For additional information, contact:

T. Heath Fountain

Executive Vice President and

Chief Financial Officer

(229) 878-2055

 

HERITAGE FINANCIAL GROUP, INC. REPORTS HIGHER NET INCOME

FOR THE FOURTH QUARTER AND YEAR

---

COMPANY DECLARES QUARTERLY DIVIDEND OF $0.07 PER SHARE

ALBANY, Ga. (January 29, 2014) – Heritage Financial Group, Inc. (NASDAQ: HBOS), the holding company for HeritageBank of the South, today announced unaudited financial results for the quarter and year ended December 31, 2013.  Highlights of the Company's results for the year ended 2013 include:

·

Net income of $11.3 million or $1.50 per diluted share, up 67% from net income of $6.8 million or $0.85 per diluted share for the year ended 2012;

·

Excluding special items for each year, net income of $10.6 million or $1.42 per diluted share, up 86% from $5.7 million or $0.71 per diluted share for the year ended 2012 (see reconciliation of non-GAAP items);

·

Loan growth, excluding loans acquired through FDIC-assisted acquisitions, of $98.8 million or 17% from 2012;

·

A decline in the provision for loan losses, excluding FDIC-acquired loans, to $1.7 million, down 34% from $2.5 million for 2012;

Commenting on the results, Leonard Dorminey, President and Chief Executive Officer, said, "We are pleased to announce solid financial results for the fourth quarter and for all of 2013.  Our team has been focused on several strategic initiatives, and we are excited to report that those efforts came to fruition in our financial results this past quarter.  Contributing to our results were organic loan growth from commercial banking, fee income and improved efficiency from our branch network, fee income and growth in assets under management from our brokerage division, continued growth in mortgage banking, and significant gains on resolutions from our FDIC-acquired special asset team.  We enter 2014 well positioned on all strategic fronts."

Dorminey also noted that the Company's Board of Directors has declared a quarterly cash dividend of $0.07 per share, resuming regular payments after a special dividend was paid in December 2012 in lieu of dividends for 2013.  The new dividend will be paid on February 28, 2014, to stockholders of record as of February 14, 2014.

Operating Efficiency Initiatives

During 2013, the Company closed its branch in Vincent, Alabama, and its Broadway Avenue branch in Sylacauga, Alabama, both of which were added with the FDIC-assisted acquisition of Frontier Bank in March 2013.  Also, the Company completed staffing reductions related to the Frontier acquisition that will result in a decrease of approximately $1.6 million from Frontier's pre-acquisition level of personnel expenses.  Separately, the Company reduced Bank staffing by nine full-time equivalent employees, resulting in a one-time charge of $67,000 for severance ($60,000 in the third quarter of 2013 and $7,000 in the fourth quarter), and anticipates expense savings of approximately $460,000 per year related to this staffing reduction.

 

- MORE-

---

HBOS Reports Fourth Quarter 2013 Results

Page 2

January 29, 2014

 

Commenting on the operating efficiency initiatives, Heath Fountain, Executive Vice President and Chief Financial Officer, said, "We continue to focus on improving our operating efficiency while expanding our mortgage and banking presence.  While we have completed many efficiency initiatives, we anticipate building on the momentum gained in 2013 to further improve our operating efficiency in 2014."

Fourth Quarter 2013 Results of Operations

Highlights of the Company's results for the fourth quarter of 2013 include:

·

Net income of $3.4 million or $0.45 per diluted share, up 158% from $1.3 million or $0.18 per diluted share for the linked quarter and up 40% from $2.4 million or $0.31 per diluted share for the year-earlier quarter;

·

Excluding special items for each quarter, net income of $4.0 million or $0.53 per diluted share, up 124% from $1.8 million or $0.24 per diluted share for the linked quarter and up 221% from $1.2 million or $0.16 per diluted share for the year-earlier quarter (see reconciliation of non-GAAP items);

·

Loan growth, excluding loans acquired through FDIC-assisted acquisitions, of $19.0 million or 3% on a linked-quarter basis and $98.8 million or 17% compared with the year-earlier quarter;

·

A decrease in FDIC-acquired loans of $9.3 million, or 8%, on a linked-quarter basis, but an increase of $29.9 million or 36% compared with the year-earlier quarter;

·

A decrease in the provision for loan losses, excluding FDIC-acquired loans, to $220,000, down 37% from $350,000 for the linked quarter and down 63% compared with $600,000 for the year-earlier quarter;

The $2.1 million increase in reported quarterly earnings for the fourth quarter of 2013 compared with the linked quarter resulted primarily from the following items:

·

Increased loan discount accretion from FDIC-acquired loans of $2.3 million, partially offset by increased negative accretion of the FDIC loss-share receivable of $522,000;

·

Increased mortgage banking fees of $1.0 million;

·

Decreased FDIC-acquired other real estate owned write-downs and foreclosed asset expenses of $410,000;

·

Decreased legacy other real estate owned write-downs and foreclosed asset expenses of $394,000;

·

Increased interest income on core loans and loans held for sale of $385,000;

·

Decreased acquisition-related expenses of $178,000; offset by

·

Increased salaries and employee benefits of $614,000; and

·

Increased impairment loss on assets held for sale of $328,000.

Commenting on the fourth quarter results, Fountain added, "During the fourth quarter, we were able to resolve several FDIC-acquired non‑covered loans that significantly improved our loan discount accretion income.  Loan discount accretion income can vary significantly based on the timing of asset resolutions and will continue to cause volatility in earnings.  We also posted a significant increase in our mortgage banking fees, building on the momentum that our mortgage division developed in the previous quarter."

 

- MORE-

---

HBOS Reports Fourth Quarter 2013 Results

Page 3

January 29, 2014

 

The $977,000 increase in reported quarterly earnings for the fourth quarter of 2013 compared with the year-earlier quarter primarily resulted from the following items:

·

Improved net interest income of $1.7 million;

·

Decreased provision expense of $2.3 million;

·

Increased non-interest income of $1.4 million; offset by

·

Increased non-interest expense of $3.4 million.

Net interest income for the fourth quarter of 2013 increased 12% to $16.3 million from $14.5 million in the year-earlier quarter, primarily reflecting an increase in interest-earning assets related to both acquisitions and organic growth and a reduction in the cost of interest-bearing liabilities.  The Company's net interest margin was 5.50% for the fourth quarter of 2013, a decline of 87 basis points from 6.37% for the year-earlier period.  The reduction in net interest margin for the fourth quarter of 2013 compared with the year-earlier quarter was driven by a decline in the yield on loans, offset in part by an increase in the yield on investment securities coupled with a reduction in the cost of interest-bearing liabilities as rates continue to reset to lower levels and the Company takes advantage of historically low interest rates on non-deposit funding.  Excluding FDIC-acquired loan discount adjustments from the net interest margin, the core net interest margin was 3.20% for the fourth quarter of 2013, a decrease of two basis points from 3.22% for the year-earlier quarter.

In the fourth quarter of 2013, the Company continued to achieve loan growth, with its core loan portfolio increasing $19.0 million organically on a linked-quarter basis and advancing $98.8 million overall compared with the year-earlier quarter.  For the fourth quarter of 2013, the Company's loan portfolio, including FDIC-acquired loans, totaled $798.8 million, increasing $9.7 million on a linked-quarter basis from $789.1 million and from $670.0 million compared with the year-earlier quarter.  The organic loan growth for the linked quarter was primarily driven by growth in Albany, Macon, and South Atlanta, Georgia markets, Auburn and Birmingham, Alabama markets, and the Ocala, Florida market.  Total deposits stood at $1.076 billion at the end of the fourth quarter of 2013, up 2% from $1.052 billion on a linked-quarter basis, and up 24% from $869.6 million for the year-earlier quarter.

For the fourth quarter of 2013, the Company's loans held for sale totaled $110.7 million, increasing significantly by $72.6 million, or 191%, on a linked-quarter basis from $38.0 million, and increasing $95.1 million, or 609%, from $15.6 million compared with the year-earlier quarter.  The significant increase in the loans held for sale for the current quarter was driven by a slowing in loan sales as the Company prepared to deliver directly to Fannie Mae.  Loan sales to Fannie Mae for the fourth quarter totaled $20.8 million and, separately, the Company recorded a gain of $202,000 related to the mortgage servicing rights for those loans.  Total mortgage production for the fourth quarter was $120.4 million, up 4% on a linked-quarter basis from $115.3 million and up 116% from $55.8 million compared with the year-earlier quarter.

Non-interest income for the fourth quarter of 2013 increased 47% to $4.5 million from $3.1 million in the year-earlier quarter, primarily driven by increases in mortgage banking fees of $1.5 million and service charges on deposit accounts of $335,000 and a decline in negative accretion for the FDIC loss-share receivable of $552,000, together which were partially offset by a decline in the gain on sales of securities of $1.2 million.  Non-interest expense for the fourth quarter of 2013 increased 28% to $15.7 million from $12.3 million in the year-earlier quarter, primarily driven by increases in salaries and employee benefits of $2.6 million, impairment loss on assets held for sale of $328,000 and realized loss on assets held for sale of $228,000.  The increase in salaries and employee benefits was associated with the hiring of employees from the Frontier acquisition and for the mortgage division expansion, while the impairment loss on assets held for sale was driven by two former branch buildings and a corporate facility the Company holds, and the realized loss on assets held for sale was the result of the Company selling its former corporate headquarters building in Albany, Georgia.

 

 

Accounting for FDIC-Assisted Acquisitions

The Company performs ongoing assessments of the estimated cash flows of its FDIC-acquired loan portfolios.  The fair value of the FDIC-acquired loan portfolios consisted of $50.9 million in covered and $63.3 million in non-covered loans at the end of the fourth quarter of 2013 compared with $72.4 million in covered and $11.9 million in non-covered loans for the year-earlier quarter.  The outstanding principal balance of the FDIC-acquired loan portfolios totaled $177.8 million at the end of the fourth quarter of 2013 compared with $152.1 million for the year-earlier quarter.  The details of the accounting for the FDIC-acquired loan portfolios for the fourth quarter of 2013 are as follows:

·

Covered FDIC-acquired loans decreased $3.0 million from the linked quarter to $50.9 million;

·

Non-covered FDIC-acquired loans decreased $6.3 million to $63.3 million;

·

The FDIC loss-share receivable associated with covered assets acquired in FDIC-assisted acquisitions decreased $3.2 million to $41.3 million;

·

The negative accretion for the FDIC loss-share receivable was $2.0 million and the FDIC loss-share clawback accrual increased to $1.9 million;

·

Increase in provision expense for FDIC-acquired non-covered loans to $12,000;

·

Loan discount accretion recognized in interest income improved $2.6 million;

·

The non-accretable discount decreased $11.8 million to $36.7 million; and

·

The accretable discount increased $3.4 million to $26.9 million.

For the fourth quarter of 2013, loan discount accretion recognized in interest income improved 69% to $6.3 million from $3.7 million for the linked quarter, but declined 6% from $6.6 million for the year-earlier quarter.  The FDIC loss-share receivable associated with covered FDIC-acquired assets decreased 7% to $41.3 million from $44.5 million for the linked quarter and declined 32% from $60.7 million for the year-earlier quarter.  The reduction in the FDIC loss-share receivable for the linked quarter was primarily driven by negative accretion of $2.0 million affecting the loss-share receivable asset associated with the improvement in expected cash flows of the covered FDIC-acquired performing loan portfolios and FDIC reimbursements received of $1.2 million.  An increase to the FDIC clawback liability accrual was recorded as an expense for the current quarter of $261,000, which increased the total accrual to $1.9 million.  This clawback was caused by an improvement in estimates of expected cash flows for both FDIC-assisted acquisitions covered under loss-sharing agreements.

The covered FDIC-acquired loan discount affecting the loss-share receivable was $39.1 million, or 94.6% of the loss-share receivable, for the fourth quarter 2013 compared with $55.2 million, or 90.9% of the loss-share receivable, for the year-earlier quarter.  The gross balance of covered FDIC-acquired assets decreased to $109.2 million for the fourth quarter of 2013 compared with $156.0 million for the year-earlier quarter.  The FDIC loss-share receivable as a percent of the covered FDIC-acquired assets decreased to 37.8% compared with 38.9% for the year-earlier quarter.

Asset Quality

Total non-performing assets, excluding FDIC-acquired assets, decreased to $11.2 million, or 0.81% of total assets, compared with $13.6 million, or 1.03% of total assets, for the linked quarter and declined from $17.3 million, or 1.58% of total assets, for the year-earlier quarter.  Annualized net charge-offs to average outstanding loans, excluding FDIC-acquired loans, were 0.10% for the fourth quarter of 2013 compared with 0.31% for the linked quarter and 0.05% for the year-earlier quarter.  Non-performing loans, excluding FDIC-acquired loans, totaled $9.4 million, down from $11.0 million for the linked quarter and from $14.7 million for the year-earlier quarter.  Other real estate owned and repossessed assets, excluding FDIC-acquired assets, totaled $1.8 million for the fourth quarter of 2013, down from $2.7 million for the linked quarter and from $2.6 million for the year-earlier quarter.

 

 

The provision for loan losses on non-FDIC-acquired loans decreased to $220,000 for the fourth quarter of 2013 from $350,000 for the linked quarter and from $600,000 for the year-earlier quarter, primarily driven by improving trends in total criticized and classified loans.  For the fourth quarter in 2013, the allowance for loan losses represented 1.31% of total loans outstanding, excluding FDIC-acquired loans, versus 1.34% for the linked quarter and 1.55% for the year-earlier quarter.  The improving loan loss allowance was primarily the result of declining criticized and classified loans as a percentage of total loans.

Capital Management Initiatives

The Company reinstated its regular quarterly dividend during January 2014 at $0.07 per share.  Looking ahead, the Company intends to maintain its capital strength at the current level to support growth and its acquisition activities.  The Company currently has authorization to purchase approximately 344,000 shares under the current repurchase program, which is set to expire in April 2014, unless extended or otherwise completed.  Accordingly, future stock buybacks and future dividends will be premised largely on the Company's future earnings power rather than a return of capital to stockholders.

The Company's estimated total risk-based capital ratio at December 31, 2013, was 14.5%, 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 8.8% as of December 31, 2013.

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, North Central Florida and Eastern Alabama through 27 full-service branch locations, 14 mortgage offices, and 4 investment offices.  As of December 31, 2013, the Company reported total assets of approximately $1.4 billion and total stockholders' equity of approximately $125 million.  For more information about the Company, visit HeritageBank of the South on the Web at www.eheritagebank.com and see Investors.

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 "opportunities," "prospects," "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 includes 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 2012 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 Fourth Quarter 2013 Results

Page 6

January 29, 2014

 

HERITAGE FINANCIAL GROUP, INC.

Unaudited Reconciliation of Non-GAAP Measures Presented in Earnings Release

(Dollars in thousands, except per share data)

 

* The effective tax rate for the period presented is used to determine net of tax amounts.

 

Net Income and Diluted Earnings Per Share are presented in accordance with Generally Accepted Accounting Principles ("GAAP").  Adjusted Noninterest Income, Adjusted Noninterest Expense, Adjusted Net Income and Adjusted Diluted Earnings 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.

---

		(Unaudited)
		December 31,				December 31,
		2013					2012*
Cash and due from banks		$	34,804			$	23,993
Interest-bearing deposits in banks			3,249				15,393
Federal funds sold			130				4,306
Cash and cash equivalents			38,183				43,692
Securities available for sale, at fair value			294,299				221,406
Federal Home Loan Bank stock, at cost			7,342				4,330
Other equity securities, at cost			1,010				1,010
Loans held for sale			110,669				15,608
Loans			747,862				597,579
Covered loans			50,891				72,425
Less allowance for loan losses			8,955				9,061
Loans, net			789,798				660,943
Other real estate owned			3,482				3,242
Covered other real estate owned			7,053				9,467
Total other real estate owned			10,535				12,709
FDIC loss-share receivable			41,306				60,731
Premises and equipment, net			37,978				33,015
Goodwill and intangible assets			4,253				4,235
Cash surrender value of bank owned life insurance			24,183				23,382
Other assets			21,369				16,445
Total assets		$	1,380,925			$	1,097,506
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest-bearing deposits		$	148,253			$	116,272
Interest-bearing deposits			928,168				753,282
Total deposits			1,076,421				869,554
Federal funds purchased and securities sold under repurchase agreements			37,648				33,219
Other borrowings			131,394				60,000
Other liabilities			10,399				14,084
Total liabilities			1,255,862				976,857
SHAREHOLDERS' EQUITY
Preferred stock, par value; $0.01; 5,000,000 shares authorized; none issued			-				-
Common stock, par value $0.01; 45,000,000 shares authorized; 7,834,537 and  8,172,486 shares issued and outstanding, respectively			78				82
Capital surplus			78,566				82,154
Retained earnings			57,614				46,299
Accumulated other comprehensive loss, net of tax of $5,175 and  $2,566, respectively			(7,762	)			(3,849	)
Unearned employee stock ownership plan (ESOP), 332,535 and 385,836 shares, respectively			(3,433	)			(4,037	)
Total shareholders' equity			125,063				120,649
Total liabilities & shareholders' equity		$	1,380,925			$	1,097,506

		Three Months Ended								Twelve Months Ended
		December 31,				December 31,				December 31,				December 31,
		2013				2012				2013				2012
Interest income:
Interest and fees on loans		$	15,911			$	15,084			$	58,434			$	48,831
Interest on loans held for sale			619				238				1,458				967
Interest on taxable securities			1,231				762				4,347				3,681
Interest on nontaxable securities			337				232				1,248				1,123
Interest on federal funds sold			2				9				9				30
Interest on deposits in other banks			15				26				155				106
Total interest income			18,115				16,351				65,651				54,738
Interest expense:
Interest on deposits			1,000				1,108				4,077				4,874
Interest on other borrowings			862				713				3,308				2,739
Total interest expense			1,862				1,821				7,385				7,613
Net interest income			16,253				14,530				58,266				47,125
Provision for loan losses			232				2,507				1,735				5,930
Net interest income after provision for loan losses			16,021				12,023				56,531				41,195
Non-interest income:
Service charges on deposit accounts			1,642				1,307				5,670				4,748
Bankcard services income			890				794				3,335				3,231
Other service charges, commissions and fees			121				89				513				326
Brokerage fees			560				463				2,138				1,838
Mortgage banking activities			2,949				1,451				10,509				4,768
Bank-owned life insurance			198				210				801				771
Gain on sales of securities			85				1,285				85				2,838
Gain (loss) on acquisitions			-				-				4,188				(56	)
Accretion of FDIC loss-share receivable			(2,021	)			(2,573	)			(9,293	)			(4,325	)
Other			112				66				468				260
Total non-interest income			4,536				3,092				18,414				14,399
Non-interest expense:
Salaries and employee benefits			8,722				6,167				31,445				23,543
Equipment and occupancy			1,922				1,597				7,358				5,632
Advertising and marketing			299				147				1,170				656
Professional fees			559				387				1,416				1,319
Information services expenses			1,285				1,184				5,109				4,641
Loss (gain) on sales and write-downs of other real estate owned			38				277				406				219
Gain on sales and write-downs of FDIC-acquired other real estate owned			(536	)			(204	)			(969	)			(313	)
Foreclosed asset expenses			240				353				1,019				970
Foreclosed FDIC-acquired asset expenses			286				575				1,386				1,767
FDIC insurance and other regulatory fees			254				252				1,081				1,037
Impairment loss on assets held for sale			328				-				328				-
Acquisition related expenses			102				3				1,322				418
Deposit intangible expenses			200				191				809				781
FDIC loss-share clawback expenses			261				219				1,237				703
Other operating expenses			1,746				1,166				5,834				4,879
Total non-interest expense			15,706				12,314				58,951				46,252
Income before income taxes			4,851				2,801				15,994				9,342
Applicable income tax			1,446				373				4,679				2,585
Net income		$	3,405			$	2,428			$	11,315			$	6,757
Earnings per common share:
Basic earnings per share		$	0.46			$	0.31			$	1.52			$	0.85
Diluted earnings per share		$	0.45			$	0.31			$	1.50			$	0.85
Weighted average-common shares outstanding:
Basic			7,407,722				7,720,839				7,421,348				7,969,104
Diluted			7,530,606				7,722,867				7,528,246				7,970,903

		Five Quarter Comparison
		12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Interest income:
Interest and fees on loans		$	15,911			$	13,452			$	15,702			$	13,369			$	15,084
Interest on loans held for sale			619				434				290				115				238
Interest on taxable securities			1,231				1,155				1,095				866				762
Interest on nontaxable securities			337				318				308				285				232
Interest on federal funds sold			2				4				2				1				9
Interest on deposits in other banks			15				30				88				22				26
Total interest income			18,115				15,393				17,485				14,658				16,351
Interest expense:
Interest on deposits			1,000				982				1,041				1,054				1,108
Interest on other borrowings			862				853				844				749				713
Total interest expense			1,862				1,835				1,885				1,803				1,821
Net interest income			16,253				13,558				15,600				12,855				14,530
Provision for loan losses			220				350				640				450				600
Provision for loan losses- FDIC-acquired covered			-				-				28				35				1,907
Provision for loan losses- FDIC-acquired non-covered			12				-				-				-				-
Net interest income after provision for loan losses			16,021				13,208				14,932				12,370				12,023
Non-interest income:
Service charges on deposit accounts			1,642				1,577				1,297				1,154				1,307
Bankcard services income			890				852				831				762				794
Other service charges, commissions and fees			121				136				157				99				89
Brokerage fees			560				561				536				481				463
Mortgage banking activities			2,949				1,953				3,425				2,182				1,451
Bank-owned life insurance			198				200				201				202				210
Gain on sales of securities			85				-				-				-				1,285
Gain (loss) on acquisitions			-				-				-				4,188				-
Accretion of FDIC loss-share receivable			(2,021	)			(1,499	)			(3,376	)			(2,397	)			(2,573	)
Other			112				138				124				94				66
Total non-interest income			4,536				3,918				3,195				6,765				3,092
Non-interest expense:
Salaries and employee benefits			8,722				8,108				8,185				6,430				6,167
Equipment and occupancy			1,922				1,932				1,838				1,666				1,597
Advertising and marketing			299				335				349				187				147
Professional fees			559				340				302				215				387
Information services expenses			1,285				1,335				1,307				1,182				1,184
Loss (gain) on sales and write-downs of other real estate owned			38				335				58				(25	)			277
(Gain) loss on sales and write-downs of FDIC-acquired other real estate owned			(536	)			(206	)			(251	)			24				(204	)
Foreclosed asset expenses			240				337				227				215				353
Foreclosed FDIC-acquired asset expenses			286				366				313				421				575
FDIC insurance and other regulatory fees			254				293				278				256				252
Impairment loss on assets held for sale			328				-				-				-				-
Acquisition related expenses			102				280				148				792				3
Deposit intangible expenses			200				204				211				194				191
FDIC loss-share clawback expenses			261				286				124				566				219
Other operating expenses			1,746				1,389				1,466				1,233				1,166
Total non-interest expense			15,706				15,334				14,555				13,356				12,314
Income before income taxes			4,851				1,792				3,572				5,779				2,801
Applicable income tax			1,446				470				912				1,851				373
Net income		$	3,405			$	1,322			$	2,660			$	3,928			$	2,428
Earnings per common share:
Basic earnings per share		$	0.46			$	0.18			$	0.36			$	0.52			$	0.31
Diluted earnings per share		$	0.45			$	0.18			$	0.36			$	0.52			$	0.31
Dividends		$	0.00			$	0.00			$	0.00			$	0.00			$	0.24
Weighted average-common shares outstanding:
Basic			7,407,722				7,371,804				7,381,370				7,526,344				7,720,839
Diluted			7,530,606				7,483,812				7,383,992				7,528,522				7,722,867

		Three Months Ended																								Twelve Months Ended
		December 31,																								December 31,
		2013												2012												2013												2012
		Average								Average				Average								Average				Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate
Interest-earning assets:
Loans(1)(2)		$	868,420			$	16,536				7.55	%		$	658,346			$	15,325				9.26	%		$	795,094			$	59,907				7.53	%		$	608,722			$	49,807				8.18	%
Investment securities (2)			299,638				1,683				2.23	%			211,524				1,073				2.02	%			283,782				6,020				2.12	%			240,198				5,186				2.16	%
Other short-term investments			13,785				16				0.46	%			42,264				35				0.33	%			41,576				164				0.39	%			38,782				137				0.35	%
Total interest-earning assets			1,181,843				18,235				6.12	%			912,134				16,433				7.17	%			1,120,452				66,091				5.90	%			887,702				55,130				6.21	%
Non-interest earning assets			169,547												174,694												175,168												183,373
Total assets		$	1,351,390											$	1,086,828											$	1,295,620											$	1,071,075
Interest-bearing liabilities:
Deposits:
Interest checking, money market and savings		$	543,633			$	343				0.25	%		$	452,243			$	276				0.24	%		$	534,972			$	1,261				0.24	%		$	465,954			$	1,347				0.29	%
Time deposits			370,737				658				0.70	%			295,389				832				1.12	%			353,802				2,818				0.80	%			299,333				3,528				1.18	%
Total interest bearing-deposits			914,370				1,001				0.43	%			747,632				1,108				0.59	%			888,774				4,079				0.46	%			765,287				4,875				0.64	%
Federal Funds purchased and securities sold under repurchase agreements			36,548				337				3.66	%			34,324				336				3.89	%			34,527				1,331				3.85	%			33,528				1,333				3.98	%
Other Borrowings			114,041				525				1.83	%			50,489				377				2.97	%			96,132				1,976				2.06	%			38,975				1,406				3.61	%
Total interest-bearing liabilities			1,064,959				1,863				0.69	%			832,445				1,821				0.87	%			1,019,433				7,386				0.72	%			837,790				7,614				0.91	%
Non-interest bearing liabilities:
Demand Deposits			152,577												115,014												142,578												96,077
Other Liabilities			12,147												16,418												12,852												12,615
Total non-interest bearing liabilities			164,724												131,432												155,430												108,692
Total liabilities			1,229,683												963,877												1,174,863												946,482
Shareholders' equity			121,707												122,951												120,757												124,593
Total liabilities & shareholders' equity		$	1,351,390											$	1,086,828											$	1,295,620											$	1,071,075
Net interest income						$	16,372											$	14,612											$	58,705											$	47,516
Interest rate spread											5.43	%											6.30	%											5.17	%											5.30	%
Net yield on interest-earning assets (net interest margin)											5.50	%											6.37	%											5.24	%											5.35	%
Core net interest margin (non-GAAP):
Loans(1)(2)		$	868,420			$	16,536				7.55	%		$	658,346			$	15,325				9.26	%		$	795,094			$	59,907				7.53	%		$	608,722			$	49,807				8.18	%
FDIC-acquired loan discount adjustments(3)			69,283				6,272				35.92	%			73,309				6,646				36.07	%			73,647				20,722				28.14	%			86,382				15,709				18.19	%
Adjusted loans			937,703				10,264				4.34	%			731,655				8,679				4.72	%			868,741				39,185				4.51	%			695,104				34,098				4.91	%
Adjusted total interest-earning assets		$	1,251,126				11,963				3.79	%		$	985,443				9,787				3.95	%		$	1,194,099				45,369				3.80	%		$	974,084				39,421				4.05	%
Total interest-bearing liabilities		$	1,064,959				1,863				0.69	%		$	832,445				1,821				0.87	%		$	1,019,433				7,386				0.72	%		$	837,790				7,614				0.91	%
Core Net interest income						$	10,100											$	7,966											$	37,983											$	31,807
Core Interest rate spread											3.10	%											3.08	%											3.07	%											3.14	%
Core Net yield on interest-earning assets (net interest margin non-GAAP)											3.20	%											3.22	%											3.18	%											3.27	%

			Five Quarter Comparison
Financial Condition Data:			12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Total loans		$	798,753			$	789,092			$	769,921			$	752,866			$	670,004
Loans held for sale			110,669				38,042				43,545				18,905				15,608
Covered loans			50,891				53,843				57,176				65,815				72,425
Allowance for loan losses			8,955				8,894				9,047				9,105				9,061
Total other real estate owned			10,535				10,244				11,949				13,851				12,709
Covered other real estate owned			7,053				5,909				7,815				9,460				9,467
FDIC loss-share receivable			41,306				44,527				48,106				52,012				60,731
Goodwill and intangible assets			4,253				4,251				4,455				4,666				4,235
Total assets			1,380,925				1,322,309				1,334,016				1,370,550				1,097,506
Non-interest-bearing deposits			148,253				153,163				148,219				151,709				116,272
Interest-bearing deposits			928,168				899,318				917,712				943,850				753,282
Other borrowings			131,394				101,667				101,940				102,210				60,000
Federal funds purchased and securities sold under agreement to repurchase			37,648				35,393				33,094				34,251				33,219
Stockholders' equity			125,063				120,534				118,540				120,655				120,649
Total shares outstanding			7,834,537				7,834,765				7,803,910				7,881,260				8,172,486
Unearned ESOP shares			332,535				345,860				359,186				372,511				385,836
Total shares outstanding net of unearned ESOP			7,502,002				7,488,905				7,444,724				7,508,749				7,786,650
Book value per share		$	16.67			$	16.10			$	15.92			$	16.07			$	15.49
Book value per share including unearned
ESOP (non-GAAP)			15.96				15.38				15.19				15.31				14.76
Tangible book value per share (non-GAAP)			16.10				15.53				15.32				15.45				14.95
Tangible book value per share  including unearned ESOP (non-GAAP)			15.42				14.84				14.62				14.72				14.24
Market value per share			19.25				17.42				14.75				14.48				13.79
		Five Quarter Comparison
			12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Key Financial Ratios and other information:
Performance Ratios
Annualized return on average assets			1.00	%			0.40	%			0.79	%			1.37	%			0.89	%
Annualized return on average equity			11.10	%			4.41	%			8.74	%			13.01	%			7.90	%
Net interest margin			5.50	%			4.73	%			5.61	%			5.51	%			6.37	%
Net interest spread			5.43	%			4.66	%			5.55	%			5.44	%			6.30	%
Core net interest margin			3.20	%			3.23	%			3.27	%			3.35	%			3.22	%
Core net interest spread			3.10	%			3.13	%			3.17	%			3.23	%			3.08	%
Efficiency ratio			71.66	%			82.29	%			74.17	%			80.22	%			69.50	%
Capital Ratios
Average stockholders' equity to average assets			9.0	%			9.0	%			9.0	%			10.5	%			11.3	%
Tangible equity to tangible assets (non-GAAP)			8.8	%			8.8	%			8.6	%			8.5	%			10.6	%
Tier 1 leverage ratio			9.5	%			9.4	%			9.0	%			10.4	%			11.0	%
Tier 1 risk-based capital ratio			13.5	%			14.3	%			14.3	%			15.2	%			17.2	%
Total risk-based capital ratio			14.5	%			15.4	%			15.3	%			16.3	%			18.4	%
Other Information
Full-time equivalent employees			426				412				401				355				321
Banking			306				308				316				285				264
Mortgage			113				97				79				64				50
Investments			7				7				6				6				7
Number of full-service offices			27				27				29				29				20
Mortgage loan offices			14				12				12				12				13
Investment offices			4				4				4				4				4

			Five Quarter Comparison
			12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Loans
Construction and land		$	50,167			$	48,808			$	42,753			$	37,659			$	33,340
Farmland			23,420				22,561				23,447				20,749				20,141
Permanent 1 - 4			174,565				169,105				166,199				163,302				161,883
Permanent 1 - 4 - junior liens and revolving			32,038				30,180				29,432				28,852				27,345
Multifamily			22,650				27,468				26,301				24,280				21,293
Nonresidential			256,567				250,859				234,259				225,946				212,570
Commercial business			101,161				95,108				88,828				83,015				83,659
Consumer and other			23,976				21,499				26,889				19,931				25,498
Total core loans		$	684,544			$	665,588			$	638,108			$	603,734			$	585,729
FDIC-acquired non-covered			63,318				69,661				74,637				83,317				11,850
Total loans			747,862				735,249				712,745				687,051				597,579
FDIC-acquired covered			50,891				53,843				57,176				65,815				72,425
Allowance for loan losses			8,955				8,894				9,047				9,105				9,061
		$	789,798			$	780,198			$	760,874			$	743,761			$	660,943
Loan Balances by Geographical Region (excluding FDIC- acquired loans):
			Five Quarter Comparison
			12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Albany, Georgia		$	294,033			$	288,089			$	282,509			$	273,116			$	282,151
Valdosta, Georgia			100,936				101,729				96,485				90,385				84,198
Ocala, Florida			58,343				58,115				58,240				58,533				55,197
Statesboro, Georgia			122,928				124,667				118,056				107,650				103,176
Auburn, Alabama			36,130				31,485				26,061				24,386				20,149
Macon, Georgia			68,638				60,197				55,935				49,165				40,858
Birmingham, Alabama			1,590				344				822				499				-
South Atlanta			1,946				962				-				-				-
		$	684,544			$	665,588			$	638,108			$	603,734			$	585,729
Asset Quality Data (excluding FDIC -acquired loans):
			Five Quarter Comparison
			12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Nonaccrual loans		$	9,435			$	10,986			$	12,223			$	12,723			$	14,677
Loans - 90 days past due & still accruing			-				-				-				-				-
Total non-performing loans			9,435				10,986				12,223				12,723				14,677
OREO			1,789				2,654				3,046				3,028				2,620
Total non-performing assets		$	11,224			$	13,640			$	15,269			$	15,751			$	17,297
Trouble debt restructuring - nonaccrual		$	5,763			$	5,840			$	6,496			$	4,593			$	6,856
Trouble debt restructuring - accruing			1,983				1,996				2,009				2,023				7
Total trouble debt restructuring		$	7,746			$	7,836			$	8,505			$	6,616			$	6,863
Accruing past due loans		$	1,001			$	669			$	934			$	1,316			$	2,131
Total criticized assets			22,741				26,116				25,785				25,474				28,194
Total classified assets			19,582				23,048				22,985				22,118				25,129
Allowance for loan losses			8,955				8,894				9,047				9,105				9,061
Net charge-offs		$	160			$	503			$	698			$	406			$	68
Asset Quality Ratios:
Allowance for loan losses to total core loans			1.31	%			1.34	%			1.42	%			1.51	%			1.55	%
Allowance for loan losses to average core loans			1.33	%			1.37	%			1.45	%			1.53	%			1.62	%
Allowance for loan losses to non-performing loans			94.91	%			80.96	%			74.02	%			71.56	%			61.73	%
Non-performing loans to total core loans			1.38	%			1.65	%			1.92	%			2.11	%			2.51	%
Non-performing assets to total assets			0.81	%			1.03	%			1.14	%			1.15	%			1.58	%
Net charge-offs to average core loans (annualized)			0.10	%			0.31	%			0.45	%			0.27	%			0.05	%

		Five Quarter Comparison
FDIC-acquired assets		12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
FDIC-acquired non-covered loans:
Commercial real estate		$	22,268			$	25,027			$	27,258			$	30,851			$	6,359
Residential real estate			30,134				32,318				33,452				34,938				2,110
Construction and land			5,156				5,195				5,941				7,756				494
Commercial and industrial			2,604				3,638				4,106				5,125				1,574
Consumer and other			3,156				3,483				3,880				4,647				1,313
Total			63,318				69,661				74,637				83,317				11,850
FDIC-acquired covered loans:
Commercial real estate			14,161				14,956				15,384				18,849				21,820
Residential real estate			23,886				25,082				27,283				30,735				32,846
Construction and land			11,642				12,469				12,645				13,370				14,248
Commercial and industrial			864				924				1,340				2,216				2,670
Consumer and other			338				412				524				645				841
Total			50,891				53,843				57,176				65,815				72,425
Total carrying value of FDIC-acquired loans		$	114,209			$	123,504			$	131,813			$	149,132			$	84,275
Non-accrete discount for FDIC-acquired loans			36,746				48,545				55,170				59,558				46,000
Accretable discount for FDIC-acquired loans			26,860				23,445				23,007				26,136				21,834
Total discount for FDIC-acquired loans			63,606				71,990				78,177				85,694				67,834
Outstanding principal balance for FDIC-acquired loans		$	177,815			$	195,494			$	209,989			$	234,826			$	152,109
FDIC-acquired OREO:
Non-covered		$	1,694			$	1,680			$	1,087			$	1,363			$	602
Covered			7,053				5,909				7,815				9,460				9,467
Total carrying value of FDIC-acquired OREO		$	8,747			$	7,589			$	8,902			$	10,823			$	10,069
Total discount for FDIC-acquired OREO			11,186				12,038				11,013				12,176				11,690
Gross carrying value of FDIC-acquired OREO		$	19,933			$	19,627			$	19,915			$	22,999			$	21,759
Total loan discount accretion recognized in income:
Individual assessed discount accretion		$	3,132			$	791			$	2,336			$	637			$	2,515
Pooled assessed discount accretion			3,140				2,927				3,808				3,951				4,131
Total loan discount accretion recognized in income		$	6,272			$	3,718			$	6,144			$	4,588			$	6,646
FDIC-acquired ratios:
Total discount to principal balance for FDIC-acquired loans			35.8	%			36.8	%			37.2	%			36.5	%			44.6	%
		Five Quarter Comparison
Non-covered FDIC-acquired assets		12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Outstanding principal balance:
FDIC-acquired non-covered loan pools		$	61,893			$	66,294			$	70,144			$	76,675			$	14,196
FDIC-acquired non-covered loans individually assessed			22,214				27,627				31,603				35,837				2,903
Total non-covered outstanding principal loan balance			84,107				93,921				101,747				112,512				17,099
Gross carrying value for FDIC-acquired non-covered OREO			4,470				4,993				2,529				2,371				793
Total gross balance of non-covered assets		$	88,577			$	98,914			$	104,276			$	114,883			$	17,892
Non-covered non-accretable discount for estimated credit losses:
FDIC-acquired non-covered loan pools		$	8,932				9,297				9,341				9,479				1,775
FDIC-acquired non-covered loans individually assessed			5,397				12,294				14,894				16,482				2,130
Total non-covered non-accretable discount			14,329				21,591				24,235				25,961				3,905
FDIC-acquired non-covered OREO discount			2,776				3,313				1,442				1,008				191
Total non-covered discount for estimated credit losses			17,105				24,904				25,677				26,969				4,096
Non-covered accretable discount:
Non-covered accretable discount for improvement in cash flows			5,458				380				318				475				381
Other non-covered accretable discount			1,002				2,288				2,558				2,759				963
Total non-covered accretable discount			6,460				2,668				2,876				3,234				1,344
Total non-covered discount		$	23,565			$	27,572			$	28,553			$	30,203			$	5,440
Non-covered loan discount accretion recognized in income:
Individual assessed discount accretion		$	2,375			$	619			$	974			$	42			$	29
Pooled assessed discount accretion			249				184				174				24				39
Total non-covered discount accretion recognized in income		$	2,624			$	803			$	1,148			$	66			$	68
Non-covered FDIC-acquired ratios:
Total discount to principal balance for non-covered FDIC-acquired assets			26.6	%			27.9	%			27.4	%			26.3	%			30.4	%
Gross balance of non-covered loans to total FDIC-acquired loans			47.3	%			48.0	%			48.5	%			47.9	%			11.2	%

		Five Quarter Comparison
Covered FDIC-acquired assets		12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Outstanding principal balance:
FDIC-acquired covered loan pools		$	69,192			$	74,020			$	79,552			$	90,020			$	98,570
FDIC-acquired covered loans individually assessed			24,517				27,554				28,690				32,294				36,440
Total covered outstanding principal loan balance			93,709				101,574				108,242				122,314				135,010
Gross carrying value for FDIC-acquired OREO covered			15,463				14,634				17,385				20,628				20,966
Total gross balance of covered assets		$	109,172			$	116,208			$	125,627			$	142,942			$	155,976
Covered non-accretable discount for estimated credit losses:
FDIC-acquired covered loan pools		$	15,284			$	16,281			$	19,917			$	20,705			$	27,194
FDIC-acquired covered loans individually assessed			7,133				10,673				11,018				12,892				14,900
Total covered non-accretable discount			22,417				26,954				30,935				33,597				42,094
FDIC-acquired covered OREO discount			8,410				8,725				9,570				11,168				11,499
Total covered discount for estimated credit losses			30,827				35,679				40,505				44,765				53,593
Covered accretable discount:
Covered accretable discount for improvement in cash flows			18,012				17,676				16,297				18,820				15,396
Other covered accretable discount			2,389				3,101				3,834				4,082				5,095
Total covered accretable discount			20,401				20,777				20,131				22,902				20,491
Total covered discount		$	51,228			$	56,456			$	60,636			$	67,667			$	74,084
Covered loan discount accretion recognized in income:
Individual assessed accretion		$	757			$	172			$	1,362			$	595			$	2,486
Pooled assessed accretion			2,891				2,743				3,634				3,927				4,092
Total covered discount accretion recognized in income		$	3,648			$	2,915			$	4,996			$	4,522			$	6,578
Covered FDIC-acquired ratios:
Total discount to principal balance for covered FDIC-acquired assets			46.9	%			48.6	%			48.3	%			47.3	%			47.5	%
		Five Quarter Comparison
FDIC loss-share receivable		12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
FDIC loss-share receivable:
Single family estimated credit losses		$	8,995			$	9,134			$	9,764			$	10,720			$	11,292
Non-single family estimated credit losses			30,077				33,550				35,678				40,148				43,899
Pending reimbursements and other			2,234				1,843				2,664				1,144				5,540
Total		$	41,306			$	44,527			$	48,106			$	52,012			$	60,731
FDIC loss-share clawback liability		$	1,941			$	1,681			$	1,393			$	1,269			$	703
Total covered discount		$	51,228			$	56,456			$	60,636			$	67,667			$	74,084
Total covered discount impacting FDIC loss-share receivable		$	48,839			$	53,355			$	56,802			$	63,585			$	68,989
Total covered discount impacting FDIC loss-share receivable at 80%		$	39,071			$	42,684			$	45,442			$	50,868			$	55,191
FDIC loss-share receivable ratios:
FDIC receivable as % of gross balance of covered assets			37.8	%			38.3	%			38.3	%			36.4	%			38.9	%
Covered discount at 80% as of % of FDIC receivable			94.6	%			95.9	%			94.5	%			97.8	%			90.9	%

Mortgage Segment Information
		Five Quarter Comparison
		12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Net interest income		$	114			$	218			$	112			$	19			$	156
Provision for loan losses			-				-				-				-				-
Noninterest income			2,951				1,952				3,424				2,182				1,452
Noninterest expense			3,149				2,968				3,239				2,206				1,732
Income tax expense (benefit)			(26	)			(247	)			92				(2	)			(38	)
Mortgage profit (loss)		$	(58	)		$	(551	)		$	205			$	(3	)		$	(86	)
Mortgage segment assets		$	120,716			$	44,588			$	46,854			$	20,849			$	16,382
Mortgage Segment Selected Other Information:
		Five Quarter Comparison
		12/31/2013				9/30/2013				6/30/2013				3/31/2013				12/31/2012
Retail production		$	84,381			$	83,657			$	97,608			$	49,450			$	55,815
Wholesale production		$	36,030			$	31,646			$	19,072			$	5,588			$	-
Purchase as a % of total production			78	%			76	%			66	%			54	%			42	%
Refi as a % of total production			22	%			24	%			34	%			46	%			58	%
End of period Locks		$	43,054			$	47,871			$	53,910			$	49,964			$	20,271