Heritage Financial Group Inc - FORM 8-K - EX-99 - EXHIBIT 99

Attached files

file	filename
8-K - HERITAGE FINANCIAL GROUP, INC. 8-K 10-26-2011 - Heritage Financial Group Inc	form8-k.htm

Exhibit 99

For additional information, contact:

T. Heath Fountain

Executive Vice President and

Chief Financial Officer

(229) 878-2055

HERITAGE FINANCIAL GROUP, INC. REPORTS THIRD QUARTER NET INCOME

OF $1.7 MILLION OR $0.21 PER DILUTED SHARE

ALBANY, Ga. (October 26, 2011) – Heritage Financial Group, Inc. (NASDAQ: HBOS), the holding company for HeritageBank of the South, today announced unaudited financial results for the quarter ended September 30, 2011. 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.

Commenting on the results, Leonard Dorminey, President and Chief Executive Officer, said, "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."

-MORE-

HBOS Reports Third Quarter 2011 Results

Page 2

October 26, 2011

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. This $2.2 million change in earnings was primarily the result of the following items:

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.

The Company's results for the third quarter ended September 30, 2011, included acquisition-related expenses of $299,000 and an increase in the pre-tax bargain purchase gain of $2.0 million associated with the First Southern acquisition. In the year-earlier quarter, the Company incurred a charge of $1.0 million to write-off an intangible asset related to its 2006 expansion into Florida. Excluding these items, the Company would have reported net income of $568,000 or $0.07 per diluted share for the third quarter of 2011 compared with net income of $448,000 or $0.05 per diluted share in the third quarter of 2010.

Net interest income for the third quarter increased 45% to $7.4 million from $5.1 million in the year-earlier quarter, primarily reflecting an increase in interest-earning assets related to both acquisitions and organic growth. The Company's net interest margin for the third quarter of 2011 increased eight basis points to 3.44% on a linked-quarter basis from 3.36% in the second quarter of 2011 and declined six basis points from 3.50% in the year-earlier period. The improvement in the third quarter of 2011 net interest margin on a linked-quarter basis was driven by an increase in loan yields on the Company's FDIC-assisted loan portfolios, coupled with a decline in the cost of interest bearing deposits as rates continue to reset lower. The reduction in the third quarter of 2011 net interest margin compared with the year-earlier period reflected a lower interest rate environment and excess liquidity generating a minimal yield associated with the Company's second-step conversion and acquisition activity.

The Company's estimated total risk-based capital ratio at September 30, 2011, was 21.4%, significantly exceeding the required minimum of 10% to be considered a well-capitalized institution. The ratio of tangible common equity to total tangible assets was 10.8% as of September 30, 2011.

-MORE-

HBOS Reports Third Quarter 2011 Results

Page 3

October 26, 2011

In the third quarter of 2011, the Company continued to post both organic and acquisition-related loan and deposit growth, with both increasing on a linked-quarter basis and advancing significantly compared with the year-earlier quarter in all of the Company's markets except Ocala. Ocala has been disproportionately affected by the real estate downturn and higher unemployment compared with the Company's other markets. Still, bank acquisitions, including the Company's second and third whole-bank acquisitions in February 2011 and August 2011, accounted for much of the growth in loans and deposits over the past 12 months. At September 30, 2011, the Company's loan portfolio totaled $560.9 million, including loans acquired through FDIC-assisted acquisitions, up $60.2 million or 12% from $500.7 million at June 30, 2011. Total deposits stood at $900.1 million at the end of the third quarter of 2011, up $136.4 million or 18% from $763.7 million at June 30, 2011.

Accounting for FDIC-Assisted Loans

The Company performs ongoing assessments of the estimated cash flows of its acquired FDIC-assisted loan portfolios. The fair value of the FDIC-assisted loan portfolios consist of $116.2 million in covered and $24.7 million in non-covered loans as of September 30, 2011, compared with $60.4 million in covered and $24.2 million in non-covered loans as of June 30, 2011. The principal balance of the FDIC-assisted loan portfolios consist of $248.6 million as of September 30, 2011, compared with $156.0 million as of June 30, 2011. The details of the accounting for the FDIC-assisted loan portfolios for the third quarter of 2011 are as follows:

Covered loans acquired in FDIC-assisted acquisitions increased $55.8 million to $116.2 million;

Non-covered loans acquired in FDIC-assisted acquisitions increased $500,000 to $24.7 million;

The FDIC loss-share receivable associated with covered loans acquired in FDIC-assisted acquisitions increased $29.6 million to $87.8 million;

The accretion for the FDIC loss-share receivable was $448,000;

The non-accretable discount increased $31.5 million to $98.8 million; and

The accretable discount increased $4.7 million to $8.8 million.

At September 30, 2011, covered and non-covered loans acquired in FDIC-assisted acquisitions increased to $116.2 million and $24.7 million, respectively, on a linked-quarter basis from $60.7 million and $24.2 million, respectively, driven primarily by the First Southern acquisition, partially offset by a combination of net charge-offs and principal reductions. The net charge-offs for both the covered and non-covered loans were fully provided for by the associated loan discounts and expected reimbursement from the FDIC and did not affect the Company's loan loss reserve. The FDIC loss-share receivable associated with covered FDIC-assisted loans increased $31.5 million from $58.2 million in the prior quarter to $87.8 million, primarily driven by the First Southern acquisition, while $1.6 million was submitted in the third quarter to the FDIC for reimbursement.

The non-accretable discount increased to $98.8 million at the end of the third quarter of 2011 from $67.3 million on a linked-quarter basis, due primarily to the First Southern acquisition, partially offset by net charge-offs in the FDIC-assisted loan portfolios and a transfer to accretable discount. The accretable discount increased to $8.8 million for the current quarter from $4.1 million for the second quarter of 2011, primarily driven by the First Southern acquisition.

-MORE-

HBOS Reports Third Quarter 2011 Results

Page 4

October 26, 2011

Asset Quality

Total non-performing loans, excluding loans acquired in FDIC-assisted acquisitions, were $8.0 million at September 30, 2011, down from $8.6 million at June 30, 2011. Other real estate owned and repossessed assets, excluding assets acquired in FDIC-assisted acquisitions, were $1.8 million at September 30, 2011, down from $2.7 million at June 30, 2011. Non-performing loans to total loans, excluding loans acquired in FDIC-assisted acquisitions, decreased to 1.90% as of September 30, 2011, from 2.06% as of June 30, 2011. Net charge-offs to average outstanding loans, excluding loans acquired in FDIC-assisted acquisitions, on an annualized basis, were 0.73% for the third quarter of 2011 versus 0.26% for the second quarter of 2011, while the annualized year-to-date net charge-offs were 1.30% as of September 30, 2011, versus 0.58% as of September 30, 2010.

The provision for loan losses increased to $1.0 million for the third quarter of 2011 from $700,000 for the second quarter of 2011, driven primarily by an increase in annualized net charge-offs. At September 30, 2011, the allowance for loan losses represented 1.65% of total loans outstanding, excluding loans acquired in FDIC-assisted acquisitions, versus 1.58% at June 30, 2011.

About Heritage Financial Group, Inc. and HeritageBank of the South

Heritage Financial Group, Inc. is the holding company for HeritageBank of the South, a community-oriented bank serving primarily South Georgia and North Central Florida through 23 full-service branch locations and 11 mortgage offices. As of September 30, 2011, the Company reported total assets of approximately $1.1 billion and total stockholders' equity of approximately $124 million. For more information about the Company, visit HeritageBank of the South on the Web at www.eheritagebank.com and see Investor Relations under About Us.

Cautionary Note Regarding Forward Looking Statements

Except for historical information contained herein, the matters included in this news release and other information in the Company's filings with the Securities and Exchange Commission may contain certain "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. These statements can be identified by the fact that they do not relate strictly to historical or current facts and often use words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions. The forward-looking statements made herein represent the current expectations, plans or forecasts of the Company's future results and revenues. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and include this statement for purposes of these safe harbor provisions. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. Investors should not place undue reliance on any forward-looking statement and should consider the uncertainties and risks, discussed under Item 1A. "Risk Factors" of the Company's 2010 Annual Report on Form 10-K and in any of the Company's subsequent SEC filings. Further information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in its other filings with the SEC.

-MORE-

HBOS Reports Third Quarter 2011 Results

Page 5

October 26, 2011

HERITAGE FINANCIAL GROUP, INC.

Unaudited Reconciliation of Non-GAAP Measures Presented in Earnings Release

(In thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Total non-interest income	$	5,892		$	2,478		$	14,294		$	6,245
Bargain purchase gain		(2,000	)		--			(4,217	)		--
Adjusted non-interest income	$	3,892		$	2,478		$	10,077		$	6,245

Total non-interest expense	$	9,779		$	7,779		$	28,218		$	18,509
Acquisition related expense		(299	)		(257	)		(1,056	)		(524	)
Impairment of intangible asset (Florida bank charter)		--			(1,000	)		--			(1,000	)
Adjusted non-interest expense	$	9,480		$	6,522		$	27,162		$	16,985


Net income (loss) as reported	$	1,740		$	(443	)	$	2,474		$	484
Bargain purchase gain and acquisition related expense, net of tax		(1,172	)		182			(2,134	)		372
Impairment of intangible asset (Florida bank charter), net of tax		--			709			--			709
Adjusted net income	$	568		$	448		$	340		$	1,565

Diluted earnings (loss) per share	$	0.21		$	(0.05	)	$	0.30		$	0.06
Bargain purchase gain and acquisition related expense, net of tax		(0.14	)		0.02			(0.26	)		0.04
Impairment of intangible asset (Florida bank charter), net of tax		--			0.08			--			0.08
Adjusted diluted earnings per share	$	0.07		$	0.05		$	0.04		$	0.18

Net Income (Loss) and Diluted Earnings (Loss) Per Share are presented in accordance with Generally Accepted Accounting Principles (GAAP). Adjusted Non-interest Income, Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share are non-GAAP financial measures. The Company believes that these non-GAAP measures aid in understanding and comparing current-year and prior-year results, both of which include unusual items of different natures. These non-GAAP measures should be viewed in addition to, and not as a substitute for, the Company's reported results.

-MORE-

HBOS Reports Third Quarter 2011 Results

Page 6

October 26, 2011

HERITAGE FINANCIAL GROUP, INC.

Unaudited Financial Highlights

(In thousands, except per share amounts)

	Third Quarter Ended September 30,					Nine Months Ended September 30,
	2011		2010			2011		2010
Interest income	$	10,148	$	7,396		$	27,881	$	20,699
Interest expense		2,735		2,290			7,993		6,487
Net interest income		7,413		5,106			19,888		14,211
Provision for loan losses		1,000		950			2,300		2,100
Net interest income after provision for loan losses		6,413		4,156			17,588		12,111
Non-interest income		5,892		2,478			14,294		6,245
Non-interest expense		9,779		7,779			28,218		18,508
Income (loss) before income taxes		2,526		(1,145	)		3,664		(152	)
Income tax (benefit) expense		786		(702	)		1,190		(636	)
Net income (loss)	$	1,740	$	(443	)	$	2,474	$	484
Net income (loss) per share:
Basic*	$	0.21	$	(0.05	)	$	0.30	$	0.06
Diluted*	$	0.21	$	(0.05	)	$	0.30	$	0.06
Weighted average shares outstanding:
Basic		8,215		8,494			8,175		8,438
Diluted		8,216		8,494			8,177		8,440
Dividends declared per share*	$	0.03	$	0.11		$	0.09	$	0.33

	Sept. 30, 2011		June 30, 2011		Sept. 30, 2010
Total assets	$	1,102,504	$	963,571	$	683,324
Cash and cash equivalents		23,292		15,225		33,275
Interest-bearing deposits in banks		99,211		100,309		10,579
Securities available for sale		218,384		186,867		161,798
Loans		560,940		500,725		413,980
Allowance for loan losses		6,936		6,585		6,534
Total deposits		900,103		763,673		535,392
Federal Home Loan Bank advances		35,000		35,000		42,500
Stockholders' equity		123,638		122,038		63,085

*	Prior-period share and per share data have been adjusted throughout this press release to reflect the 0.8377:1 conversion ratio used in conjunction with the completion of the Company's second-step offering on November 30, 2010.

-END-

Heritage Financial Group, Inc.

Page 1 of 6

Third Quarter 2011 Earnings Release Supplement

(Unaudited)

(Dollars in thousands, except per share data)

	Quarter Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011		2010
Income Statement Data
Interest income
Loans	$	8,774		$	6,136		$	23,483	$	17,219
Loans held for sale		45			6			99		6
Securities - taxable		1,013			1,006			3,441		2,572
Securities - nontaxable		207			212			629		749
Federal funds sold		16			11			45		38
interest-bearing deposits in banks		93			25			184		115
Total interest income		10,148			7,396			27,881		20,699
Interest expense
Deposits		2,048			1,631			5,879		4,667
Other borrowings		687			659			2,114		1,820
Total interest expense		2,735			2,290			7,993		6,487
Net interest income		7,413			5,106			19,888		14,212
Provision for loan losses		1,000			950			2,300		2,100
Net interest income after provision for loan losses		6,413			4,156			17,588		12,112
Non-interest income
Service charges on deposit accounts		1,267			1,112			3,540		2,918
Other service charges, fees & commissions		746			643			2,151		1,511
Brokerage fees		328			253			1,088		733
Mortgage origination fees		719			227			1,611		337
Bank owned life insurance		146			153			440		459
Gain on sale of securities		213			71			666		230
Bargain purchase gain		2,000			-			4,217		-
Accretion of FDIC loss share receivable		448			-			453		-
Other		25			19			96		57
Total non-interest income		5,892			2,478			14,294		6,245
Non-interest expense
Salaries and employee benefits		5,384			3,446			14,635		8,985
Equipment		516			304			1,295		810
Occupancy		685			424			1,666		1,059
Advertising & marketing		167			166			551		411
Legal & accounting		118			112			495		440
Consulting & other professional fees		208			71			585		208
Director fees & retirement		160			142			548		419
Telecommunications		206			132			555		304
Supplies		156			98			396		251
Data processing fees		857			604			1,990		1,596
(Gain) loss on sale and write-downs of other real estate owned		(385	)		-			507		(343	)
Foreclosed asset expenses		288			181			703		779
FDIC insurance and other regulatory fees		128			283			775		682
Impairment loss on intangible assets		-			1,000			-		1,000
Acquisition related expenses		299			257			1,056		524
Deposit Intangible expense		183			115			485		221
Other operating		809			444			1,976		1,163
Total non-interest expense		9,779			7,779			28,218		18,509
Income before taxes		2,526			(1,145	)		3,664		(152	)
Applicable income tax		786			(702	)		1,190		(636	)
Net income	$	1,740		$	(443	)	$	2,474	$	484

Weighted average shares - basic		8,215,077			8,493,671			8,175,126		8,438,180
Weighted average shares - diluted		8,216,472			8,493,671			8,176,786		8,439,560

Basic earnings per share	$	0.21		$	(0.05	)	$	0.30	$	0.06
Diluted earnings per share		0.21			(0.05	)		0.30		0.06
Cash dividend declared per share		0.03			0.11			0.09		0.33

Heritage Financial Group, Inc.

Page 2 of 6

Third Quarter 2011 Earnings Release Supplement

(Unaudited)

(Dollars in thousands, except per share data)

	September 30,
	2011		2010
Balance Sheet Data (Ending Balance)
Total loans	$	560,940	$	413,980
Loans held for sale		5,538		700
Covered loans		116,206		-
Allowance for loan losses		6,936		6,534
Total foreclosed assets		12,355		2,787
Covered other real estate owned		10,514		-
FDIC loss-share receivable		87,757		-
Intangible assets		5,056		1,489
Total assets		1,102,504		683,324
Non-interest-bearing deposits		84,716		48,014
Interest-bearing deposits		815,387		487,378
Federal Home Loan Bank advances		35,000		42,500
Federal funds purchased and securities sold under agreement to repurchase		36,118		35,092
Stockholders' equity		123,638		63,085

Total shares outstanding		8,712,140		9,595,304
Less treasury shares		-		884,663
Net shares outstanding		8,712,140		8,710,641

Shares held by Heritage, MHC		-		6,591,757
Unearned ESOP shares		452,348		175,358

Book value per share	$	14.97	$	7.39
Tangible book value per share (non-GAAP)		14.36		7.22
Market value per share		10.39		10.05

	Quarter Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Average Balance Sheet Data
Average interest-bearing deposits in banks	$	102,769		$	19,003		$	54,481		$	31,130
Average federal funds sold		26,889			17,320			23,815			19,569
Average investment securities		201,762			158,781			213,518			129,841
Average loans		533,487			397,421			497,422			366,091
Average mortgage loans held for sale		4,336			595			2,984			209
Average FDIC loss-share receivable		71,942			-			58,149			-
Average earning assets		869,243			593,120			792,220			546,840
Average assets		1,040,575			676,789			955,312			621,386
Average non-interest-bearing deposits		76,940			48,258			66,567			38,724
Average interest-bearing deposits		761,344			480,785			675,966			435,600
Average total deposits		838,284			529,043			742,533			474,324
Average federal funds purchased and securities sold under agreement to repurchase		33,678			34,607			32,303			33,718
Average Federal Home Loan Bank advances		35,000			42,500			50,297			42,500
Average interest-bearing liabilities		830,022			557,892			758,566			511,818
Average stockholders' equity		123,844			62,983			122,207			62,126

Performance Ratios
Annualized return on average assets		0.67	%		-0.26	%		0.35	%		0.10	%
Annualized return on average equity		5.62	%		-2.81	%		2.70	%		1.04	%
Net interest margin		3.44	%		3.50	%		3.41	%		3.57	%
Net interest spread		3.38	%		3.40	%		3.35	%		3.46	%
Efficiency ratio		73.50	%		102.57	%		82.55	%		90.48	%

Capital Ratios
Average stockholders' equity to average assets		11.9	%		9.3	%		12.8	%		10.0	%
Tangible equity to tangible assets (non-GAAP)		10.8	%		9.0	%		10.8	%		9.0	%
Tier 1 leverage ratio (1)		11.3	%		8.7	%		11.3	%		8.7	%
Tier 1 risk-based capital ratio (1)		20.2	%		13.4	%		20.2	%		13.4	%
Total risk-based capital ratio (1)		21.4	%		14.7	%		21.4	%		14.7	%

Other Information
Full-time equivalent employees		313			206			313			206
Number of full-service offices		23			16			23			16
Mortgage loan offices		11			1			11			1

(1) September 30, 2011 consolidated ratios are estimated and may be subject to change pending the filing of the call report; all other periods are presented as filed.

Heritage Financial Group, Inc.

Page 3 of 6

Third Quarter 2011 Earnings Release Supplement

(Unaudited)

(Dollars in thousands, except per share data)

	Five Quarter Comparison for the Three Months Ended
	9/30/11			6/30/11			3/31/11		12/31/10		9/30/10
Income Statement Data
Interest income
Loans	$	8,774		$	7,564		$	7,145	$	6,584	$	6,136
Loans held for sale		45			46			8		4		6
Securities - taxable		1,013			1,221			1,207		923		1,006
Securities - nontaxable		207			211			211		211		212
Federal funds sold		16			16			13		7		11
Interest-bearing deposits in banks		93			51			40		15		25
Total interest income		10,148			9,109			8,624		7,740		7,396
Interest expense
Deposits		2,048			1,983			1,848		1,092		1,631
Other borrowings		687			684			743		695		659
Total interest expense		2,735			2,667			2,591		1,787		2,290
Net interest income		7,413			6,442			6,033		5,953		5,106
Provision for loan losses		1,000			700			600		3,400		950
Net interest income after provision for loan losses		6,413			5,742			5,433		2,553		4,156
Non-interest income
Service charges on deposit accounts		1,267			1,222			1,051		1,194		1,112
Other service charges, fees & commissions		746			749			660		553		643
Brokerage fees		328			406			354		337		253
Mortgage origination fees		719			624			268		270		227
Bank owned life insurance		146			149			145		151		153
Life insurance proceeds		-			32			-		916		-
Gain on sale of securities		213			453			-		63		71
Bargain purchase gain		2,000			(117	)		2,334		2,722		-
Accretion of FDIC loss share receivable		448			5			-		-		-
Other		25			37			29		32		19
Total non-interest income		5,892			3,560			4,841		6,238		2,478
Non-interest expense
Salaries and employee benefits		5,384			4,923			4,328		3,691		3,446
Equipment		516			428			351		320		304
Occupancy		685			536			445		452		424
Advertising & marketing		167			220			164		183		166
Legal & accounting		118			167			210		176		112
Consulting & other professional fees		208			198			179		156		71
Director fees & retirement		160			161			227		144		142
Telecommunications		206			204			145		213		132
Supplies		156			145			95		99		98
Data processing fees		857			615			518		594		604
(Gain) loss on sale and write-downs of other real estate owned		(385	)		535			402		326		-
Foreclosed asset expenses		288			245			170		234		181
FDIC insurance and other regulatory fees		128			354			293		242		283
Impairment loss on intangible assets		-			-			-		-		1,000
Acquisition related expenses		299			474			282		103		256
Deposit intangible expense		183			207			95		55		115
Other operating		809			628			494		552		445
Total non-interest expense		9,779			10,040			8,398		7,540		7,779
Income (loss) before taxes		2,526			(738	)		1,876		1,251		(1,145	)
Applicable income tax (benefit)		786			(257	)		661		329		(702	)
Net income (loss)	$	1,740			(481	)	$	1,215	$	922	$	(443	)

Weighted average shares - basic		8,215,077			8,213,761			8,186,502		8,485,215		8,493,671
Weighted average shares - diluted		8,216,406			8,215,090			8,187,835		8,485,733		8,493,671

Basic earnings (loss) per share	$	0.21		$	(0.05	)	$	0.15	$	0.11	$	(0.05	)
Diluted earnings (loss) per share		0.21			(0.05	)		0.15		0.11		(0.05	)
Cash dividend declared per share		0.03			0.03			0.03		0.11		0.11

Heritage Financial Group, Inc.

Page 4 of 6

Third Quarter 2011 Earnings Release Supplement

(Unaudited)

(Dollars in thousands, except per share data)

	Five Quarter Comparison
	9/30/11		6/30/11		3/31/11		12/31/10		9/30/10
Balance Sheet Data (at period end)
Total loans	$	560,940		500,724	$	496,067	$	418,997	$	413,980
Loans held for sale		5,538		5,579		2,642		225		700
Covered loans		116,206		60,426		62,372		-		-
Allowance for loan losses		6,936		6,585		6,138		8,101		6,534
Total foreclosed assets		12,355		9,693		10,577		3,689		2,787
Covered other real estate owned		10,514		6,968		7,361		-		-
FDIC loss-share receivable		87,757		58,152		58,174		-		-
Intangible assets		5,056		4,388		4,713		2,912		1,489
Total assets		1,102,504		963,571		951,918		755,436		683,324
Non-interest-bearing deposits		84,716		73,382		63,134		44,769		48,014
Interest-bearing deposits		815,387		690,291		667,954		489,474		487,378
Federal home loan bank advances		35,000		35,000		60,000		62,500		42,500
Federal funds purchased and securities sold under agreement to repurchase		36,118		31,989		31,509		32,421		35,092
Stockholders' equity		123,638		122,038		121,331		119,340		63,085

Total shares outstanding		8,712,140		8,712,750		8,712,750		8,710,640		9,595,304
Less treasury shares		-		-		-		-		884,663
Net shares outstanding		8,712,140		8,712,750		8,712,750		8,710,640		8,710,641

Unearned ESOP shares		452,348		465,673		478,996		492,320		175,358

Book value per share	$	14.97	$	14.80	$	14.74	$	14.52	$	7.39
Tangible book value per share (non-GAAP)		14.36		14.26		14.16		14.17		7.22
Market value per share		10.39		11.92		12.73		12.42		10.05

	Five Quarter Comparison
	9/30/11			6/30/11			3/31/11			12/31/10			9/30/10
Average Balance Sheet Data
Average interest-bearing deposits in banks	$	102,769		$	44,525		$	16,150		$	10,910		$	19,003
Average federal funds sold		26,889			20,447			24,111			11,181			17,320
Average investment securities		201,762			210,261			228,530			179,682			158,781
Average loans		533,487			501,929			456,851			419,572			397,421
Average mortgage loans held for sale		4,336			3,878			737			315			595
Average FDIC Loss-Share Receivable		71,942			58,149			58,174			-			-
Average earning assets		864,907			777,162			725,642			621,345			593,120
Average assets		1,040,575			966,962			858,398			712,689			676,789
Average non-interest-bearing deposits		76,940			70,346			52,414			49,612			48,258
Average interest-bearing deposits		761,344			680,424			586,129			491,903			480,785
Average total deposits		838,284			750,770			638,543			541,515			529,043
Average federal funds purchased and securities sold under agreement to repurchase		33,678			31,664			31,568			35,234			34,607
Average Federal Home Loan Bank advances		35,000			54,143			61,749			44,435			42,500
Average interest-bearing liabilities		830,022			766,231			679,446			571,572			557,892
Average stockholders' equity		123,844			122,528			120,248			83,154			62,983

Performance Ratios
Annualized return on average assets		0.67	%		-0.20	%		0.57	%		0.52	%		-0.26	%
Annualized return on average equity		5.62	%		-1.57	%		4.04	%		4.44	%		-2.81	%
Net interest margin		3.44	%		3.36	%		3.42	%		3.88	%		3.50	%
Net interest spread		3.38	%		3.34	%		3.32	%		3.78	%		3.40	%
Efficiency ratio		73.50	%		100.38	%		77.23	%		61.85	%		102.57	%

Capital Ratios
Average stockholders' equity to average assets		11.9	%		12.7	%		14.0	%		11.7	%		9.3	%
Tangible equity to tangible assets (non-GAAP)		10.8	%		12.3	%		12.3	%		15.5	%		9.0	%
Tier 1 leverage ratio		11.3	%		12.10	%		13.4	%		16.1	%		8.7	%
Tier 1 risk-based capital ratio		20.2	%		22.20	%		23.3	%		25.1	%		13.4	%
Total risk-based capital ratio		21.4	%		23.40	%		24.5	%		26.4	%		14.7	%

Other Information
Full-time equivalent employees		313			295			273			217			206
Number of full-service offices		23			21			20			16			16
Mortgage loan offices		11			10			5			1			1

Heritage Financial Group, Inc.

Page 5 of 6

Third Quarter 2011 Earnings Release Supplement

(Dollars in thousands)

	Nine Months Ended September 30,
	9/30/11			9/30/10
Loans by Type
Construction and land loans	$	28,115		$	24,263
Farmland loans		18,272			14,658
Permanent 1 - 4		134,269			123,275
Permanent 1 - 4 - junior liens and revolving		26,071			26,922
Multifamily		13,754			13,737
Nonresidential		129,730			108,440
Commercial business loans		47,854			50,230
Consumer and other loans		21,955			31,168
		420,020			392,693
Loans acquired through FDIC-assisted acquisitions:
Non-covered loans		24,713			21,287
Covered loans		116,206			-
		560,940			413,980


Asset Quality Data (excluding Loans acquired through FDIC-assisted acquisitions):
Allowance for loan losses to total loans		1.65	%		1.66	%
Allowance for loan losses to average loans		1.29	%		1.74	%
Allowance for loan losses to non-performing loans		86.76	%		53.56	%
Accruing past due loans	$	1,487		$	899
Nonaccrual loans		7,994			12,199
Loans - 90 days past due & still accruing		-			-
Total non-performing loans		7,994			12,199
OREO and repossessed assets		1,841			2,787
Total non-performing assets		9,835			14,986
Non-performing loans to total loans		1.90	%		3.11	%
Non-performing assets to total assets		0.89	%		2.19	%
QTD Net charge-offs to average loans (annualized)		0.73	%		0.47	%
Net charge-offs QTD	$	650		$	443

YTD Net charge-offs to average loans (annualized)		1.30	%		0.58	%
Net charge-offs YTD	$	3,466		$	1,626

Heritage Financial Group, Inc.

Page 6 of 6

Third Quarter 2011 Earnings Release Supplement

(Dollars in thousands)

	Five Quarter Comparison for the Quarter Ended
	9/30/11			6/30/11			3/31/11			12/31/10			9/30/10
Loans by Type
Construction and land loans	$	28,115		$	26,688		$	27,580		$	24,522		$	24,263
Farmland loans		18,272			13,276			13,707			12,339			14,658
Permanent 1 - 4		134,269			131,596			129,371			131,293			123,275
Permanent 1 - 4 - junior liens and revolving		26,071			26,140			25,642			26,091			26,922
Multifamily		13,754			12,755			12,110			13,598			13,737
Nonresidential		129,730			131,027			119,325			110,079			108,440
Commercial business loans		47,854			50,997			52,662			52,589			50,230
Consumer and other loans		21,955			23,592			25,046			27,115			31,168
		420,020			416,071			405,443			397,626			392,693

Loans acquired through FDIC-assisted acquisitions:
Non-covered		24,713			24,227			28,252			21,371			21,287
Covered loans		116,206			60,427			62,372			-			-
		560,940			500,725			496,067			418,997			413,980


Asset Quality Data (excluding Loans acquired through FDIC-assisted acquisitions):
Allowance for loan losses to total loans		1.65	%		1.58	%		1.51	%		2.04	%		1.66	%
Allowance for loan losses to average loans		1.29	%		1.48	%		1.59	%		2.03	%		1.74	%
Allowance for loan losses to non-performing loans		86.76	%		76.67	%		67.63	%		81.79	%		53.56	%
Accruing past due loans	$	1,487		$	727		$	1,245		$	1,879		$	899
Nonaccrual loans		7,994			8,589			9,077			9,905			12,199
Loans - 90 days past due & still accruing		-			-			-			-			-
Total non-performing loans		7,994			8,589			9,077			9,905			12,199
OREO and repossessed assets		1,841			2,725			3,215			3,689			2,787
Total non-performing assets		9,835			11,314			12,292			13,594			14,986
Non-performing loans to total loans		1.90	%		2.06	%		2.24	%		2.49	%		3.11	%
Non-performing assets to total assets		0.89	%		1.17	%		1.29	%		1.80	%		2.19	%
Net charge-offs to average loans (annualized)		0.73	%		0.26	%		2.80	%		1.84	%		0.47	%
Net charge-offs	$	650		$	253		$	2,563		$	1,833		$	443

Note:

Certain prior-period amounts have been reclassified to conform with current presentation.

Prior period share and per share data have been adjusted for the 0.8377:1 conversion ratio in conjunction with the completion of the second step stock offering on November 30, 2010.

Loans acquired through FDIC-assisted acquisitions include loans acquired in the acquisition of The Tattnall Bank in December of 2009, the acquisition of Citizens Bank of Effingham in February 2011, and First Southern National Bank in August 2011. The acquisition of The Tattnall Bank did not involve a loss-share agreement with the FDIC; however, the acquisitions of Citizens Bank of Effingham and First Southern National Bank both involved loss-share agreements in which the FDIC will, for a specified number of years, reimburse the Bank for 80% of all losses and related expenses on covered assets.

Heritage Financial Group Inc - FORM 8-K - EX-99 - EXHIBIT 99 - October 27, 2011

Attached files