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Heritage Financial Group, Inc. 2011 Net Income More Than Doubles Versus 2010, Increasing To $3.8 Million Or $0.47 Per Diluted Share

Fourth Quarter 2011 Results of Operations

The Company reported net income of $1.4 million, or $0.16 per diluted share, for the three months ended December 31, 2011, compared with net income of $922,000 or $0.11 per diluted share for the three months ended December 31, 2010. This $430,000 improvement in earnings was primarily the result of the following items:

  • Improved net interest income of $3.3 million due to growth in interest-earning assets;
  • Lower provision expense of $2.8 million reflecting lower net charge-offs compared with the 2010 quarter; offset by
  • Reduced noninterest income of $3.1 million, reflecting a $2.7 million bargain purchase gain associated with the Tattnall FDIC-assisted acquisition and $916,000 of life insurance proceeds on a former key employee recorded during the 2010 quarter, partially offset by improvement in mortgage banking fees of $404,000; and
  • Increased non-interest expense of $3.0 million due to increased salaries and employment benefits of $2.1 million driven by the acquisition-related hiring of an additional 121 full-time equivalent employees, on top of growth in most other noninterest expense categories.

The Company's results for the three months ended December 31, 2011, included acquisition-related expenses, net of tax, of $177,000 and a $477,000 income tax benefit for state tax credits recorded as the Company returned to core profitability. Excluding special items, the Company would have reported net income of $1.1 million or $0.13 per diluted share for the fourth quarter of 2011 compared with a net loss of $1.6 million or $0.19 per diluted share in the fourth quarter of 2010 (see reconciliation of non-GAAP items).

Net interest income for the fourth quarter increased 55% to $9.2 million from $5.9 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 fourth quarter of 2011 increased 75 basis points to 4.19% on a linked-quarter basis from 3.44% in the third quarter of 2011 and increased 31 basis points from 3.88% in the year-earlier period. The improvement in the fourth 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 to lower levels.

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