Company Declares Quarterly Cash Dividend of
$0.07 Per Share and Extends Its Stock Repurchase Plan
Heritage Financial Group, Inc. (NASDAQ: HBOS), the holding
company for HeritageBank of the South, today announced unaudited
financial results for the quarter ended March 31, 2014. Key
aspects of the Company's results for the first quarter of 2014
include:
- Net income of $1.3 million or $0.18 per
diluted share, down 61% from $3.4 million or $0.45 per diluted
share for the linked quarter and down 66% from $3.9 million or
$0.52 per diluted share for the year-earlier quarter;
- Excluding special items for each
quarter, net income of $1.8 million or $0.24 per diluted share,
down 55% from $4.0 million or $0.53 per diluted share for the
linked quarter and down 11% from $2.0 million or $0.27 per diluted
share for the year-earlier quarter (see reconciliation of non-GAAP
items);
- Loan growth, excluding loans acquired
through FDIC-assisted acquisitions, of $18.0 million or 3% on a
linked-quarter basis and $98.8 million or 16% compared with the
year-earlier quarter;
- A decline in nonperforming loans,
excluding FDIC-acquired loans, of 2% on a linked-quarter basis and
28% compared with the year-earlier quarter;
- A decrease in the provision for loan
losses, excluding FDIC-acquired loans, to $65,000, down 70% from
$220,000 for the linked quarter and down 86% compared with $450,000
for the year-earlier quarter; and
- An increase in the provision for
FDIC-acquired loan losses to $105,000, up from $12,000 for the
linked quarter (there was no provision for FDIC-acquired loan
losses in the year-earlier quarter).
Commenting on the results, Leonard Dorminey, President and Chief
Executive Officer, said, "While accretion from our FDIC-assisted
acquisitions and mortgage banking add volatility to our earnings,
we are pleased to note ongoing improvement in our core operations.
Asset quality indicators in our core loan portfolio continue to
improve and organic loan growth is on track for another year of
double-digit growth. Our banking expansion efforts continue as we
opened a loan production office in Birmingham during the quarter.
Our mortgage expansion also continues as we were able to recruit a
mortgage banking team in Colorado Springs, Colorado during the
quarter. This team, which had previously worked with our mortgage
executives, will add significantly to our mortgage expansion
efforts."
Dorminey noted that the Company's Board of Directors has
declared a regular quarterly cash dividend of $0.07 per share,
which will be paid on May 23, 2014, to stockholders of record as of
May 9, 2014. Dorminey also noted the Company’s Board of Directors
also has extended the current stock repurchase plan for one year.
The plan has approximately 340,000 shares authorized for repurchase
and now expires in May 2015, unless otherwise completed or
extended.
Acquisition News
Commenting on the Company's recently announced acquisition,
Dorminey added, "We are excited and optimistic about our pending
acquisition of Alarion Financial Services, Inc., which is expected
to contribute significantly to our growth plans in Florida and for
our mortgage division. This transaction is a significant event, not
only for its implications for our franchise, but also because it
demonstrates that our company is well positioned to be a
consolidator in the post FDIC-assisted transaction merger and
acquisition environment."
First Quarter 2014 Results of Operations
The $2.1 million decrease in reported quarterly earnings for the
first quarter of 2014 compared with the linked quarter resulted
primarily from the following items:
- Decreased loan discount accretion from
FDIC-acquired loans of $2.4 million coupled with steady negative
accretion of the FDIC loss-share receivable; and
- Decreased mortgage banking fees of
$783,000.
The $2.6 million decrease in reported quarterly earnings for the
first quarter of 2014 compared with the year-earlier quarter
primarily resulted from the following items:
- Reduction in gain on acquisitions of
$4.2 million;
- Increased salaries and employee
benefits of $2.2 million; offset by
- Improved interest income on loans held
for sale of $910,000; and
- Increased interest income on securities
of $409,000.
Net interest income for the first quarter of 2014 increased 9%
to $14.0 million from $12.9 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 4.66% for the first quarter of 2014, a decline of 69 basis
points from 5.35% for the year-earlier period. The reduction in net
interest margin for the first quarter of 2014 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 remained unchanged at 3.23% for the first quarter of 2014
compared to the year-earlier quarter.
In the first quarter of 2014, the Company continued to achieve
loan growth, with its core loan portfolio increasing $18.0 million
organically on a linked-quarter basis and advancing $98.8 million
overall compared with the year-earlier quarter. For the first
quarter of 2014, the Company's loan portfolio, including
FDIC-acquired loans, totaled $800.9 million, increasing $11.1
million on a linked-quarter basis from $789.8 million and from
$743.8 million compared with the year-earlier quarter. The organic
loan growth for the linked quarter was primarily driven by growth
in the Albany, Macon, South Atlanta, and Valdosta, Georgia markets,
as well as in the Auburn and Birmingham, Alabama markets. Total
deposits stood at $1.127 billion at the end of the first quarter of
2014, up 5% from $1.076 billion on a linked-quarter basis, and up
3% from $1.096 billion for the year-earlier quarter.
For the first quarter of 2014, the Company's loans held for sale
totaled $126.4 million, increasing $15.8 million, or 14%, on a
linked-quarter basis from $110.7 million, and increasing $107.5
million, or 569%, from $18.9 million compared with the year-earlier
quarter. The increase in the loans held for sale for the current
quarter was driven by an increase in production outpacing loan
sales for the quarter. Loan sales to Fannie Mae for the first
quarter totaled $88.3 million and, separately, the Company recorded
a gain of $717,000 related to the mortgage servicing rights for
those loans. During the quarter, the Company made the decision to
slow loan sales to Fannie Mae in order to sell to Freddie Mac for
better execution. The Company received approval to sell loans to
Freddie Mac at the end of the first quarter of 2014, and expects to
deliver loans during the second quarter of 2014. Total mortgage
production for the first quarter was $135.5 million, up 13% on a
linked-quarter basis from $120.4 million and up 146% from $55.0
million compared with the year-earlier quarter.
Noninterest income for the first quarter of 2014 declined 48% to
$3.5 million from $6.8 million in the year-earlier quarter,
primarily driven by a decrease in gain on acquisitions of $4.2
million offset in part by a decline in negative accretion for the
FDIC loss-share receivable of $366,000 and increases in service
charges on deposit accounts of $289,000 and bankcard services
income of $127,000. Noninterest expense for the first quarter of
2014 increased 16% to $15.5 million from $13.4 million in the
year-earlier quarter, primarily driven by increases in salaries and
employee benefits of $2.2 million related to the expansion of the
mortgage division.
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 $47.7 million in covered
and $59.8 million in non-covered loans at the end of the first
quarter of 2014 compared with $65.8 million in covered and $83.3
million in non-covered loans for the year-earlier quarter. The
outstanding principal balance of the FDIC-acquired loan portfolios
totaled $165.8 million at the end of the first quarter of 2014
compared with $234.8 million for the year-earlier quarter. The
details of the accounting for the FDIC-acquired loan portfolios for
the first quarter of 2014 are as follows:
- Covered FDIC-acquired loans decreased
$3.2 million and non-covered FDIC-acquired loans decreased $3.5
million from the linked quarter;
- The negative accretion for the FDIC
loss-share receivable was $2.0 million and the FDIC loss-share
clawback accrual increased to $2.5 million;
- Provision expense for FDIC-acquired
non-covered loans increased to $93,000; and
- Loan discount accretion recognized in
interest income declined $2.4 million.
For the first quarter of 2014, loan discount accretion
recognized in interest income declined 39% to $3.9 million from
$6.3 million for the linked quarter, and declined 16% from $4.6
million for the year-earlier quarter. Provision expense for
non-covered loans of $105,000 was recorded for a valuation
adjustment needed for the Frontier portfolio to adjust the yield
for the current quarter compared with $12,000 for the linked
quarter and no provision expense for the year-earlier quarter. The
FDIC loss-share receivable associated with covered FDIC-acquired
assets decreased 9% to $37.6 million from $41.3 million for the
linked quarter and declined 28% from $52.0 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 $1.5 million. An increase to the FDIC
clawback liability accrual was recorded as an expense for the
current quarter of $543,000, which increased the total accrual to
$2.5 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 $35.9 million, or 95.4% of the loss-share
receivable, for the first quarter of 2014 compared with $50.9
million, or 97.8% of the loss-share receivable, for the
year-earlier quarter. The gross balance of covered FDIC-acquired
assets decreased to $100.5 million for the first quarter of 2014
compared with $142.9 million for the year-earlier quarter. The FDIC
loss-share receivable as a percent of the covered FDIC-acquired
assets decreased to 37.5% compared with 36.4% for the year-earlier
quarter.
Asset Quality
Total nonperforming assets, excluding FDIC-acquired assets,
decreased to $10.3 million, or 0.73% of total assets, compared with
$11.2 million, or 0.81% of total assets, for the linked quarter and
declined from $15.8 million, or 1.15% of total assets, for the
year-earlier quarter. Annualized net recoveries to average
outstanding loans, excluding FDIC-acquired loans, were 0.01% for
the first quarter of 2014 compared with annualized net charge-offs
of 0.10% for the linked quarter and annualized net-charge-offs of
0.27% for the year-earlier quarter. Nonperforming loans, excluding
FDIC-acquired loans, totaled $9.2 million for the first quarter of
2014, down from $9.4 million for the linked quarter and from $12.7
million for the year-earlier quarter. Other real estate owned and
repossessed assets, excluding FDIC-acquired assets, totaled $1.1
million for the first quarter of 2014, down from $1.8 million for
the linked quarter and from $3.0 million for the year-earlier
quarter.
The provision for loan losses on non-FDIC-acquired loans
decreased to $65,000 for the first quarter of 2014 from $220,000
for the linked quarter and from $450,000 for the year-earlier
quarter, primarily driven by improving trends in total criticized
and classified loans. For the first quarter in 2014, the allowance
for loan losses represented 1.30% of total loans outstanding,
excluding FDIC-acquired loans, versus 1.31% for the linked quarter
and 1.51% 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's Board of Directors has declared a regular
quarterly cash dividend of $0.07 per share, payable on May 23,
2014, to stockholders of record as of May 9, 2014. The Board of
Directors also has extended the Company's current stock repurchase
program for an additional year until April 2015, unless extended or
otherwise completed earlier, and has total authorization under the
program to purchase 340,000 shares, or 4% of the Company's
currently outstanding common stock.
Looking ahead, the Company intends to maintain its capital
strength at the current level to support growth and its acquisition
activities. 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 March
31, 2014, was 13.8%, 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 8.7% as of
March 31, 2014.
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 Georgia, Florida and Alabama through 29 banking
locations, 15 mortgage offices, and 5 investment offices. As of
March 31, 2014, the Company reported total assets of
approximately $1.4 billion and total stockholders' equity of
approximately $128 million. For more information about the Company,
visit HeritageBank of the South on the Web at www.eheritagebank.com
under the "Investors" tab.
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 2013 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.
HERITAGE FINANCIAL GROUP, INC.
Unaudited Reconciliation of Non-GAAP
Measures Presented in Earnings Release
(Dollars in thousands, except per share
data)
Three Months Ended March 31,
Dec. 31,
2013
2014 2013 Total noninterest income $
3,487 $ 6,765 $ 4,536 Gain on sale of securities – – (85 )
Gain on acquisitions – (4,188 ) –
Adjusted noninterest income $ 3,487 $ 2,577 $
4,451 Total noninterest expense $ 15,476 $ 13,356 $
15,706 Salaries and employee benefits – early retirement and
severance expense – – (7 ) Acquisition-related expenses (52 ) (792
) (102 ) Impairment loss on assets held for sale – – (328 )
Realized loss on the disposition of assets held for sale – – (226 )
Accrual of FDIC acquisitions estimated clawback liability
(543 ) (566 ) (261 ) Adjusted noninterest expense $
14,881 $ 11,998 $ 14,782 Net income as
reported $ 1,343 $ 3,928 $ 3,405 Total adjustments, net of tax*
441 (1,924 ) 589 Adjusted net
income $ 1,784 $ 2,004 $ 3,994 Diluted
earnings per share $ 0.18 $ 0.52 $ 0.45 Total adjustments, net of
tax* 0.06 (0.25 ) 0.08 Adjusted
diluted earnings per share $ 0.24 $ 0.27 $ 0.53
* 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.
Heritage Financial Group, Inc. and
Subsidiary Consolidated Balance Sheets
(Unaudited) (Dollars in thousands)
(Unaudited) March 31, December 31,
2014 2013* Cash and due from
banks
$ 27,703
$ 34,804 Interest-bearing deposits in
banks 10,495 3,249 Federal funds sold 1,215
130 Cash and cash equivalents 39,413 38,183
Securities available for sale, at fair value 305,044 294,299
Federal Home Loan Bank stock, at cost 6,282 7,342 Other equity
securities, at cost 1,010 1,010 Loans held for sale 126,436 110,669
Loans 762,344 747,862 Covered loans 47,684 50,891 Less allowance
for loan losses 9,145 8,955 Loans, net
800,883 789,798 Other real
estate owned 2,632 3,482 Covered other real estate owned
6,095 7,053 Total other real estate owned
8,727 10,535 FDIC loss-share
receivable 37,637 41,306 Premises and equipment, net 38,603 37,978
Goodwill and intangible assets 4,757 4,253 Cash surrender value of
bank owned life insurance 24,372 24,183 Other assets 20,376
21,369
Total assets $
1,413,540 $ 1,380,925
LIABILITIES AND
SHAREHOLDERS' EQUITY
Non-interest-bearing deposits
$ 163,090
$
148,253 Interest-bearing deposits 963,564
928,168 Total deposits 1,126,654
1,076,421 Federal funds purchased and securities sold
under repurchase agreements 33,785 37,648 Other borrowings 116,127
131,394 Other liabilities 8,990 10,399
Total liabilities 1,285,556
1,255,862
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; 7,834,517 and 7,834,537 shares issued and
outstanding, respectively
78 78 Capital surplus 78,871 78,566 Retained earnings 58,464 57,614
Accumulated other comprehensive loss, net
of tax of $4,098 and $5,175, respectively
(6,147 ) (7,762 )
Unearned employee stock ownership plan
(ESOP), 319,210 and 332,535 shares, respectively
(3,282 ) (3,433 )
Total shareholders' equity
127,984 125,063
Total liabilities & shareholders' equity $
1,413,540 $ 1,380,925 *
Derived from Audited Consolidated Financial Statements.
Heritage Financial Group, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited)
(Dollars in thousands except share and per share
data) Three Months Ended March 31,
March 31, 2014 2013
Interest
income:
Interest and fees on loans
$ 13,350
$ 13,369 Interest
on loans held for sale 1,025 115 Interest on taxable securities
1,206 866 Interest on nontaxable securities 354 285 Interest on
federal funds sold 1 1 Interest on deposits in other banks
19 22
Total interest income
15,955 14,658
Interest
expense:
Interest on deposits 1,140 1,054 Interest on other borrowings
844 749
Total interest expense
1,984 1,803 Net
interest income 13,971 12,855 Provision
for loan losses 170 485
Net
interest income after provision for loan losses
13,801 12,370
Noninterest
income:
Service charges on deposit accounts 1,443 1,154 Bankcard services
income 889 762 Other service charges, commissions and fees 162 99
Brokerage fees 566 481 Mortgage banking activities 2,166 2,182
Bank-owned life insurance 189 202 Gain on acquisitions - 4,188
Accretion of FDIC loss-share receivable (2,031 ) (2,397 ) Other
103 94
Total noninterest income
3,487 6,765
Noninterest
expense:
Salaries and employee benefits 8,580 6,430 Equipment and occupancy
1,995 1,666 Advertising and marketing 228 187 Professional fees 451
215 Information services expenses 1,200 1,182
Loss (gain) on sales and write-downs of
other real estate owned
318 (25 )
(Gain) loss on sales and write-downs of
FDIC-acquired other real estate owned
(264 ) 24 Foreclosed asset expenses 87 215 Foreclosed FDIC-acquired
asset expenses 333 421 FDIC insurance and other regulatory fees 244
256 Acquisition related expenses 52 792 Deposit intangible expenses
196 194 FDIC loss-share clawback expenses 543 566 Other operating
expenses 1,513 1,233
Total
noninterest expense 15,476
13,356 Income before income taxes
1,812 5,779 Applicable income tax 469
1,851
Net income $
1,343 $ 3,928
Earnings per
common share:
Basic earnings per share
$0.18
$0.52 Diluted earnings per share
$0.18 $0.52
Weighted
average-common shares outstanding:
Basic
7,422,044 7,526,344
Diluted
7,581,775 7,528,522
Heritage Financial Group, Inc. and
Subsidiary Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except share and per
share data) Five Quarter Comparison
3/31/2014 12/31/2013
9/30/2013 6/30/2013
3/31/2013
Interest
income:
Interest and fees on loans
$ 13,350
$ 15,911
$
13,452
$ 15,702 $ 13,369 Interest on loans held for sale
1,025 619 434 290 115 Interest on taxable securities 1,206 1,231
1,155 1,095 866 Interest on nontaxable securities 354 337 318 308
285 Interest on federal funds sold 1 2 4 2 1 Interest on deposits
in other banks 19 15 30
88 22
Total interest income
15,955 18,115
15,393 17,485
14,658
Interest
expense:
Interest on deposits 1,140 1,000 982 1,041 1,054 Interest on other
borrowings 844 862 853
844 749
Total interest expense
1,984 1,862
1,835 1,885 1,803
Net interest income 13,971
16,253 13,558 15,600 12,855
Provision for loan losses 65 220 350 640 450 Provision for
loan losses- FDIC-acquired covered - - - 28 35 Provision for loan
losses- FDIC-acquired non-covered 105 12 - - -
Net interest
income after provision for loan losses 13,801
16,021 13,208
14,932 12,370
Noninterest
income:
Service charges on deposit accounts 1,443 1,642 1,577 1,297 1,154
Bankcard services income 889 890 852 831 762 Other service charges,
commissions and fees 162 121 136 157 99 Brokerage fees 566 560 561
536 481 Mortgage banking activities 2,166 2,949 1,953 3,425 2,182
Bank-owned life insurance 189 198 200 201 202 Gain on sales of
securities - 85 - - - Gain on acquisitions - - - - 4,188 Accretion
of FDIC loss-share receivable (2,031 ) (2,021 ) (1,499 ) (3,376 )
(2,397 ) Other 103 112 138
124 94
Total noninterest
income 3,487 4,536
3,918 3,195
6,765
Noninterest
expense:
Salaries and employee benefits 8,580 8,722 8,108 8,185 6,430
Equipment and occupancy 1,995 1,922 1,932 1,838 1,666 Advertising
and marketing 228 299 335 349 187 Professional fees 451 559 340 302
215 Information services expenses 1,200 1,285 1,335 1,307 1,182
Loss (gain) on sales and write-downs of
other real estate owned
318 38 335 58 (25 )
(Gain) loss on sales and write-downs of
FDIC-acquired other real estate owned
(264 ) (536 ) (206 ) (251 ) 24 Foreclosed asset expenses 87 240 337
227 215 Foreclosed FDIC-acquired asset expenses 333 286 366 313 421
FDIC insurance and other regulatory fees 244 254 293 278 256
Impairment loss on assets held for sale - 328 - - - Acquisition
related expenses 52 102 280 148 792 Deposit intangible expenses 196
200 204 211 194 FDIC loss-share clawback expenses 543 261 286 124
566 Other operating expenses 1,513 1,746
1,389 1,466 1,233
Total noninterest expense 15,476
15,706 15,334
14,555 13,356 Income
before income taxes 1,812 4,851 1,792
3,572 5,779 Applicable income tax 469
1,446 470 912
1,851
Net income $ 1,343
$ 3,405 $ 1,322
$ 2,660 $ 3,928
Earnings per
common share:
Basic earnings per share
$0.18
$0.46 $0.18
$0.36 $0.52 Diluted
earnings per share
$0.18 $0.45
$0.18 $0.36
$0.52 Dividends
$0.07
$0.00 $0.00
$0.00 $0.00
Weighted
average-common shares outstanding:
Basic
7,422,044 7,407,722
7,371,804 7,381,370 7,526,344
Diluted
7,581,775 7,530,606
7,483,812 7,383,992 7,528,522
Heritage Financial Group, Inc. and
Subsidiary Condensed Average Balances, Interest Rates and
Yields (Unaudited)
(Dollars in thousands)
Three Months Ended March 31, 2014
2013 Average Average Average
Average Balance Interest Rate
Balance Interest Rate
Interest-earning
assets:
Loans(1)(2) $ 903,153 $ 14,379 6.46 % $ 698,905 $ 13,486
7.83 % Investment securities (2) 301,407 1,680 2.26 % 237,729 1,248
2.13 % Other short-term investments 20,715 20 0.39 %
45,613 24 0.21 %
Total interest-earning assets
1,225,275 16,079 5.32 %
982,247 14,758 6.09 %
Non-interest earning assets 163,312 166,667
Total assets $ 1,388,587 $
1,148,914
Interest-bearing
liabilities:
Deposits:
Interest checking, money market and savings $ 555,828 $ 327 0.24 %
$ 475,176 $ 287 0.24 % Time deposits 382,486 813 0.86
% 321,970 767 0.97 %
Total interest
bearing-deposits 938,314 1,140
0.49 % 797,146 1,054
0.54 %
Federal Funds purchased and securities
sold under repurchase agreements
35,977 329 3.71 % 34,273 328 3.88 % Other Borrowings 119,413
515 1.75 % 65,965 421 2.59 %
Total
interest-bearing liabilities 1,093,704
1,984 0.74 % 897,384
1,803 0.81 %
Non-interest
bearing liabilities:
Demand Deposits 158,583 119,059 Other Liabilities 8,475
11,671
Total non-interest bearing liabilities
167,058 130,730
Total liabilities
1,260,762 1,028,114 Shareholders' equity 127,825
120,800
Total liabilities & shareholders' equity
$ 1,388,587 $ 1,148,914 Net
interest income $ 14,095 $ 12,955
Interest rate spread 4.59 % 5.28
% Net yield on interest-earning assets (net
interest margin) 4.66 % 5.35 %
Core net interest margin (non-GAAP): Loans(1)(2) $
903,153 $ 14,379 6.46 % $ 698,905 $ 13,486 7.83 % FDIC-acquired
loan discount adjustments(3) 61,056 3,850 25.57 %
67,744 4,588 27.47 %
Adjusted loans
964,209 10,529 4.43 % 766,649 8,898 4.71 %
Adjusted total
interest-earning assets $ 1,286,331
12,229 3.86 % $ 1,049,991
10,170 3.93 %
Total interest-bearing liabilities $
1,093,704 1,984 0.74 % $
897,384 1,803 0.81 %
Core Net interest income $ 10,245 $
8,367 Core Interest rate spread 3.12
% 3.11 % Core Net yield on
interest-earning assets (net interest margin non-GAAP)
3.23 % 3.23 % (1) Average loan
balances includes nonaccrual loans for the periods presented. (2)
Fully Taxable Equivalent (“FTE”) at the rate of 34%. The FTE basis
adjusts for the tax benefits of income on certain tax-exempt loans
and investments using the federal statutory rate of 34% for each
period presented. The Company believes this measure to be the
preferred industry measurement of net interest income and provides
relevant comparison between taxable and non-taxable amounts. (3)
FDIC-acquired loan discount adjustments include the reduction of
interest income for FDIC-acquired loan discount accretion excluding
contractual interest payments and the increase of core loans for
the total balance of FDIC-acquired loan discounts.
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights (Unaudited)
(Dollars in
thousands except share and per share data) Five
Quarter Comparison
Financial
Condition Data:
3/31/2014 12/31/2013
9/30/2013 6/30/2013
3/31/2013 Total loans
$ 810,028
$
798,753
$ 789,092
$ 769,921
$ 752,866 Loans
held for sale 126,436 110,669 38,042 43,545 18,905 Covered loans
47,684 50,891 53,843 57,176 65,815 Allowance for loan losses 9,145
8,955 8,894 9,047 9,105 Total other real estate owned 8,727 10,535
10,244 11,949 13,851 Covered other real estate owned 6,095 7,053
5,909 7,815 9,460 FDIC loss-share receivable 37,637 41,306 44,527
48,106 52,012 Goodwill and intangible assets 4,757 4,253 4,251
4,455 4,666 Total assets 1,413,540 1,380,925 1,322,309 1,334,016
1,370,550 Non-interest-bearing deposits 163,090 148,253 153,163
148,219 151,709 Interest-bearing deposits 963,564 928,168 899,318
917,712 943,850 Other borrowings 116,127 131,394 101,667 101,940
102,210 Federal funds purchased and securities sold under agreement
to repurchase 33,785 37,648 35,393 33,094 34,251 Stockholders'
equity 127,984 125,063 120,534 118,540 120,655 Total shares
outstanding 7,834,517 7,834,537 7,834,765 7,803,910 7,881,260
Unearned ESOP shares 319,210 332,535 345,860
359,186 372,511 Total shares outstanding net of
unearned ESOP 7,515,307 7,502,002 7,488,905
7,444,724 7,508,749 Book value per share $
17.03 $ 16.67 $ 16.10 $ 15.92 $ 16.07
Book value per share including unearned
ESOP (non-GAAP)
16.34 15.96 15.38 15.19 15.31 Tangible book value per share
(non-GAAP) 16.40 16.10 15.53 15.32 15.45
Tangible book value per share including
unearned ESOP (non-GAAP)
15.73 15.42 14.84 14.62 14.72 Market value per share 19.65 19.25
17.42 14.75 14.48
Five Quarter Comparison 3/31/2014
12/31/2013
9/30/2013 6/30/2013
3/31/2013
Key Financial
Ratios and other information:
Performance Ratios Annualized return on average
assets 0.39% 1.00% 0.40% 0.79% 1.37% Annualized return on average
equity 4.26% 11.10% 4.41% 8.74% 13.01% Net interest margin 4.66%
5.50% 4.73% 4.78% 5.35% Net interest spread 4.59% 5.43% 4.66% 4.71%
5.28% Core net interest margin 3.23% 3.20% 3.23% 3.28% 3.23% Core
net interest spread 3.12% 3.10% 3.13% 3.17% 3.11% Efficiency ratio
84.20% 71.66% 82.29% 74.17% 80.22%
Capital Ratios
Average stockholders' equity to average assets 9.2% 9.0% 9.0% 9.0%
10.5% Tangible equity to tangible assets (non-GAAP) 8.7% 8.8% 8.8%
8.6% 8.5% Tier 1 leverage ratio 9.0% 9.5% 9.4% 9.0% 10.4% Tier 1
risk-based capital ratio 12.8% 13.5% 14.3% 14.3% 15.2% Total
risk-based capital ratio 13.8% 14.5% 15.4% 15.3% 16.3%
Other Information Full-time equivalent employees 455 426 412
401 355 Banking 305 306 308 316 285 Mortgage 143 113 97 79 64
Investments 7 7 7 6 6 Number of banking offices 29 27 27 29 29
Mortgage loan offices 15 14 12 12 12 Investment offices 5 4 4 4 4
Heritage Financial Group,
Inc. and Subsidiary Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands) Five Quarter Comparison
Loans
3/31/2014 12/31/2013
9/30/2013 6/30/2013
3/31/2013 Construction and land $ 53,138 $ 50,167 $ 48,808 $
42,753 $ 37,659 Farmland 30,116 23,420 22,561 23,447 20,749
Permanent 1 - 4 173,581 174,565 169,105 166,199 163,302 Permanent 1
- 4 - junior liens and revolving 34,661 32,038 30,180 29,432 28,852
Multifamily 25,718 22,650 27,468 26,301 24,280 Nonresidential
262,753 256,567 250,859 234,259 225,946 Commercial business 101,696
101,161 95,108 88,828 83,015 Consumer and other 20,907
23,976 21,499 26,889 19,931 Total core
loans $ 702,570 $ 684,544 $ 665,588 $ 638,108 $ 603,734
FDIC-acquired non-covered 59,774 63,318 69,661
74,637 83,317 Total loans 762,344
747,862 735,249 712,745 687,051
FDIC-acquired covered 47,684 50,891 53,843 57,176 65,815
Allowance for loan losses 9,145 8,955 8,894
9,047 9,105 $ 800,883 $ 789,798 $ 780,198 $ 760,874 $
743,761
Loan Balances by
Geographical Region (excluding FDIC- acquired
loans):
Five Quarter Comparison 3/31/2014
12/31/2013 9/30/2013
6/30/2013 3/31/2013 Albany,
Georgia $ 302,664 $ 294,033 $ 288,089 $ 282,509 $ 273,116 Valdosta,
Georgia 103,479 100,936 101,729 96,485 90,385 Ocala, Florida 57,322
58,343 58,115 58,240 58,533 Statesboro, Georgia 121,636 122,928
124,667 118,056 107,650 Auburn, Alabama 36,171 36,130 31,485 26,061
24,386 Macon, Georgia 75,722 68,638 60,197 55,935 49,165
Birmingham, Alabama 2,091 1,590 344 822 499 South Atlanta
3,485 1,946 962 - - $ 702,570 $ 684,544
$ 665,588 $ 638,108 $ 603,734
Asset Quality
Data (excluding FDIC -acquired loans):
Five Quarter Comparison 3/31/2014
12/31/2013 9/30/2013
6/30/2013 3/31/2013
Nonaccrual loans $ 9,245 $ 9,435 $ 10,986 $ 12,223 $ 12,723 Loans -
90 days past due & still accruing - - -
- - Total non-performing loans 9,245
9,435 10,986 12,223 12,723 OREO
1,104 1,789 2,654 3,046 3,028 Total
non-performing assets $ 10,349 $ 11,224 $ 13,640 $ 15,269 $ 15,751
Trouble debt restructuring - nonaccrual $ 5,702 $
5,763 $ 5,840 $ 6,496 $ 4,593 Trouble debt restructuring - accruing
1,968 1,983 1,996 2,009 2,023
Total trouble debt restructuring $ 7,670 $ 7,746 $ 7,836 $ 8,505 $
6,616 Accruing past due loans $ 830 $ 1,001 $ 669 $ 934 $
1,316 Total criticized assets 22,026 22,741 26,116 25,785
25,474 Total classified assets 18,717 19,582 23,048 22,985 22,118
Allowance for loan losses 9,145 8,955 8,894 9,047 9,105 Net
(recoveries) charge-offs $ (20) $ 160 $ 503 $ 698 $ 406
Asset Quality
Ratios:
Allowance for loan losses to total core loans 1.30% 1.31%
1.34% 1.42% 1.51% Allowance for loan losses to average core loans
1.32% 1.33% 1.37% 1.45% 1.53% Allowance for loan losses to
non-performing loans 98.92% 94.91% 80.96% 74.02% 71.56%
Non-performing loans to total core loans 1.32% 1.38% 1.65% 1.92%
2.11% Non-performing assets to total assets 0.73% 0.81% 1.03% 1.14%
1.15%
Net (recoveries) charge-offs to average
core loans (annualized)
-0.01% 0.10% 0.31% 0.45% 0.27%
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights (Unaudited)
(Dollars in
thousands) Five Quarter Comparison
FDIC-acquired
assets
3/31/2014 12/31/2013
9/30/2013 6/30/2013
3/31/2013
FDIC-acquired
non-covered loans:
Commercial real estate $ 21,269 $ 22,268 $ 25,027 $ 27,258 $ 30,851
Residential real estate 28,115 30,134 32,318 33,452 34,938
Construction and land 5,573 5,156 5,195 5,941 7,756 Commercial and
industrial 1,926 2,604 3,638 4,106 5,125 Consumer and other
2,891 3,156 3,483 3,880 4,647 Total
59,774 63,318 69,661 74,637 83,317
FDIC-acquired
covered loans:
Commercial real estate 14,044 14,161 14,956 15,384 18,849
Residential real estate 22,372 23,886 25,082 27,283 30,735
Construction and land 10,332 11,642 12,469 12,645 13,370 Commercial
and industrial 801 864 924 1,340 2,216 Consumer and other
135 338 412 524 645 Total 47,684
50,891 53,843 57,176 65,815 Total
carrying value of FDIC-acquired loans $ 107,458 $ 114,209 $ 123,504
$ 131,813 $ 149,132 Non-accrete discount for FDIC-acquired loans
30,818 36,746 48,545 55,170 59,558 Accretable discount for
FDIC-acquired loans 27,492 26,860 23,445
23,007 26,136 Total discount for FDIC-acquired loans
58,310 63,606 71,990 78,177
85,694 Outstanding principal balance for FDIC-acquired loans $
165,768 $ 177,815 $ 195,494 $ 209,989 $ 234,826
FDIC-acquired
OREO:
Non-covered $ 1,527 $ 1,694 $ 1,680 $ 1,087 $ 1,363 Covered
6,095 7,053 5,909 7,815 9,460 Total
carrying value of FDIC-acquired OREO $ 7,622 $ 8,747 $ 7,589 $
8,902 $ 10,823 Total discount for FDIC-acquired OREO 10,255
11,186 12,038 11,013 12,176 Gross
carrying value of FDIC-acquired OREO $ 17,877 $ 19,933 $ 19,627 $
19,915 $ 22,999
Total loan discount
accretion recognized in income:
Individual assessed discount accretion $ 808 $ 3,132 $ 791 $ 2,336
$ 637 Pooled assessed discount accretion 3,042 3,140
2,927 3,808 3,951 Total loan discount
accretion recognized in income $ 3,850 $ 6,272 $ 3,718 $ 6,144 $
4,588
FDIC-acquired
ratios:
Total discount to principal balance for FDIC-acquired loans 35.2%
35.8% 36.8% 37.2% 36.5%
Five Quarter Comparison
Non-covered
FDIC-acquired assets
3/31/2014 12/31/2013
9/30/2013 6/30/2013
3/31/2013
Outstanding
principal balance:
FDIC-acquired non-covered loan pools $ 58,294 $ 61,893 $ 66,294 $
70,144 $ 76,675 FDIC-acquired non-covered loans individually
assessed 20,644 22,214 27,627 31,603
35,837 Total non-covered outstanding principal loan balance 78,938
84,107 93,921 101,747 112,512 Gross carrying value for
FDIC-acquired non-covered OREO 4,254 4,470
4,993 2,529 2,371 Total gross balance of non-covered
assets $ 83,192 $ 88,577 $ 98,914 $ 104,276 $ 114,883
Non-covered
non-accretable discount for estimated credit losses:
FDIC-acquired non-covered loan pools $ 7,337 8,932 9,297 9,341
9,479 FDIC-acquired non-covered loans individually assessed
4,283 5,397 12,294 14,894 16,482 Total
non-covered non-accretable discount 11,620 14,329 21,591 24,235
25,961 FDIC-acquired non-covered OREO discount 2,728
2,776 3,313 1,442 1,008 Total non-covered
discount for estimated credit losses 14,348 17,105
24,904 25,677 26,969
Non-covered
accretable discount:
Non-covered accretable discount for improvement in cash flows 6,603
5,458 380 318 475 Other non-covered accretable discount 941
1,002 2,288 2,558 2,759 Total
non-covered accretable discount 7,544 6,460
2,668 2,876 3,234 Total non-covered discount $ 21,892
$ 23,565 $ 27,572 $ 28,553 $ 30,203
Non-covered loan
discount accretion recognized in income:
Individual assessed discount accretion $ 428 $ 2,375 $ 619 $ 974 $
42 Pooled assessed discount accretion 187 249
184 174 24 Total non-covered discount accretion
recognized in income $ 615 $ 2,624 $ 803 $ 1,148 $ 66
Non-covered
FDIC-acquired ratios:
Total discount to principal balance for non-covered FDIC-acquired
assets 26.3% 26.6% 27.9% 27.4% 26.3% Gross balance of non-covered
loans to total FDIC-acquired loans 47.6% 47.3% 48.0% 48.5% 47.9%
Five Quarter
Comparison
Covered
FDIC-acquired assets
3/31/2014 12/31/2013
9/30/2013 6/30/2013
3/31/2013
Outstanding
principal balance:
FDIC-acquired covered loan pools $ 63,789 $ 69,192 $ 74,020
$
79,552 $ 90,020 FDIC-acquired covered loans individually assessed
23,041 24,517 27,554 28,690
32,294 Total covered outstanding principal loan balance 86,830
93,709 101,574 108,242 122,314 Gross carrying value for
FDIC-acquired OREO covered 13,622 15,463
14,634 17,385 20,628 Total gross balance of covered
assets $ 100,452 $ 109,172 $ 116,208 $ 125,627 $ 142,942
Covered
non-accretable discount for estimated credit losses:
FDIC-acquired covered loan pools $ 12,215 $ 15,284 $ 16,281 $
19,917 $ 20,705 FDIC-acquired covered loans individually assessed
6,983 7,133 10,673 11,018 12,892
Total covered non-accretable discount 19,198 22,417 26,954 30,935
33,597 FDIC-acquired covered OREO discount 7,528
8,410 8,725 9,570 11,168 Total covered
discount for estimated credit losses 26,726 30,827
35,679 40,505 44,765
Covered accretable
discount:
Covered accretable discount for improvement in cash flows 18,156
18,012 17,676 16,297 18,820 Other covered accretable discount
1,792 2,389 3,101 3,834 4,082
Total covered accretable discount 19,948 20,401
20,777 20,131 22,902 Total covered discount $
46,674 $ 51,228 $ 56,456 $ 60,636 $ 67,667
Covered loan
discount accretion recognized in income:
Individual assessed accretion $ 380 $ 757 $ 172 $ 1,362 $ 595
Pooled assessed accretion 2,855 2,891 2,743
3,634 3,927 Total covered discount accretion
recognized in income $ 3,235 $ 3,648 $ 2,915 $ 4,996 $ 4,522
Covered
FDIC-acquired ratios:
Total discount to principal balance for covered FDIC-acquired
assets 46.5% 46.9% 48.6% 48.3% 47.3%
Five Quarter Comparison
FDIC loss-share
receivable
3/31/2014 12/31/2013
9/30/2013 6/30/2013
3/31/2013
FDIC loss-share
receivable:
Single family estimated credit losses $ 8,446 $ 8,995 $ 9,134 $
9,764 $ 10,720 Non-single family estimated credit losses 27,459
30,077 33,550 35,678 40,148 Pending reimbursements and other
1,732 2,234 1,843 2,664 1,144 Total $
37,637 $ 41,306 $ 44,527 $ 48,106 $ 52,012 FDIC loss-share
clawback liability $ 2,484 $ 1,941 $ 1,681 $ 1,393 $ 1,269
Total covered discount $ 46,674 $ 51,228 $ 56,456 $ 60,636 $ 67,667
Total covered discount impacting FDIC loss-share receivable $
44,882 $ 48,839 $ 53,355 $ 56,802 $ 63,585 Total covered discount
impacting FDIC loss-share receivable at 80% $ 35,906 $ 39,071 $
42,684 $ 45,442 $ 50,868
FDIC loss-share
receivable ratios:
FDIC receivable as % of gross balance of covered assets 37.5% 37.8%
38.3% 38.3% 36.4% Covered discount at 80% as of % of FDIC
receivable 95.4% 94.6% 95.9% 94.5% 97.8%
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights (Unaudited)
Mortgage Segment
Information
Five Quarter Comparison 3/31/2014
12/31/2013 9/30/2013
6/30/2013 3/31/2013 Net interest
income $ 825 $ 114 $ 218 $ 112 $ 19 Provision for loan losses - - -
- - Noninterest income 2,392 2,951 1,952 3,424 2,182 Noninterest
expense 3,815 3,149 2,968 3,239 2,206 Income tax expense (benefit)
(185 ) (26 ) (247 ) 92 (2
) Mortgage profit (loss) $ (413 ) $ (58 ) $ (551 ) $ 205 $
(3 ) Mortgage segment assets $ 136,662 $ 120,716
$ 44,588 $ 46,854 $ 20,849
Mortgage Segment
Selected Other Information:
Five Quarter Comparison 3/31/2014
12/31/2013 9/30/2013
6/30/2013 3/31/2013 Retail
production $ 98,554 $ 84,381 $ 83,657 $ 97,608 $ 49,450 Wholesale
production $ 36,941 $ 36,030 $ 31,646 $ 19,072 $ 5,588 Purchase as
a % of total production 80 % 78 % 76 % 66 % 54 % Refi as a % of
total production 20 % 22 % 24 % 34 % 46 % End of period locks $
71,121 $ 43,054 $ 47,871 $ 53,910 $ 49,964
Heritage Financial Group, Inc.T. Heath Fountain,
229-878-2055Executive Vice President andChief Financial Officer
Heritage Financial (NASDAQ:HBOS)
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