Regulatory Matters

12 Months Ended

Dec. 31, 2017

Banking and Thrift [Abstract]

Regulatory Matters

Regulatory Matters

FSC is regulated by the Board of Governors of the Federal Reserve Board and is subject to the securities registration and public reporting regulations of the SEC. The Bank is regulated by the Federal Deposit Insurance Corporation (“FDIC”) and the Georgia Department of Banking and Finance.

The Bank must comply with regulatory capital requirements established by the regulators. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. These capital standards require us to maintain minimum ratios of “Tier 1” capital to total risk-weighted assets and total capital to risk-weighted assets of 6.00% and 8.00%, respectively. Tier 1 capital is comprised of total shareholders’ equity calculated in accordance with generally accepted accounting principles, excluding accumulated other comprehensive income, less intangible assets and disallowed portions of our loan servicing rights, and total capital is comprised of Tier 1 capital plus certain adjustments, the largest of which is our qualifying subordinated debt, as well as the allowable portion of the allowance for loan losses. Risk-weighted assets refer to our on- and off-balance sheet exposures, adjusted for their related risk levels using formulas set forth in FDIC regulations.

In addition to the risk-based capital requirements described above, we are subject to a leverage capital requirement, which calls for a minimum ratio of Tier 1 capital to quarterly average total assets of 4.00%. The Bank is also subject to a Common Equity Tier 1 (“CET1”) capital to total risk-weighted assets ratio of 4.50%. CET1 Capital is comprised of Tier 1 capital less amounts attributable to qualifying non-cumulative perpetual preferred stock and minority interests in consolidated subsidiaries.

Beginning January 1, 2016, minimum capital ratios are subject to a capital conservation buffer. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, the Bank must hold a capital conservation buffer above its minimum risk-based capital requirements. This capital conservation buffer is calculated as the lowest of the differences between the actual CET1 ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk-Based Capital Ratio and the corresponding minimum ratios. At December 31, 2016, the required minimum capital conservation buffer was 0.625% and will increase in subsequent years by 0.625% until it is fully phased in on January 1, 2019 at 2.50%. At December 31, 2017, the capital conservation buffers of FSC and the Bank were 4.36% and 4.28%, respectively.

The following tables sets forth the capital requirements for the Bank under FDIC regulations and the Bank’s capital ratios at December 31, 2017, and 2016:

Fidelity Bank	December 31, 2017				December 31, 2016
($ in thousands)	Amount		Percent		Amount		Percent
Common Equity Tier 1 Capital:
Actual	$	355,580	8.78	%	$	337,337	8.58	%
Minimum	182,245		4.50	%	176,925		4.50	%
Tier 1 Capital:
Actual	$	371,407	9.17	%	$	352,601	8.97	%
Minimum	243,014		6.00	%	235,854		6.00	%
Total Risk-Based Capital:
Actual	$	487,149	12.03	%	$	468,234	11.91	%
Minimum	323,956		8.00	%	314,515		8.00	%
Tier 1 Capital Leverage Ratio:
Actual			8.34	%			8.14	%
Minimum			4.00	%			4.00	%

The Company is not subject to the provisions of prompt corrective action. The FRB, as the primary regulator of FSC, has established minimum capital requirements as a function of its oversight of bank holding companies.

The following tables depict FSC’s capital ratios at December 31, 2017, and 2016, in relation to the minimum capital ratios established by the regulations of the FRB:

Fidelity Southern Corporation	December 31, 2017				December 31, 2016
($ in thousands)	Amount		Percent		Amount		Percent
Common Equity Tier 1 Capital:
Actual	$	349,133	8.86	%	$	328,193	8.35	%
Minimum	177,225		4.50	%	176,870		4.50	%
Tier 1 Capital:
Actual	$	393,818	10.00	%	$	371,841	9.46	%
Minimum	236,291		6.00	%	235,840		6.00	%
Total Risk-Based Capital:
Actual	$	498,166	12.65	%	$	476,081	12.11	%
Minimum	315,071		8.00	%	314,504		8.00	%
Tier 1 Capital Leverage Ratio:
Actual			8.85	%			8.58	%
Minimum			4.00	%			4.00	%

Generally, dividends that may be paid by the Bank to FSC 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. At December 31, 2017, and 2016, the Bank’s total shareholders’ equity was $423.0 million and $386.4 million, respectively. FSC invested no capital in the Bank during 2017 or 2016 in the form of capital infusions. In 2017, the Bank and LionMark paid dividends of $9.0 million and $1.5 million, respectively, to FSC. In 2016, the Bank and LionMark paid dividends of $4.8 million and $2.0 million, respectively, to FSC.

Also, under current Federal regulations, the Bank is limited in the amount it may loan to its non-bank affiliates, including FSC. As of December 31, 2017, and 2016, there were no loans outstanding from the Bank to FSC.