Heritage Financial 8-K/A Financial Statements and Exhibits

Exhibit 99.2

ALARION FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
	Unaudited September,		December 31,
	2014		2013
Assets
Cash and due from banks	$	3,837	$	5,693
Interest-bearing deposits in banks		293		235
Federal funds sold		430		35
Total cash and cash equivalents		4,560		5,963
Securities available for sale, at fair value		39,362		43,067
Loans, net allowance for loan losses of $3,832 and $4,054		203,656		196,777
Loans held for sale		6,753		9,234
Accrued interest receivable		714		839
Premises and equipment, net		13,944		14,669
Other real estate owned, net		2,549		2,923
Federal Home Loan Bank Stock, at cost		926		1,211
Deferred income taxes		3,659		4,496
Other assets		348		352
	$	276,471	$	279,531
Liabilities and Stockholders' Equity
Noninterest bearing deposits	$	33,264	$	32,554
NOW, money-market and savings deposits		87,999		95,482
Time deposits less than $100,000		73,389		72,947
Time deposits greater than $100,000		35,287		28,180
Total deposits		229,939		229,163
Federal funds purchased		-		2,000
Federal Home Loan Bank advances		13,000		19,500
Other borrowings		3,224		2,956
Accrued interest payable		282		229
Accrued expenses and other liabilities		3,942		1,145
Total liabilities		250,387		254,993
Commitments and Contingencies
Stockholders' equity
Preferred stock, par value; $0.01; 1,000,000  shares authorized;
Preferred stock, Series A, $.01 par value; $1,000 liquidation
value; 6,514 shares issued and outstanding		-		-
Preferred stock, Series B, $.01 par value; $1,000 liquidation
value; 326 shares issued and outstanding		-		-
Additional paid-in capital, preferred		6,840		6,840
Preferred stock discount		-		(4)
Common stock, par value $0.01; 4,000,000 shares authorized; 2,633,208 issued and outstanding		26		26
Additional paid-in capital, common		26,595		26,595
Accumulated deficit		(7,387)		(8,309)
Accumulated other comprehensive income (loss)		10		(610)
Total stockholders' equity		26,084		24,538
	$	276,471	$	279,531

2

oans
ALARION FINANCIAL SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
For the Nine Months Ended September 30, 2014 and 2013
(Dollars in Thousands except per share data)
	For the Nine Months Ended September 30,
	2014		2013
Interest income:
Loans	$	7,167	$	7,009
Securities		931		756
Other		13		31
		8,111		7,796
Interest expense:
Deposits		1,119		1,225
Borrowings		451		446
		1,570		1,671
Net interest income		6,541		6,125
Provision for loan losses		50		1,025
Net interest income after provision		6,491		5,100
Noninterest income
Deposit account fees		305		280
Net gain on sale of securities		-		88
Net gain on sale of loans held for sale		2,860		2,800
Other		683		1,316
		3,848		4,484
Noninterest expense
Salaries and employee benefits		4,522		4,679
Occupancy and equipment		1,225		951
Data processing		740		627
Professional fees		722		599
Advertising and promotion		137		200
Office supplies and printing		117		87
Other real estate owned expenses		(6)		245
FDIC assessment		288		291
Other		1,199		1,278
		8,944		8,957
Income before income taxes		1,395		627
Applicable income tax		468		188
Net income	$	927	$	439
Preferred stock dividend requirement and
Accretion of preferred stock to par		462		315
Net earnings available to
common shareholders	$	465	$	124

3

ALARION FINANCIAL SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
For the Nine Months Ended September 30, 2014 and 2013
(Dollars in Thousands)
	For the Nine Months Ended September 30,
	2014		2013
Net earnings	$	927	$	439
Other comprehensive income (loss):
Change in unrealized gain on investments:
Unrealized gain (loss) arising during the period		990		(1,474)
Reclassification adjustment for realized gains		-		(89)
Net change in unrealized gain (loss)		990		(1,563)
Deferred income tax (benefit) expense
on above change		(371)		586
Total other comprehensive income  (loss)		619		(977)
Comprehensive income (loss)	$	1,546	$	(538)

4

ALARION FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Nine Months Ended September, 30 2014 (Unaudited)

And The Year Ended December 31, 2013

(Dollars in Thousands, except per share data)

																													Accumulated
	Preferred Stock																Common Stock												Other
												Additional										Additional						Compre-
	Series A					Series B					Paid-In										Paid-In			Accumulated						hensive
	Shares		Amount				Shares	Amount					Capital		Discount		Shares	Par Value			Capital			Deficit				Income (Loss)					Total
Balance, December 31, 2012		6,514		$	-		326		$	-			$	6,840	$	(69)	2,633,208	$	26	$		26,595	$		(8,805)	$	430				$	25,017
Net earnings		-			-		-			-				-		-	-		-			-			561		-					561
Net change in unrealized  gain
on securities available  for sale,
net of taxes $621		-			-		-			-				-		-	-		-			-			-		(1,040)					(1,040)
Series B preferred stock
accretion of discount		-			-		-			-				-		65	-		-			-			(65)		-					-
Balance, December 31 ,2013		6,514			-		326			-				6,840		(4)	2,633,208		26			26,595			(8,309)		(610)					24,538
Net earnings		-			-		-			-				-		-	-		-			-			926		-					926
Net change in unrealized gain
on securities available  for sale		-			-		-			-				-		-	-		-			-			-		620					620
Series B preferred stock
Accretion discount		-			-		-			-				-		4	-		-			-			(4)		-					-
Balance, September 30, 2014		6,514		$	-		326		$	-			$	6,840	$	-	2,633,208	$	26	$		26,595	$		(7,387)	$	10				$	26,084

5

ALARION FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Nine Months Ended September 30,
	2014		2013
OPERATING ACTIVITIES
Net earnings	$	927	$	439
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		50		1,025
Depreciation and amortization		761		443
Gain on sale of loans held for sale		(2,860)		(2,800)
Loans originated for sale		(58,545)		(100,232)
Proceeds from loans sold		63,647		111,833
Net amortization of deferred loan fees and costs		168		109
Deferred income taxes		468		188
(Gain) Loss on sale of other real estate owned		(92)		5
Provision for other real estate owned		-		78
Net gain on sale of securities		-		(88)
Net amortization of premiums and discounts on securities available for sale		310		3,904
Net decrease in accrued interest receivable		125		130
Net increase (decrease) in accrued interest payable		53		(30)
Net decrease in other assets		2,004		132
Net increase in accrued expenses and other liabilities		797		809
Net cash provided by operating activities		7,813		15,945
INVESTING ACTIVITIES
Purchases of securities available for sale		-		(15,906)
Proceeds from sales, principal repayments, principal pay-ups and
maturities on securities available for sale		4,383		11,716
Net (increase) decrease in loans		(6,957)		878
Purchase of premises and equipment		(36)		(394)
Proceeds from sale of other real estate owned		565		1,131
Redemption of Federal Home Loan Bank Stock		285		93
Net cash used in investing activities		(1,760)		(2,482)
FINANCING ACTIVITIES
Net increase (decrease) in deposits		776		(5,831)
Net increase in other borrowings		268		2,067
Net decrease in federal funds purchased		(2,000)		-
Net decrease in Federal Home Loan Bank advances		(6,500)		-
Net cash used in financing activities		(7,456)		(3,764)
Net (decrease) increase in cash and due from banks		(1,403)		9,699
Cash and due from banks at beginning of period		5,963		5,794
Cash and due from banks at end of period	$	4,560	$	15,493

(Continued)

6

ALARION FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(Dollars in thousands)

	Nine Months Ended September 30,
	2014		2013
et
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	1,517	$	1,701
NONCASH TRANSACTIONS
Accumulated other comprehensive income (loss),
net change in unrealized gain on securities
available for sale, net of taxes	$	620	$	(976)
Transfer of loans to other real estate owned	$	99	$	835
Series B preferred stock accretion of discount	$	4	$	49

7