NEWS - Banking & Finance

SBJ Staff Report

Oct 31, 2011 - Heritage Financial Group, Inc. (NASDAQ: HBOS), the holding company for HeritageBank of the South, announced unaudited financial results for the quarter ended Sept. 30 last week, including net income of $1.7 million versus a loss of $ 443,000 in the same quarter last year. 

According to Leonard Dorminey, President and Chief Executive Officer, "During the third quarter of 2011, we continued our expansion efforts with our third FDIC-assisted transaction. The First Southern acquisition moves us to number three in market share in Statesboro, further improving our foothold in Southeast Georgia and continuing our successful capital deployment. We continue to look for further opportunities for strategic expansion.

"Despite the increase in provision expense for the quarter, we continue to see improvement in the credit quality of our non-FDIC-assisted loan portfolio, as evidenced by the decline in non-performing assets, excluding assets acquired in FDIC-assisted acquisitions," Dorminey continued. "We also are pleased with the progress we are making in our FDIC-acquired portfolios."

Key aspects of the Company's results for the third quarter of 2011 include:

·         Net income of $1.7 million or $0.21 per diluted share compared with a net loss of $443,000 or $0.05 per diluted share in the year-earlier quarter;

·         Excluding special items in the current and year-earlier quarter, net income for the third quarter was $568,000 or $0.07 per diluted share versus net income of $448,000 or $0.05 per diluted share in the third quarter of 2010 (see reconciliation of non-GAAP items);

·         Organic loan growth, excluding loans acquired in FDIC-assisted acquisitions, of $3.9 million or 1% on a linked-quarter basis;

·         Loans acquired through FDIC-assisted acquisitions increased $56.3 million or 10% on a linked-quarter basis, driven primarily by the First Southern National Bank (First Southern) FDIC-assisted acquisition;

·         Core non-time deposit growth of $19.4 million, excluding deposits associated with the First Southern acquisition;

·         An increase in the allowance for loan losses to 1.65% of period-end loans, excluding loans acquired in FDIC-assisted acquisitions, from 1.58% of loans, excluding loans acquired in FDIC-assisted acquisitions, at June 30, 2011;

·         An increase in annualized net charge-offs to 0.73% for the third quarter of 2011 from 0.26% on a linked-quarter basis; and

·         A decline in non-performing assets (NPAs), excluding loans acquired in FDIC-assisted acquisitions, to 0.89% from 1.17% on a linked-quarter basis.  

Results of Operations

The Company reported net income of $1.7 million or $0.21 per diluted share for the three months ended September 30, 2011, compared with a net loss of $443,000 or $0.05 per diluted share for the three months ended September 30, 2010. According to the company, the $2.2 million change in earnings was primarily the result of:

·         Improved net interest income of $2.3 million due to solid growth in interest-earning assets;

·         Improved non-interest income of $3.4 million, reflecting a $2.0 million bargain purchase gain associated with the First Southern FDIC-assisted acquisition, an increase of $492,000 in mortgage origination fees, and a net increase in FDIC loss-share receivable accretion of $448,000; offset by

·         Increased provision expense of $50,000, driven by an increase in the charge-offs on the non-FDIC-assisted loan portfolio; and

·         Increased non-interest expense of $2.0 million due to increased salaries and employment benefits of $1.9 million driven by the hiring of an additional 107 full-time equivalent employees on top of growth in most other non-interest expense categories, which was partially offset by a one-time, noncash charge of $1.0 million during the 2010 quarter to write-off an intangible asset.