EXHIBIT 99
Heritage Financial Group Reports Higher Third Quarter Earnings of
$0.11 Per Share, up from $0.02 in Same Period Last Year
ALBANY, Ga.--(BUSINESS WIRE)--Oct. 17, 2007--Heritage Financial
Group (NASDAQ:HBOS), the mid-tier holding company for HeritageBank of
the South, today announced financial results for the third quarter and
nine months ended September 30, 2007. Highlights of the quarter
included significantly higher net income and earnings per share
together with continued growth in the Company's loan portfolio, which
has increased 6% over the past year primarily due to the Company's
expansion into the Florida market in the summer of 2006.
Separately, the Company also announced that its Board of Directors
has declared a cash dividend of $0.06 per common share. The dividend
will be paid on November 16, 2007, to stockholders of record as of
November 2, 2007. Heritage, MHC, which holds 7,868,875 shares or
approximately 73% of the Company's total outstanding stock, has
informed the Company that it will waive receipt of the dividend on its
shares.
Net income for the third quarter of 2007 was $1,163,000 or $0.11
per diluted share compared with $162,000 or $0.02 per diluted share in
the third quarter last year. For the first nine months of 2007, net
income increased to $2,431,000 or $0.23 per diluted share versus
$1,493,000 or $0.14 per dilute share in the year-earlier period.
The Company's reported results for the third quarter and first
nine months of 2007 reflect two items of an unusual nature that affect
the year-to-year comparability of the Company's financial performance.
First, in the third quarter of 2007, the Company recorded charges to
noninterest expense of approximately $1,435,000 related to the
acceleration of vesting under two retirement plans for directors and
certain senior officers, which will reduce future expense under these
plans. Second, during the quarter, the Company recognized an income
tax benefit of $1,060,000 resulting from the elimination of a
tax-related contingent liability established in 2001 when the Company
became a taxable entity. Excluding the effect of these unusual items,
the Company's earnings per diluted share for the third quarter and
first nine months of 2007 totaled $0.10 and $0.22, respectively, both
up substantially from prior-year amounts (see reconciliation of net
income and earnings per share to adjusted net income and adjusted
earnings per share - non-GAAP measures - at the end of this release).
Commenting on the Company's announcement, Leonard Dorminey,
President and Chief Executive Officer of Heritage Financial Group,
said, "We are pleased to announce a strong third-quarter performance
for our company, as reflected in significantly higher earnings,
continued loan growth, and ongoing success in extending our reach to
new customers and markets. This progress underscores the positive
impact we have seen from several steps taken over the past two years
to position the Company for attractive and sustainable growth in the
future, and we are encouraged by the momentum developing in many areas
of our business due to these efforts.
"We continue to be excited about the prospects for expanding our
presence in Florida, where in December we expect to make the
transition from our existing temporary location to our first permanent
office in Ocala," Dorminey continued. "In August, we also announced
plans to open a second banking location in Ocala. This downtown office
is set to serve as the main office for HeritageBank of the South in
Ocala when it is completed in January 2008. With its central location
in the heart of Ocala's business district, we believe this second
location will position us to leverage our commercial lending expertise
and capabilities, complementing the more retail-oriented operations of
our first location."
Net interest income for the third quarter increased 3% to
$3,703,000 from $3,596,000 in the same quarter last year. During the
quarter, the Company recorded a loan loss provision of $58,000 versus
a loan loss provision of $635,000 in the same period last year. Net
interest income after provision for loan losses increased 23% to
$3,645,000 in the third quarter of 2007 from $2,961,000 in the
prior-year quarter. Net interest income for the first nine months of
2007 increased 2% to $10,849,000 from $10,652,000 in the year-earlier
period. The year-to-date provision for loan losses totaled $553,000
compared with $695,000 in first nine months of 2006. Net interest
income after provision for loan losses increased 3% to $10,296,000 for
the first nine months of 2007 versus $9,957,000 in the comparable
period last year.
Non-performing loans at the end of the third quarter of 2007
increased to $3,542,000 versus $546,000 in the second quarter of 2007
and $391,000 in the third quarter last year. The increase primarily
reflected the recent classification as non-performing of the Company's
$2,800,000 participation in a construction loan in Florida, originated
from the Company's commercial lending operations in Albany. As a
percent of total loans outstanding, non-performing loans were 1.19% in
the third quarter, up from 0.19% in the second quarter of 2007 and
0.30% for the year-earlier period. On the other hand, net charge-offs
to average outstanding loans, on an annualized basis, remained low,
totaling 0.06% for the third quarter of 2007 versus 0.01% in the
second quarter of 2007 and 0.04% for the prior-year period. Also, in
management's opinion, the allowance for loan losses remained adequate
at the end of the third quarter, totaling $4,496,000 or 1.51% of total
loans outstanding versus 1.53% at the end of the second quarter of
2007 and 1.49% at the end of the third quarter last year. Because of
these factors, and notwithstanding an increase in non-performing
loans, management believes the allowance for loan losses appropriately
reflects the overall risk profile of the loan portfolio and,
therefore, lower provisions for loan losses in the third quarter and
first nine months of 2007 were in order.
The Company's net interest margin was 3.70% in the third quarter,
reflecting a decline of three basis points from 3.73% in the second
quarter of 2007 and down 55 basis points from third quarter last year.
The decline underscored the continuation of a flat yield curve and
upward pressures on deposit rates as the Company has continued to
build its level of deposits in support of its loan portfolio growth.
The Company's net interest margin for the first nine months of 2007
was 3.71%, down 62 basis points from the same period last year.
Noninterest income for the third quarter of 2007 increased 22% to
$1,856,000 from $1,521,000 in the same period last year, reflecting
primarily higher brokerage fees, along with increased service charges
and transaction fees. Noninterest income for the first nine months of
2007 rose 26% to $5,153,000 from $4,076,000 in the year-earlier
period, mirroring similar trends seen in the third quarter.
Noninterest expense for the third quarter of 2007 increased 31% to
$5,556,000 from $4,257,000 in the third quarter of 2006, primarily
reflecting expense of approximately $1,435,000 related to the
acceleration of vesting under two retirement plans for directors and
certain senior officers. Without those unusual charges, noninterest
expense for the third quarter was largely unchanged compared with the
same period last year. For the first nine months of 2007, noninterest
expense rose 16% to $13,808,000 from $11,867,000 in the year-earlier
period. Aside from the unusual charges referred to above, noninterest
expense for the first nine months of 2007 increased 4% from the same
period last year, primarily because of higher salaries, and employee
benefits related to the Company's new branch in Ocala, which opened in
August 2006, increased data processing fees, and other noninterest
expense.
Annualized return on average stockholders' equity for the third
quarter and nine months ended September 30, 2007, was 7.36% and 5.12%,
respectively, versus 0.96% and 2.89%, respectively, for the comparable
periods last year. Annualized return on average total assets for the
third quarter and nine months ended September 30, 2007, was 1.03% and
0.74%, respectively, compared with 0.17% and 0.54%, respectively, for
the same periods in 2006.
The Company's total assets increased 10% to $454,818,000 at
September 30, 2007, from $413,330,000 at December 31, 2006, and
increased 20% from $380,552,000 at September 30, 2006. Gross loans
increased 7% to $296,922,000 at September 30, 2007, from $276,776,000
at December 31, 2006, and increased 6% from $279,480,000 at the end of
the third quarter last year. Deposits increased 6% to $317,309,000 at
the end of the third quarter of 2007 from $299,189,000 at December 31,
2006, and increased 26% from $251,908,000 at September 30, 2006. Total
stockholders' equity increased 2% to $64,216,000 at September 30,
2007, from $62,809,000 as of December 31, 2006, and declined 6% from
$68,082,000 at September 30, 2006, with the year-over-year decline
reflecting the impact of the Company's ongoing stock repurchase
programs. During the third quarter, the Company repurchased 54,000
shares under its current 300,000-share stock repurchase program,
approved in February, at a cost of $712,000. The Company has remaining
authorization under the program to repurchase up to 239,000 shares
through February 2008.
Heritage Financial Group is the mid-tier holding company for
HeritageBank of the South, a community-oriented bank serving primarily
Southwest Georgia and North Central Florida through seven full-service
banking offices. As of September 30, 2007, the Company reported total
assets of approximately $455 million and total stockholders' equity of
approximately $64 million. For more information about the Company,
visit HeritageBank of the South on the Web at www.eheritagebank.com,
and see Investor Relations under About Us.
Heritage, MHC, a mutual holding company formed in 2002, holds
approximately 73% of the shares of Heritage Financial Group. The
remaining 27% of Heritage Financial Group's shares are held by public
stockholders following the Company's June 2005 initial public
offering.
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. We intend such
forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities
Reform Act of 1995 and include this statement for purposes of these
safe harbor provisions. Further information concerning the Company and
its business, including additional factors that could materially
affect our financial results, is included in our other filings with
the SEC.
HERITAGE FINANCIAL GROUP
Unaudited Financial Highlights
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Total interest income $ 7,232 $ 5,794 $ 20,820 $ 16,391
Total interest expense 3,529 2,198 9,971 5,739
--------- --------- --------- ---------
Net interest income 3,703 3,596 10,849 10,652
Provision for loan losses 58 635 553 695
--------- --------- --------- ---------
Net interest income after
provision for loan losses 3,645 2,961 10,296 9,957
Noninterest income 1,856 1,521 5,153 4,076
Noninterest expense 5,556 4,257 13,808 11,867
--------- --------- --------- ---------
Income before income taxes (55) 225 1,641 2,166
Income tax expense (benefit) (1,218) 63 (790) 673
--------- --------- --------- ---------
Net income $ 1,163 $ 162 $ 2,431 $ 1,493
========= ========= ========= =========
Basic earnings per share $ 0.11 $ 0.02 $ 0.24 $ 0.14
========= ========= ========= =========
Diluted earnings per share $ 0.11 $ 0.02 $ 0.23 $ 0.14
========= ========= ========= =========
Weighted average shares
outstanding - basic 10,350 10,636 10,337 10,755
========= ========= ========= =========
Weighted average shares
outstanding - diluted 10,351 10,657 10,404 10,768
========= ========= ========= =========
Dividends declared per share $ 0.06 $ 0.05 $ 0.12 $ 0.10
========= ========= ========= =========
Sept. 30, Dec. 31, Sept. 30,
2007 2006 2006
--------- --------- ---------
Total assets $ 454,818 $413,330 $ 380,552
Cash and cash equivalents 9,432 9,781 8,988
Interest-bearing deposits in banks 413 2,154 456
Securities available for sale 115,244 84,572 58,156
Loans receivable 296,922 276,776 279,480
Allowance for loan losses 4,496 4,076 4,172
Total deposits 317,309 299,189 251,908
Federal Home Loan Bank advances 50,000 40,000 50,000
Stockholders' equity 64,216 62,809 68,082
Selected Consolidated Financial Ratios and Other Data (unaudited) for
the third quarter and nine months ended September 30, 2007 and 2006,
may be found at the Company's website under SEC Filings. Investors
should refer to the Company's Form 10-Q for the three and nine months
ended September 30, 2007, for additional information and disclosures;
the Form 10-Q will be available at the Investor Information section
of the Company's website immediately upon filing with the Securities
and Exchange Commission.
HERITAGE FINANCIAL GROUP
Unaudited Reconciliation of Net Income to Adjusted Net Income
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net income $ 1,163 $ 162 $ 2,431 $ 1,493
Charges to accelerate vesting
on retirement plans, after
tax 947 -- 947 --
Reversal of contingent income
tax liability (1,060) -- (1,060) --
--------- --------- --------- ---------
Adjusted net income $ 1,050 $ 161 $ 2,318 $ 1,493
========= ========= ========= =========
Diluted earnings per share $ 0.11 $ 0.02 $ 0.23 $ 0.14
Charges to accelerate vesting
on retirement plans, after
tax 0.09 -- 0.09 --
Reversal of contingent income
tax liability (0.10) -- (0.10) --
--------- --------- --------- ---------
Adjusted earnings per diluted
share $ 0.10 $ 0.02 $ 0.22 $ 0.14
========= ========= ========= =========
Net Income and Basic and Diluted Earnings Per Share are presented in
accordance with Generally Accepted Accounting Principals (GAAP).
Adjusted Net Income and Adjusted Basic and Diluted Earnings Per Share
are non-GAAP financial measures. The Company believes that these non-
GAAP measures aid in understanding and comparing current year
results, which include unusual items, to those of the prior year.
These non-GAAP measures should be viewed in addition to, and not as a
substitute for, the Company's reported results.
CONTACT: Heritage Financial Group
T. Heath Fountain, 229-878-2055
Senior Vice President and Chief Financial Officer