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Heritage Financial Group, Inc. Reports Third Quarter Net Income Of $1.7 Million Or $0.21 Per Diluted Share

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

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

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

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