Heritage Financial Group, Inc. Reports First Quarter Net Income Of $1.0 Million Or $0.12 Per Diluted Share

The non-accretable discount decreased to $84.1 million at the end of the first quarter of 2012 from $89.5 million on a linked-quarter basis, primarily driven by the clearing of $3.9 million of discount in conjunction with the resolution of the FDIC-assisted loans and transfers to accretable discount of $1.5 million. The accretable discount decreased to $12.7 million for the current quarter from $12.8 million on a linked-quarter basis, primarily due to loan discount accretion of $1.6 million that was partially offset by the transfer from the non-accretable discount as a result of the improvement in cash flows.

Asset Quality

Net charge-offs to average outstanding loans on an annualized basis, excluding loans acquired in FDIC-assisted acquisitions, were down sharply to 0.24% for the first quarter of 2012 versus 2.80% for the first quarter of 2011. Total nonperforming loans, excluding loans acquired in FDIC-assisted acquisitions, were $10.7 million or 2.38% of total loans for the first quarter of 2012 compared with $9.1 million or 2.24% of total loans for the same quarter in 2011. Other real estate owned and repossessed assets, excluding assets acquired in FDIC-assisted acquisitions, were $3.0 million for the first quarter of 2012, down from $3.2 million for the same quarter in 2011.

The provision for loan losses decreased to $400,000 for the first quarter of 2012 from $600,000 for the same quarter in 2011, reflecting primarily a decline in annualized net charge-offs. For the first quarter in 2012, the allowance for loan losses represented 1.70% of total loans outstanding, excluding loans acquired in FDIC-assisted acquisitions, versus 1.51% for the first quarter in 2011.

About Heritage Financial Group, Inc. and HeritageBank of the South

Heritage Financial Group, Inc. is the holding company for HeritageBank of the South, a community-oriented bank serving primarily South Georgia and North Central Florida through 21 full-service branch locations, 11 mortgage offices, and 3 investment offices. As of March 31, 2012, the Company reported total assets of approximately $1.1 billion and total stockholders' equity of approximately $125 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.

Cautionary Note Regarding Forward Looking Statements

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. These statements can be identified by the fact that they do not relate strictly to historical or current facts and often use words or phrases "opportunities," "prospects," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions. The forward-looking statements made herein represent the current expectations, plans or forecasts of the Company's future results and revenues. The Company intends 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 includes this statement for purposes of these safe harbor provisions. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. Investors should not place undue reliance on any forward-looking statement and should consider the uncertainties and risks, discussed under Item 1A. "Risk Factors" of the Company's 2011 Annual Report on Form 10-K and in any of the Company's subsequent SEC filings. Further information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in its other filings with the SEC.

HERITAGE FINANCIAL GROUP, INC. Unaudited Reconciliation of Non-GAAP Measures Presented in Earnings Release (Dollars in thousands, except per share data)
			Three Months Ended March 31,
			2012					2011
Total noninterest income			$	2,783				$	4,841
Bargain purchase gain				--					(2,334	)
Adjusted noninterest income			$	2,783				$	2,507
Total noninterest expense			$	10,801				$	8,398
Acquisition-related expenses				(331	)				(282	)
Adjusted noninterest expense			$	10,470				$	8,116
Net income as reported			$	971				$	1,215
Bargain purchase gain and acquisition-related expenses, net of tax*				246					(1,218	)
Adjusted net income (loss)			$	1,217				$	(3	)
Diluted earnings per share			$	0.12				$	0.15
Bargain purchase gain and acquisition-related expenses, net of tax*				0.03					(0.15	)
Adjusted diluted earnings (loss) per share			$	0.15				$	(0.00	)
* The effective tax rate is used for the period presented to determine net of tax amounts.

Net Income (Loss) and Diluted Earnings (Loss) Per Share are presented in accordance with Generally Accepted Accounting Principles (GAAP). Adjusted Noninterest Income, Adjusted Noninterest Expense, Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share are non-GAAP financial measures. The Company believes that these non-GAAP measures aid in understanding and comparing current-year and prior-year results, both of which include unusual items of different natures. These non-GAAP measures should be viewed in addition to, and not as a substitute for, the Company's reported results.

HERITAGE FINANCIAL GROUP, INC. Unaudited Financial Highlights (Dollars in thousands, except per share data)
							Three Months Ended March 31,
							2012				2011
Interest income							$	11,659			$	8,624
Interest expense								1,935				2,591
Net interest income								9,724				6,033
Provision for loan losses								400				600
Net interest income after provision for loan losses								9,324				5,433
Noninterest income								2,783				4,841
Noninterest expense								10,801				8,398
Income before income taxes								1,306				1,876
Income tax expense								335				661
Net income							$	971			$	1,215
Net income per share:
Basic							$	0.12			$	0.15
Diluted							$	0.12			$	0.15
Weighted average shares outstanding:
Basic								8,144,382				8,186,502
Diluted								8,145,730				8,187,835
Dividends declared per share							$	0.04			$	0.03
			Mar. 31, 2012				Dec. 31, 2011				Mar. 31, 2011
Total assets			$	1,075,510			$	1,089,852			$	951,918
Cash and cash equivalents				22,438				34,521				64,580
Interest-bearing deposits in banks				47,174				43,101				21,800
Securities available for sale				264,535				259,017				220,803
Loans				562,495				560,620				496,067
Allowance for loan losses				7,629				7,494				6,138
Total deposits				868,743				884,187				731,088
Federal Home Loan Bank advances				35,000				35,000				60,000
Stockholders' equity				125,067				124,136				121,331

Heritage Financial Group, Inc.
First Quarter 2012 Earnings Release Supplement
(Unaudited)
(Dollars in thousands, except per share data)
			Three Months Ended
			March 31,
			2012					2011
Income Statement Data
Interest income
Loans			$	10,147				$	7,145
Loans held for sale				182					8
Securities - taxable				979					1,207
Securities - nontaxable				299					211
Federal funds sold				15					13
Interest-bearing deposits in banks				37					40
Total interest income				11,659					8,624
Interest expense
Deposits				1,263					1,848
Other borrowings				672					743
Total interest expense				1,935					2,591
Net interest income				9,724					6,033
Provision for loan losses				400					600
Net interest income after provision for loan losses				9,324					5,433
Non-interest income
Service charges on deposit accounts				1,020					1,051
Bankcard services income				824					586
Other service charges, fees & commissions				85					74
Brokerage fees				446					354
Mortgage banking fees				689					268
Bank owned life insurance				140					145
Gain on sale of securities				42					-
Bargain purchase gain				-					2,334
Accretion of FDIC loss-share receivable				(498	)				-
Other				35					29
Total non-interest income				2,783					4,841
Non-interest expense
Salaries and employee benefits				5,536					4,328
Equipment				667					351
Occupancy				657					445
Advertising & marketing				180					164
Legal & accounting				119					210
Consulting & other professional fees				119					179
Director fees & retirement				165					227
Telecommunications				231					145
Supplies				154					95
Data processing fees				821					518
(Gain) loss on sale and write-downs of other real estate owned				(7	)				402
Loss on sale and write-downs of FDIC acquired other real estate				174					-
Foreclosed asset expenses				221					170
Foreclosed FDIC acquired asset expenses				162					-
FDIC insurance and other regulatory fees				245					293
Acquisition related expenses				331					282
Deposit Intangible expense				201					95
Other operating				825					494
Total non-interest expense				10,801					8,398
Income before taxes				1,306					1,876
Applicable income tax				335					661
Net income			$	971				$	1,215
Weighted average shares - basic				8,144,382					8,186,502
Weighted average shares - diluted				8,145,730					8,187,835
Basic earnings per share			$	0.12				$	0.15
Diluted earnings per share				0.12					0.15
Cash dividend declared per share				0.04					0.03

Heritage Financial Group, Inc.
First Quarter 2012 Earnings Release Supplement
(Unaudited)
(Dollars in thousands, except per share data)
			March 31,
			2012					2011
Balance Sheet Data (Ending Balance)
Total loans			$	562,495				$	496,067
Loans held for sale				4,731					2,642
Covered loans				95,493					62,372
Allowance for loan losses				7,629					6,138
Total foreclosed assets				12,117					10,577
Covered other real estate owned				8,445					7,361
FDIC loss-share receivable				82,925					58,174
Intangible assets				4,647					4,713
Total assets				1,075,510					951,918
Non-interest-bearing deposits				88,582					63,134
Interest-bearing deposits				780,161					667,954
Federal Home Loan Bank advances				35,000					60,000
Federal funds purchased and securities sold under agreement to repurchase				37,227					31,509
Stockholders' equity				125,067					121,331
Total shares outstanding				8,668,752					8,712,750
Unearned ESOP shares				425,813					478,996
Book value per share			$	15.17				$	14.74
Tangible book value per share (non-GAAP)				14.61					14.16
Market value per share				11.82					12.73
			Three Months Ended
			March 31,
			2012					2011
Average Balance Sheet Data
Average interest-bearing deposits in banks			$	37,999				$	16,150
Average federal funds sold				22,363					24,111
Average investment securities				257,863					228,530
Average loans				560,385					456,851
Average mortgage loans held for sale				4,550					737
Average FDIC loss-share receivable				84,017					27,489
Average earning assets				883,160					726,379
Average assets				1,074,260					858,398
Average noninterest-bearing deposits				84,920					52,414
Average interest-bearing deposits				784,944					586,129
Average total deposits				869,864					638,543
Average federal funds purchased and securities sold under agreement to repurchase				33,822					31,568
Average Federal Home Loan Bank advances				35,000					61,749
Average interest-bearing liabilities				853,766					679,446
Average stockholders' equity				125,503					120,248
Performance Ratios
Annualized return on average assets				0.36	%				0.57	%
Annualized return on average equity				3.09	%				4.04	%
Net interest margin				4.49	%				3.42	%
Net interest spread				4.46	%				3.32	%
Efficiency ratio				86.36	%				77.23	%
Capital Ratios
Average stockholders' equity to average assets				11.7	%				14.0	%
Tangible equity to tangible assets (non-GAAP)				11.2	%				12.3	%
Tier 1 leverage ratio (1)				11.4	%				13.4	%
Tier 1 risk-based capital ratio (1)				21.0	%				23.3	%
Total risk-based capital ratio (1)				22.2	%				24.5	%
Other Information
Full-time equivalent employees				324					273
Number of full-service offices				21					20
Mortgage loan offices				11					5
Investment offices				3					2
(1) March 31, 2012 consolidated ratios may be subject to change pending the filing of an amendment to our call report; all other periods are presented as filed.

Heritage Financial Group, Inc.
First Quarter 2012 Earnings Release Supplement
(Unaudited)
(Dollars in thousands, except per share data)
			Five Quarter Comparison for the Three Months Ended
			3/31/12					12/31/11					9/30/11					6/30/11					3/31/11
Income Statement Data
Interest income
Loans			$	10,147				$	9,945				$	8,774				$	7,564				$	7,145
Loans held for sale				182					198					45					46					8
Securities - taxable				979					1,095					1,013					1,221					1,207
Securities - nontaxable				299					251					207					211					211
Federal funds sold				15					15					16					16					13
Interest-bearing deposits in banks				37					65					93					51					40
Total interest income				11,659					11,569					10,148					9,109					8,624
Interest expense
Deposits				1,263					1,671					2,048					1,983					1,848
Other borrowings				672					686					687					684					743
Total interest expense				1,935					2,357					2,735					2,667					2,591
Net interest income				9,724					9,212					7,413					6,442					6,033
Provision for loan losses				400					595					1,000					700					600
Net interest income after provision for loan losses				9,324					8,617					6,413					5,742					5,433
Non-interest income
Service charges on deposit accounts				1,020					1,237					1,267					1,222					1,051
Bankcard services income				824					691					684					674					586
Other service charges, fees & commissions				85					188					62					75					74
Brokerage fees				446					298					328					406					354
Mortgage banking fees				689					674					719					624					268
Bank owned life insurance				140					148					146					149					145
Life insurance proceeds				-					-					-					32					-
Gain on sale of securities				42					18					213					453					-
Bargain purchase gain				-					-					2,000					(117	)				2,334
Accretion of FDIC loss-share receivable				(498	)				(72	)				448					5					-
Other				35					33					25					37					29
Total non-interest income				2,783					3,215					5,892					3,560					4,841
Non-interest expense
Salaries and employee benefits				5,536					5,758					5,384					4,923					4,328
Equipment				667					701					516					428					351
Occupancy				657					613					685					536					445
Advertising & marketing				180					233					167					220					164
Legal & accounting				119					93					118					167					210
Consulting & other professional fees				119					131					208					198					179
Director fees & retirement				165					151					160					161					227
Telecommunications				231					274					206					204					145
Supplies				154					151					156					145					95
Data processing fees				821					856					857					615					518
(Gain) loss on sale and write-downs of other real estate owned				(7	)				(27	)				(139	)				535					402
Loss (gain) on sale and write-downs of FDIC acquired other real estate				174					(92	)				(246	)				(45	)				-
Foreclosed asset expenses				221					22					216					244					170
Foreclosed FDIC acquired asset expenses				162					118					72					1					-
FDIC insurance and other regulatory fees				245					179					128					354					293
Acquisition related expenses				331					254					299					474					282
Deposit intangible expense				201					207					183					207					95
Other operating				825					906					809					673					494
Total non-interest expense				10,801					10,528					9,779					10,040					8,398
Income (loss) before taxes				1,306					1,304					2,526					(738	)				1,876
Applicable income tax (benefit)				335					(91	)				786					(257	)				661
Net income (loss)			$	971				$	1,395				$	1,740				$	(481	)			$	1,215
Weighted average shares - basic				8,144,382					8,229,293					8,215,077					8,213,761					8,186,502
Weighted average shares - diluted				8,145,730					8,230,206					8,216,472					8,215,090					8,187,835
Basic earnings (loss) per share			$	0.12				$	0.17				$	0.21				$	(0.05	)			$	0.15
Diluted earnings (loss) per share				0.12					0.17					0.21					(0.05	)				0.15
Cash dividend declared per share				0.04					0.03					0.03					0.03					0.03

Heritage Financial Group, Inc.
First Quarter 2012 Earnings Release Supplement
(Unaudited)
(Dollars in thousands, except per share data)
			Five Quarter Comparison
			3/31/12					12/31/11					9/30/11					6/30/11					3/31/11
Balance Sheet Data (at period end)
Total loans			$	562,495				$	560,620				$	560,940				$	500,724				$	496,067
Loans held for sale				4,731					7,471					5,538					5,579					2,642
Covered loans				95,493					107,457					116,206					60,426					62,372
Allowance for loan losses				7,629					7,494					6,936					6,585					6,138
Total foreclosed assets				12,117					13,441					12,355					9,693					10,577
Covered other real estate owned				8,445					10,084					10,514					6,968					7,361
FDIC loss-share receivable				82,925					83,901					87,757					58,152					58,174
Intangible assets				4,647					4,848					5,056					4,388					4,713
Total assets				1,075,510					1,089,852					1,102,504					963,571					951,918
Non-interest-bearing deposits				88,582					78,823					84,716					73,382					63,134
Interest-bearing deposits				780,161					805,364					815,387					690,291					667,954
Federal home loan bank advances				35,000					35,000					35,000					35,000					60,000
Federal funds purchased and securities sold under agreement to repurchase				37,227					35,049					36,118					31,989					31,509
Stockholders' equity				125,067					124,136					123,638					122,038					121,331
Total shares outstanding				8,668,752					8,712,031					8,712,140					8,712,750					8,712,750
Unearned ESOP shares				425,813					439,138					452,348					465,673					478,996
Book value per share			$	15.17				$	15.01				$	14.97				$	14.80				$	14.74
Tangible book value per share (non-GAAP)				14.61					14.42					14.36					14.26					14.16
Market value per share				11.82					11.80					10.36					11.92					12.73
			Five Quarter Comparison
			3/31/12					12/31/11					9/30/11					6/30/11					3/31/11
Average Balance Sheet Data
Average interest-bearing deposits in banks			$	37,999				$	56,025				$	102,769				$	44,525				$	16,150
Average federal funds sold				22,363					22,805					26,889					20,447					24,111
Average investment securities				257,863					240,101					201,762					210,261					228,530
Average loans				560,385					559,556					533,487					501,929					456,851
Average mortgage loans held for sale				4,550					7,599					4,336					3,878					737
Average FDIC Loss-Share Receivable				84,017					86,544					71,942					58,149					27,489
Average earning assets				883,160					878,487					864,907					777,162					725,642
Average assets				1,074,260					1,085,490					1,040,575					966,962					858,398
Average noninterest-bearing deposits				84,920					80,376					76,940					70,346					52,414
Average interest-bearing deposits				784,944					801,246					761,344					680,424					586,129
Average total deposits				869,864					881,622					838,284					750,770					638,543
Average federal funds purchased and securities sold under agreement to repurchase				33,822					36,621					33,678					31,664					31,568
Average Federal Home Loan Bank advances				35,000					35,000					35,000					54,143					61,749
Average interest-bearing liabilities				853,766					872,867					830,022					766,231					679,446
Average stockholders' equity				125,503					124,257					123,844					122,528					120,248
Performance Ratios
Annualized return on average assets				0.36	%				0.51	%				0.67	%				-0.20	%				0.57	%
Annualized return on average equity				3.09	%				4.49	%				5.62	%				-1.57	%				4.04	%
Net interest margin				4.49	%				4.19	%				3.44	%				3.36	%				3.42	%
Net interest spread				4.46	%				4.17	%				3.38	%				3.34	%				3.32	%
Efficiency ratio				86.36	%				85.01	%				73.50	%				100.38	%				77.23	%
Capital Ratios
Average stockholders' equity to average assets				11.7	%				11.4	%				11.9	%				12.7	%				14.0	%
Tangible equity to tangible assets (non-GAAP)				11.2	%				11.0	%				10.8	%				12.3	%				12.3	%
Tier 1 leverage ratio				11.4	%				11.2	%				11.3	%				12.1	%				13.4	%
Tier 1 risk-based capital ratio				21.0	%				21.2	%				21.2	%				22.2	%				23.3	%
Total risk-based capital ratio				22.2	%				22.4	%				22.4	%				23.4	%				24.5	%
Other Information
Full-time equivalent employees				324					327					313					295					273
Number of full-service offices				21					22					23					21					20
Mortgage loan offices				11					11					11					10					5
Investment offices				3					3					3					2					2

Heritage Financial Group, Inc.
First Quarter 2012 Earnings Release Supplement
(Dollars in thousands)
			Three Months Ended
			March 31,
			2012					2011
Loans by Type
Construction and land loans			$	24,375				$	27,580
Farmland loans				17,150					13,707
Permanent 1 - 4				132,172					129,371
Permanent 1 - 4 - junior liens and revolving				25,220					25,642
Multifamily				18,577					12,110
Nonresidential				150,492					119,325
Commercial business loans				59,697					52,662
Consumer and other loans				21,935					25,046
				449,618					405,443
Loans acquired through FDIC-assisted acquisitions:
Non covered loans				17,384					28,252
Covered loans				95,493					62,372
				562,495					496,067
OREO				2,992					2,659
OREO assets acquired through FDIC-assisted acquisitions:
Non Covered				680					556
Covered				8,445					-
				12,117					3,215
Asset Quality Data (excluding assets acquired through FDIC-assisted acquisitions):
Allowance for loan losses to total loans				1.70	%				1.51	%
Allowance for loan losses to average loans				1.35	%				1.59	%
Allowance for loan losses to non-performing loans				71.42	%				67.63	%
Accruing past due loans			$	452				$	1,245
Nonaccrual loans				10,681					9,077
Loans - 90 days past due & still accruing				-					-
Total non-performing loans				10,681					9,077
OREO and repossessed assets				2,992					3,215
Total non-performing assets				13,673					12,292
Non-performing loans to total loans				2.38	%				2.24	%
Non-performing assets to total assets				1.27	%				1.29	%
QTD Net charge-offs to average loans (annualized)				0.24	%				2.80	%
Net charge-offs QTD			$	265				$	2,563

Heritage Financial Group, Inc.
First Quarter 2012 Earnings Release Supplement
(Dollars in thousands)
			Five Quarter Comparison for the Quarter Ended
			3/31/12					12/31/11					9/30/11					6/30/11					3/31/11
Loans by Type
Construction and land loans			$	24,375				$	26,804				$	28,115				$	26,688				$	27,580
Farmland loans				17,150					17,921					18,272					13,276					13,707
Permanent 1 - 4				132,172					129,745					134,269					131,596					129,371
Permanent 1 - 4 - junior liens and revolving				25,220					26,154					26,071					26,140					25,642
Multifamily				18,577					15,797					13,754					12,755					12,110
Nonresidential				150,492					138,970					129,730					131,027					119,325
Commercial business loans				59,697					55,179					47,854					50,997					52,662
Consumer and other loans				21,935					23,872					21,955					23,592					25,046
				449,618					434,442					420,020					416,071					405,443
Loans acquired through FDIC-assisted acquisitions:
Non covered loans				17,384					18,721					24,713					24,227					28,252
Covered loans				95,493					107,457					116,206					60,427					62,372
				562,495					560,620					560,939					500,725					496,067
Asset Quality Data (excluding Loans acquired through FDIC-assisted acquisitions):
Allowance for loan losses to total loans				1.70	%				1.72	%				1.65	%				1.58	%				1.51	%
Allowance for loan losses to average loans				1.35	%				1.32	%				1.29	%				1.48	%				1.59	%
Allowance for loan losses to non-performing loans				71.42	%				106.40	%				86.76	%				76.67	%				67.63	%
Accruing past due loans			$	452				$	371				$	1,487				$	727				$	1,245
Nonaccrual loans				10,681					7,043					7,994					8,589					9,077
Loans - 90 days past due & still accruing				-					-					-					-					-
Total non-performing loans				10,681					7,043					7,994					8,589					9,077
OREO and repossessed assets				2,992					3,356					1,841					2,725					3,215
Total non-performing assets				13,673					10,399					9,835					11,314					12,292
Non-performing loans to total loans				2.38	%				1.62	%				1.90	%				2.06	%				2.24	%
Non-performing assets to total assets				1.27	%				0.95	%				0.89	%				1.17	%				1.29	%
Net charge-offs to average loans (annualized)				0.24	%				0.04	%				0.73	%				0.26	%				2.80	%
Net charge-offs			$	265				$	37				$	650				$	253				$	2,563

Note:

Certain prior-period amounts have been reclassified to conform with current presentation.

Loans acquired through FDIC-assisted acquisitions include loans acquired in the acquisition of The Tattnall Bank in December of 2009 and the acquisition of Citizens Bank of Effingham in February 2011 and First Southern National Bank in August 2011. The acquisition of The Tattnall Bank did not involve a loss-share agreement with the FDIC. The acquisition of Citizens Bank of Effingham involved a loss-share agreement in which the FDIC will, for a specified number of years, reimburse the Bank for 80% of all losses and related expenses on covered assets.

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