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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

The Company's estimated total risk-based capital ratio at December 31, 2011, was 19.2%, 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 11.0% as of December 31, 2011.

In the fourth quarter of 2011, the Company continued to post organic and acquisition-related loan growth, increasing on a linked-quarter basis and advancing significantly compared with the year-earlier quarter. Still, bank acquisitions, including the Company's second and third whole-bank acquisitions in February 2011 and August 2011, respectively, accounted for much of the growth in loans and deposits over the past 12 months. At December 31, 2011, the Company's loan portfolio, including loans acquired through FDIC-assisted acquisitions, totaled $560.6 million, which was flat on a linked-quarter basis as a result of organic loan growth of $14.4 million, which offset loan pay-downs in the FDIC-assisted portfolios. Total deposits stood at $884.2 million at the end of the fourth quarter of 2011, down $15.9 million or 2% from $900.1 million at September 30, 2011, driven primarily by planned time deposit runoff.

Accounting for FDIC-Assisted Loans

The Company performs ongoing assessments of the estimated cash flows of its acquired FDIC-assisted loan portfolios. The fair value of the FDIC-assisted loan portfolios consist of $107.5 million in covered and $18.7 million in non-covered loans as of December 31, 2011, compared with $116.2 million in covered and $24.7 million in non-covered loans as of September 30, 2011. The principal balance of the FDIC-assisted loan portfolios totaled $228.4 million as of December 31, 2011, compared with $248.6 million as of September 30, 2011. The details of the accounting for the FDIC-assisted loan portfolios for the fourth quarter of 2011 are as follows:
  • Covered loans acquired in FDIC-assisted acquisitions decreased $8.7 million to $107.5 million;
  • Non-covered loans acquired in FDIC-assisted acquisitions decreased $6.0 million to $18.7 million;
  • The FDIC loss-share receivable associated with covered loans acquired in FDIC-assisted acquisitions decreased $3.9 million to $83.9 million;
  • The accretion for the FDIC loss-share receivable turned negative $72,000;
  • The non-accretable discount decreased $9.3 million to $89.5 million; and
  • The accretable discount increased $4.0 million to $12.8 million.

At December 31, 2011, covered and non-covered loans acquired in FDIC-assisted acquisitions decreased to $107.5 million and $18.7 million, respectively, on a linked-quarter basis from $116.2 million and $24.7 million, respectively, primarily driven by loan pay-downs. The net charge-offs for both the covered and non-covered loans were fully provided for by the associated loan discounts and expected reimbursement from the FDIC and did not affect the Company's loan loss reserve. The FDIC loss-share receivable associated with covered FDIC-assisted loans decreased $3.9 million from $87.8 million in the prior quarter to $83.9 million, driven by $3.2 million of reimbursements received from the FDIC.

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