowings mature either overnight or on a remaining fixed maturity not to exceed one year. Overnight repurchase agreements consist primarily of balances in the transaction accounts of commercial customers swept nightly to an overnight investment account. All short-term repurchase agreements are collateralized with investment securities having a market value equal to or greater than, but approximating, the balance borrowed. The daily rate line of credit advance with the FHLB is a line collateralized with pledged qualifying real estate loans which may be increased or decreased daily and may be drawn on to the extent of available pledged collateral. It reprices daily and bears a rate comparable to that of overnight Federal funds. At December 31, 2005 and 2004, Fidelity had a collateralized line of credit with the FHLB, which required loans secured by real estate, investment securities or other acceptable collateral, to borrow up to a maximum of approximately $140 million and $122 million, respectively, subject to available qualifying pledged collateral. At December 31, 2005 and 2004, Fidelity had a contingent line of credit collateralized with consumer loans with the Federal Reserve Bank of Atlanta Discount Window. In addition, Fidelity had an unused $20 million term repurchase line available at December 31, 2005 and 2004. Finally, it had $62 million and $37 million in total unsecured Federal funds lines available with various financial institutions as of December 31, 2005 and 2004, respectively. The weighted average rate on short-term borrowings outstanding at December 31, 2005, 2004, and 2003, was 3.09%, 1.91% and 2.96%, respectively.

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9. Subordinated Debt and Other Long-Term Debt

      Subordinated Debt and Other Long-term Debt are summarized as follows (dollars in thousands):

			December 31,
			2005		2004
Subordinated Debt
Fixed rate 30-year capital pass-through securities (“TruPS”) with interest at 10.875%, payable semi-annually, redeemable in whole or part on or after March 8, 2010, at a declining redemption price ranging from 105.438% to 100%			$	10,825	$	10,825
Fixed rate 30-year trust preferred securities (“Preferred Securities”) with interest at 11.045%, payable semi-annually, redeemable in whole or part on or after July 19, 2010, at a declining redemption price ranging from 105.523% to 100%				10,309		10,309
Floating rate 30-year capital securities (“Capital Securities”) with interest adjusted quarterly at three-month LIBOR plus 3.10%, with a rate at December 31, 2005 and 2004, of 7.62% and 5.65%, respectively, with interest payable quarterly, redeemable in whole or part on or after June 26, 2008, at a redemption price of 100%				15,464		15,464
Floating rate 30-year capital securities (“Capital Securities”) with interest adjusted quarterly at three-month LIBOR plus 1.89%, with a rate at December 31, 2005 of 6.39%, with interest paid quarterly, redeemable in whole or part on or after March 17, 2009, at a redemption price of 100%				10,310		—
		Subordinated debt		46,908		36,598
Long-Term Debt
	Fixed rate debt with an interest rate of 3.03% maturing November 17, 2006			—		6,000
	Fixed rate debt with an interest rate of 2.91% maturing December 11, 2006			—		5,000
	Fixed rate debt with an interest rate of 3.51% maturing November 17, 2007			6,000		6,000
	Fixed rate debt with an interest rate of 3.36% maturing December 11, 2007			5,000		5,000
	Fixed rate debt with an interest rate of 3.90% maturing November 17, 2008			7,000		7,000
	Fixed rate debt with an interest rate of 3.71% maturing December 11, 2008			5,000		5,000
	FHLB five year European Convertible Advance with interest at 4.38% maturing November 3, 2010, with a one-time FHLB conversion option to reprice to a three-month LIBOR floating rate at the end of two years			25,000		—
		Long-term debt		48,000		34,000
		Total subordinated debt and other long-term debt	$	94,908	$	70,598

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Subordinated debt and other long-term debt note maturities as of December 31, 2005, are summarized as follows (dollars in thousands):

		Amount
2007		$	11,000
2008			12,000
2009			—
2010			25,000
2011			—
Thereafter			46,908
	Total	$	94,908

      In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46”). FIN 46 addresses whether business enterprises must consolidate the financial statements of entities known as “variable interest entities”. FIN 46 was revised in December 2003 (“FIN 46 (Revised)”) and the revised interpretations clarified that trust preferred securities such as those issued by Fidelity could not be consolidated for financial reporting purposes. Fidelity adopted FIN 46 (Revised) effective January 2004 and consequently, the $45.5 million of trust preferred securities issued by trusts established by Fidelity are not consolidated for financial reporting purposes from that date. Prior periods were not restated. The equity investments in the subsidiaries created to issue the obligations, the obligations themselves, and related dividend income and interest expense are reported on a deconsolidated basis, with the investments in the amount of $1.4 million reported as investments held-to-maturity and dividends included as investment interest income. The obligations, including the amount related to the equity investments, in the amount of $46.9 million are reported as subordinated debt, with related interest expense reported as interest on subordinated debt.

      FSC has four business trust subsidiaries that are variable interest entities, FNC Capital Trust I (“FNCCTI”), Fidelity National Capital Trust I (“FidNCTI”), and Fidelity Southern Statutory Trust I (“FSSTI”), and Fidelity Southern Statutory Trust II (“FSST II”). During 2000, FNCCTI and FidNCTI and during 2003 and 2005 FSSTI and FSST II, respectively, issued common securities, all of which were purchased and are held by FSC, totaling $1.4 million and are classified by Fidelity as investments held-to-maturity and trust preferred securities totaling $45.5 million and classified by Fidelity as subordinated debt, which were sold to investors, with 30-year maturities. In addition, the $1.4 million borrowed from the business trust subsidiaries to purchase their respective common securities are classified as subordinated debt. The trust preferred securities are callable by the business trust subsidiaries on or after defined periods. The trust preferred security holders may only terminate the business trusts under defined circumstances such as default, dissolution, or bankruptcy. The trust preferred security holders and other creditors, if any, of each business trust have no recourse to Fidelity and may only look to the assets of each business trust to satisfy all debts and obligations.

      The only assets of FNCCTI, FidNCTI, FSSTI, and FSSTII are subordinated debentures of FSC, which were purchased with the proceeds from the issuance of the common and preferred securities. FNCCTI and FidNCTI have fixed interest rates of 10.875% and 11.045%, respectively, while FSSTI and FSSTII have current interest rates of 7.62% and 6.39%, respectively, and reprice quarterly at interest rates set at 3.10% and 1.89%, respectively, over three-month LIBOR. FSC makes semi-annual interest payments on the subordinated debentures to FNCCTI and FidNCTI and quarterly interest payments to FSSTI and FSSTII, which use these payments to pay dividends on the common and preferred securities. The trust preferred securities are eligible for regulatory Tier 1 capital, with a limit of 25% of the sum of all core

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

capital elements. All amounts exceeding the 25% limit are includable in regulatory Tier 2 capital (see Note 3 — “Regulatory Matters”).

      Long-term debt collateralized with mortgage backed securities totaled $23 million and $34 million at December 31, 2005 and 2004, respectively. In November and December 2003, Fidelity purchased approximately $70 million in Agency mortgage backed securities, funded in part with $45 million in fixed rate long-term debt, with laddered maturities of approximately equal amounts of two years through five years. The $45 million was funded through a financial institution on a collateralized basis. As principal payments on the borrowings are made at maturity, excess collateral will be released to Fidelity. Debt of $11 million was reclassified to short-term debt in the fourth quarter of 2005 and in the fourth quarter of 2004 when maturity dates were less than one year in duration. In November 2005, Fidelity entered into a $25 million 5-year FHLB European Convertible Advance collateralized with pledged qualifying real estate loans and maturing November 3, 2010, with interest at 4.38%, with a one-time FHLB conversion option at the end of the second year. Under the provisions of the advance, the FHLB has the option to convert the advance into a three month LIBOR-based floating rate advance effective November 3, 2007, at which time Fidelity may elect to terminate the agreement on any interest payment date without penalty. If the FHLB elects not to convert the advance, Fidelity has the option of paying a substantial prepayment fee and terminating the advance on any interest payment date prior to maturity. Fidelity utilized approximately $20 million of the proceeds of the advance to purchase mortgage backed securities. (See “Investment Securities.”)

      There was no indebtedness to directors, executive officers, or principal holders of equity securities in excess of 5% of shareholders’ equity at December 31, 2005 or 2004.

10. Income Tax

      Income tax expense (benefit) attributable to income from continuing operations consists of (dollars in thousands):

		Current		Deferred			Total
Year ended December 31, 2005:
	Federal	$	5,240	$	(477	)	$	4,763
	State		335		346			681
		$	5,575	$	(131	)	$	5,444
Year ended December 31, 2004:
	Federal	$	4,321	$	(811	)	$	3,510
	State		130		147			277
		$	4,451	$	(664	)	$	3,787
Year ended December 31, 2003:
	Federal	$	1,879	$	(479	)	$	1,400
	State		35		(93	)		(58	)
		$	1,914	$	(572	)	$	1,342

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Income tax expense differed from amounts computed by applying the statutory U.S. Federal income tax rate to pretax income from continuing operations as a result of the following (dollars in thousands):

			2005			2004			2003
Taxes at statutory rate			$	5,362		$	3,883		$	1,732
Increase (reduction) in income taxes resulting from:
	State income tax expense, net of Federal income tax benefit			450			185			(38	)
	Tax exempt income			(435	)		(309	)		(270	)
	Other, net			67			28			(82	)
		Income tax expense	$	5,444		$	3,787		$	1,342

      The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2005 and 2004, are presented below (dollars in thousands):

	December 31,
	2005				2004
	Assets		Liabilities		Assets		Liabilities
State tax credit carry forwards	$	—	$	—	$	180	$	—
Allowance for loan losses		4,799		—		4,621		—
Accelerated depreciation		—		995		—		1,369
Deferred loan fees, net		—		224		—		285
Other real estate		—		—		325		—
Unrealized holding losses on securities available-for-sale		879		—		63		—
Other		408		189		441		245
	$	6,086	$	1,408	$	5,630	$	1,899

      There is no valuation allowance provided for any of the deferred tax assets based on management’s belief that all deferred tax asset benefits will be realized.

11. Employee Benefits

      Fidelity maintains a 401(k) defined contribution retirement savings plan (the “Plan”) for employees age 21 or older who have completed six months of service with at least 500 hours of service. Employees’ contributions to the Plan are voluntary. Fidelity matches 50% of the first 6% of participants’ contributions. For the years ended December 31, 2005, 2004, and 2003, Fidelity contributed $305,169, $229,196, and $299,102 respectively, net of forfeitures, to the Plan.

      Fidelity has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”) requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise prices of Fidelity’s employee stock options equal or are greater than the market price of the underlying stock on the date of grant, no compensation expense is recognized. In December 2004, the FASB issued SFAS No. 123-R (see Note 1 — “Recent Accounting Pronouncements”). Among other things, SFAS 123-R eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

values on the date of the grant. SFAS 123-R is effective for Fidelity on January 1, 2006. Fidelity expects to recognize additional pre-tax annual compensation cost of approximately $52,000 beginning in the first quarter of 2006 as a result of the adoption of SFAS 123-R, which amount is insignificant to Fidelity’s operations and financial condition. Future levels of compensation cost recognized related to stock-based compensation awards may be impacted by new awards and/or modifications, repurchases, and cancellations of existing awards before and after the adoption of this standard.

      Fidelity’s 1997 Incentive Stock Option Plan has authorized the grant of options to management personnel for up to 500,000 shares of Fidelity’s common stock. All options granted have five to eight year terms and vest and become fully exercisable at the end of four to five years of continued employment.

      The following schedule summarizes the detail of the incentive stock options granted under the plan:

			Weighted
			Average
	Number		Exercise
	Granted		Price
Balance at January 1, 2003		417,600	$	8.39
Granted during 2003		—		—
Exercised during 2003		16,400		8.05
Terminated during 2003		21,600		8.05
Expired during 2003		—		—
Balance at December 31, 2003		379,600		8.42
Granted during 2004		—		—
Exercised during 2004		229,600		8.83
Terminated during 2004		—		—
Expired during 2004		—		—
Balance at December 31, 2004		150,000		7.80
Granted during 2005		21,905		16.39
Exercised during 2005		101,000		7.28
Terminated during 2005		—		—
Expired during 2005		—		—
Balance at December 31, 2005		70,905	$	11.19

      Options totaling 37,000, 132,000, and 329,600 had vested and were exercisable as of December 31, 2005, 2004, and 2003, respectively, at a weighted average exercise price of $8.26, $7.40, and $8.36, respectively.

      At December 31, 2005, there were 70,905 options outstanding at an exercise price ranging from $7.06 to $16.70, with a weighted average exercise price of $11.19. At December 31, 2004 and 2003, there were 150,000 and 379,600 options outstanding at exercise prices ranging from $7.06 to $10.75, with a weighted average price of $7.80 and $8.42, respectively. The weighted average remaining contractual term of the options at December 31, 2005, was 3.84 years.

      The following pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if Fidelity had accounted for its employee stock options under the fair value method of that statement (dollars in thousands). The effects of applying SFAS No. 123 for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

providing pro forma disclosures are not likely to be representative of the effects on reported net income for future years.

				Net			Net
				Income			Income
	Net			Per Share			Per Share
	Income			Basic			Diluted
December 31, 2005:
As reported	$	10,326		$	1.13		$	1.12
Stock based compensation, net of related tax effect		(26	)		(.01	)		—
Pro forma	$	10,300		$	1.12		$	1.12
December 31, 2004:
As reported	$	7,632		$	.85		$	.84
Stock based compensation, net of related tax effect		(79	)		(.01	)		(.01	)
Pro forma	$	7,553		$	.84		$	.83
December 31, 2003:
As reported	$	3,831		$	.43		$	.43
Stock based compensation, net of related tax effect		(82	)		(.01	)		(.01	)
Pro forma	$	3,749		$	.42		$	.42

      There were 21,905 options granted in 2005, while no options were granted in 2004 and 2003. The per share weighted fair value of stock options granted during 2005 was $4.63 using the Black-Scholes option pricing model. The fair values of the options granted during 2005 were based upon the discounted value of future cash flows of options using the following assumptions:

	2005
Risk-free rate		4.03	%
Expected life of the options (in years)		5
Expected dividends (as a percent of the fair value of the stock)		1.71	%
Volatility		30.33

12. Commitments and Contingencies

      The approximate future minimum rental commitment as of December 31, 2005, for all noncancellable leases with initial or remaining terms of one year or more are shown in the following table (dollars in thousands):

		Amount
2006		$	2,282
2007			2,262
2008			2,163
2009			2,046
2010			1,996
Thereafter			3,093
	Total	$	13,842

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Rental expense for all leases amounted to approximately $2,250,000, $2,452,000, and $2,700,000 in 2005, 2004, and 2003, respectively, net of sublease revenues of $117,000 and $492,000 respectively, in 2004 and 2003. There were no sublease revenues in 2005.

      Due to the nature of their activities, Fidelity and its subsidiaries are at times engaged in various legal proceedings which arise in the normal course of business, some of which were outstanding at December 31, 2005. While it is difficult to predict or determine the outcome of these proceedings, it is the opinion of management and its counsel that the ultimate liabilities, if any, will not have a material adverse impact on Fidelity’s consolidated results of operations or its financial position.

      The Federal Reserve Board requires that banks maintain cash on hand and reserves in the form of average deposit balances at the Federal Reserve Bank based on the Bank s’ average deposits. At December 31, 2004, the Bank’s reserve requirement, net of available credits, was $226,000. At December 31, 2005, the available credits exceeded the reserve requirement and only minimal balances were maintained to provide a positive reserve balance.

13. Shareholders’ Equity

      Generally, dividends that may be paid by the Bank to Fidelity are subject to certain regulatory limitations. In particular, under Georgia banking law applicable to Georgia state chartered commercial banks such as the Bank, the approval of the GDBF will be required if the total of all dividends declared in any calendar year by the Bank exceeds 50% of the Bank’s net profits for the prior year or if certain other provisions relating to classified assets and capital adequacy are not met. Based on this rule, at December 31, 2005 and 2004, the Bank could pay approximately $6 million and $5 million in dividends, respectively, during 2005 and 2004 without GDBF regulatory approval. At December 31, 2005 and 2004, the Bank’s total shareholders’ equity was approximately $111 million and $99 million, respectively. In 2005 Fidelity invested $5 million in the Bank in the form of capital surplus.

      Also, under current Federal regulations, the Bank is limited in the amount it may loan to its nonbank affiliates, including Fidelity. As of December 31, 2005 and 2004, there were no loans outstanding from the Bank to Fidelity.

14. Components of Other Comprehensive Income (Loss)

      SFAS No. 130, “Reporting Comprehensive Income,” (“SFAS 130”) establishes standards for reporting comprehensive (loss) income. Comprehensive (loss) income includes net income and other comprehensive (loss) income, which is defined as non-owner related transactions in equity. The only other comprehensive (loss) income item for Fidelity is unrealized gains or losses, net of tax, on securities available-for-sale.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The amounts of other comprehensive (loss) income included in equity with the related tax effect and the accumulated other comprehensive (loss) income are reflected in the following schedule (dollars in thousands):

							Accumulated
				Tax			Other
	Gain/(Loss)			(Expense)			Comprehensive
	Before Tax			/Benefit			Income/(Loss)
January 1, 2003							$	2,146
Unrealized market adjustments for the period	$	(2,832	)	$	1,150			(1,682	)
Less adjustment for net gains included in income		331			(126	)		205
December 31, 2003	$	(3,163	)	$	1,276			259
Unrealized market adjustments for the period	$	(200	)	$	76			(124	)
Less adjustment for net gains included in income		384			(146	)		238
December 31, 2004	$	(584	)	$	222			(103	)
Unrealized market adjustments for the period	$	(2,179	)	$	828			(1,351	)
Less adjustment for net gains included in income		32			(12	)		20
December 31, 2005	$	(2,147	)	$	816		$	(1,434	)

15. Fair Value of Financial Instruments

      SFAS 107, “Disclosures about Fair Value of Financial Instruments,” (“SFAS 107”) requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on settlements using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets, and, in many cases, could not be realized in immediate settlement of the instrument. SFAS 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of Fidelity.

      The carrying amounts reported in the consolidated balance sheets for cash, due from banks, and Federal funds sold approximate the fair values of those assets. For investment securities, fair value equals quoted market prices, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or dealer quotes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		December 31,
		2005				2004
		Carrying				Carrying
		Amount		Fair Value		Amount		Fair Value
		(Dollars in thousands)
Financial Instruments (Assets):
Cash and due from banks		$	21,179	$	21,179	$	24,465	$	24,465
Federal funds sold			44,177		44,177		9,274		9,274
Investment securities available-for-sale			124,200		124,200		114,137		114,137
Investment securities held-to-maturity			44,660		43,998		51,913		52,250
Total loans			1,129,777		1,121,298		995,289		989,975
Total financial instruments (assets)			1,363,993	$	1,354,852		1,195,078	$	1,190,101
Non-financial instruments (assets)			41,710				28,639
	Total assets	$	1,405,703			$	1,223,717
Financial Instruments (Liabilities):
Noninterest-bearing demand deposits		$	120,970	$	120,970	$	116,420	$	116,420
Interest-bearing deposits			1,003,043		1,000,488		899,957		900,331
	Total deposits		1,124,013		1,121,458		1,016,377		1,016,751
Short-term borrowings			92,488		92,289		52,212		52,137
Subordinated debt			46,908		51,340		36,598		42,423
Other long-term debt			48,000		46,756		34,000		33,701
Total financial instruments (liabilities)			1,311,409	$	1,311,843		1,139,187	$	1,145,012
Non-financial instruments (liabilities and shareholders’ equity)			94,294				84,530
	Total liabilities and shareholders’ equity	$	1,405,703			$	1,223,717

      Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type. The fair value of performing loans is calculated by discounting scheduled cash flows through the remaining maturities using estimated market discount rates that reflect the credit and interest rate risk inherent in the loans.

      Fair value for significant nonperforming loans is estimated taking into consideration recent external appraisals of the underlying collateral for loans that are collateral dependent. If appraisals are not available or if the loan is not collateral dependent, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information.

      The fair value of deposits with no stated maturities, such as noninterest-bearing demand deposits, savings, interest-bearing demand, and money market accounts, is equal to the amount payable on demand. The fair value of time deposits is based on the discounted value of contractual cash flows based on the discount rates currently offered for deposits of similar remaining maturities.

      The carrying amounts reported in the consolidated balance sheets for short-term debt approximate those liabilities’ fair values.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The fair value of Fidelity’s long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to Fidelity for debt of the same remaining maturities.

      For off-balance sheet instruments, fair values are based on rates currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing for loan commitments and letters of credit. Fees related to these instruments were immaterial at December 31, 2005 and 2004, and the carrying amounts represent a reasonable approximation of their fair values. Loan commitments, letters and lines of credit, and similar obligations typically have variable interest rates and clauses which deny funding if the customer’s credit quality deteriorates. Therefore, the fair values of these items are not significant and are not included in the foregoing schedule.

      This presentation excludes certain financial instruments and all nonfinancial instruments. The disclosures also do not include certain intangible assets, such as customer relationships, deposit base intangibles, and goodwill. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of Fidelity.

16. Financial Instruments With Off-Balance Sheet Risk

      Fidelity is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments, which include commitments to extend credit and letters of credit, involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. The contract or notional amounts of these instruments reflect the extent of involvement Fidelity has in particular classes of financial instruments.

      Fidelity’s exposure to credit loss, in the event of nonperformance by customers for commitments to extend credit and letters of credit, is represented by the contractual or notional amount of those instruments. Fidelity uses the same credit policies in making commitments and conditional obligations as it does for recorded loans. Loan commitments and other off-balance sheet exposures are evaluated by Credit Review quarterly and reserves are provided for risk as deemed appropriate.

      Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Fidelity evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Fidelity upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

      Standby and import letters of credit are commitments issued by Fidelity to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Fidelity holds collateral supporting those commitments as deemed necessary.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Financial instruments with off-balance sheet risk at December 31, 2005, are summarized as follows (dollars in thousands):

Financial Instruments Whose Contract Amounts Represent Credit Risk:

			December 31,
			2005
Loan commitments:
	Commercial real estate, construction and land development		$	158,366
	Commercial			67,680
	Home equity			48,651
	Mortgage loans			3,444
	Lines of credit			3,140
	Standby letters of credit and bankers acceptances			4,649
	Federal funds line			500
		Total loan commitments	$	286,430

17. Other Assets, Other Liabilities and Other Operating Expenses

      Other assets and other liabilities at December 31, 2005 and 2004, consisted of the following (dollars in thousands):

		December 31,
		2005			2004
Other Assets
Receivables and prepaids		$	2,228		$	2,129
Deferred tax assets, net			3,799			3,731
Other			2,788			1,635
	Total	$	8,815		$	7,495
Other Liabilities
Payables and accrued expenses		$	1,517		$	1,434
Taxes (refundable) payable			(1,252	)		966
Other			2,821			457
	Total	$	3,086		$	2,857

      Other expenses for the years ended December 31, 2005, 2004, and 2003, consisted of the following (dollars in thousands):

		Years Ended December 31,
		2005		2004		2003
Other Operating Expenses
ATM, check card fees		$	481	$	378	$	453
Regulatory fees and assessments			263		246		539
Other real estate, repossession and other losses, expenses and write-downs			48		163		250
Other operating expenses			3,664		3,682		3,726
	Total	$	4,456	$	4,469	$	4,968

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

18. Condensed Financial Information of Fidelity Southern Corporation (Parent Company Only)

Condensed Balance Sheets

		December 31,
		2005			2004
		(Dollars in thousands)
Assets:
Cash		$	9,643		$	3,951
Land			419			419
Investment in bank subsidiary			110,799			99,215
Investments in and amounts due from nonbank subsidiaries			1,604			1,138
Subordinated loans to subsidiaries			10,000			10,000
Other assets			2,131			1,586
	Total assets	$	134,596		$	116,309
Liabilities:
Long-term debt		$	46,908		$	36,598
Other liabilities			949			902
	Total liabilities		47,857			37,500
Shareholders’ Equity:
Common stock			44,178			42,725
Treasury stock			(17	)		(66	)
Accumulated other comprehensive gain (loss), net of tax			(1,434	)		(103	)
Retained earnings			44,012			36,253
	Total shareholders’ equity		86,739			78,809
	Total liabilities and shareholders’ equity	$	134,596		$	116,309

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Statements of Income

	Years Ended December 31,
	2005			2004			2003
	(Dollars in thousands)
Interest Income:
Deposits in bank	$	297		$	42		$	30
Subordinated loan to bank		649			465			680
Other interest income		113			91			—
Total interest income		1,059			598			710
Interest Expense — Long-term debt		3,796			3,067			3,357
Net Interest Expense		(2,737	)		(2,469	)		(2,647	)
Noninterest Income:
Lease income		120			120			120
Dividends from subsidiaries		3,880			2,930			3,680
Management fees		495			320			284
Other		—			—			—
Total noninterest income		4,495			3,370			4,084
Noninterest Expense		556			500			484
Income before income taxes and equity in undistributed income of subsidiaries		1,202			401			953
Income tax benefit		1,011			961			1,055
Income before equity in undistributed income of subsidiaries		2,213			1,362			2,008
Equity in undistributed income of subsidiaries, continuing operations		8,113			6,270			1,745
Discontinued operations		—			—			78
Net Income	$	10,326		$	7,632		$	3,831

88

FIDELITY SOUTHERN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Statements of Cash Flows

		Years Ended December 31,
		2005			2004			2003
		(Dollars in thousands)
Operating Activities:
Net income		$	10,326		$	7,632		$	3,831
Equity in undistributed income of subsidiaries, continuing operations			(8,113	)		(6,269	)		(1,745	)
Discontinued operations			—			—			(78	)
Increase in other assets			(545	)		(294	)		(371	)
Increase (decrease) in other liabilities			46			33			(733	)
Other			—			—			443
	Net cash flows provided by operating activities		1,714			1,102			1,347
Investing Activities:
Net (increase) decrease in loans to and investment in subsidiaries			(5,267	)		(1,108	)		146
	Net cash flows (used in) provided by investing activities		(5,267	)		(1,108	)		146
Financing Activities:
Issuance (repayment) of long-term debt			—			1,098			(15,000	)
Issuance of subordinated debt			10,310			—			15,464
Issuance of Common Stock			1,502			2,212			181
Dividends paid			(2,567	)		(1,799	)		(2,216	)
	Net cash flows provided by (used in) financing activities		9,245			1,511			(1,571	)
	Net increase (decrease) in cash		5,692			1,505			(78	)
Cash, beginning of year			3,951			2,446			2,524
Cash, end of year		$	9,643		$	3,951		$	2,446

89

Item 9. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure.

      None

Item 9A. Controls and Procedures

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2005, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2005.

      Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

Evaluation of Disclosure Controls and Procedures

      Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, Fidelity carried out an evaluation, with the participation of Fidelity’s management, including Fidelity’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of Fidelity’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, Fidelity’s Chief Executive Officer and Chief Financial Officer concluded that Fidelity’s disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

      There has been no change in Fidelity’s internal control over financial reporting during the three months ended December 31, 2005, that has materially affected, or is reasonably likely to materially affect, Fidelity’s internal control over financial reporting.

90

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Fidelity Southern Corporation

      We have audited management’s assessment, included in the accompanying Report of Management on Internal Control over Financial Reporting, that Fidelity Southern Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Fidelity Southern Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted account principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that Fidelity Southern Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Fidelity Southern Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Fidelity Southern Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005, and our report dated March 10 2006, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Atlanta, GA

March 10, 2006

91

Item 9B. Other Information

      None.

PART III

Item 10. Directors and Executive Officers of Registrant

      The information required by Item 10 is incorporated herein by reference to the information that appears under the headings “Information About Nominees for Director,” “Section 16(a) Beneficial Ownership Reporting compliance,” “Compensation of Directors,” “Meetings and Committees of the Board of Directors — Audit Committee,” and “Executive Officers and Compensation,” in the registrant’s Proxy Statement for the 2006 Annual Meeting of Shareholders. The Code of Ethics for the Chief Executive Officer, the Chief Financial Officer and the Controller of the registrant is set forth on our website at www.fidelitysouthern.com.

Item 11. Executive Compensation

      The information required by Item 11 is incorporated herein by reference to the information that appears under the headings “Executive Officers and Compensation,” “Compensation of Directors,” and “Compensation Committee Interlocks and Insider Participation” in the registrant’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management

      The information required by Item 12 is incorporated herein by reference to the information that appears under the heading “Security Ownership of Certain Beneficial Owners and Management” in the registrant’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions

      The information required by Item 13 is incorporated herein by reference to the information that appears under the headings “Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Related Transactions” in the registrant’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

Item 14. Principal Accountant Fees and Services

      The information required by Item 14 is incorporated by reference to the information that appears under the heading “Fees Incurred By Fidelity For Ernst & Young” in the Registrant’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

92

PART IV

Item 15. Exhibits, Financial Statement Schedules

      (a) Documents filed as part of this Report

      (1) Financial Statements

(2)  Financial Statement Schedules

All financial statement schedules are omitted as the required information is inapplicable or the information is presented in the Consolidated Financial Statements and the Notes thereto in Item 8 above.

(3)  Exhibits

The exhibits filed herewith or incorporated by reference to exhibits previously filed with the SEC are set forth in Item 15(b)

      (b) Exhibits

      The following exhibits are required to be filed with this Report by Item 601 of Regulation S-K.

Exhibit No.	Name of Exhibit
3(a) and 4(a)	Amended and Restated Articles of Incorporation of Fidelity Southern Corporation (incorporated by reference from Exhibit 3(f) to Fidelity Southern Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003)
3(b)*	By-Laws
10(a)	Fidelity Southern Corporation Defined Contribution Master Plan and Trust Agreement and related Adoption Agreement, as amended (incorporated by reference from Exhibit 10(a) to Fidelity Southern Corporation’s Registration Statement on Form 10, Commission File No. 0-22374)
10(b)#	Amended and Restated Supplemental Deferred Compensation Plan (incorporated by reference from Exhibit 10.7 to Fidelity Southern Corporation’s Form 8-K filed January 25, 2006)
10(c)#	Fidelity Southern Corporation 1997 Stock Option Plan (incorporated by reference from Exhibit A to Fidelity Southern Corporation’s Proxy Statement, dated April 21, 1997, for the 1997 Annual Meeting of Shareholders)
10(d)*#	Employment Agreement among Fidelity, the Bank and James B. Miller, Jr., dated as of January 19, 2006 (attached version corrects error contained in previous version attached as Exhibit 10.2 to Fidelity Southern Corporation’s Form 8-K filed January 25, 2006 and supersedes such previous version)
10(e)#	Employment Agreement among Fidelity, the Bank and H. Palmer Proctor, Jr., dated as of January 19, 2006 (incorporated by reference from Exhibit 10.1 to Fidelity Southern Corporation’s Form 8-K filed January 25, 2006)
10(f)#	Executive Continuity Agreement among Fidelity, the Bank and James B. Miller, Jr., dated as of January 19, 2006 (incorporated by reference from Exhibit 10.3 to Fidelity Southern Corporation’s Form 8-K filed January 25, 2006)
10(g)#	Executive Continuity Agreement among Fidelity, the Bank and H. Palmer Proctor, Jr., dated as of January 19, 2006 (incorporated by reference from Exhibit 10.4 to Fidelity Southern Corporation’s Form 8-K filed January 25, 2006)

93

Exhibit No.	Name of Exhibit
10(h)#	Executive Continuity Agreement among Fidelity, the Bank and M. Howard Griffith, Jr. dated as of January 19, 2006 (incorporated by reference from Exhibit 10.5 to Fidelity Southern Corporation’s Form 8-K filed January 25, 2006)
10(i)#	Executive Continuity Agreement among Fidelity, the Bank and David Buchanan dated as of January 19, 2006 (incorporated by reference from Exhibit 10.6 to Fidelity Southern Corporation’s Form 8-K filed January 25, 2006)
10(j)*#	Director Compensation Arrangements
10(k)*#	Named Executive Officer Compensation Arrangements
13*	Annual Report to Shareholders
21*	Subsidiaries of Fidelity Southern Corporation
23*	Consent of Ernst & Young LLP
24*	Powers of Attorney
31.1*	Rule 13a-14a/15d-14(a) Certification of Mr. Miller
31.2*	Rule 13a-14a/15d-14(a) Certification of Mr. Griffith
32.1*	Section 1350 Certifications of Mr. Miller
32.2*	Section 1350 Certifications of Mr. Griffith

*  Included as Exhibits to the Report on Form 10-K for 2005 filed with the Commission.

# Indicates director and management contracts or compensatory plans or arrangements.

(c)  Financial Statement Schedules.

See Item 15 (a) (2) above.

94

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Fidelity Southern Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Fidelity Southern Corporation

By:  /s/ James B. Miller, Jr.

James B. Miller, Jr.

Chairman of the Board

March 10, 2006

95

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Fidelity Southern Corporation and in the capacities and on the dates indicated.

Signature		Title	Date
/s/ James B. Miller, Jr. James B. Miller, Jr.		Chairman of the Board and Director (Principal Executive Officer)	March 10, 2006
/s/ M. Howard Griffith, Jr. M. Howard Griffith, Jr.		Chief Financial Officer (Principal Financial and Accounting Officer)	March 10, 2006
* David R. Bockel		Director	March 10, 2006
* Edward G. Bowen, M.D.		Director	March 10, 2006
* Kevin S. King		Director	March 10, 2006
* James H. Miller, III		Director	March 10, 2006
/s/ H. Palmer Proctor, Jr. H. Palmer Proctor, Jr.		Director	March 10, 2006
* Robert J. Rutland		Director	March 10, 2006
* W. Clyde Shepherd, III		Director	March 10, 2006
* Rankin M. Smith, Jr.		Director	March 10, 2006
* By:	/s/ M. Howard Griffith, Jr. M. Howard Griffith, Jr., Attorney-in-fact pursuant to power of attorney filed as part of this Form 10-K.

96 EX-3.(B) 2 g00159exv3wxby.txt EX-3(B) BY-LAWS BY-LAWS OF FIDELITY SOUTHERN CORPORATION AS AMENDED APRIL 15, 1987 ARTICLE I OFFICES Section 1. Registered Office. The registered office shall be in the State of Georgia. Section 2. Other Offices. The corporation may have offices at such places both within and without the State of Georgia as the Board of Directors may from time to time determine due to requirements of the business of the Corporation. ARTICLE II SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders for the election of Directors and for the transaction of such other business as may properly come before the meeting shall be held at such place, either within or without the State of Georgia, on such date and at such time as the Board of Directors may by resolution provide, or if the Board of Directors fails to provide, then such meeting shall be held at the principal office of the Corporation at 10:00 A.M. on the fourth Tuesday in April of each year, or, if such date is a legal holiday, on the next succeeding business day. The Board of Directors may specify by resolution prior to any special meeting of shareholders held within the year that such meeting shall be in lieu of the annual meeting. Section 2. Special Meeting: Call and Notice of Meetings. Special meeting of the shareholders may be called at any time by the Board of Directors, the President, or upon written request of the holders of at least twenty-five (25%) per cent of the outstanding common stock. Such meetings shall be held at such place, either within or without the State of Georgia, as is stated in the call and notice thereof. Written notice of each meeting of shareholders, stating the time and place of the meeting, and the purpose of any special meeting, shall be mailed to each shareholder entitled to vote at or to notice of such meeting at his address shown on the books of the Corporation not less than ten (10) nor more than seventy (70) days prior to such meeting unless such shareholder waives notice of the meeting. Any shareholder may execute a waiver of notice, in person or by proxy, either before or after any meeting and shall be deemed to have waived notice if he is present at such meeting in person or by proxy. Neither the business transacted at, nor the purpose of, any meeting need be stated in the waiver of notice of a meeting at which a plan of merger or consolidation is considered, information as required by the Georgia Business Corporation Code must be delivered to the shareholder prior to his execution of the waiver of notice or the waiver itself must conspicuously and specifically waive the right to such information. Notice of any meeting may be given by the President, the Secretary or by the person or persons calling such meeting. No notice need be given of the time and place of reconvening of any adjourned meeting, if the time and place to which the meeting is adjourned are announced at the adjourned meeting. Section 3. Quorum; Required Shareholder Vote. A quorum for the transaction of business at any annual or special meeting of shareholders shall exist when the holders of a majority of the outstanding shares entitled to vote are represented either in person or by proxy at such meeting. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote and the subject matter shall be the act of the shareholders, unless a greater vote is required by law, by the Articles of Incorporation or by these By-Laws. When a quorum is once present to organize a meeting, the shareholders present may continue to do business at the meeting or at any adjournment thereof notwithstanding the withdrawal of enough shareholders to leave less than a quorum. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time. Section 4. Proxies. A shareholder may vote either in person or by proxy which he has duly executed in writing. No proxy shall be valid after eleven (11) months from the date of its execution unless a longer period is expressly provided in the proxy. Section 5. Action of Shareholders Without Meeting. Any action required to be, or which may be, taken at a meeting of the shareholders, may be taken without a meeting if written consent; setting forth the actions so taken, shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof, except that, with respect to approval of a plan of merger or consolidation by written consent, information as required by the Georgia Business Corporation Code must be delivered to the shareholders prior to their execution of the consent or the consent must conspicuously and specifically waive the right to such information. Such consent shall have the same force and effect as a unanimous affirmative vote of the shareholders and shall be filed with the minutes of the proceedings of the shareholders. Section 6. Order of Business. At the annual meeting of shareholders the order of business shall be: 1. Calling meeting to order. 2. Proof of notice of meeting. 3. Reading of minutes of last previous annual meeting. 4. Reports of officers. 5. Reports of committees. 6. Election of directors. 2 7. Miscellaneous business. Section 7. List of Shareholders. The corporation will keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving their names and addresses and the number, class and series, if any, of the shares held by each. The officer who has charge of the stock transfer books of the corporation shall prepare and make, before every meeting of shareholders or any adjournment thereof, a complete list of the shareholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number and class and series~ if any, of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder during the whole time of the meeting. The list may be the corporation's regular record of shareholders if it is arranged in alphabetical order or contains an alphabetical index. ARTICLE III DIRECTORS Section 1. Power of Directors. The Board of Directors shall manage the business of the Corporation and may exercise all the powers of the Corporation, subject to any restrictions imposed by law, by the Articles of Incorporation or by these By-Laws. Section 2. Composition of the Board. The Board of Directors of the Corporation shall consist of not less than (3) or more than twenty-four (24) natural persons of the age of eighteen years of over, except that if all of the shares of the Corporation are owned beneficially and of record by less than three shareholders, the number of Directors may be less than three but not less than the number of shareholders. Directors need not be residents of the State of Georgia or shareholders of the Corporation. At each annual meeting the shareholders shall fix the number of Directors and elect the Directors, who shall serve until their successors are elected and qualified; provided that the shareholders may, by the affirmative vote of the holders of a majority of the shares entitled to vote at an election of Directors, increase or reduce the number of Directors and add or remove Directors with or without cause at any time. The Board of Directors may, by its action, increase the number of Directors by two and elect Directors to fill those positions provided the number of Directors does not exceed the number permitted by these By-Laws. Section 3. Meetings of the Board; Notice of Meetings; Waiver of Notice. The annual meeting of the Board of Directors for the purpose of electing officers and transacting such other business as may be brought before the meeting shall be held each year immediately following the annual meeting of shareholders. The Board of Directors may by resolution provide for the time and place of other regular meetings and no notice of such regular meetings need be given. Special meetings of the Board of Directors may be called by the President or by any two Directors, and written notice of the time and place of such meetings shall be given to each Director by first class or air mail at least four (4) days before the meeting or by telephone, telegraph, cablegram or in person at least two (2) days before the meeting. Any Director may execute the waiver of notice, either before or after any meeting, and shall be deemed to have 3 waived notice if he is present at such meeting. Neither the business to be transacted at, nor the purpose of; any meeting of the Board of Directors need be stated in the notice or waiver of notice of such meeting. Any meeting may be held at any place within or without the State of Georgia Section 4. Quorum; Vote Requirement. A majority of the Directors in office at nay time shall constitute a quorum for the transaction of business at any meeting. When a quorum is present, the vote of a majority of the Directors present shall be the act of the Board of Directors, unless a greater vote is required by law, by the Articles of Incorporation or by these By-Laws. Section 5. Action of Board Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or any committee thereof may be taken without a meeting if written consent, setting forth the action so taken, is signed by all the Directors or committee members and filed with the Minutes of the proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous affirmative vote of the Board of Directors or committee, as the case may be. Section 6. Committees. The Board of Directors, by resolution adopted by a majority of all of the Directors, may designate from among its members an Executive Committee, or other committees, each composed of two (2) or more Directors, which may exercise such authority as is delegated by the Board of Directors, provided that no committee shall have the authority of the Board of Directors in reference to (l) an amendment to the Articles of Incorporation or By-Laws of the Corporation, (2) the adoption of a plan of merger or consolidation, (3) the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the Corporation, or (4) a voluntary dissolution of the Corporation or a revocation thereof. Section 7. Vacancies. A vacancy occurring in the Board of Directors by reason of removal of a Director by the shareholders shall be filled by the shareholders, or, if authorized by the shareholders, by the remaining Directors. Any other vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining Directors though less than a quorum of the Board of Directors, or by the sole remaining Director, as the case may be, or, if the vacancy is not so filled, or if no director remains, by the shareholders. A Director elected to fill a vacancy shall serve for the unexpired term of his predecessor in office. Section 8. Telephone Conference Meetings. Unless the Articles of Incorporation otherwise provide, members of the Board of Directors, or any committee designed by the Board of Directors, may participate in a meeting of the Board or committee by means of telephone conference or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 8 shall constitute presence in person at such meeting. Section 9. Voting Securities of Corporation. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the corporation to attend and to act and vote at any meetings of security holders of corporations in which the corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the corporation might have possessed and exercised if it had been present. The Board of Directors by resolution from time to time may confer like powers upon any other person or persons. 4 ARTICLE IV OFFICERS Section 1. Executive Structure of the Corporation. The Officers of the Corporation shall consist of a President, a Secretary, a Treasurer and other officers or assistant officers, including Vice-Presidents, as may be elected by the Board of Directors. Each officer shall hold office for the term for which he has been elected or appointed and until his successor has been elected or appointed and has qualified, or until his earlier resignation, removal from office or death. Any two or more offices may be held by the same person, except that the same person shall not be both the President and Secretary. Section 2. President. The President shall be the chief executive officer of the Corporation and shall give general supervision and direction to the affairs of the corporation subject to the direction of the Board of Directors. He shall preside at all meetings of the shareholders. Section 3. Vice-President. The Vice-President shall act in the case of absence or disability of the President. Section 4. Secretary. The Secretary shall keep the Minutes of the proceedings of the shareholders and of the Board of Directors, and shall have custody of and attest the seal of the Corporation. Section 5. Treasurer. The Treasurer shall be responsible for the maintenance of proper financial books and records of the Corporation. Section 6. Other Duties and Authority. Each officer, employee and agent of the corporation shall have such other duties and authority as may be conferred upon him by the Board of Directors or delegated to him by the President. Section 7. Removal of Officers. Any officer may be removed at any time by the Board of Directors, and such vacancy may be filled by the Board of Directors. This provision shall not prevent the making of a contract of employment for a definite term with any officer and shall have no effect upon any cause of action which any officer may have as a result of removal in breach of a contract of employment. Section 8. Compensation. The salaries of the officers shall be fixed from time to time by the Board of Directors or by any person designated by them. No officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation. 5 ARTICLE V STOCK Section 1. Stock Certificates. The shares of stock of the Corporation shall be represented by certificates in such form as may be approved by the Board of Directors, which certificates shall be issued to the shareholder of the Corporation in numerical order from the stock book of the Corporation, and each of which shall bear the name of the shareholder, the number of shares represented, and the date of issue; and which shall be signed by the President or a Vice-President and the Secretary or an Assistant Secretary of the Corporation; and which shall be sealed with the seal of the Corporation. No share certificate shall be issued until the consideration for the shares represented thereby has been fully paid. Section 2. Transfer of Stock. Shares of stock of the Corporation shall be transferred only on the books of the Corporation upon surrender to the Corporation of the certificate or certificates representing the shares to the transferred accompanied by an assignment in writing of such shares properly executed by the shareholder of record or his duly authorized attorney-in-fact and with all taxes on the transfer having been paid. The Corporation may refuse any requested transfer until furnished evidence satisfactory to it that such transfer is proper. Upon the surrender of a certificate for transfer of stock, such certificate shall at once be conspicuously marked on its face "Canceled" and filed with the permanent stock records of the Corporation. The Board of Directors may make such additional rules concerning the issuance, transfer and registration of stock and requirements regarding the establishment of lost, destroyed or wrongfully taken stock certificates (including any requirement of an indemnity bond prior to issuance of any replacement certificate) as it deems appropriate. Section 3. Registered Shareholders. The Corporation may deem and treat the holder of record of any stock as the absolute owner for all purposes and shall not be required to take any notice of any right or claim of right of any other person. Section 4. Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors of the Corporation may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy (70) days and, in the case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. ARTICLE VI DEPOSITORIES, SIGNATURES, SEAL, FISCAL YEAR Section 1. Depositories. All funds of the Corporation shall be deposited in the name of the Corporation in such bank, banks, or other financial institutions as the Board of Directors may from time to time designate and shall be drawn out on checks, drafts or other orders signed 6 on behalf of the Corporation by such person or persons as the Board of Directors may from time to time designate. Section 2. Contracts and Deeds. All contracts, deeds and other instruments shall be signed on behalf of the Corporation by the President or by such other office, officers, agent or agents as the Board of Directors may from time to time by resolution provide. Section 3. Seal. The seal of the Corporation shall be as follows: If the seal is affixed to a document, the signature of the Secretary or an Assistant Secretary shall attest the seal. The seal and its attestation may be lithographed or otherwise printed on any document and shall have, to the extent permitted by law, the same force and effect as if had been affixed and attested manually. Section 4. Fiscal Year. The fiscal year of the corporation is the calendar year unless otherwise fixed by resolution of the Board of Directors. ARTICLE VII AMENDMENT OF BY-LAWS The Board of Directors shall have the power to alter, amend or repeal the By-Laws or adopt new by-laws, but any by-laws adopted by the Board of Directors may be altered, amended or repealed and new by-laws adopted by the shareholders. The shareholders may prescribe that any by-law or by-laws adopted by them shall not be altered, amended or repealed by the Board of Directors. Action by the Directors with respect to the By-Laws shall be taken by an affirmative vote of a majority of all the Directors then in office. Action by the shareholders with respect to the By-Laws shall be taken by and affirmative vote of a majority of all shares outstanding and entitled to vote. ARTICLE VIII INDEMNIFICATION (a) The Corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a Director, Officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, Officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no 7 reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, or itself, create a presumption that the person did not act in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact he is or was a Director, Officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, Officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. (c) To the extent that a Director, Officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Except as provided in paragraph (c) of this Article and except as may be ordered by a court, any indemnification under paragraphs (a) and (b) of the Article shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, Officer, employee or agent is proper in the circumstances because be has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding or (2) such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Directors so directs, by the firm of independent legal counsel then employed by the Corporation in a written option, or (3) by the affirmative vote of a majority of the shares entitled to vote thereon. (e) Expenses incurred in defending a civil or criminal action, sit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf or the Director, Officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this section. (f) The indemnification and advancement of expenses provided by or granted pursuant to this Article shall not be deemed exclusive of any other rights, in respect of 8 indemnification of or otherwise, to which those seeking indemnification or advancement of expenses may be entitled under any resolution or agreement, either specifically or in general terms, approved by the affirmative vote of the holders of a majority of the shares entitled to vote thereon taken at a meeting the notice of which specified that such resolution or agreement would be placed before the Shareholders, both as to action by a Director, Officer, employee or agent in his official capacity and as to action in another capacity while holding such office or position, except that no such other rights in respect to indemnification or otherwise, may be provided or granted to a Director, Officer, employee or agent pursuant to this paragraph by the Corporation with respect to the liabilities described in O.C.G.A. Section 14-2-171(b)(3)(A) (i)-(iv). (g) The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, Officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this section. (h) If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or by an insurance carrier pursuant to insurance maintained by the corporation, the Corporation shall, not later than the next annual meeting of the Shareholders, unless such meeting is held within three (3) months from the date of such payment, and, in any event, within fifteen (15) months from the date of such payment, send by delivery or first class mail, or such other means as is authorized by O.C.G.A. Section 2-113, to its Shareholders of record at the same time entitled to vote for the election of Directors, a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation. (i) For purpose of paragraphs (a) and (b) of this Article, reference to "the Corporation" shall include, in addition to the surviving or new Corporation, any merging or consolidating Corporation (including any merging or consolidating Corporation of a merging or consolidating corporation) absorbed in a merge or consolidation with the Corporation so that any person who is or was a Director, Officer, employee or agent of such merging or consolidating Corporation, or is or was serving at the request of such merging or consolidating Corporation as a Director, Officer, employee or agent of another corporation, partnership, venture, trust or other enterprise, shall stand in the same position under the provision of paragraphs (a) and (b) of this Article with respect to the Corporation as he would if he had served the Corporation in the same capacity provided, however, no indemnification under paragraphs (a) and (b) of this Article as permitted by this paragraph shall be mandatory under this paragraph without the approval of such indemnification by the Board of Directors or Shareholders of the Corporation in the manner provided in paragraph (d) of this Article. (j) The indemnification and advancement of expenses provided by or granted pursuant to this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. 9 EX-10.(D) 3 g00159exv10wxdy.txt EX-10.(D) EMPLOYMENT AGREEMENT, JAMES B. MILLER EXHIBIT 10(d) FIDELITY SOUTHERN CORPORATION FIDELITY BANK EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 19th day of January, 2006, by and among FIDELITY SOUTHERN CORPORATION ("Fidelity"), a Georgia Corporation, FIDELITY BANK (the "Bank"), a Georgia banking corporation, and JAMES B. MILLER, JR. ("Miller"). The Employment Agreement among Fidelity, the Bank and Miller dated March 17, 2005 (the "2005 Agreement") is hereby terminated and replaced by this Agreement effective as of January 1, 2006; provided, however, that Miller shall retain all rights to any incentive compensation payable under the 2005 Agreement which was earned and payable as of the date hereof. WHEREAS, Miller is the Chairman, Chief Executive Officer and President of Fidelity and Chairman and Chief Executive Officer of the Bank; WHEREAS, Fidelity and the Bank agree to continue to employ Miller as Chief Executive Officer, subject to his election, to provide the services set forth herein; and WHEREAS, Miller agrees to accept such employment and to continue to provide such services in accordance with the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the mutual promises herein made and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. EMPLOYMENT/DUTIES. (a) Fidelity shall employ Miller as the President and Chief Executive Officer and the Bank shall employ Miller as Chief Executive Officer during the term of his employment as set forth in this Agreement and Miller hereby accepts such employment. Miller also agrees to serve as the Chairman of the Board of Directors of Fidelity (the "Board") and of the Bank upon his election to such positions. (b) Miller shall be the senior executive officer of Fidelity and shall be responsible for the day-to-day operations of the business of Fidelity and shall have such authority consistent with such positions and necessary for the conduct of such business under the general direction of the Board of Directors of Fidelity. (c) Miller agrees that he will at all times and to the best of his ability and experience faithfully perform all of the duties that may be required of him pursuant to the terms of this Agreement and shall comply with all policies and procedures adopted by the Board of Directors or any committee thereof. Miller shall devote his full business time to the performance of his obligations hereunder. (d) The term of employment of Miller shall be for a term of three (3) years, commencing as of January 1, 2005, and may be extended upon written agreement of the parties. (e) Miller shall be prohibited from serving as a director of other businesses and as a member of any committee of the board(s) of directors thereof unless the Board formally has approved such service before Miller becomes any such director or member of any committee of such board(s) of directors. 2. COMPENSATION. (a) Base Salary. During the term of the employment of Miller hereunder, Fidelity and the Bank will pay to Miller an aggregate base salary ("Base Salary") at the rate of $500,000 per year, payable in arrears in equal semi-monthly payments, subject to applicable withholdings and deductions. In the event of the disability of Miller, to the extent payments are received by him under any employer sponsored disability program and/or under any disability policy the premiums of which are paid by Fidelity or the Bank, the payments hereunder are to be reduced by an amount equal to any such disability payments that are intended to replace all or a portion of any compensation Miller loses due to such disability. (b) Incentive Compensation. Fidelity and the Bank shall pay to Miller the incentive compensation ("Incentive Compensation") determined as set forth in Attachment A hereto. Miller shall be eligible to participate in incentive plans and programs hereafter adopted as determined by the Board or the Compensation Committee of the Board. (c) Employee Benefit Programs. Miller shall be eligible to participate in all employee benefit programs, including medical, dental and hospitalization programs, now or hereafter made available by Fidelity to its employees and/or executives, subject to terms and conditions of such programs, including eligibility. It is understood that Fidelity reserves the right to modify and rescind any program or adopt new programs in its sole discretion. (d) Life Insurance for Fidelity. Fidelity may, in its sole discretion, maintain key man life insurance on the life of Miller and designate Fidelity as the beneficiary. Miller agrees to execute any documents necessary to effect the issuance of such policy. Miller hereby acknowledges that he has consented to the purchase and maintenance by Fidelity of the Split Dollar Insurance Plan (the "Split Dollar Plan") in the face amount of $400,000 dated October 3, 1984 (including all amendments and replacement and substitute policies, as hereafter mutually agreed in writing). The policies purchased and maintained by Fidelity under the Split Dollar Plan shall be maintained by Fidelity at all times hereafter, including after the termination of this Agreement or Miller's Termination of Employment. In addition, Fidelity and the Bank agree to maintain three Flexible Premium Adjustable Life Insurance, Universal Life policies issued by Great-West Life & Annuity Insurance Company ("Great-West") one in the face amount of $6 million, one issued by Life Investors Insurance Company of America ("Life Investors") in the face amount of $800,000 and one issued by Mass Mutual Financial Group ("Mass Mutual") in the face amount of $800,000 each of which is payable to beneficiaries designated by Miller or his estate or trust in lieu thereof, at all times hereafter 2 (except as provided in Section 3(e)), regardless of the termination of this Agreement or Miller's Termination of Employment hereunder including a Termination of Employment pursuant to Section 3. (e) Vacation. Miller is entitled to five (5) weeks vacation each year. Vacation shall be taken at such times as not to materially interfere with the business of Fidelity. The vacation time must be taken prior to the end of each calendar year or as otherwise mutually agreed in writing, otherwise it expires to the extent not taken. (f) Expenses. Fidelity shall pay all reasonable expenses incurred by Miller in the performance of his responsibilities and duties for Fidelity, including without limitation, dues payable to the Atlanta Athletic Club and the Capital City Club and to such reasonable civic organizations of Miller's choice. Miller shall submit to Fidelity periodic statements of all expenses so incurred in accordance with the policies of Fidelity then in effect. Subject to such reviews as Fidelity may deem reasonably necessary, Fidelity shall, promptly in the ordinary course of business, reimburse Miller for the full amount of all such expenses advanced by Miller. (g) Automobile. Fidelity will continue to provide Miller with an appropriate automobile for his use and will maintain and insure it at Fidelity's expense. 3. EARLY TERMINATION. (a) For Cause. (i) Notwithstanding the foregoing, Miller may have a Termination of Employment by the Board "for cause" (as hereinafter defined) at any time upon 10 business days' prior written notice. The term "for cause" shall mean (A) the commission of a felony or any other crime involving moral turpitude or the pleading of nolo contendere to any such act, (B) the commission of any act or acts of dishonesty when such acts are intended to result or result, directly or indirectly, in gain or personal enrichment of Miller or any related person or affiliated company and are intended to cause harm or damage to Fidelity, the Bank or their subsidiaries, (C) the illegal use of controlled substances, (D) the misappropriation or embezzlement of assets of Fidelity, the Bank or their subsidiaries, (E) the breach of any other material term or provision of this Agreement to be performed by Miller (other than pursuant to Sections 4, 5, 6 or 7) which have not been cured within thirty (30) days of receipt of written notice of such breach from the Board or the board of directors of the Bank, or (F) the breach of any provision of Section 4, 5, 6 or 7 during his employment. (ii) Upon a Termination of Employment for cause, Fidelity and the Bank shall have no further obligation to pay any compensation to Miller or make available to Miller participation under any employee benefit program for periods after the effective date of the Termination of Employment for cause. Upon such a Termination of Employment, the Base Salary which accrued as of the termination date, the Incentive Compensation payable pursuant to Section 2(b) for the periods of employment and accrued but unused vacation pay will be paid after the effective date of termination on the next normal payroll payment date. (b) Other Termination by Fidelity. 3 (i) Miller may have a Termination of Employment by Fidelity or the Bank for any reason (other than for cause, death or total disability (as defined in Section 3(d)(iii) below)) at any time upon at least 90 days' prior written notice. Upon such a Termination of Employment, the Base Salary which accrued as of the termination date, the Incentive Compensation payable pursuant to Section 2(b) for the periods of employment and accrued but unused vacation pay will be paid after the effective date of termination on the next normal payroll payment date. Miller's right to additional compensation after the effective date of termination shall cease, except that if Miller executes a "Release" (as defined below) within the time period specified by Fidelity or the Bank, and does not revoke such Release, Miller will be paid severance equal to the excess of (i) three times his then Base Salary over (ii) the aggregate amount payable under Section 8 below. If Miller is not a Specified Employee (as defined below) such severance benefit will be payable in 72 equal semi-monthly installments commencing on the 15th or last day of the month immediately following the date of the Termination of Employment, whichever date occurs first, and then continuing on the 15th and last day of each calendar month thereafter until all such installments are paid. If Miller is a Specified Employee, such severance benefit shall not be payable until the first 15th or last day of the month which is at least six months after Miller's Termination of Employment. All installments, which would have otherwise been required to be made over such six-month period if Miller had not been a Specified Employee shall be paid to Miller in one lump sum payment as soon as administratively feasible after the first 15th or last day of the month which is at least six months after Miller's Termination of Employment. After the lump sum payment, the remaining semi-monthly installments (each equal to 1/72 of the total severance benefit) will continue on the 15th and last day of each calendar month until all such installments are paid. (ii) Additionally, if Miller timely executes and does not revoke a Release and elects such continued participation, the employee welfare benefits as provided in Section 2(c) shall be continued for eighteen (18) months from the date of termination at a cost to Miller not to exceed the amounts paid by executives for such employee welfare benefits; provided, however, that if continued participation in any of such employee welfare benefit plans is not possible under the terms of such plans or any provision of law would create any adverse tax effect for Miller, Fidelity or the Bank, due to such participation, Fidelity will provide substantially identical benefits directly or through an insurance arrangement or pay Miller's costs for such welfare benefits if continued by Miller, including as permitted under ERISA. Notwithstanding the above, if Miller is a Specified Employee and if Fidelity or the Bank determines that any portion of such employee welfare benefits are subject to Section 409A of the Code, then to the extent necessary to avoid taxation under Section 409A, Miller will be required to pay for such employee welfare benefits during the six-month period following his Termination of Employment; provided; however, that at the end of such six-month period, Fidelity or the Bank will reimburse Miller for such payments. (iii) For purposes of this Agreement, the term "Release" means a general release that releases Fidelity, the Bank, their affiliates, shareholders, directors, officers, employees, employee benefit plans, representatives, and agents and their successors and assigns from any and all employment related claims Miller or Miller's successors and 4 beneficiaries might then have against them (excluding any claims for vested benefits under any employee pension plan of Fidelity or the Bank). (v) If Miller violates any of the undertakings set forth in Sections 4, 5, 6 and 7 of this Agreement after the Termination of Employment, any additional compensation and benefits under Sections 3(b)(i) & 3(b)(ii) shall cease. (vi) Subsequent to the date of any written notice of termination provided to Miller pursuant to Section 3(b) or by Miller to Fidelity pursuant to Section 3(c)(ii), Fidelity shall engage the independent accounting firm regularly utilized by Fidelity ("Accounting Firm") to provide to Fidelity and Miller, at Fidelity's expense, a determination of whether any compensation payable to Miller pursuant to Sections 3(b)(i) & 3(b)(ii) (alone or when added to all other compensation paid or payable to Miller by Fidelity and the Bank) constitutes a "parachute payment" ("Parachute Payment") as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"). If the Accounting Firm determines that any compensation payable to Miller pursuant to Sections 3(b)(i) & 3(b)(ii) (alone or when added to all other compensation paid or payable to Miller by Fidelity and the Bank) constitutes a Parachute Payment, the Accounting Firm shall also determine: (A) the amount of the excise tax to be imposed under Section 4999 of the Code; (B) whether Miller would realize a greater amount after Federal and Georgia income taxes (assuming the highest marginal rates then in effect apply) if the compensation payable to Miller pursuant to Sections 3(b)(i) & 3(b)(ii) were reduced (assuming latest payments are reduced first) so that no amount payable to Miller hereunder (alone or when added to all other compensation paid or payable to Miller by Fidelity and the Bank) constitutes a Parachute Payment than he would realize after Federal and Georgia income taxes (assuming the highest marginal rates then in effect apply) and after imposition of the excise tax under Section 4999 of the Code if the amounts payable to Miller hereunder were not so reduced; and (C), if the Accounting Firm determines in (B) above that Miller would realize a higher amount if the compensation payable to Miller were so reduced, the amount of the reductions. All determinations shall be made on a present value basis. The Accounting Firm shall provide to Fidelity and to Miller a written report of its determinations hereunder no later than forty-five (45) days prior to the termination date. No later than fifteen (15) days following his receipt of the report from the Accounting Firm, Miller will notify Fidelity in writing of any disagreement with said report, and, in such case, Fidelity shall direct the Accounting Firm to promptly discuss its determinations with an accountant or counsel designated by Miller in his written notice and seek to reach an agreement regarding same no later than fifteen (15) days prior to the termination date, with Fidelity and Miller, each bearing the cost of their own accountants or counsel. If no agreement can be reached within thirty (30) days after the expiration of said fifteen (15) day period, the matter shall be promptly submitted to binding arbitration under Section 16 hereof by either party. The determinations so made shall be binding on the parties. If it is determined hereunder that Miller would realize a greater amount after Federal and Georgia income taxes (assuming the highest marginal rates then in effect apply) if the compensation payable to him pursuant to Sections 3(b)(i) & 3(b)(ii) were reduced (assuming latest payments are reduced first) so that no amount payable to Miller hereunder constitutes a Parachute Payment, then the amounts payable to Miller pursuant to Sections 3(b)(i) & 3(b)(ii) shall be so reduced. 5 (vii) As a result of the uncertainty in the application of Sections 280G and 4999 of the Code, it is possible that amounts will have been paid or distributed to Miller that should not have been paid or distributed under this Section 3(b) ("Overpayments"), or that additional amounts should be paid or distributed to Miller under this Section 3(b) ("Underpayments"). If based on either the assertion of a deficiency by the Internal Revenue Service against Fidelity or Miller, which assertion has a high probability of success, or controlling precedent or substantial authority, an Overpayment has been made, that Overpayment will be treated for all purposes as a loan ab initio that Miller must repay to Fidelity immediately together with interest at the applicable Federal rate under Section 7872 of the Code; provided, however, that no loan will be deemed to have been made and no amount will be payable by Miller to Fidelity unless, and then only to the extent that, the deemed loan and payment would either reduce the amount on which Miller is subject to tax under Section 4999 of the Code or generate a refund of tax imposed under Section 4999 of the Code. If based upon controlling precedent or substantial authority, an Underpayment has occurred, the amount of that Underpayment will be paid to Miller promptly by Fidelity. Whether an Overpayment or Underpayment has occurred may be determined in substantially the same manner as the original determination. (viii) Fidelity and Miller shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of Fidelity or Miller, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Section 3(b). (ix) The Federal, state and local income or other tax returns filed by Miller shall be prepared and filed on a consistent basis with the determination with respect to the excise tax payable by Miller. Miller, at the request of Fidelity, shall provide Fidelity true and correct copies (with any amendments) of his Federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by Fidelity, evidencing such conformity. (c) Termination by Miller. (i) Miller may have a Termination of Employment by Miller at any time upon at least 90 days' prior written notice to Fidelity and the Bank. Upon such Termination of Employment Miller's right to compensation after the effective date of termination shall cease. Upon such a Termination of Employment, the Base Salary which accrued as of the termination date, the Incentive Compensation payable pursuant to Section 2(b) for the periods of employment and accrued but unused vacation pay will be paid after the effective date of termination on the next normal payroll payment date. (ii) Notwithstanding the foregoing, if Fidelity or the Bank fails to perform any of its material obligations hereunder and such failure continues for sixty (60) days after written notice thereof by Miller to the Board, termination by Miller of this Agreement for such failure shall be deemed to constitute a Termination of Employment by Fidelity and the Bank without cause under Section 3(b) of this Agreement. A reduction in the 6 responsibilities and authority of Miller as provided in Section l(b) shall constitute a breach of a material obligation of Fidelity and the Bank hereunder. (d) Termination Upon Death or Disability. (i) Miller shall have a Termination of Employment upon his death, or (10) business days after written notice by Fidelity of termination during the continuance of the total disability (as hereinafter defined) of Miller. (ii) Upon Termination of Employment upon death or by Fidelity upon total disability, Miller's right to compensation after the effective date of termination shall cease . Upon such a Termination of Employment, the Base Salary which accrued as of the termination date, the Incentive Compensation payable pursuant to Section 2(b) for the periods of employment and accrued but unused vacation pay will be paid after the effective date of termination on the next normal payroll payment date. Fidelity and the Bank shall have no obligation to pay any compensation for periods after the effective date of such termination under this Section 3(d). (iii) The term "total disability" means the inability of Miller to substantially perform his duties hereunder for a continuous period of ninety (90) days unless such period is extended in writing by Fidelity, in which event, for such greater period. Total disability shall be deemed to commence upon the expiration of such continuous ninety (90) day period or such greater period, if so extended. In the event of any dispute as to the "total disability" of Miller or the expiration of said ninety (90) day period or such greater period, if so extended, the matter shall be resolved by the decision of a single physician, serving as an arbitrator, mutually selected or appointed in accordance with the rules of the American Arbitration Association, Atlanta, Georgia. The decision of the arbitrator shall be binding on all parties hereto. Miller agrees to submit medical records requested and to submit to such examination and testing reasonably requested by such physician. (e) Life Insurance Policies. Termination of this Agreement or the benefits payable hereunder for any reason, including pursuant to Section 3(a), (b), (c) or (d) hereof, shall not terminate the duty of Fidelity and the Bank to maintain or continue the Split Dollar Plan, or the insurance policies with Great-West, Life Investors and Mass Mutual pursuant to Section 2(d) hereof, including any substitute plan or policy hereafter mutually agreed to. Notwithstanding any other provision of this Agreement, if Miller is a Specified Employee and if Fidelity determines that the maintenance of the Split Dollar Plan, or the insurance policies with Great-West, Life Investors and Mass Mutual is subject to Section 409A of the Code, then, to the extent necessary to avoid taxation under Section 409A, Miller will be required to pay for the maintenance of the Split Dollar Plan, and the insurance policies with Great-West, Life Investors and Mass Mutual during the six-month period following his Termination of Employment; provided; however, that at the end of such six-month period, Fidelity or the Bank will reimburse Miller for such payments. 4. COVENANT NOT TO COMPETE. Miller agrees that during his employment with Fidelity or the Bank and for a period of eighteen (18) months after Miller's Termination of 7 Employment for any reason , that Miller shall not, on his own behalf or on another's behalf, work in any management or executive capacity in the business of providing banking or banking related services. This restriction shall apply only within a 50-mile radius of 3490 Piedmont Road, Atlanta, Georgia 30305. Miller agrees that because of the nature of Fidelity's and the Bank's business, the nature of Miller's job responsibilities, and the nature of the Confidential Information and Trade Secrets of Fidelity and the Bank which Fidelity and the Bank will give Miller access to, any breach of this provision by Miller would result in the inevitable disclosure of Fidelity's and the Bank's Trade Secrets and Confidential Information to its direct competitors. 5. NON-SOLICITATIONS OF CLIENTS AND CUSTOMERS. Miller agrees that during his employment with Fidelity or the Bank and for a period of eighteen (18) months after Miller's Termination of Employment for any reason, Miller will not directly or indirectly solicit, contact, call upon, communicate with or attempt to communicate with any client or customer of Fidelity or the Bank for the purpose of providing banking or banking related services. This restriction shall apply only to any client or customer of Fidelity or the Bank with whom Miller had material contact during the last twelve months of Miller's employment with Fidelity or the Bank. "Material contact" means interaction between Miller and the client or customer which takes place to further the business relationship. "Clients" and "customers" include, but are not limited to, depositors and commercial, SBA or construction loan customers. 6. NON-SOLICITATIONS OF EMPLOYEES. Miller agrees that during his employment with Fidelity or the Bank and for a period of eighteen (18) months after Miller's Termination of Employment for any reason, Miller will not recruit, hire or attempt to recruit or hire, directly or by assisting others, any other employee of Fidelity or the Bank with whom Miller had material contact during Miller's employment with Fidelity or the Bank. This restriction shall apply only to recruiting, hiring or attempting to recruit or hire any employee for the purpose of working in the business of providing banking or banking related services. 7. CONFIDENTIALITY, PROPRIETARY INFORMATION AND INVENTIONS. (a) During the term of Miller's employment with Fidelity or the Bank, and at all times thereafter, Miller shall not use or disclose to others, without the prior written consent of Fidelity and the Bank, any Trade Secrets (as hereinafter defined) of Fidelity or the Bank, or any subsidiary thereof or any of their customers, except for use or disclosure thereof in the course of the business of Fidelity or the Bank (or that of any subsidiary), and such disclosure shall be limited to those who have a need to know. (b) During the term of Miller's employment with Fidelity or the Bank, and for eighteen (18) months after Miller's Termination of Employment for any reason, Miller shall not use or disclose to others, without the prior written consent of Fidelity and the Bank, any Confidential Information (as hereinafter defined) of Fidelity or the Bank, or any subsidiary thereof or any of their customers, except for use or disclosure thereof in the course of the business of Fidelity or the Bank (or that of any subsidiary), and such disclosure shall be limited to those who have a need to know. 8 (c) Upon Miller's Termination of Employment for any reason, Miller shall not take with him any documents or data of Fidelity or the Bank or any subsidiary or of any customer thereof or any reproduction thereof and agrees to return any such documents and data in his possession at that time. (d) Miller agrees to take reasonable precautions to safeguard and maintain the confidentiality and secrecy and limit the use of all Trade Secrets and Confidential Information of Fidelity, the Bank and all subsidiaries and customers thereof. (e) Trade Secrets shall include only such information constituting a "Trade Secret" within the meaning of subsection 10-1-761(4) of the Georgia Trade Secrets Act of 1990, including as hereafter amended. Confidential Information shall include all information and data which is protectable as a legal form of property or non-public information of Fidelity or the Bank or their customers, excluding any information or data which constitutes a Trade Secret. (f) Trade Secrets and Confidential Information shall not include any information (A) which becomes publicly known through no fault or act of Miller; (B) is lawfully received by Miller from a third party after Termination of Employment without a similar restriction regarding confidentiality and use and without a breach of this Agreement; or (C) which is independently developed by Miller and entirely unrelated to the business of providing banking or banking related services. (g) Miller agrees that any and all information and data originated by Miller while employed by Fidelity or the Bank and, where applicable, by other employees or associates under Miller's direction or supervision in connection with or as a result of any work or service performed under the terms of Miller's employment, shall be promptly disclosed to Fidelity and the Bank, shall become Fidelity and/or the Bank's property, and shall be kept confidential by Miller. Any and all such information and data, reduced to written, graphic, or other tangible form and any and all copies and reproduction thereof shall be furnished to Fidelity and the Bank upon request and in any case shall be returned to Fidelity and the Bank upon Miller's Termination of Employment. (h) Miller agrees that Miller will promptly disclose to Fidelity and the Bank all inventions or discoveries made, conceived, or for the first time reduced to practice in connection with or as a result of the work and/or services Miller performs for Fidelity or the Bank. (i) Miller agrees that he will assign the entire right, title, and interest in any such invention or inventions and any patents that may be granted thereon in any country in the world concerning such inventions to Fidelity and the Bank. Miller further agrees that Miller will, without expense to Fidelity or the Bank, execute all documents and do all acts which may be necessary, desirable, or convenient to enable Fidelity and the Bank, at its expense, to file and prosecute applications for patents on such inventions, and to maintain patents granted thereon. 9 8. CONSIDERATION FOR NON-COMPETE, NON-SOLICITATION AND NON-DISCLOSURE PROVISIONS. In consideration of Miller's undertakings set forth in Sections 4, 5, 6 and 7 above, with respect to periods after Termination of Employment, Fidelity or the Bank will pay Miller a "Non-Compete Benefit" as described below. If Miller is not a Specified Employee, the Non-Compete Benefit will be payable in 36 equal semi-monthly installments, each installment in an amount equal to sixty percent (60%) of his Base Salary in effect immediately prior to the Termination of Employment divided by 24, commencing on the 15th or last day of the month immediately following the date of the Termination of Employment, whichever date occurs first, and then continuing on the 15th and last day of each calendar month thereafter until all such installments are paid. If Miller is a Specified Employee, the Non-Compete Benefit shall not become payable until the first 15th or last day of the month which is at least six months after Miller's Termination of Employment. All installments which would have otherwise been required to be made over such six-month period if Miller had not been a Specified Employee, shall be paid to Miller in one lump sum payment as soon as administratively feasible after the first 15th or last day of the month which is at least six months after Miller's Termination of Employment. After the lump sum payment, the remaining semi-monthly installments (each equal to sixty percent (60%) of his Base Salary in effect immediately prior to Termination of Employment divided by 24) will continue on the 15th and last day of each calendar month until all such installments are paid. If Miller violates any of the undertakings set forth in Sections 4, 5, 6 and 7 of this Agreement, Miller waives and forfeits any and all rights to any further payments under this Agreement, including but not limited to, any additional payments, compensation or severance he may otherwise be entitled to receive under this Agreement, whether pursuant to this Section or otherwise. 9. SPECIFIC PERFORMANCE. Because of Miller's knowledge and experience, Miller agrees that Fidelity shall be entitled to specific performance, an injunction, temporary injunction or other similar relief without the posting of a bond or other security in addition to all other rights and remedies it might have for any violation of the undertakings set forth in Sections 4, 5, 6 and 7 of this Agreement. In any such court proceeding, Miller will not object thereto and claim that monetary damages are an adequate remedy. 10. MAXIMUM PAYMENTS. The total amount payable hereunder as severance pay (as set forth in Sections 3(b)(i) & 3(b)(ii)) and consideration for the non-compete, non-solicitation and non-disclosure provisions (as set forth in Section 8) shall not exceed three times Miller's Base Salary. 11. NO SETOFF. Nothing in this Agreement will limit or otherwise affect such rights as Miller may have under any other contract or agreement with Fidelity, the Bank or Affiliates, except as specifically set forth in such contract or agreement. Amounts which constitute vested benefits or which Miller is otherwise entitled to receive under any employee benefit plan, policy, practice or program of or any contract or agreement (collectively, "programs") with Fidelity or the Bank at or subsequent to Miller's Termination of Employment will be payable in accordance with such programs. 12. INDEMNIFICATION OF MILLER. Fidelity shall indemnify Miller and shall advance reimbursable expenses incurred by Miller in any proceeding against Miller, including a 10 proceeding brought in the right of Fidelity, as a director or officer of Fidelity or any subsidiary thereof, except claims and proceedings brought directly by Fidelity against Miller, to the fullest extent permitted under the Articles of Incorporation and By-Laws of Fidelity and the Georgia Business Corporation Code, as amended from time to time. Such indemnities and advances shall be paid to Miller on the next normal payroll payment date after Miller's rights to such amounts are no longer in dispute; provided, however, that if Miller is a Specified Employee such payments shall not be made before the date that is six months after the date of Miller's Termination of Employment. 13. NOTICES. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been given upon receipt when delivered by hand or upon delivery to the address of the party determined pursuant to this Section when delivered by express mail, overnight courier or other similar method to such address or by facsimile transmission (provided a copy is also sent by registered or certified mail or by overnight courier), or five (5) business days after deposit of the notice in the US mail, if mailed by certified or registered mail, with postage prepaid addressed to the respective party as set forth below, which address may be changed by written notice to the other party: If to Fidelity or the Bank: Fidelity Southern Corporation 3490 Piedmont Road Suite 1550 Atlanta, Georgia 30305 Attn: Board of Directors If to Miller: James B. Miller, Jr. c/o Fidelity Southern Corporation 3490 Piedmont Road, Suite 1550 Atlanta, Georgia 30305 14. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon and enforceable by Miller and his estate, personal representatives and heirs, and by Fidelity and the Bank and its successors and assigns. This Agreement and the payments hereunder may not be assigned, pledged or otherwise hypothecated by Miller. 15. ENTIRE AGREEMENT. This Agreement, including the Split Dollar Plan, the insurance policies with Great-West, Life Investors and Mass Mutual and the Miller Management Continuity Agreement are intended by the parties hereto to constitute the entire understanding of the parties with respect to the employment of Miller as an employee and officer of Fidelity and election as Chairman of the Board of Fidelity and the Bank and supersedes all prior agreements and understandings, oral or written. 16. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise specifically provided herein, including as provided in Section 9 hereof, Specific Performance, all disputes arising under this Agreement shall be submitted to and settled by arbitration. Arbitration shall 11 be by one (1) arbitrator selected in accordance with the rules of the American Arbitration Association, Atlanta, Georgia ("AAA") by the AAA. The hearings before the arbitrator shall be held in Atlanta, Georgia and shall be conducted in accordance with the rules existing on the date thereof of the AAA to the extent not inconsistent with this Agreement. All reasonable costs and expense incurred in connection with any such arbitration proceedings and those incurred in any civil action to enforce the same shall be borne by the party against which the decision is rendered. To the extent that Miller is entitled to reimbursement of any such costs and expenses, such reimbursements shall be paid to Miller on the next normal payroll payment date after Miller's rights to such reimbursements are no longer in dispute; provided, however, that if Miller is a Specified Employee such payments shall not be made before the date that is six months after the date of Miller's Termination of Employment. 17. AMENDMENTS. This Agreement may not be amended or modified except in writing signed by both parties. 18. WAIVERS. The failure of either party to insist upon the strict performance of any provision hereof shall not constitute a wavier of such provision. All waivers must be in writing. 19. FUTURE EMPLOYERS. Fidelity or the Bank may notify anyone employing Miller or evidencing an intention to employ Miller as to the existence and provisions of this Agreement and may provide any such person or organization a copy of this Agreement. Miller agrees that for a period of 18 months after Miller's Termination of Employment for any reason, Miller will provide Fidelity and the Bank the identity of any employer Miller goes to work for along with Miller's job title and anticipated job duties with any such employer. 20. GOVERNING LAW. This Agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the laws of the State of Georgia, excluding its conflicts of laws. 21. COMPLIANCE WITH SECTION 409A. 22. This Agreement is intended to satisfy the requirements of Code Section 409A and shall be construed and interpreted in accordance therewith. 23. DEFINITIONS. FOR PURPOSES OF THIS AGREEMENT: (a) "Affiliate" means any entity with whom Fidelity or the Bank would be considered a single employer under Code Sections 414(b) or 414(c). (b) "Specified Employee" means an employee who is (i) an officer of Fidelity having annual compensation greater than $135,000 (with certain adjustments for inflation after 2005), (ii) a five-percent owner of Fidelity or (iii) a one-percent owner of Fidelity having annual compensation greater than $150,000. For purposes of this Section, no more than 50 employees (or, if lesser, the greater of three or 10 percent of the employees) shall be treated as officers. Employees who (i) normally work less than 17 1/2 hours per week, (ii) normally work not more than 6 months during any year, (iii) have not attained age 12 21 or (iv) are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and Fidelity (except as otherwise provided in regulations issued under the Code) shall be excluded for purposes of determining the number of officers. For purposes of this Section, the term "five-percent owner" ("one-percent owner") means any person who owns more than five percent (one percent) of the outstanding stock of Fidelity or stock possessing more than five percent (one percent) of the total combined voting power of all stock of Fidelity. For purposes of determining ownership, the attribution rules of Section 318 of the Code shall be applied by substituting "five percent" for "50 percent" in Section 318(a)(2) and the rules of Sections 414(b), 414(c) and 414(m) of the Code shall not apply. For purposes of this Section, the term "compensation" has the meaning given such term by Section 414(q)(4) of the Code. The determination of whether Miller is a Specified Employee will be based on a December 31 identification date such that if Miller satisfies the above definition of Specified Employee at any time during the 12-month period ending on December 31, he will be treated as a Specified Employee if he has a Termination of Employment during the 12-month period beginning on the first day of the fourth month following the identification date. This definition is intended to comply with the specified employee rules of Section 409A(a)(2)(B)(i) of the Code and shall be interpreted accordingly. (c) "Termination of Employment" means the termination of Miller's employment with Fidelity, the Bank and all Affiliates; provided, however, that Miller will not be considered as having had a Termination of Employment if (i) Miller continues to provide services to Fidelity, the Bank or any Affiliate as an employee at an annual rate that is at least equal to 20 percent of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is at least equal to 20 percent of the average annual remuneration earned during the final three full calendar years of employment (or if less, such lesser period), (ii) Miller continues to provide services to Fidelity, the Bank or any Affiliate in a capacity other than as an employee and such services are provided at an annual rate that is 50 percent or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is 50 percent or more of the annual remuneration earned during the final three full calendar years of employment (or, if less, such lesser period) or (iii) Miller is on military leave, sick leave or other bona fide leave of absence (such as temporary employment by the government) so long as the period of such leave does not exceed six months, or if longer, so long as the individual's right to reemployment with Fidelity, the Bank or any Affiliate is provided either by statute or by contract. If the period of leave exceeds six months and Miller's right to reemployment is not provided either by statute or by contract, the Termination of Employment will be deemed to occur on the first date immediately following such six-month period. For purposes of this Section, annual rate of providing services shall be determined based upon the measurement used to determine Miller's base compensation. 13 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. FIDELITY SOUTHERN CORPORATION By: /s/ David R. Bockel ----------------------------------- Name: David R. Bockel Title: Chairman, Compensation Committee FIDELITY BANK By: /s/ David R. Bockel ----------------------------------- Name: David R. Bockel Title: Chairman, Compensation Committee MILLER /s/ James B. Miller, Jr. --------------------------------------- James B. Miller, Jr. 14 ATTACHMENT A INCENTIVE COMPENSATION For each calendar year during the term of the Agreement, the Compensation Committee ("Committee") of the Board of Directors of Fidelity will establish in its sole discretion (after discussion with Miller) a target consolidated net income of Fidelity Southern Corporation and Subsidiaries ("Fidelity") before the Incentive Compensation provided herein, excluding extraordinary items (determined in accordance with generally accepted accounting principles) ("Target Income") for such calendar year prior to the commencement of the calendar year. Miller will be paid incentive compensation ("Incentive Compensation") in cash depending upon the percentage in excess of Target Income achieved for such calendar year. In the event the consolidated net income of Fidelity for any calendar year before the Incentive Compensation provided herein and excluding extra-ordinary items, determined in accordance with generally accepted accounting principles ("Income") achieved exceeds 100% of the Target Income, the Incentive Compensation shall be the product of (i) $100,000 times (ii) the incremental percentage of the Target Income between 100% of the Target Income and 105% of the Target Income. For example, if the percentage of Income achieved is 104% of the Target Income, the Incentive Compensation is $80,000. No Incentive Compensation will be paid if the percentage of Target Income achieved is 100% or less. The maximum Incentive Compensation shall be $100,000. The Compensation Committee may modify the Target Income for any calendar year at any time during a calendar year to reflect changes resulting from changes in accounting principles or practices of Fidelity and changes in the business plan. In the event of any dispute as to the achieved Income, it shall be such amount as set forth in Fidelity's certified financial statements less the amount of this Incentive Compensation for such calendar year. The right of Miller to receive the Incentive Compensation hereunder related to a calendar year shall vest on the last day of such calendar year. In the event Miller is entitled pursuant to the Agreement to Incentive Compensation for a period of less than a full year, the Incentive Compensation for such year shall vest on the last day of his employment and the amount shall be determined as set forth hereinabove for the calendar year prorated based upon the percentage of the year Miller was employed under the Agreement. Payment is to be made in cash promptly after the amount is determined but in no event later than March 15 of the calendar year following the calendar year for which the Incentive Compensation is earned. The Committee, in its sole discretion, during a calendar year may make a non-refundable prepayment of a portion of the Incentive Compensation to Miller if it believes that the partial payment will not exceed the amount of the Incentive Compensation for that calendar year. FIDELITY SOUTHERN CORPORATION By: /s/ David R. Bockel ------------------------------------ Name: David R. Bockel Title: Chairman, Compensation Committee FIDELITY BANK By: /s/ David R. Bockel ------------------------------------ Name: David R. Bockel Title: Chairman, Compensation Committee MILLER /s/ James B. Miller, Jr. --------------------------------------- James B. Miller, Jr. 2 EX-10.(J) 4 g00159exv10wxjy.txt EX-10.(J) DIRECTOR COMPENSATION ARRANGEMENTS EXHIBIT 10(j) FIDELITY SOUTHERN CORPORATION DIRECTOR COMPENSATION Each non-employee director of Fidelity Southern Corporation (the "Company") receives a $10,000 annual retainer, paid in four quarterly installments. In addition, each non-employee director receives $2,000 for each Board of Directors' meeting attended and $1,000 for each committee meeting attended. Directors who are employees of the Company do not receive a fee for attending Board of Directors or committee meetings. EX-10.(K) 5 g00159exv10wxky.txt EX-10.(K) NAMED EXECUTIVE OFFICER COMPENSATION ARRANGEMENTS EXHIBIT 10(k) FIDELITY SOUTHERN CORPORATION EXECUTIVE OFFICER COMPENSATION ARRANGEMENTS The annual base salary for each of the named executive officers of Fidelity Southern Corporation (the "Company") for 2006 is as follows: James B. Miller, Jr. $500,000 H. Palmer Proctor, Jr. 300,000 David Buchanan 240,000 M. Howard Griffith, Jr. 230,000 Each of Mr. Miller and Mr. Proctor is also entitled to receive incentive compensation not to exceed $100,000 in the case of Mr. Miller and $50,000 in the case of Mr. Proctor, based on the Company achieving targeted income levels. For 2005, the only named executive officer to receive a bonus/incentive compensation was Mr. Proctor who received $38,141. In addition to the foregoing, the Company has paid all of the premiums for split dollar and/or corporate life insurance policies for each of the executive officers and pays annual club fees for each executive officer other than Mr. Buchanan. Under the split dollar policies, the Company will receive upon termination of the policies proceeds equal to the insurance premiums paid plus a market yield. EX-13 6 g00159exv13.htm EX-13 ANNUAL REPORT TO SHAREHOLDERS

ABOUT THE COMPANY

Common Stock:

     Fidelity’s common stock trades on the Nasdaq National Market under the symbol LION.

Annual Meeting:

     The annual meeting of shareholders will be held on Thursday, April 27, 2006, at three p.m. in Fidelity’s Board Room, Suite 1550, at 3490 Piedmont Road NE, Atlanta, GA.

Our Mission:

     Fidelity’s mission is to continue growth, improve earnings and increase shareholder value; to treat customers, employees, community and shareholders according to the Golden Rule; and to operate within a culture of strong internal controls.

We are:

     Atlanta’s Community Bank

     Fidelity Southern Corporation (“Fidelity”), a Georgia corporation incorporated on August 3, 1979, is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended.

     Through Fidelity’s wholly-owned subsidiaries, Fidelity Bank (“the Bank”) and LionMark Insurance Company, Fidelity provides a wide range of personal and corporate financial services, including mortgage banking, traditional deposit and credit services, investment services, and a credit related insurance product to a growing customer base.

     Fidelity Bank, which became a Georgia state chartered bank on May 9, 2003, originally opened on February 10, 1974. The Bank has 19 full-service branches, an internet branch at www.lionbank.com, two indirect automobile loan offices, and a Small Business Administration Loan office in Conyers, Georgia. The Bank also has a residential construction lending and indirect automobile loan office in Florida and has a mortgage origination office in Georgia and one in Florida.

     As of December 31, 2005, Fidelity had total assets and shareholders’ equity of $1.4 billion and $87 million, respectively.

     Fidelity is an equal opportunity employer and had 356 full-time equivalent employees at December 31, 2005. Employees are provided a variety of benefits including hospitalization, medical-surgical, major medical, dental, group life and disability income, a 401(k) retirement plan, a deferred compensation plan, a flexible spending plan for child care and out-of-pocket medical expenses, and a stock purchase plan.

Table of Contents

Financial Highlights	2
Letter from the Chairman	3
Report of Independent Registered Public Accounting Firm	10
Consolidated Balance Sheets	11
Consolidated Statements of Income	12
Selected Financial Data	13
Corporate and Shareholder Information	14
Boards of Directors and Senior Management	15
Offices	16

FINANCIAL HIGHLIGHTS

	Years Ended December 31,
(Dollars in Thousands Except Per Share)	2005			2004			% Change
For the Year
Net Income	$	10,326		$	7,632			35.3	%
Earnings Per Share, Basic		1.13			.85			32.9
Earnings Per Share, Diluted		1.12			.84			33.3
Cash Dividends — Common		.28			.20			40.0
Book Value		9.39			8.64			8.7
Closing Stock Price		17.90			19.00			(5.8	)
Average Common Shares O/S — Diluted		9,223,723			9,097,733			1.4
Year-End Balances
Assets	$	1,405,703		$	1,223,717			14.9	%
Investment Securities		168,860			166,050			1.7
Total Loans		1,129,777			995,289			13.5
Earning Assets		1,343,743			1,170,534			14.8
Total Deposits		1,124,013			1,016,377			10.6
Shareholders’ Equity		86,739			78,809			10.1
Common Shares Outstanding		9,237,727			9,120,135			1.3
Financial Ratios1
Return on Average Common Shareholders’ Equity		12.59	%		10.29	%
Efficiency Ratio		65.22			67.75
Return on Average Assets		.79			.66
Net Interest Margin		3.17			3.22
Net Charge-offs to Average Loans		.23			.29
Allowance as % of Loans		1.15			1.27
Allowance to Nonperforming Loans/Repos		4.50x			5.53	x
Allowance to Nonperforming Assets		4.50			4.25
Nonperforming Assets to Total Loans and Repossessions		.25	%		.29	%
Dividend Payout on Common Shares		24.86			23.56

Diluted Earnings Per Common Share¹

(in Dollars)

Dividends Per Common Share

(in Dollars)

Book Value Per Common Share

(in Dollars)

Average Total Loans

($ in Millions)

Average Earning Assets

($ in Millions)

Return on

Average Common Equity¹

(%)

¹ from continuing operations

Fidelity Southern Corporation 8 2

LETTER FROM THE CHAIRMAN

March 10, 2006

To Our Shareholders:

     The business of this company is growing value for its owners. Management believes the best way to do that is to pay close attention to our customers, our employees, and the communities we serve, and to have clear plans for the future, which are followed.

     Net income increased 34.5% to $10.3 million for 2005 over 2004. For the five-year period ended December 31, 2005, Fidelity’s compounded earnings growth rate was 33.5%. These results were achieved while we continued to invest in the future. During 2005, earning assets grew 12.0% to $1.4 billion, asset quality was maintained, operational and compliance efforts were strengthened, and we added to our great group of experienced bankers. One of the ways Palmer Proctor, Fidelity Bank’s President, demonstrated his leadership is by attracting these bankers.

2005 INITIATIVES

8 Strengthened our Board of Directors by adding a new member

8 Used new and improved technology to reduce costs

8 Significantly expanded the SBA lending team

8 Established an SBA loan production office in Conyers, Georgia

8 Strengthened the retail banking and brokerage staffs

8 Began constructing a Duluth, Georgia, full-service branch

8 Set in motion the planning for two to four additional branches over the next 24 months

8 Expanded credit administration and hired a general counsel

8 Opened LionMark Insurance Company

8 Entered into a marketing agreement to promote significant transaction deposit growth

     We strengthened our board of directors when James H. Miller III was elected to the Board of Directors on June 17, 2005.

Fidelity Southern Corporation 8 3

LETTER FROM THE CHAIRMAN (continued...)

Mr. Miller has a fine name, but we are not related. He is Senior Vice President and General Counsel of Georgia Power Company. After earning a bachelor’s degree in marketing from the University of Alabama, Mr. Miller spent three years in the U. S. Navy and later earned the rank of Lieutenant Commander in the U. S. Navy Reserves. He subsequently earned a law degree from the University of Alabama. He is also a graduate of the Advanced Management Program at Oxford University, England.

     One of the reasons that we are able to continually improve our operating efficiencies and lower our efficiency ratios is our effective use of new technology. This year was no exception, as Ben Davis and his team implemented front-end systems to improve loan processing efficiency, improved our antifraud systems, and upgraded our hardware, software, and other systems. On July 27, 2005, we became the first Atlanta-based depositor to clear imaged checks through the Federal Reserve Bank of Atlanta. This process has helped us reduce our overall check clearing times and processing expenses.

     Danny Preston, Jr. joined us as Director of our SBA Division. He is a seasoned SBA lender, with over ten years of SBA experience. By year-end 2005, Preston had built his team, improved our SBA control systems, and opened a loan production office in Conyers, Georgia. The SBA department is expected to be a significant contributor to the objective of increasing our noninterest income in 2006 and beyond.

     A primary 2005 initiative was to develop and implement a program to lower our cost of deposits by increasing the number and volume of both personal and business transaction accounts. In July, Janet Sanchez Wilcoxson joined our Bank as Director of Retail Banking to lead our drive to significantly increase our transaction accounts and balances. She has added several experienced retail bankers to her staff, revamped our retail training program, reorganized the branch management structure, and has begun to build a strong marketing and sales culture. During 2005, we began construction on our first new branch in several years. It is

Fidelity Southern Corporation 8 4

LETTER FROM THE CHAIRMAN (continued...)

located in Duluth, Georgia, and should open in the second quarter of 2006. We are currently looking at sites for several other branches slated to open in 2006 and beyond.

     During the second quarter of 2005, David Buchanan formed LionMark Insurance Company. LionMark currently provides a credit related insurance product to our indirect automobile customers. We have no plans now to grow this company beyond our initial efforts.

     In 2005, our indirect automobile lending activity, the major contributor to our profitability, showed significant loan growth, although this growth was outpaced by commercial and construction loan growth. This portfolio includes both consumer and commercial indirect automobile loans. During the year ended December 31, 2005, total indirect automobile loans, including those loans held-for-sale, grew 12.6% to $588 million. The five-year average compound growth rate for indirect automobile loans, including loans held-for-sale, through December 31, 2005, was 15.6%. During 2005, indirect automobile loan asset quality improved significantly, as net charge-offs on this portfolio as a percentage of average indirect automobile loans outstanding were approximately .39% compared to .47% during 2004.

     We produce indirect automobile loans for both our portfolio and to sell. We currently sell about a third of the loans produced, with servicing retained. The production of $453 million in indirect automobile loans during 2005 represented a 1.2% increase over 2004 production.

     Sam Mathis’ area, construction lending, another area of high focus, had an excellent year. Construction loans, which do not include construction loans on pre-sold homes, grew 27.6% to $207 million at December 31, 2005. The five-year compound average growth rate for construction loans through December 31, 2005, was 15.9%. For the third year in a row, construction lending experienced record new loan production. During the past three years, Fidelity has experienced no charge-

Fidelity Southern Corporation 8 5

LETTER FROM THE CHAIRMAN (continued...)

offs from its residential construction lending activities. While home sales continue to be strong, of late there has been some slowing in the housing markets we serve.

     During 2005, Michael Pierson and his team grew commercial loans, which includes commercial mortgage loans, 13.0% to $209 million. The five-year compound average growth rate for commercial loans through December 31, 2005, was 10.5%. Commercial loan quality, as measured by net charge-offs as a percent of average commercial loans of .05% for 2005, continues to be outstanding. During 2004, commercial loan recoveries actually exceeded charge-offs. This favorable loss experience is due to quality loans and the expertise of Rusty Bramlett and Gary Wetherholt.

     During 2005, every major line of business grew, while loan quality improved and net income increased significantly. The following schedule depicts the strong growth in loans by category ($ in thousands):

Loan Growth by Catagory

	December 31,
Loan Catagory	2004		2005		% Increase
Commercial	$	85,842	$	100,790		17.4	%
Real Estate — Commercial		98,770		107,817		9.2
Total Commercial		184,612		205,044		11.1
Real Estate — Construction		162,176		206,865		27.6
Real Estate — Residential		81,447		83,873		3.0
Real Estate — Home Equity		46,564		49,237		5.7
Consumer		520,490		581,194		11.7
Total Loans	$	995,289	$	1,129,776		13.5

     In 2005, net interest income increased $3.7 million or 10.4% over 2004. The increase in net interest income was driven by our earning assets, primarily as a result of strong loan growth. This loan growth was the primary contributor to the 2005 net income increase of 35.4% over 2004.

     During 2005, the Federal Reserve Bank (“FRB”) increased the Federal funds rate eight times and advised that rates would

Fidelity Southern Corporation 8 6

LETTER FROM THE CHAIRMAN (continued...)

continue rising into 2006. The competitive demand for deposits in the Atlanta market was such that the cost side was rising faster than loan yields, causing the net interest margin to contract. At Fidelity, the net interest margin declined five basis points during 2005 to 3.17% when compared to 2004.

     Our unwavering commitment to building value through operating and compliance soundness provided credit quality improvements in 2005 over 2004. Richard McCrea has joined us as Chief Credit Officer to strengthen that function. He has more than 33 years of strong credit experience.

     Following last year’s strong credit quality performance, we did not anticipate further credit quality improvements in 2005. That was not the case. Nonperforming assets declined to .20% of total assets at year-end 2005 and net charge-offs as a percentage of average loans outstanding declined to .23% for 2005 from .29% during 2004. Total loans criticized, as determined through our internal risk classification process, decreased by $5.8 million or 19.9% to $23.6 million by December 31, 2005, compared to year-end 2004. At December 31, 2005, we had no foreclosed real estate assets on our books. As a result of our strong credit quality and lower net charge-offs, our provision for loan losses in 2005 declined $1.9 million or 39.6% to $2.9 million when compared to 2004.

     Lower than anticipated noninterest income of $14.2 million for 2005, compared to $14.6 million in 2004, was an earnings disappointment. Noninterest income improvements in brokerage activities, debit card and merchant services, income from corporate owned life insurance, and from two non-recurring items were more than offset by declines in revenues from mortgage banking activities, indirect lending activities, and SBA lending activities in 2005 compared to 2004.

     Noninterest expenses, while increasing 2.73% during 2005 over 2004, continued to show significant improvement by declining to 2.68% of average assets in 2005 compared to 2.78% in 2004. The major expense increases were in salaries,

Fidelity Southern Corporation 8 7

LETTER FROM THE CHAIRMAN (continued...)

benefits, professional services, and communication expenses due primarily to growth. As a result of the numerous 2005 initiatives discussed, the ratio of noninterest expenses to average assets is expected to increase moderately in 2006.

     Since December 31, 2001, the total performance of our stock has significantly outpaced the S&P 500 and the NASDAQ bank indices as indicated below:

     In July we announced that Fidelity was selected for inclusion in the Russell Microcap Index. Russell Investment Group launched this new index, which reflects a Fidelity four-year return of 73.6% versus 43.8% for all small corporations. Being selected underscores our success in achieving the objective of significantly increasing shareholder value.

     After two years of extremely strong earnings growth, we expect the earnings growth rate to moderate. However, we continue to expect earnings to improve over time as we move toward our goals of 1% ROA and 15% ROE by year-end 2007. This steady growth will continue to come from increases in average earnings assets, strong loan quality, and improving noninterest income, largely as a result of the

Fidelity Southern Corporation 8 8

LETTER FROM THE CHAIRMAN (continued...)

initiatives mentioned above. And, of course, Atlanta and Jacksonville are two of the best banking markets. We are fortunate to be there.

     We thank you for your confidence in owning shares in the Company. It is important to spread the word about the Company in the markets we serve and to have more customers as shareholders — and shareholders as customers.

     We all appreciate the opportunity to work together for you and for our community.

Sincerely,

James B. Miller, Jr.,

Chairman

Building Value

Our New Duluth Branch
Opening Second Quarter 2006

Fidelity Southern Corporation 8 9

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Fidelity Southern Corporation

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Fidelity Southern Corporation and subsidiaries at December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005, (not presented separately herein) and in our report dated March 10, 2006, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Fidelity Southern Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2006, expressed an unqualified opinion thereon.

March 10, 2006
Atlanta, Georgia

Fidelity Southern Corporation 8 10

CONSOLIDATED BALANCE SHEETS

	December 31,
(Dollars in Thousands)	2005			2004
Assets
Cash and due from banks	$	20,250		$	23,445
Interest-bearing deposits with banks		929			1,020
Federal funds sold		44,177			9,274
Investment securities available-for-sale (amortized cost of $126,514 and $114,304 at December 31, 2005 and 2004, respectively)		124,200			114,137
Investment securities held-to-maturity (approximate fair value of $43,998 and $52,250 at December 31, 2005 and 2004, respectively)		44,660			51,913
Loans held-for-sale		30,608			34,063
Loans		1,099,169			961,226
Allowance for loan losses		(12,643	)		(12,174	)
Loans, net		1,086,526			949,052
Premises and equipment, net		14,068			13,512
Other real estate		—			665
Accrued interest receivable		6,736			5,233
Bank owned life insurance		24,734			13,908
Other assets		8,815			7,495
Total assets	$	1,405,703		$	1,223,717
Liabilities
Deposits
Noninterest-bearing demand deposits	$	120,970		$	116,420
Interest-bearing deposits:
Demand and money market		224,511			251,308
Savings		176,760			126,761
Time deposits, $100,000 and over		225,162			201,780
Other time deposits		376,610			320,108
Total deposits		1,124,013			1,016,377
Federal funds purchased		15,000			5,000
Other short-term borrowings		77,488			47,212
Subordinated debt		46,908			36,598
Other long-term debt		48,000			34,000
Accrued interest payable		4,469			2,864
Other liabilities		3,086			2,857
Total liabilities		1,318,964			1,144,908
Shareholders’ Equity
Preferred Stock, no par value. Authorized 10,000,000: no shares issued and outstanding		—			—
Common Stock, no par value. Authorized 50,000,000; issued 9,240,527 and 9,130,689; outstanding 9,237,727 and 9,120,135 in 2005 and 2004, respectively		44,178			42,725
Treasury stock		(17	)		(66	)
Accumulated other comprehensive loss, net of tax		(1,434	)		(103	)
Retained earnings		44,012			36,253
Total shareholders’ equity		86,739			78,809
Total liabilities and shareholders’ equity	$	1,405,703		$	1,223,717

Fidelity Southern Corporation 8 11

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
(Dollars in Thousands)	2005		2004		2003
Interest Income:
Loans, including fees	$	66,112	$	50,843	$	49,913
Investment securities		7,670		8,727		6,610
Federal funds sold and bank deposits		347		130		195
Total interest income		74,129		59,700		56,718
Interest Expense:
Deposits		27,948		18,797		18,817
Short-term borrowings		1,593		669		1,307
Trust preferred securities		—		—		2,614
Subordinated debt		3,814		3,084		789
Other long-term debt		1,329		1,411		311
Total interest expense		34,684		23,961		23,838
Net Interest Income		39,445		35,739		32,880
Provision for loan losses		2,900		4,800		4,750
Net Interest Income After Provision for Loan Losses		36,545		30,939		28,130
Noninterest Income:
Service charges on deposit accounts		4,059		4,454		4,989
Other fees and charges		1,492		1,134		1,159
Mortgage banking activities		1,246		1,917		2,808
Brokerage activities		949		683		437
Indirect lending activities		3,995		4,321		3,039
SBA lending activities		559		768		35
Bank owned life insurance		946		579		479
Securities gains, net		32		384		331
Other		948		310		479
Total noninterest income		14,226		14,550		13,756
Noninterest Expense:
Salaries and employee benefits		19,170		17,876		18,755
Furniture and equipment		2,733		2,953		2,756
Net occupancy		3,368		3,616		3,891
Communication expenses		1,392		1,375		1,433
Professional and other services		2,848		2,340		3,043
Stationery, printing and supplies		662		661		886
Insurance expenses		372		780		1,059
Other		4,456		4,469		4,968
Total noninterest expense		35,001		34,070		36,791
Income from continuing operations before income taxes		15,770		11,419		5,095
Income taxes		5,444		3,787		1,342
Income from continuing operations		10,326		7,632		3,753
Income from discontinued operations (net of income taxes of $37 for 2003)		—		—		78
Net Income	$	10,326	$	7,632	$	3,831
Earnings per share from continuing operations:
Basic earnings per share	$	1.13	$	.85	$	.42
Diluted earnings per share	$	1.12	$	.84	$	.42
Earnings per share:
Basic earnings per share	$	1.13	$	.85	$	.43
Diluted earnings per share	$	1.12	$	.84	$	.43
Weighted average shares outstanding — Basic		9,176,771		9,003,626		8,865,059
Weighted average shares outstanding — Fully Diluted		9,223,723		9,097,733		8,966,419

Fidelity Southern Corporation 8 12

SELECTED FINANCIAL DATA

	Years Ended December 31,
(Dollars in Thousands Except Per Share Data)	2005			2004			2003			2002			2001
For the Years Ended:
Interest income	$	74,129		$	59,700		$	56,718		$	57,784		$	63,925
Interest expense		34,684			23,961			23,838			27,539			39,584
Net interest income		39,445			35,739			32,880			30,245			24,341
Provision for loan losses		2,900			4,800			4,750			6,668			2,007
Noninterest income, including securities gains		14,226			14,550			13,756			19,623			20,207
Securities gains, net		32			384			331			300			600
Noninterest expense		35,001			34,070			36,791			38,648			40,381
Income from continuing operations		10,326			7,632			3,753			3,179			1,603
Income from discontinued operations		—			—			78			8,216			907
Net Income		10,326			7,632			3,831			11,395			2,510
Dividends declared – common		2,567			1,799			1,774			1,767			1,756
Per Share Data:
Income from continuing operations:
Basic earnings	$	1.13		$	.85		$	.42		$	.36		$	.18
Diluted earnings		1.12			.84			.42			.36			.18
Net income:
Basic earnings		1.13			.85			.43			1.29			.29
Diluted earnings		1.12			.84			.43			1.28			.29
Book value		9.39			8.64			8.01			7.99			6.64
Dividends declared		.28			.20			.20			.20			.20
Dividend payout ratio		24.86	%		23.56	%		47.27	%		55.57	%		109.62	%
Average common shares outstanding		9,176,771			9,003,626			8,865,059			8,832,309			8,781,628
Profitability Ratios1:
Return on average assets		.79	%		.66	%		.36	%		.34	%		.18	%
Return on average shareholders’ equity		12.59			10.29			5.29			5.10			2.76
Net interest margin		3.17			3.22			3.35			3.43			2.93
Efficiency ratio		65.22			67.75			78.89			77.50			90.65
Asset Quality Ratios:
Net charge-offs to average loans		.23	%		.29	%		.54	%		.38	%		.41	%
Allowance to period-end loans		1.15			1.27			1.25			1.25			.82
Nonperforming assets to total loans & repossessions		.25			.29			.49			.92			1.18
Allowance to nonperforming loans & repossessions		4.50	x		5.53	x		3.14	x		2.03	x		1.32	x
Liquidity Ratios:
Total loans to total deposits		100.51	%		97.93	%		93.81	%		87.12	%		87.65	%
Net loans to total deposits		97.79			94.57			89.61			83.21			80.38
Average total loans to average earning assets		86.48			82.78			84.26			85.78			85.89
Capital Ratios:
Leverage		8.64	%		8.74	%		9.03	%		8.42	%		8.08	%
Risk-based capital
Tier 1		9.60			9.88			10.33			10.38			9.05
Total		11.97			11.91			12.74			12.55			11.72
Average equity to average assets		6.29			6.38			6.86			6.16			5.94
Balance Sheet Data (At End of Period):
Assets	$	1,405,703		$	1,223,717		$	1,091,919		$	1,065,727		$	993,412
Earning assets		1,343,743			1,170,534			1,043,543			1,003,950			841,907
Total loans		1,129,777			995,289			833,029			789,402			717,088
Total deposits		1,124,013			1,016,377			887,979			906,095			818,081
Long-term debt		94,908			70,598			80,925			61,008			67,334
Shareholders’ equity		86,739			78,809			71,126			70,774			58,270
Daily Average:
Assets, net of discontinued operations	$	1,304,090		$	1,162,651		$	1,034,527		$	937,452		$	891,176
Earning assets		1,248,811			1,115,149			986,485			882,947			832,530
Total loans		1,080,025			923,103			831,243			757,430			715,099
Total deposits		1,072,695			969,815			865,182			845,619			814,477
Long-term debt		81,817			80,205			46,906			61,360			63,021
Shareholders’ equity		82,002			74,137			70,967			62,317			58,038

¹ from continuing operations

Fidelity Southern Corporation 8 13

CORPORATE AND SHAREHOLDER INFORMATION

Direct Stock Purchase and Dividend Reinvestment Plan

Fidelity Southern Corporation’s Direct Stock Purchase and Dividend Reinvestment Plan was established to provide shareholders with an easy way to purchase shares of stock. This Plan allows shareholders to make initial direct stock purchases of $1,000 to $10,000. It also allows shareholders to reinvest their quarterly dividends and make cash investments in Fidelity’s common stock for a minimum of $100 up to $10,000 per transaction and $120,000 per year. Go to www.stockbny.com.

Executive Offices	Telephone Banking
3490 Piedmont Road, NE	404-248-LION
Suite 1550	888-248-LION
Atlanta, GA 30305
404-639-6500

Main Office Number	Internet Banking
404-639-6500	accessed at:
	www.lionbank.com

Independent Registered Public Accounting Firm
Ernst & Young LLP
Atlanta, GA

Legal Counsel
Hunton & Williams LLP
Atlanta, GA

Financial Information

Shareholders and others seeking financial information about Fidelity may call Martha Fleming at 404-240-1504, write her at Fidelity Southern Corporation, P. O. Box 105075, Atlanta, Georgia, 30348, or go to www.fidelitysouthern.com and see investor relations for more information concerning Fidelity’s products and services, news releases, financial information, and other material relating to Fidelity Southern Corporation.

Shareholder Assistance

Shareholders requiring a change of address, records or information about lost certificates or dividend checks may contact Fidelity’s transfer agent:

The Bank of New York
	1-800-524-4458 1-610-382-7833 (Outside the U.S.)
	1-888-269-5221 (TDD phone — Hearing Impaired)
	E-mail Address: Shareowners@bankofny.com

Address Shareholder Inquiries to:
	Shareholder Relations Department
	P.O. Box 11258
	Church Street Station
	New York, NY 10286

The Bank of New York’s Stock Transfer Website: http://www.stockbny.com

Send Certificates for Transfer and Address Changes to:
	Receive and Deliver Department
	P.O. Box 11002
	Church Street Station
	New York, NY 10286

Market Price — Common Stock

2005	High		Low
Fourth Quarter	$	18.00	$	16.40
Third Quarter		18.00		15.04
Second Quarter		17.71		14.50
First Quarter		19.57		15.90

2004	High		Low
Fourth Quarter	$	19.60	$	15.01
Third Quarter		15.24		12.85
Second Quarter		15.99		12.76
First Quarter		15.00		12.91

As of March 10, 2006, there were approximately 650 shareholders of record. In addition, shares of approximately 2,000 beneficial owners of Fidelity’s Common Stock were held by brokers, dealers, and their nominees.

Equal Opportunity Employer

Fidelity Southern Corporation is an equal opportunity employer. All matters regarding recruiting, hiring, training, compensation, benefits, promotions, transfers, and all other personnel policies will continue to be free from all discriminatory practices.

Annual Reports, Forms 10-K & 10-Q

Copies of Fidelity Southern

Corporation’s financial reports and Forms 10-K and 10-Q filed with the Securities and Exchange Commission and supplemental quarterly information are available on request or at www.fidelitysouthern.com. (investor relations)

This Annual Report includes forward-looking statements which are subject to risks and uncertainties. Actual results could differ materially for many reasons from those projected Information and factors that could affect future financial results are included in Fidelity Southern Corporation’s 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Fidelity Southern Corporation 8 14

FIDELITY SOUTHERN CORPORATION
FIDELITY BANK

BOARDS OF DIRECTORS

James B. Miller, Jr.

Chairman and CEO

Fidelity Southern Corporation

Fidelity Bank

Board Member

Berlin American Companies

Interface, Inc.

American Software

Major General (Ret) David R. Bockel

Deputy Executive Director

Reserve Officers Association

of the United States

Washington, D.C.

Edward G. Bowen, M.D.

Retired

Gynecologist and

Obstetrician

Board Member

Duke University Board of

Trustees

Kevin S. King

Attorney

James H. Miller III

Senior Vice President

General Counsel

Georgia Power Company

H. Palmer Proctor, Jr.

Senior Vice President

Fidelity Southern Corporation

President

Fidelity Bank

Robert J. Rutland, Founder

Chairman

Allied Holdings, Inc.

W. Clyde Shepherd III

President

Plant Improvement Co., Inc.

Vice President and Secretary

Toco Hill, Inc.

Rankin M. Smith, Jr.

Owner and Manager

Seminole Plantation

W. Clyde Shepherd, Jr.

Director Emeritus

SENIOR MANAGEMENT

James B. Miller, Jr.

Chairman and CEO

Fidelity Southern Corporation

Fidelity Bank

H. Palmer Proctor, Jr.

Senior Vice President

Fidelity Southern Corporation

President

Fidelity Bank

M. Howard Griffith, Jr.

Chief Financial Officer

Fidelity Southern Corporation

Fidelity Bank

David Buchanan

Vice President

Fidelity Southern Corporation

Executive Vice President

Fidelity Bank

President

LionMark Insurance Company

Fidelity Southern Corporation 8 15

OFFICES

BANKING SERVICES

Mailing Address
P.O. Box 105075
Atlanta, GA 30348
(404) 639-6500

Internet Banking
www.lionbank.com

Buckhead
3490 Piedmont Rd. NE
Atlanta, GA 30305
(404) 814-8114

Canton Road
830 Old Piedmont Rd.
Marietta, GA 30066
(770) 919-0175

Crabapple
10920 Crabapple Rd.
Roswell, GA 30075
(770) 993-3438

Decatur
160 Clairemont Ave.
Decatur, GA 30030
(404) 371-9333

Dunwoody
1425 Dunwoody Village Pkwy.
Dunwoody, GA 30338
(770) 668-0527

Lawrenceville
415 Grayson Hwy.
Lawrenceville, GA 30045
(770) 237-0121

Merchants Walk
1223 Johnson Ferry Rd.
Marietta, GA 30068
(770) 973-5494

Northlake
2255 Northlake Pkwy.
Tucker, GA 30084
(770) 491-7770

Peachtree Center
260 Peachtree St.
Suite 100
Atlanta, GA 30303
(404) 524-1171

Peachtree Corners
3500 Holcomb Bridge Rd.
Norcross, GA 30092
(770) 448-0554

Perimeter Center
2 Perimeter Center East
Atlanta, GA 30346
(770) 551-8662

Perimeter West
135 Perimeter Center West
Atlanta, GA 30346
(770) 351-9038

River Exchange
2080 Riverside Pkwy.
Lawrenceville, GA 30043
(770) 338-4031

Roswell
1325 Hembree Rd.
Roswell, GA 30076
(770) 667-9797

Sandy Springs
225 Sandy Springs Cir.
Sandy Springs, GA 30328
(404) 252-3602

Southlake
1267 Southlake Circle
Morrow, GA 30260
(770) 961-9040

Sugarloaf
1115 Old Peachtree Rd.
Duluth, GA 30097
(Opening 2nd Quarter)

Terrell Mill
1642 Powers Ferry Road SE
Suite 230
Marietta, GA 30067
(770) 952-0212

Toco Hills
2936 North Druid Hills Rd.
Atlanta, GA 30329
(404) 329-9595

Vinings
3020 Paces Mill Road
Suite 150
Atlanta, GA 30339
(770) 434-7800

Telephone Banking
(404) 248-LION
(888) 248-LION outside Atlanta

MORTGAGE SERVICES

Atlanta
3 Corporate Square
Suite 700
Atlanta, GA 30329
(800) 876-0543

Jacksonville, FL
10151 Deerwood Park Blvd.
Building 200
Suite 100
Jacksonville, FL 32256
(904) 996-10001

INDIRECT AUTOMOBILE AND
RESIDENTIAL CONSTRUCTION LOAN
PRODUCTION OFFICE

Jacksonville, FL
10151 Deerwood Park Blvd.
Building 200
Suite 100
Jacksonville, FL 32256
(904) 996-1000I

SBA LOAN PRODUCTION OFFICE

1498 Klondike Rd.
Suite 103
Conyers, GA 30094
(678) 413-2609

CREDIT INSURANCE

LionMark Insurance Company
3490 Piedmont Rd. NE
Suite 1550
Atlanta, GA 30305
(404) 240-1504

INVESTMENT BROKERAGE*

Atlanta
3 Corporate Square
7th Floor
Atlanta, GA 30329
(404) 639-6767
(800) 934-3624

* Raymond James Financial Services, located at Fidelity Bank, is not a bank. Securities offered exclusively through Raymond James Financial Services, Inc., member NASD/SIPC, an independent broker/dealer, are not deposits or other obligations of or guaranteed by Fidelity Bank or any bank, are not guaranteed or insured by the FDIC or any other government agency, and involve investment risk, including the possible loss of the principal amount invested.

Fidelity Southern Corporation 8 16

EX-3.(B)

                                     BY-LAWS

                                       OF

                          FIDELITY SOUTHERN CORPORATION
                            AS AMENDED APRIL 15, 1987

                                    ARTICLE I

                                     OFFICES

     Section 1. Registered Office. The registered office shall be in the State
of Georgia.

     Section 2. Other Offices. The corporation may have offices at such places
both within and without the State of Georgia as the Board of Directors may from
time to time determine due to requirements of the business of the Corporation.

                                   ARTICLE II

                                  SHAREHOLDERS

     Section 1. Annual Meeting. The annual meeting of the shareholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, either within or
without the State of Georgia, on such date and at such time as the Board of
Directors may by resolution provide, or if the Board of Directors fails to
provide, then such meeting shall be held at the principal office of the
Corporation at 10:00 A.M. on the fourth Tuesday in April of each year, or, if
such date is a legal holiday, on the next succeeding business day. The Board of
Directors may specify by resolution prior to any special meeting of shareholders
held within the year that such meeting shall be in lieu of the annual meeting.

     Section 2. Special Meeting: Call and Notice of Meetings. Special meeting of
the shareholders may be called at any time by the Board of Directors, the
President, or upon written request of the holders of at least twenty-five (25%)
per cent of the outstanding common stock. Such meetings shall be held at such
place, either within or without the State of Georgia, as is stated in the call
and notice thereof. Written notice of each meeting of shareholders, stating the
time and place of the meeting, and the purpose of any special meeting, shall be
mailed to each shareholder entitled to vote at or to notice of such meeting at
his address shown on the books of the Corporation not less than ten (10) nor
more than seventy (70) days prior to such meeting unless such shareholder waives
notice of the meeting. Any shareholder may execute a waiver of notice, in person
or by proxy, either before or after any meeting and shall be deemed to have
waived notice if he is present at such meeting in person or by proxy. Neither
the business transacted at, nor the purpose of, any meeting need be stated in
the waiver of notice of a meeting at which a plan of merger or consolidation is
considered, information as required by the Georgia Business Corporation Code
must be delivered to the shareholder prior to his execution of the waiver of
notice or the waiver itself must conspicuously and specifically waive the right
to such information.



     Notice of any meeting may be given by the President, the Secretary or by
the person or persons calling such meeting. No notice need be given of the time
and place of reconvening of any adjourned meeting, if the time and place to
which the meeting is adjourned are announced at the adjourned meeting.

     Section 3. Quorum; Required Shareholder Vote. A quorum for the transaction
of business at any annual or special meeting of shareholders shall exist when
the holders of a majority of the outstanding shares entitled to vote are
represented either in person or by proxy at such meeting. If a quorum is
present, the affirmative vote of the majority of the shares represented at the
meeting and entitled to vote and the subject matter shall be the act of the
shareholders, unless a greater vote is required by law, by the Articles of
Incorporation or by these By-Laws. When a quorum is once present to organize a
meeting, the shareholders present may continue to do business at the meeting or
at any adjournment thereof notwithstanding the withdrawal of enough shareholders
to leave less than a quorum. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present, may adjourn such
meeting from time to time.

     Section 4. Proxies. A shareholder may vote either in person or by proxy
which he has duly executed in writing. No proxy shall be valid after eleven (11)
months from the date of its execution unless a longer period is expressly
provided in the proxy.

     Section 5. Action of Shareholders Without Meeting.

     Any action required to be, or which may be, taken at a meeting of the
shareholders, may be taken without a meeting if written consent; setting forth
the actions so taken, shall be signed by all the shareholders entitled to vote
with respect to the subject matter thereof, except that, with respect to
approval of a plan of merger or consolidation by written consent, information as
required by the Georgia Business Corporation Code must be delivered to the
shareholders prior to their execution of the consent or the consent must
conspicuously and specifically waive the right to such information. Such consent
shall have the same force and effect as a unanimous affirmative vote of the
shareholders and shall be filed with the minutes of the proceedings of the
shareholders.

     Section 6. Order of Business. At the annual meeting of shareholders the
order of business shall be:

          1.   Calling meeting to order.

          2.   Proof of notice of meeting.

          3.   Reading of minutes of last previous annual meeting.

          4.   Reports of officers.

          5.   Reports of committees.

          6.   Election of directors.


                                        2



          7.   Miscellaneous business.

     Section 7. List of Shareholders. The corporation will keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving their names
and addresses and the number, class and series, if any, of the shares held by
each. The officer who has charge of the stock transfer books of the corporation
shall prepare and make, before every meeting of shareholders or any adjournment
thereof, a complete list of the shareholders entitled to vote at the meeting or
any adjournment thereof, arranged in alphabetical order, with the address of and
the number and class and series~ if any, of shares held by each. The list shall
be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the whole time of the meeting.
The list may be the corporation's regular record of shareholders if it is
arranged in alphabetical order or contains an alphabetical index.

                                   ARTICLE III

                                    DIRECTORS

     Section 1. Power of Directors. The Board of Directors shall manage the
business of the Corporation and may exercise all the powers of the Corporation,
subject to any restrictions imposed by law, by the Articles of Incorporation or
by these By-Laws.

     Section 2. Composition of the Board. The Board of Directors of the
Corporation shall consist of not less than (3) or more than twenty-four (24)
natural persons of the age of eighteen years of over, except that if all of the
shares of the Corporation are owned beneficially and of record by less than
three shareholders, the number of Directors may be less than three but not less
than the number of shareholders. Directors need not be residents of the State of
Georgia or shareholders of the Corporation. At each annual meeting the
shareholders shall fix the number of Directors and elect the Directors, who
shall serve until their successors are elected and qualified; provided that the
shareholders may, by the affirmative vote of the holders of a majority of the
shares entitled to vote at an election of Directors, increase or reduce the
number of Directors and add or remove Directors with or without cause at any
time.

     The Board of Directors may, by its action, increase the number of Directors
by two and elect Directors to fill those positions provided the number of
Directors does not exceed the number permitted by these By-Laws.

     Section 3. Meetings of the Board; Notice of Meetings; Waiver of Notice. The
annual meeting of the Board of Directors for the purpose of electing officers
and transacting such other business as may be brought before the meeting shall
be held each year immediately following the annual meeting of shareholders. The
Board of Directors may by resolution provide for the time and place of other
regular meetings and no notice of such regular meetings need be given. Special
meetings of the Board of Directors may be called by the President or by any two
Directors, and written notice of the time and place of such meetings shall be
given to each Director by first class or air mail at least four (4) days before
the meeting or by telephone, telegraph, cablegram or in person at least two (2)
days before the meeting. Any Director may execute the waiver of notice, either
before or after any meeting, and shall be deemed to have


                                        3



waived notice if he is present at such meeting. Neither the business to be
transacted at, nor the purpose of; any meeting of the Board of Directors need be
stated in the notice or waiver of notice of such meeting. Any meeting may be
held at any place within or without the State of Georgia

     Section 4. Quorum; Vote Requirement. A majority of the Directors in office
at nay time shall constitute a quorum for the transaction of business at any
meeting. When a quorum is present, the vote of a majority of the Directors
present shall be the act of the Board of Directors, unless a greater vote is
required by law, by the Articles of Incorporation or by these By-Laws.

     Section 5. Action of Board Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if written consent, setting forth the
action so taken, is signed by all the Directors or committee members and filed
with the Minutes of the proceedings of the Board of Directors or committee. Such
consent shall have the same force and effect as a unanimous affirmative vote of
the Board of Directors or committee, as the case may be.

     Section 6. Committees. The Board of Directors, by resolution adopted by a
majority of all of the Directors, may designate from among its members an
Executive Committee, or other committees, each composed of two (2) or more
Directors, which may exercise such authority as is delegated by the Board of
Directors, provided that no committee shall have the authority of the Board of
Directors in reference to (l) an amendment to the Articles of Incorporation or
By-Laws of the Corporation, (2) the adoption of a plan of merger or
consolidation, (3) the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation, or (4) a
voluntary dissolution of the Corporation or a revocation thereof.

     Section 7. Vacancies. A vacancy occurring in the Board of Directors by
reason of removal of a Director by the shareholders shall be filled by the
shareholders, or, if authorized by the shareholders, by the remaining Directors.
Any other vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors though less than a
quorum of the Board of Directors, or by the sole remaining Director, as the case
may be, or, if the vacancy is not so filled, or if no director remains, by the
shareholders. A Director elected to fill a vacancy shall serve for the unexpired
term of his predecessor in office.

     Section 8. Telephone Conference Meetings. Unless the Articles of
Incorporation otherwise provide, members of the Board of Directors, or any
committee designed by the Board of Directors, may participate in a meeting of
the Board or committee by means of telephone conference or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 8 shall constitute presence in person at such meeting.

     Section 9. Voting Securities of Corporation. Unless otherwise ordered by
the Board of Directors, the President shall have full power and authority on
behalf of the corporation to attend and to act and vote at any meetings of
security holders of corporations in which the corporation may hold securities,
and at such meetings shall possess and may exercise any and all rights and
powers incident to the ownership of such securities which the corporation might
have possessed and exercised if it had been present. The Board of Directors by
resolution from time to time may confer like powers upon any other person or
persons.


                                        4



                                   ARTICLE IV

                                    OFFICERS

     Section 1. Executive Structure of the Corporation. The Officers of the
Corporation shall consist of a President, a Secretary, a Treasurer and other
officers or assistant officers, including Vice-Presidents, as may be elected by
the Board of Directors. Each officer shall hold office for the term for which he
has been elected or appointed and until his successor has been elected or
appointed and has qualified, or until his earlier resignation, removal from
office or death. Any two or more offices may be held by the same person, except
that the same person shall not be both the President and Secretary.

     Section 2. President. The President shall be the chief executive officer of
the Corporation and shall give general supervision and direction to the affairs
of the corporation subject to the direction of the Board of Directors. He shall
preside at all meetings of the shareholders.

     Section 3. Vice-President. The Vice-President shall act in the case of
absence or disability of the President.

     Section 4. Secretary. The Secretary shall keep the Minutes of the
proceedings of the shareholders and of the Board of Directors, and shall have
custody of and attest the seal of the Corporation.

     Section 5. Treasurer. The Treasurer shall be responsible for the
maintenance of proper financial books and records of the Corporation.

     Section 6. Other Duties and Authority. Each officer, employee and agent of
the corporation shall have such other duties and authority as may be conferred
upon him by the Board of Directors or delegated to him by the President.

     Section 7. Removal of Officers. Any officer may be removed at any time by
the Board of Directors, and such vacancy may be filled by the Board of
Directors. This provision shall not prevent the making of a contract of
employment for a definite term with any officer and shall have no effect upon
any cause of action which any officer may have as a result of removal in breach
of a contract of employment.

     Section 8. Compensation. The salaries of the officers shall be fixed from
time to time by the Board of Directors or by any person designated by them. No
officer shall be prevented from receiving such salary by reason of the fact that
he is also a Director of the Corporation.


                                        5



                                   ARTICLE V

                                     STOCK

     Section 1. Stock Certificates. The shares of stock of the Corporation shall
be represented by certificates in such form as may be approved by the Board of
Directors, which certificates shall be issued to the shareholder of the
Corporation in numerical order from the stock book of the Corporation, and each
of which shall bear the name of the shareholder, the number of shares
represented, and the date of issue; and which shall be signed by the President
or a Vice-President and the Secretary or an Assistant Secretary of the
Corporation; and which shall be sealed with the seal of the Corporation. No
share certificate shall be issued until the consideration for the shares
represented thereby has been fully paid.

     Section 2. Transfer of Stock. Shares of stock of the Corporation shall be
transferred only on the books of the Corporation upon surrender to the
Corporation of the certificate or certificates representing the shares to the
transferred accompanied by an assignment in writing of such shares properly
executed by the shareholder of record or his duly authorized attorney-in-fact
and with all taxes on the transfer having been paid. The Corporation may refuse
any requested transfer until furnished evidence satisfactory to it that such
transfer is proper. Upon the surrender of a certificate for transfer of stock,
such certificate shall at once be conspicuously marked on its face "Canceled"
and filed with the permanent stock records of the Corporation. The Board of
Directors may make such additional rules concerning the issuance, transfer and
registration of stock and requirements regarding the establishment of lost,
destroyed or wrongfully taken stock certificates (including any requirement of
an indemnity bond prior to issuance of any replacement certificate) as it deems
appropriate.

     Section 3. Registered Shareholders. The Corporation may deem and treat the
holder of record of any stock as the absolute owner for all purposes and shall
not be required to take any notice of any right or claim of right of any other
person.

     Section 4. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other purpose, the Board of
Directors of the Corporation may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than seventy (70) days and, in the case of a meeting of shareholders, not less
than ten (10) days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken.

                                   ARTICLE VI

                   DEPOSITORIES, SIGNATURES, SEAL, FISCAL YEAR

     Section 1. Depositories. All funds of the Corporation shall be deposited in
the name of the Corporation in such bank, banks, or other financial institutions
as the Board of Directors may from time to time designate and shall be drawn out
on checks, drafts or other orders signed


                                        6



on behalf of the Corporation by such person or persons as the Board of Directors
may from time to time designate.

     Section 2. Contracts and Deeds. All contracts, deeds and other instruments
shall be signed on behalf of the Corporation by the President or by such other
office, officers, agent or agents as the Board of Directors may from time to
time by resolution provide.

     Section 3. Seal. The seal of the Corporation shall be as follows:


     If the seal is affixed to a document, the signature of the Secretary or an
Assistant Secretary shall attest the seal. The seal and its attestation may be
lithographed or otherwise printed on any document and shall have, to the extent
permitted by law, the same force and effect as if had been affixed and attested
manually.

     Section 4. Fiscal Year. The fiscal year of the corporation is the calendar
year unless otherwise fixed by resolution of the Board of Directors.

                                  ARTICLE VII

                              AMENDMENT OF BY-LAWS

     The Board of Directors shall have the power to alter, amend or repeal the
By-Laws or adopt new by-laws, but any by-laws adopted by the Board of Directors
may be altered, amended or repealed and new by-laws adopted by the shareholders.
The shareholders may prescribe that any by-law or by-laws adopted by them shall
not be altered, amended or repealed by the Board of Directors. Action by the
Directors with respect to the By-Laws shall be taken by an affirmative vote of a
majority of all the Directors then in office. Action by the shareholders with
respect to the By-Laws shall be taken by and affirmative vote of a majority of
all shares outstanding and entitled to vote.

                                  ARTICLE VIII

                                 INDEMNIFICATION

     (a) The Corporation shall indemnify and hold harmless any person who was or
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a Director, Officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no


                                        7



reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, or itself, create a
presumption that the person did not act in a manner which he reasonably believed
to be in or not opposed to the best interests of the Corporation, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.

     (b) The Corporation shall indemnify and hold harmless any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact he is or was a Director, Officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; provided, however, that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation, unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.

     (c) To the extent that a Director, Officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this
Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

     (d) Except as provided in paragraph (c) of this Article and except as may
be ordered by a court, any indemnification under paragraphs (a) and (b) of the
Article shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the Director, Officer, employee or
agent is proper in the circumstances because be has met the applicable standard
of conduct set forth in paragraphs (a) and (b). Such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum consisting of
Directors who were not parties to such action, suit or proceeding or (2) such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
Directors so directs, by the firm of independent legal counsel then employed by
the Corporation in a written option, or (3) by the affirmative vote of a
majority of the shares entitled to vote thereon.

     (e) Expenses incurred in defending a civil or criminal action, sit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
or the Director, Officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this section.

     (f) The indemnification and advancement of expenses provided by or granted
pursuant to this Article shall not be deemed exclusive of any other rights, in
respect of


                                        8



indemnification of or otherwise, to which those seeking indemnification or
advancement of expenses may be entitled under any resolution or agreement,
either specifically or in general terms, approved by the affirmative vote of the
holders of a majority of the shares entitled to vote thereon taken at a meeting
the notice of which specified that such resolution or agreement would be placed
before the Shareholders, both as to action by a Director, Officer, employee or
agent in his official capacity and as to action in another capacity while
holding such office or position, except that no such other rights in respect to
indemnification or otherwise, may be provided or granted to a Director, Officer,
employee or agent pursuant to this paragraph by the Corporation with respect to
the liabilities described in O.C.G.A. Section 14-2-171(b)(3)(A) (i)-(iv).

     (g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director, Officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a Director, Officer,
employee or agent of another Corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this section.

     (h) If any expenses or other amounts are paid by way of indemnification,
otherwise than by court order or by an insurance carrier pursuant to insurance
maintained by the corporation, the Corporation shall, not later than the next
annual meeting of the Shareholders, unless such meeting is held within three (3)
months from the date of such payment, and, in any event, within fifteen (15)
months from the date of such payment, send by delivery or first class mail, or
such other means as is authorized by O.C.G.A. Section 2-113, to its Shareholders
of record at the same time entitled to vote for the election of Directors, a
statement specifying the persons paid, the amounts paid, and the nature and
status at the time of such payment of the litigation or threatened litigation.

     (i) For purpose of paragraphs (a) and (b) of this Article, reference to
"the Corporation" shall include, in addition to the surviving or new
Corporation, any merging or consolidating Corporation (including any merging or
consolidating Corporation of a merging or consolidating corporation) absorbed in
a merge or consolidation with the Corporation so that any person who is or was a
Director, Officer, employee or agent of such merging or consolidating
Corporation, or is or was serving at the request of such merging or
consolidating Corporation as a Director, Officer, employee or agent of another
corporation, partnership, venture, trust or other enterprise, shall stand in the
same position under the provision of paragraphs (a) and (b) of this Article with
respect to the Corporation as he would if he had served the Corporation in the
same capacity provided, however, no indemnification under paragraphs (a) and (b)
of this Article as permitted by this paragraph shall be mandatory under this
paragraph without the approval of such indemnification by the Board of Directors
or Shareholders of the Corporation in the manner provided in paragraph (d) of
this Article.

     (j) The indemnification and advancement of expenses provided by or granted
pursuant to this Article shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.


                                        9

EX-10.(D)

                                                                   EXHIBIT 10(d)

                          FIDELITY SOUTHERN CORPORATION
                                  FIDELITY BANK
                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 19th day
of January, 2006, by and among FIDELITY SOUTHERN CORPORATION ("Fidelity"), a
Georgia Corporation, FIDELITY BANK (the "Bank"), a Georgia banking corporation,
and JAMES B. MILLER, JR. ("Miller"). The Employment Agreement among Fidelity,
the Bank and Miller dated March 17, 2005 (the "2005 Agreement") is hereby
terminated and replaced by this Agreement effective as of January 1, 2006;
provided, however, that Miller shall retain all rights to any incentive
compensation payable under the 2005 Agreement which was earned and payable as of
the date hereof.

      WHEREAS, Miller is the Chairman, Chief Executive Officer and President of
Fidelity and Chairman and Chief Executive Officer of the Bank;

      WHEREAS, Fidelity and the Bank agree to continue to employ Miller as Chief
Executive Officer, subject to his election, to provide the services set forth
herein; and

      WHEREAS, Miller agrees to accept such employment and to continue to
provide such services in accordance with the terms and conditions of this
Agreement;

      NOW, THEREFORE, in consideration of the mutual promises herein made and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

      1. EMPLOYMENT/DUTIES.

            (a) Fidelity shall employ Miller as the President and Chief
Executive Officer and the Bank shall employ Miller as Chief Executive Officer
during the term of his employment as set forth in this Agreement and Miller
hereby accepts such employment. Miller also agrees to serve as the Chairman of
the Board of Directors of Fidelity (the "Board") and of the Bank upon his
election to such positions.

            (b) Miller shall be the senior executive officer of Fidelity and
shall be responsible for the day-to-day operations of the business of Fidelity
and shall have such authority consistent with such positions and necessary for
the conduct of such business under the general direction of the Board of
Directors of Fidelity.

            (c) Miller agrees that he will at all times and to the best of his
ability and experience faithfully perform all of the duties that may be required
of him pursuant to the terms of this Agreement and shall comply with all
policies and procedures adopted by the Board of Directors or any committee
thereof. Miller shall devote his full business time to the performance of his
obligations hereunder.



            (d) The term of employment of Miller shall be for a term of three
(3) years, commencing as of January 1, 2005, and may be extended upon written
agreement of the parties.

            (e) Miller shall be prohibited from serving as a director of other
businesses and as a member of any committee of the board(s) of directors thereof
unless the Board formally has approved such service before Miller becomes any
such director or member of any committee of such board(s) of directors.

      2. COMPENSATION.

            (a) Base Salary. During the term of the employment of Miller
hereunder, Fidelity and the Bank will pay to Miller an aggregate base salary
("Base Salary") at the rate of $500,000 per year, payable in arrears in equal
semi-monthly payments, subject to applicable withholdings and deductions. In the
event of the disability of Miller, to the extent payments are received by him
under any employer sponsored disability program and/or under any disability
policy the premiums of which are paid by Fidelity or the Bank, the payments
hereunder are to be reduced by an amount equal to any such disability payments
that are intended to replace all or a portion of any compensation Miller loses
due to such disability.

            (b) Incentive Compensation. Fidelity and the Bank shall pay to
Miller the incentive compensation ("Incentive Compensation") determined as set
forth in Attachment A hereto. Miller shall be eligible to participate in
incentive plans and programs hereafter adopted as determined by the Board or the
Compensation Committee of the Board.

            (c) Employee Benefit Programs. Miller shall be eligible to
participate in all employee benefit programs, including medical, dental and
hospitalization programs, now or hereafter made available by Fidelity to its
employees and/or executives, subject to terms and conditions of such programs,
including eligibility. It is understood that Fidelity reserves the right to
modify and rescind any program or adopt new programs in its sole discretion.

            (d) Life Insurance for Fidelity. Fidelity may, in its sole
discretion, maintain key man life insurance on the life of Miller and designate
Fidelity as the beneficiary. Miller agrees to execute any documents necessary to
effect the issuance of such policy. Miller hereby acknowledges that he has
consented to the purchase and maintenance by Fidelity of the Split Dollar
Insurance Plan (the "Split Dollar Plan") in the face amount of $400,000 dated
October 3, 1984 (including all amendments and replacement and substitute
policies, as hereafter mutually agreed in writing). The policies purchased and
maintained by Fidelity under the Split Dollar Plan shall be maintained by
Fidelity at all times hereafter, including after the termination of this
Agreement or Miller's Termination of Employment. In addition, Fidelity and the
Bank agree to maintain three Flexible Premium Adjustable Life Insurance,
Universal Life policies issued by Great-West Life & Annuity Insurance Company
("Great-West") one in the face amount of $6 million, one issued by Life
Investors Insurance Company of America ("Life Investors") in the face amount of
$800,000 and one issued by Mass Mutual Financial Group ("Mass Mutual") in the
face amount of $800,000 each of which is payable to beneficiaries designated by
Miller or his estate or trust in lieu thereof, at all times hereafter

                                       2


(except as provided in Section 3(e)), regardless of the termination of this
Agreement or Miller's Termination of Employment hereunder including a
Termination of Employment pursuant to Section 3.

            (e) Vacation. Miller is entitled to five (5) weeks vacation each
year. Vacation shall be taken at such times as not to materially interfere with
the business of Fidelity. The vacation time must be taken prior to the end of
each calendar year or as otherwise mutually agreed in writing, otherwise it
expires to the extent not taken.

            (f) Expenses. Fidelity shall pay all reasonable expenses incurred by
Miller in the performance of his responsibilities and duties for Fidelity,
including without limitation, dues payable to the Atlanta Athletic Club and the
Capital City Club and to such reasonable civic organizations of Miller's choice.
Miller shall submit to Fidelity periodic statements of all expenses so incurred
in accordance with the policies of Fidelity then in effect. Subject to such
reviews as Fidelity may deem reasonably necessary, Fidelity shall, promptly in
the ordinary course of business, reimburse Miller for the full amount of all
such expenses advanced by Miller.

            (g) Automobile. Fidelity will continue to provide Miller with an
appropriate automobile for his use and will maintain and insure it at Fidelity's
expense.

      3. EARLY TERMINATION.

            (a) For Cause. (i) Notwithstanding the foregoing, Miller may have a
Termination of Employment by the Board "for cause" (as hereinafter defined) at
any time upon 10 business days' prior written notice. The term "for cause" shall
mean (A) the commission of a felony or any other crime involving moral turpitude
or the pleading of nolo contendere to any such act, (B) the commission of any
act or acts of dishonesty when such acts are intended to result or result,
directly or indirectly, in gain or personal enrichment of Miller or any related
person or affiliated company and are intended to cause harm or damage to
Fidelity, the Bank or their subsidiaries, (C) the illegal use of controlled
substances, (D) the misappropriation or embezzlement of assets of Fidelity, the
Bank or their subsidiaries, (E) the breach of any other material term or
provision of this Agreement to be performed by Miller (other than pursuant to
Sections 4, 5, 6 or 7) which have not been cured within thirty (30) days of
receipt of written notice of such breach from the Board or the board of
directors of the Bank, or (F) the breach of any provision of Section 4, 5, 6 or
7 during his employment.

                  (ii) Upon a Termination of Employment for cause, Fidelity and
the Bank shall have no further obligation to pay any compensation to Miller or
make available to Miller participation under any employee benefit program for
periods after the effective date of the Termination of Employment for cause.
Upon such a Termination of Employment, the Base Salary which accrued as of the
termination date, the Incentive Compensation payable pursuant to Section 2(b)
for the periods of employment and accrued but unused vacation pay will be paid
after the effective date of termination on the next normal payroll payment date.

            (b) Other Termination by Fidelity.

                                       3


                  (i) Miller may have a Termination of Employment by Fidelity or
the Bank for any reason (other than for cause, death or total disability (as
defined in Section 3(d)(iii) below)) at any time upon at least 90 days' prior
written notice. Upon such a Termination of Employment, the Base Salary which
accrued as of the termination date, the Incentive Compensation payable pursuant
to Section 2(b) for the periods of employment and accrued but unused vacation
pay will be paid after the effective date of termination on the next normal
payroll payment date. Miller's right to additional compensation after the
effective date of termination shall cease, except that if Miller executes a
"Release" (as defined below) within the time period specified by Fidelity or the
Bank, and does not revoke such Release, Miller will be paid severance equal to
the excess of (i) three times his then Base Salary over (ii) the aggregate
amount payable under Section 8 below. If Miller is not a Specified Employee (as
defined below) such severance benefit will be payable in 72 equal semi-monthly
installments commencing on the 15th or last day of the month immediately
following the date of the Termination of Employment, whichever date occurs
first, and then continuing on the 15th and last day of each calendar month
thereafter until all such installments are paid. If Miller is a Specified
Employee, such severance benefit shall not be payable until the first 15th or
last day of the month which is at least six months after Miller's Termination of
Employment. All installments, which would have otherwise been required to be
made over such six-month period if Miller had not been a Specified Employee
shall be paid to Miller in one lump sum payment as soon as administratively
feasible after the first 15th or last day of the month which is at least six
months after Miller's Termination of Employment. After the lump sum payment, the
remaining semi-monthly installments (each equal to 1/72 of the total severance
benefit) will continue on the 15th and last day of each calendar month until all
such installments are paid.

                  (ii) Additionally, if Miller timely executes and does not
revoke a Release and elects such continued participation, the employee welfare
benefits as provided in Section 2(c) shall be continued for eighteen (18) months
from the date of termination at a cost to Miller not to exceed the amounts paid
by executives for such employee welfare benefits; provided, however, that if
continued participation in any of such employee welfare benefit plans is not
possible under the terms of such plans or any provision of law would create any
adverse tax effect for Miller, Fidelity or the Bank, due to such participation,
Fidelity will provide substantially identical benefits directly or through an
insurance arrangement or pay Miller's costs for such welfare benefits if
continued by Miller, including as permitted under ERISA. Notwithstanding the
above, if Miller is a Specified Employee and if Fidelity or the Bank determines
that any portion of such employee welfare benefits are subject to Section 409A
of the Code, then to the extent necessary to avoid taxation under Section 409A,
Miller will be required to pay for such employee welfare benefits during the
six-month period following his Termination of Employment; provided; however,
that at the end of such six-month period, Fidelity or the Bank will reimburse
Miller for such payments.

                  (iii) For purposes of this Agreement, the term "Release" means
a general release that releases Fidelity, the Bank, their affiliates,
shareholders, directors, officers, employees, employee benefit plans,
representatives, and agents and their successors and assigns from any and all
employment related claims Miller or Miller's successors and

                                       4


beneficiaries might then have against them (excluding any claims for vested
benefits under any employee pension plan of Fidelity or the Bank).

                  (v) If Miller violates any of the undertakings set forth in
Sections 4, 5, 6 and 7 of this Agreement after the Termination of Employment,
any additional compensation and benefits under Sections 3(b)(i) & 3(b)(ii) shall
cease.

                  (vi) Subsequent to the date of any written notice of
termination provided to Miller pursuant to Section 3(b) or by Miller to Fidelity
pursuant to Section 3(c)(ii), Fidelity shall engage the independent accounting
firm regularly utilized by Fidelity ("Accounting Firm") to provide to Fidelity
and Miller, at Fidelity's expense, a determination of whether any compensation
payable to Miller pursuant to Sections 3(b)(i) & 3(b)(ii) (alone or when added
to all other compensation paid or payable to Miller by Fidelity and the Bank)
constitutes a "parachute payment" ("Parachute Payment") as defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"). If the
Accounting Firm determines that any compensation payable to Miller pursuant to
Sections 3(b)(i) & 3(b)(ii) (alone or when added to all other compensation paid
or payable to Miller by Fidelity and the Bank) constitutes a Parachute Payment,
the Accounting Firm shall also determine: (A) the amount of the excise tax to be
imposed under Section 4999 of the Code; (B) whether Miller would realize a
greater amount after Federal and Georgia income taxes (assuming the highest
marginal rates then in effect apply) if the compensation payable to Miller
pursuant to Sections 3(b)(i) & 3(b)(ii) were reduced (assuming latest payments
are reduced first) so that no amount payable to Miller hereunder (alone or when
added to all other compensation paid or payable to Miller by Fidelity and the
Bank) constitutes a Parachute Payment than he would realize after Federal and
Georgia income taxes (assuming the highest marginal rates then in effect apply)
and after imposition of the excise tax under Section 4999 of the Code if the
amounts payable to Miller hereunder were not so reduced; and (C), if the
Accounting Firm determines in (B) above that Miller would realize a higher
amount if the compensation payable to Miller were so reduced, the amount of the
reductions. All determinations shall be made on a present value basis. The
Accounting Firm shall provide to Fidelity and to Miller a written report of its
determinations hereunder no later than forty-five (45) days prior to the
termination date. No later than fifteen (15) days following his receipt of the
report from the Accounting Firm, Miller will notify Fidelity in writing of any
disagreement with said report, and, in such case, Fidelity shall direct the
Accounting Firm to promptly discuss its determinations with an accountant or
counsel designated by Miller in his written notice and seek to reach an
agreement regarding same no later than fifteen (15) days prior to the
termination date, with Fidelity and Miller, each bearing the cost of their own
accountants or counsel. If no agreement can be reached within thirty (30) days
after the expiration of said fifteen (15) day period, the matter shall be
promptly submitted to binding arbitration under Section 16 hereof by either
party. The determinations so made shall be binding on the parties. If it is
determined hereunder that Miller would realize a greater amount after Federal
and Georgia income taxes (assuming the highest marginal rates then in effect
apply) if the compensation payable to him pursuant to Sections 3(b)(i) &
3(b)(ii) were reduced (assuming latest payments are reduced first) so that no
amount payable to Miller hereunder constitutes a Parachute Payment, then the
amounts payable to Miller pursuant to Sections 3(b)(i) & 3(b)(ii) shall be so
reduced.

                                       5


                  (vii) As a result of the uncertainty in the application of
Sections 280G and 4999 of the Code, it is possible that amounts will have been
paid or distributed to Miller that should not have been paid or distributed
under this Section 3(b) ("Overpayments"), or that additional amounts should be
paid or distributed to Miller under this Section 3(b) ("Underpayments"). If
based on either the assertion of a deficiency by the Internal Revenue Service
against Fidelity or Miller, which assertion has a high probability of success,
or controlling precedent or substantial authority, an Overpayment has been made,
that Overpayment will be treated for all purposes as a loan ab initio that
Miller must repay to Fidelity immediately together with interest at the
applicable Federal rate under Section 7872 of the Code; provided, however, that
no loan will be deemed to have been made and no amount will be payable by Miller
to Fidelity unless, and then only to the extent that, the deemed loan and
payment would either reduce the amount on which Miller is subject to tax under
Section 4999 of the Code or generate a refund of tax imposed under Section 4999
of the Code. If based upon controlling precedent or substantial authority, an
Underpayment has occurred, the amount of that Underpayment will be paid to
Miller promptly by Fidelity. Whether an Overpayment or Underpayment has occurred
may be determined in substantially the same manner as the original
determination.

                  (viii) Fidelity and Miller shall each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of Fidelity or Miller, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by this Section 3(b).

                  (ix) The Federal, state and local income or other tax returns
filed by Miller shall be prepared and filed on a consistent basis with the
determination with respect to the excise tax payable by Miller. Miller, at the
request of Fidelity, shall provide Fidelity true and correct copies (with any
amendments) of his Federal income tax return as filed with the Internal Revenue
Service and corresponding state and local tax returns, if relevant, as filed
with the applicable taxing authority, and such other documents reasonably
requested by Fidelity, evidencing such conformity.

            (c) Termination by Miller. (i) Miller may have a Termination of
Employment by Miller at any time upon at least 90 days' prior written notice to
Fidelity and the Bank. Upon such Termination of Employment Miller's right to
compensation after the effective date of termination shall cease. Upon such a
Termination of Employment, the Base Salary which accrued as of the termination
date, the Incentive Compensation payable pursuant to Section 2(b) for the
periods of employment and accrued but unused vacation pay will be paid after the
effective date of termination on the next normal payroll payment date.

                  (ii) Notwithstanding the foregoing, if Fidelity or the Bank
fails to perform any of its material obligations hereunder and such failure
continues for sixty (60) days after written notice thereof by Miller to the
Board, termination by Miller of this Agreement for such failure shall be deemed
to constitute a Termination of Employment by Fidelity and the Bank without cause
under Section 3(b) of this Agreement. A reduction in the

                                       6


responsibilities and authority of Miller as provided in Section l(b) shall
constitute a breach of a material obligation of Fidelity and the Bank hereunder.

            (d) Termination Upon Death or Disability.

                  (i) Miller shall have a Termination of Employment upon his
death, or (10) business days after written notice by Fidelity of termination
during the continuance of the total disability (as hereinafter defined) of
Miller.

                  (ii) Upon Termination of Employment upon death or by Fidelity
upon total disability, Miller's right to compensation after the effective date
of termination shall cease . Upon such a Termination of Employment, the Base
Salary which accrued as of the termination date, the Incentive Compensation
payable pursuant to Section 2(b) for the periods of employment and accrued but
unused vacation pay will be paid after the effective date of termination on the
next normal payroll payment date. Fidelity and the Bank shall have no obligation
to pay any compensation for periods after the effective date of such termination
under this Section 3(d).

                  (iii) The term "total disability" means the inability of
Miller to substantially perform his duties hereunder for a continuous period of
ninety (90) days unless such period is extended in writing by Fidelity, in which
event, for such greater period. Total disability shall be deemed to commence
upon the expiration of such continuous ninety (90) day period or such greater
period, if so extended. In the event of any dispute as to the "total disability"
of Miller or the expiration of said ninety (90) day period or such greater
period, if so extended, the matter shall be resolved by the decision of a single
physician, serving as an arbitrator, mutually selected or appointed in
accordance with the rules of the American Arbitration Association, Atlanta,
Georgia. The decision of the arbitrator shall be binding on all parties hereto.
Miller agrees to submit medical records requested and to submit to such
examination and testing reasonably requested by such physician.

            (e) Life Insurance Policies. Termination of this Agreement or the
benefits payable hereunder for any reason, including pursuant to Section 3(a),
(b), (c) or (d) hereof, shall not terminate the duty of Fidelity and the Bank to
maintain or continue the Split Dollar Plan, or the insurance policies with
Great-West, Life Investors and Mass Mutual pursuant to Section 2(d) hereof,
including any substitute plan or policy hereafter mutually agreed to.
Notwithstanding any other provision of this Agreement, if Miller is a Specified
Employee and if Fidelity determines that the maintenance of the Split Dollar
Plan, or the insurance policies with Great-West, Life Investors and Mass Mutual
is subject to Section 409A of the Code, then, to the extent necessary to avoid
taxation under Section 409A, Miller will be required to pay for the maintenance
of the Split Dollar Plan, and the insurance policies with Great-West, Life
Investors and Mass Mutual during the six-month period following his Termination
of Employment; provided; however, that at the end of such six-month period,
Fidelity or the Bank will reimburse Miller for such payments.

      4. COVENANT NOT TO COMPETE. Miller agrees that during his employment with
Fidelity or the Bank and for a period of eighteen (18) months after Miller's
Termination of

                                       7


Employment for any reason , that Miller shall not, on his own behalf or on
another's behalf, work in any management or executive capacity in the business
of providing banking or banking related services. This restriction shall apply
only within a 50-mile radius of 3490 Piedmont Road, Atlanta, Georgia 30305.
Miller agrees that because of the nature of Fidelity's and the Bank's business,
the nature of Miller's job responsibilities, and the nature of the Confidential
Information and Trade Secrets of Fidelity and the Bank which Fidelity and the
Bank will give Miller access to, any breach of this provision by Miller would
result in the inevitable disclosure of Fidelity's and the Bank's Trade Secrets
and Confidential Information to its direct competitors.

      5. NON-SOLICITATIONS OF CLIENTS AND CUSTOMERS. Miller agrees that during
his employment with Fidelity or the Bank and for a period of eighteen (18)
months after Miller's Termination of Employment for any reason, Miller will not
directly or indirectly solicit, contact, call upon, communicate with or attempt
to communicate with any client or customer of Fidelity or the Bank for the
purpose of providing banking or banking related services. This restriction shall
apply only to any client or customer of Fidelity or the Bank with whom Miller
had material contact during the last twelve months of Miller's employment with
Fidelity or the Bank. "Material contact" means interaction between Miller and
the client or customer which takes place to further the business relationship.
"Clients" and "customers" include, but are not limited to, depositors and
commercial, SBA or construction loan customers.

      6. NON-SOLICITATIONS OF EMPLOYEES. Miller agrees that during his
employment with Fidelity or the Bank and for a period of eighteen (18) months
after Miller's Termination of Employment for any reason, Miller will not
recruit, hire or attempt to recruit or hire, directly or by assisting others,
any other employee of Fidelity or the Bank with whom Miller had material contact
during Miller's employment with Fidelity or the Bank. This restriction shall
apply only to recruiting, hiring or attempting to recruit or hire any employee
for the purpose of working in the business of providing banking or banking
related services.

      7. CONFIDENTIALITY, PROPRIETARY INFORMATION AND INVENTIONS.

            (a) During the term of Miller's employment with Fidelity or the
Bank, and at all times thereafter, Miller shall not use or disclose to others,
without the prior written consent of Fidelity and the Bank, any Trade Secrets
(as hereinafter defined) of Fidelity or the Bank, or any subsidiary thereof or
any of their customers, except for use or disclosure thereof in the course of
the business of Fidelity or the Bank (or that of any subsidiary), and such
disclosure shall be limited to those who have a need to know.

            (b) During the term of Miller's employment with Fidelity or the
Bank, and for eighteen (18) months after Miller's Termination of Employment for
any reason, Miller shall not use or disclose to others, without the prior
written consent of Fidelity and the Bank, any Confidential Information (as
hereinafter defined) of Fidelity or the Bank, or any subsidiary thereof or any
of their customers, except for use or disclosure thereof in the course of the
business of Fidelity or the Bank (or that of any subsidiary), and such
disclosure shall be limited to those who have a need to know.

                                       8


            (c) Upon Miller's Termination of Employment for any reason, Miller
shall not take with him any documents or data of Fidelity or the Bank or any
subsidiary or of any customer thereof or any reproduction thereof and agrees to
return any such documents and data in his possession at that time.

            (d) Miller agrees to take reasonable precautions to safeguard and
maintain the confidentiality and secrecy and limit the use of all Trade Secrets
and Confidential Information of Fidelity, the Bank and all subsidiaries and
customers thereof.

            (e) Trade Secrets shall include only such information constituting a
"Trade Secret" within the meaning of subsection 10-1-761(4) of the Georgia Trade
Secrets Act of 1990, including as hereafter amended. Confidential Information
shall include all information and data which is protectable as a legal form of
property or non-public information of Fidelity or the Bank or their customers,
excluding any information or data which constitutes a Trade Secret.

            (f) Trade Secrets and Confidential Information shall not include any
information (A) which becomes publicly known through no fault or act of Miller;
(B) is lawfully received by Miller from a third party after Termination of
Employment without a similar restriction regarding confidentiality and use and
without a breach of this Agreement; or (C) which is independently developed by
Miller and entirely unrelated to the business of providing banking or banking
related services.

            (g) Miller agrees that any and all information and data originated
by Miller while employed by Fidelity or the Bank and, where applicable, by other
employees or associates under Miller's direction or supervision in connection
with or as a result of any work or service performed under the terms of Miller's
employment, shall be promptly disclosed to Fidelity and the Bank, shall become
Fidelity and/or the Bank's property, and shall be kept confidential by Miller.
Any and all such information and data, reduced to written, graphic, or other
tangible form and any and all copies and reproduction thereof shall be furnished
to Fidelity and the Bank upon request and in any case shall be returned to
Fidelity and the Bank upon Miller's Termination of Employment.

            (h) Miller agrees that Miller will promptly disclose to Fidelity and
the Bank all inventions or discoveries made, conceived, or for the first time
reduced to practice in connection with or as a result of the work and/or
services Miller performs for Fidelity or the Bank.

            (i) Miller agrees that he will assign the entire right, title, and
interest in any such invention or inventions and any patents that may be granted
thereon in any country in the world concerning such inventions to Fidelity and
the Bank. Miller further agrees that Miller will, without expense to Fidelity or
the Bank, execute all documents and do all acts which may be necessary,
desirable, or convenient to enable Fidelity and the Bank, at its expense, to
file and prosecute applications for patents on such inventions, and to maintain
patents granted thereon.

                                       9


      8. CONSIDERATION FOR NON-COMPETE, NON-SOLICITATION AND NON-DISCLOSURE
PROVISIONS. In consideration of Miller's undertakings set forth in Sections 4,
5, 6 and 7 above, with respect to periods after Termination of Employment,
Fidelity or the Bank will pay Miller a "Non-Compete Benefit" as described below.
If Miller is not a Specified Employee, the Non-Compete Benefit will be payable
in 36 equal semi-monthly installments, each installment in an amount equal to
sixty percent (60%) of his Base Salary in effect immediately prior to the
Termination of Employment divided by 24, commencing on the 15th or last day of
the month immediately following the date of the Termination of Employment,
whichever date occurs first, and then continuing on the 15th and last day of
each calendar month thereafter until all such installments are paid. If Miller
is a Specified Employee, the Non-Compete Benefit shall not become payable until
the first 15th or last day of the month which is at least six months after
Miller's Termination of Employment. All installments which would have otherwise
been required to be made over such six-month period if Miller had not been a
Specified Employee, shall be paid to Miller in one lump sum payment as soon as
administratively feasible after the first 15th or last day of the month which is
at least six months after Miller's Termination of Employment. After the lump sum
payment, the remaining semi-monthly installments (each equal to sixty percent
(60%) of his Base Salary in effect immediately prior to Termination of
Employment divided by 24) will continue on the 15th and last day of each
calendar month until all such installments are paid. If Miller violates any of
the undertakings set forth in Sections 4, 5, 6 and 7 of this Agreement, Miller
waives and forfeits any and all rights to any further payments under this
Agreement, including but not limited to, any additional payments, compensation
or severance he may otherwise be entitled to receive under this Agreement,
whether pursuant to this Section or otherwise.

      9. SPECIFIC PERFORMANCE. Because of Miller's knowledge and experience,
Miller agrees that Fidelity shall be entitled to specific performance, an
injunction, temporary injunction or other similar relief without the posting of
a bond or other security in addition to all other rights and remedies it might
have for any violation of the undertakings set forth in Sections 4, 5, 6 and 7
of this Agreement. In any such court proceeding, Miller will not object thereto
and claim that monetary damages are an adequate remedy.

      10. MAXIMUM PAYMENTS. The total amount payable hereunder as severance pay
(as set forth in Sections 3(b)(i) & 3(b)(ii)) and consideration for the
non-compete, non-solicitation and non-disclosure provisions (as set forth in
Section 8) shall not exceed three times Miller's Base Salary.

      11. NO SETOFF. Nothing in this Agreement will limit or otherwise affect
such rights as Miller may have under any other contract or agreement with
Fidelity, the Bank or Affiliates, except as specifically set forth in such
contract or agreement. Amounts which constitute vested benefits or which Miller
is otherwise entitled to receive under any employee benefit plan, policy,
practice or program of or any contract or agreement (collectively, "programs")
with Fidelity or the Bank at or subsequent to Miller's Termination of Employment
will be payable in accordance with such programs.

      12. INDEMNIFICATION OF MILLER. Fidelity shall indemnify Miller and shall
advance reimbursable expenses incurred by Miller in any proceeding against
Miller, including a

                                       10


proceeding brought in the right of Fidelity, as a director or officer of
Fidelity or any subsidiary thereof, except claims and proceedings brought
directly by Fidelity against Miller, to the fullest extent permitted under the
Articles of Incorporation and By-Laws of Fidelity and the Georgia Business
Corporation Code, as amended from time to time. Such indemnities and advances
shall be paid to Miller on the next normal payroll payment date after Miller's
rights to such amounts are no longer in dispute; provided, however, that if
Miller is a Specified Employee such payments shall not be made before the date
that is six months after the date of Miller's Termination of Employment.

      13. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given upon receipt when delivered by hand or upon delivery to the address
of the party determined pursuant to this Section when delivered by express mail,
overnight courier or other similar method to such address or by facsimile
transmission (provided a copy is also sent by registered or certified mail or by
overnight courier), or five (5) business days after deposit of the notice in the
US mail, if mailed by certified or registered mail, with postage prepaid
addressed to the respective party as set forth below, which address may be
changed by written notice to the other party:

            If to Fidelity or the Bank:
                 Fidelity Southern Corporation
                 3490 Piedmont Road
                 Suite 1550
                 Atlanta, Georgia 30305
                 Attn: Board of Directors

            If to Miller:
                 James B. Miller, Jr.
                 c/o Fidelity Southern Corporation
                 3490 Piedmont Road, Suite 1550
                 Atlanta, Georgia 30305

      14. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon and enforceable by Miller and his estate, personal representatives
and heirs, and by Fidelity and the Bank and its successors and assigns. This
Agreement and the payments hereunder may not be assigned, pledged or otherwise
hypothecated by Miller.

      15. ENTIRE AGREEMENT. This Agreement, including the Split Dollar Plan, the
insurance policies with Great-West, Life Investors and Mass Mutual and the
Miller Management Continuity Agreement are intended by the parties hereto to
constitute the entire understanding of the parties with respect to the
employment of Miller as an employee and officer of Fidelity and election as
Chairman of the Board of Fidelity and the Bank and supersedes all prior
agreements and understandings, oral or written.

      16. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise specifically
provided herein, including as provided in Section 9 hereof, Specific
Performance, all disputes arising under this Agreement shall be submitted to and
settled by arbitration. Arbitration shall

                                       11


be by one (1) arbitrator selected in accordance with the rules of the American
Arbitration Association, Atlanta, Georgia ("AAA") by the AAA. The hearings
before the arbitrator shall be held in Atlanta, Georgia and shall be conducted
in accordance with the rules existing on the date thereof of the AAA to the
extent not inconsistent with this Agreement. All reasonable costs and expense
incurred in connection with any such arbitration proceedings and those incurred
in any civil action to enforce the same shall be borne by the party against
which the decision is rendered. To the extent that Miller is entitled to
reimbursement of any such costs and expenses, such reimbursements shall be paid
to Miller on the next normal payroll payment date after Miller's rights to such
reimbursements are no longer in dispute; provided, however, that if Miller is a
Specified Employee such payments shall not be made before the date that is six
months after the date of Miller's Termination of Employment.

      17. AMENDMENTS. This Agreement may not be amended or modified except in
writing signed by both parties.

      18. WAIVERS. The failure of either party to insist upon the strict
performance of any provision hereof shall not constitute a wavier of such
provision. All waivers must be in writing.

      19. FUTURE EMPLOYERS. Fidelity or the Bank may notify anyone employing
Miller or evidencing an intention to employ Miller as to the existence and
provisions of this Agreement and may provide any such person or organization a
copy of this Agreement. Miller agrees that for a period of 18 months after
Miller's Termination of Employment for any reason, Miller will provide Fidelity
and the Bank the identity of any employer Miller goes to work for along with
Miller's job title and anticipated job duties with any such employer.

      20. GOVERNING LAW. This Agreement shall be deemed to be made in and in all
respects shall be interpreted, construed and governed by and in accordance with
the laws of the State of Georgia, excluding its conflicts of laws.

      21. COMPLIANCE WITH SECTION 409A.

      22. This Agreement is intended to satisfy the requirements of Code Section
409A and shall be construed and interpreted in accordance therewith.

      23. DEFINITIONS. FOR PURPOSES OF THIS AGREEMENT:

            (a) "Affiliate" means any entity with whom Fidelity or the Bank
would be considered a single employer under Code Sections 414(b) or 414(c).

            (b) "Specified Employee" means an employee who is (i) an officer of
Fidelity having annual compensation greater than $135,000 (with certain
adjustments for inflation after 2005), (ii) a five-percent owner of Fidelity or
(iii) a one-percent owner of Fidelity having annual compensation greater than
$150,000. For purposes of this Section, no more than 50 employees (or, if
lesser, the greater of three or 10 percent of the employees) shall be treated as
officers. Employees who (i) normally work less than 17 1/2 hours per week, (ii)
normally work not more than 6 months during any year, (iii) have not attained
age

                                       12


21 or (iv) are included in a unit of employees covered by an agreement which the
Secretary of Labor finds to be a collective bargaining agreement between
employee representatives and Fidelity (except as otherwise provided in
regulations issued under the Code) shall be excluded for purposes of determining
the number of officers. For purposes of this Section, the term "five-percent
owner" ("one-percent owner") means any person who owns more than five percent
(one percent) of the outstanding stock of Fidelity or stock possessing more than
five percent (one percent) of the total combined voting power of all stock of
Fidelity. For purposes of determining ownership, the attribution rules of
Section 318 of the Code shall be applied by substituting "five percent" for "50
percent" in Section 318(a)(2) and the rules of Sections 414(b), 414(c) and
414(m) of the Code shall not apply. For purposes of this Section, the term
"compensation" has the meaning given such term by Section 414(q)(4) of the Code.
The determination of whether Miller is a Specified Employee will be based on a
December 31 identification date such that if Miller satisfies the above
definition of Specified Employee at any time during the 12-month period ending
on December 31, he will be treated as a Specified Employee if he has a
Termination of Employment during the 12-month period beginning on the first day
of the fourth month following the identification date. This definition is
intended to comply with the specified employee rules of Section 409A(a)(2)(B)(i)
of the Code and shall be interpreted accordingly.

            (c) "Termination of Employment" means the termination of Miller's
employment with Fidelity, the Bank and all Affiliates; provided, however, that
Miller will not be considered as having had a Termination of Employment if (i)
Miller continues to provide services to Fidelity, the Bank or any Affiliate as
an employee at an annual rate that is at least equal to 20 percent of the
services rendered, on average, during the immediately preceding three full
calendar years of employment (or, if employed less than three years, such lesser
period) and the annual remuneration for such services is at least equal to 20
percent of the average annual remuneration earned during the final three full
calendar years of employment (or if less, such lesser period), (ii) Miller
continues to provide services to Fidelity, the Bank or any Affiliate in a
capacity other than as an employee and such services are provided at an annual
rate that is 50 percent or more of the services rendered, on average, during the
immediately preceding three full calendar years of employment (or, if employed
less than three years, such lesser period) and the annual remuneration for such
services is 50 percent or more of the annual remuneration earned during the
final three full calendar years of employment (or, if less, such lesser period)
or (iii) Miller is on military leave, sick leave or other bona fide leave of
absence (such as temporary employment by the government) so long as the period
of such leave does not exceed six months, or if longer, so long as the
individual's right to reemployment with Fidelity, the Bank or any Affiliate is
provided either by statute or by contract. If the period of leave exceeds six
months and Miller's right to reemployment is not provided either by statute or
by contract, the Termination of Employment will be deemed to occur on the first
date immediately following such six-month period. For purposes of this Section,
annual rate of providing services shall be determined based upon the measurement
used to determine Miller's base compensation.

                                       13


      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                      FIDELITY SOUTHERN CORPORATION

                                      By: /s/ David R. Bockel
                                          -----------------------------------
                                      Name: David R. Bockel
                                      Title: Chairman, Compensation Committee

                                      FIDELITY BANK

                                      By: /s/ David R. Bockel
                                          -----------------------------------
                                      Name: David R. Bockel
                                      Title: Chairman, Compensation Committee

                                      MILLER

                                          /s/ James B. Miller, Jr.
                                      ---------------------------------------
                                          James B. Miller, Jr.

                                       14


                                  ATTACHMENT A
                             INCENTIVE COMPENSATION

      For each calendar year during the term of the Agreement, the Compensation
Committee ("Committee") of the Board of Directors of Fidelity will establish in
its sole discretion (after discussion with Miller) a target consolidated net
income of Fidelity Southern Corporation and Subsidiaries ("Fidelity") before the
Incentive Compensation provided herein, excluding extraordinary items
(determined in accordance with generally accepted accounting principles)
("Target Income") for such calendar year prior to the commencement of the
calendar year. Miller will be paid incentive compensation ("Incentive
Compensation") in cash depending upon the percentage in excess of Target Income
achieved for such calendar year.

      In the event the consolidated net income of Fidelity for any calendar year
before the Incentive Compensation provided herein and excluding extra-ordinary
items, determined in accordance with generally accepted accounting principles
("Income") achieved exceeds 100% of the Target Income, the Incentive
Compensation shall be the product of (i) $100,000 times (ii) the incremental
percentage of the Target Income between 100% of the Target Income and 105% of
the Target Income. For example, if the percentage of Income achieved is 104% of
the Target Income, the Incentive Compensation is $80,000. No Incentive
Compensation will be paid if the percentage of Target Income achieved is 100% or
less. The maximum Incentive Compensation shall be $100,000.

      The Compensation Committee may modify the Target Income for any calendar
year at any time during a calendar year to reflect changes resulting from
changes in accounting principles or practices of Fidelity and changes in the
business plan.

      In the event of any dispute as to the achieved Income, it shall be such
amount as set forth in Fidelity's certified financial statements less the amount
of this Incentive Compensation for such calendar year.

      The right of Miller to receive the Incentive Compensation hereunder
related to a calendar year shall vest on the last day of such calendar year. In
the event Miller is entitled pursuant to the Agreement to Incentive Compensation
for a period of less than a full year, the Incentive Compensation for such year
shall vest on the last day of his employment and the amount shall be determined
as set forth hereinabove for the calendar year prorated based upon the
percentage of the year Miller was employed under the Agreement.



      Payment is to be made in cash promptly after the amount is determined but
in no event later than March 15 of the calendar year following the calendar year
for which the Incentive Compensation is earned. The Committee, in its sole
discretion, during a calendar year may make a non-refundable prepayment of a
portion of the Incentive Compensation to Miller if it believes that the partial
payment will not exceed the amount of the Incentive Compensation for that
calendar year.

                                        FIDELITY SOUTHERN CORPORATION

                                        By: /s/ David R. Bockel
                                            ------------------------------------
                                        Name: David R. Bockel
                                        Title: Chairman, Compensation Committee

                                        FIDELITY BANK

                                        By: /s/ David R. Bockel
                                            ------------------------------------
                                        Name: David R. Bockel
                                        Title: Chairman, Compensation Committee

                                        MILLER

                                            /s/ James B. Miller, Jr.
                                        ---------------------------------------
                                            James B. Miller, Jr.

                                        2

EX-10.(J)

                                                                  EXHIBIT 10(j)


                          FIDELITY SOUTHERN CORPORATION
                              DIRECTOR COMPENSATION

         Each non-employee director of Fidelity Southern Corporation (the
"Company") receives a $10,000 annual retainer, paid in four quarterly
installments. In addition, each non-employee director receives $2,000 for each
Board of Directors' meeting attended and $1,000 for each committee meeting
attended.

         Directors who are employees of the Company do not receive a fee for
attending Board of Directors or committee meetings.

EX-10.(K)

                                                                  EXHIBIT 10(k)

                          FIDELITY SOUTHERN CORPORATION
                   EXECUTIVE OFFICER COMPENSATION ARRANGEMENTS

         The annual base salary for each of the named executive officers of
Fidelity Southern Corporation (the "Company") for 2006 is as follows:

                James B. Miller, Jr.                $500,000
                H. Palmer Proctor, Jr.               300,000
                David Buchanan                       240,000
                M. Howard Griffith, Jr.              230,000

         Each of Mr. Miller and Mr. Proctor is also entitled to receive
incentive compensation not to exceed $100,000 in the case of Mr. Miller and
$50,000 in the case of Mr. Proctor, based on the Company achieving targeted
income levels. For 2005, the only named executive officer to receive a
bonus/incentive compensation was Mr. Proctor who received $38,141.

         In addition to the foregoing, the Company has paid all of the premiums
for split dollar and/or corporate life insurance policies for each of the
executive officers and pays annual club fees for each executive officer other
than Mr. Buchanan. Under the split dollar policies, the Company will receive
upon termination of the policies proceeds equal to the insurance premiums paid
plus a market yield.

EX-13

ex-13 ANNUAL REPORT TO SHAREHOLDERS

EX-21

                                                                     EXHIBIT 21

                  SUBSIDIARIES OF FIDELITY SOUTHERN CORPORATION


Fidelity Bank -- Incorporated under Georgia law

LionMark Insurance Company -- Incorporated under Georgia law

FNC Capital Trust I -- formed under Delaware law

Fidelity National Capital Trust I -- formed under Delaware law

Fidelity Southern Statutory Trust I -- formed under Connecticut law

Fidelity Southern Statutory Trust II -- formed under Delaware law

EX-23

                                                                     EXHIBIT 23


            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements Form
S-8 No.333-11877 pertaining to the Employee Stock Purchase Plan of Fidelity
Southern Corporation, Form S-3 No. 333-11879 pertaining to the Dividend
Reinvestment Plan of Fidelity Southern Corporation and Form S-8 No. 333-57421
pertaining to the Tax Deferred 401(k) Savings Plan of Fidelity Southern
Corporation, and in the related prospectuses, of our reports dated March 10,
2006, with respect to the consolidated financial statements of Fidelity Southern
Corporation and subsidiaries, Fidelity Southern Corporation's management's
assessment of the effectiveness of internal control over financial reporting,
and the effectiveness of internal control over financial reporting of Fidelity
Southern Corporation, included in this Annual Report (Form 10-K) for the year
ended December 31, 2005.



                                         /s/ Ernst & Young LLP


Atlanta, Georgia
March 10, 2006

EX-24

                                   EXHIBIT 24

                          FIDELITY SOUTHERN CORPORATION

                                POWER OF ATTORNEY

         The undersigned director and/or officer of FIDELITY SOUTHERN
CORPORATION, a Georgia corporation, does hereby make, constitute and appoint
James B. Miller, Jr., M. Howard Griffith, Jr., and Martha C. Fleming, and each
of them, the undersigned's true and lawful attorneys-in-fact, with power to act
individually and power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Corporation to the annual report for the
Corporation's fiscal year ending December 31, 2005, on Form 10-K, and all
amendments thereto, to be filed by said Corporation with the Securities and
Exchange Commission, Washington, D.C., pursuant to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.

         IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10th day of March, 2006.


                                         /s/ David R. Bockel
                                         --------------------------------------
                                         David R. Bockel




                                   EXHIBIT 24

                          FIDELITY SOUTHERN CORPORATION

                                POWER OF ATTORNEY

         The undersigned director and/or officer of FIDELITY SOUTHERN
CORPORATION, a Georgia corporation, does hereby make, constitute and appoint
James B. Miller, Jr., M. Howard Griffith, Jr., and Martha C. Fleming, and each
of them, the undersigned's true and lawful attorneys-in-fact, with power to act
individually and power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Corporation to the annual report for the
Corporation's fiscal year ending December 31, 2005, on Form 10-K, and all
amendments thereto, to be filed by said Corporation with the Securities and
Exchange Commission, Washington, D.C., pursuant to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.

         IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10th day of March, 2006.


                                         /s/ Edward G. Bowen, M.D.
                                         --------------------------------------
                                         Edward G. Bowen, M. D.




                                   EXHIBIT 24

                          FIDELITY SOUTHERN CORPORATION

                                POWER OF ATTORNEY

         The undersigned director and/or officer of FIDELITY SOUTHERN
CORPORATION, a Georgia corporation, does hereby make, constitute and appoint
James B. Miller, Jr., M. Howard Griffith, Jr., and Martha C. Fleming, and each
of them, the undersigned's true and lawful attorneys-in-fact, with power to act
individually and power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Corporation to the annual report for the
Corporation's fiscal year ending December 31, 2005, on Form 10-K, and all
amendments thereto, to be filed by said Corporation with the Securities and
Exchange Commission, Washington, D.C., pursuant to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.

         IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10th day of March, 2006.


                                         /s/ Kevin S. King
                                         --------------------------------------
                                         Kevin S. King




                                   EXHIBIT 24

                          FIDELITY SOUTHERN CORPORATION

                                POWER OF ATTORNEY

         The undersigned director and/or officer of FIDELITY SOUTHERN
CORPORATION, a Georgia corporation, does hereby make, constitute and appoint
James B. Miller, Jr., M. Howard Griffith, Jr., and Martha C. Fleming, and each
of them, the undersigned's true and lawful attorneys-in-fact, with power to act
individually and power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Corporation to the annual report for the
Corporation's fiscal year ending December 31, 2005, on Form 10-K, and all
amendments thereto, to be filed by said Corporation with the Securities and
Exchange Commission, Washington, D.C., pursuant to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.

         IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10th day of March, 2006.


                                         /s/ James H. Miller, III
                                         --------------------------------------
                                         James H. Miller, III




                                   EXHIBIT 24

                          FIDELITY SOUTHERN CORPORATION

                                POWER OF ATTORNEY

         The undersigned director and/or officer of FIDELITY SOUTHERN
CORPORATION, a Georgia corporation, does hereby make, constitute and appoint
James B. Miller, Jr., M. Howard Griffith, Jr., and Martha C. Fleming, and each
of them, the undersigned's true and lawful attorneys-in-fact, with power to act
individually and power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Corporation to the annual report for the
Corporation's fiscal year ending December 31, 2005, on Form 10-K, and all
amendments thereto, to be filed by said Corporation with the Securities and
Exchange Commission, Washington, D.C., pursuant to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.

         IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10th day of March, 2006.


                                         /s/ Robert J. Rutland
                                         --------------------------------------
                                         Robert J. Rutland




                                   EXHIBIT 24

                          FIDELITY SOUTHERN CORPORATION

                                POWER OF ATTORNEY

         The undersigned director and/or officer of FIDELITY SOUTHERN
CORPORATION, a Georgia corporation, does hereby make, constitute and appoint
James B. Miller, Jr., M. Howard Griffith, Jr., and Martha C. Fleming, and each
of them, the undersigned's true and lawful attorneys-in-fact, with power to act
individually and power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Corporation to the annual report for the
Corporation's fiscal year ending December 31, 2005, on Form 10-K, and all
amendments thereto, to be filed by said Corporation with the Securities and
Exchange Commission, Washington, D.C.,, pursuant to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.

         IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10th day of March, 2006.


                                         /s/ W. Clyde Shepherd, III
                                         --------------------------------------
                                         W. Clyde Shepherd, III




                                   EXHIBIT 24

                          FIDELITY SOUTHERN CORPORATION

                                POWER OF ATTORNEY

         The undersigned director and/or officer of FIDELITY SOUTHERN
CORPORATION, a Georgia corporation, does hereby make, constitute and appoint
James B. Miller, Jr., M. Howard Griffith, Jr., and Martha C. Fleming, and each
of them, the undersigned's true and lawful attorneys-in-fact, with power to act
individually and power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director and/or officer of said Corporation to the annual report for the
Corporation's fiscal year ending December 31, 2005, on Form 10-K, and all
amendments thereto, to be filed by said Corporation with the Securities and
Exchange Commission, Washington, D.C., pursuant to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.

         IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10th day of March, 2006.


                                         /s/ Rankin M. Smith, Jr.
                                         --------------------------------------
                                         Rankin M. Smith, Jr.

EX-31.1

                                                                   EXHIBIT 31.1

                          FIDELITY SOUTHERN CORPORATION
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, James B. Miller, Jr., certify that:

1.       I have reviewed this Annual Report on Form 10-K of Fidelity Southern
         Corporation;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations, and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f) for the registrant and have:

         (a)      Designed such disclosure controls and procedures or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

         (c)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (d)      Disclosed in this report any significant change in the
                  registrant's internal control over financial reporting that
                  occurred during the registrant's most recent fiscal quarter
                  (the registrant's fourth fiscal quarter in the case of an
                  annual report) that has materially affected, or is reasonably
                  likely to materially affect, the registrant's internal control
                  over financial reporting; and

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize, and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls over financial reporting.

                                         Date: March 10, 2006


                                         /s/ James B. Miller, Jr.
                                         --------------------------------------
                                         James B. Miller, Jr.
                                         Chief Executive Officer
                                         Fidelity Southern Corporation

EX-31.2

                                                                   EXHIBIT 31.2

                         FIDELITY SOUTHERN CORPORATION
                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, M. Howard Griffith, Jr., certify that:

1.       I have reviewed this Annual Report on Form 10-K of Fidelity Southern
         Corporation;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations, and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f) for the registrant and have:

         (a)      Designed such disclosure controls and procedures or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

         (c)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (d)      Disclosed in this report any significant change in the
                  registrant's internal control over financial reporting that
                  occurred during the registrant's most recent fiscal quarter
                  (the registrant's fourth fiscal quarter in the case of an
                  annual report) that has materially affected, or is reasonably
                  likely to materially affect, the registrant's internal control
                  over financial reporting; and

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize, and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls over financial reporting.

                                         Date: March 10, 2006


                                         /s/  M. HOWARD Griffith, Jr.
                                         --------------------------------------
                                         M. Howard Griffith, Jr.
                                         Chief Financial Officer
                                         Fidelity Southern Corporation

EX-32.1

                                                                   Exhibit 32.1

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES OXLEY ACT OF 2002

In connection with the Annual Report of Fidelity Southern Corporation (the
"Corporation") on Form 10-K for the period ended December 31, 2005, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, James B. Miller, Jr., Chief Executive Officer of the Corporation, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.       The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

2.       The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Corporation.



Date: March 10, 2006
                                         /s/ James B. Miller, Jr.
                                         --------------------------------------
                                         Name:  James B. Miller, Jr.
                                         Title: Chief Executive Officer
                                         Fidelity Southern Corporation

EX-32.2

                                                                   Exhibit 32.2

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES OXLEY ACT OF 2002


In connection with the Annual Report of Fidelity Southern Corporation (the
"Corporation") on Form 10-K for the period ended December 31, 2005, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, M. Howard Griffith, Jr., Chief Financial Officer of the Corporation, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.       The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

2.       The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Corporation.



Date: March 10, 2006
                                         /s/ M. Howard Griffith, Jr.
                                         --------------------------------------
                                         Name:  M. Howard Griffith, Jr.
                                         Title: Chief Financial Officer
                                         Fidelity Southern Corporation