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Heritage Financial Group, Inc. Reports Second Quarter Net Income Of $1.4 Million Or $0.17 Per Diluted Share

In the second quarter of 2012, the Company continued to achieve loan growth, with its loan portfolio increasing $40.7 million organically on a linked-quarter basis and advancing $74.3 million overall compared with the year-earlier quarter. For the second quarter of 2012, the Company's loan portfolio, including loans acquired through FDIC-assisted acquisitions, totaled $605.0 million, which increased $42.4 million on a linked-quarter basis. Total deposits stood at $860.3 million at the end of the second quarter of 2012, down 1% or $8.4 million on a linked-quarter basis from $868.7 million, primarily reflecting a planned runoff of time deposits.

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 consisted of $87.4 million in covered and $15.2 million in non-covered loans at the end of the second quarter of 2012 compared with $95.5 million in covered and $17.4 million in non-covered loans at the end of the first quarter of 2012. The principal balance of the FDIC-assisted loan portfolios totaled $188.0 million at the end of the second quarter of 2012 compared with $209.8 million as of the end of the first quarter of 2012. The details of the accounting for the FDIC-assisted loan portfolios for the second quarter of 2012 are as follows:

  • Covered loans acquired in FDIC-assisted acquisitions decreased $8.1 million to $87.4 million;
  • Non-covered loans acquired in FDIC-assisted acquisitions decreased $2.2 million to $15.2 million;
  • The FDIC loss-share receivable associated with covered loans acquired in FDIC-assisted acquisitions decreased $6.6 million to $76.3 million;
  • The negative accretion for the FDIC loss-share receivable was $133,000;
  • Provision expense for loans acquired in FDIC-assisted acquisitions was $341,000;
  • The non-accretable discount decreased $17.6 million to $66.5 million; and
  • The accretable discount increased $6.1 million to $18.8 million.

For the second quarter of 2012, provision expense of $341,000 was recorded for loan charge-offs on loans acquired in FDIC-assisted acquisitions not provided for by the discount or reimbursement from the FDIC. The provision expense for these loans did not affect the Company's loan loss reserve. The FDIC loss-share receivable associated with covered FDIC-assisted loans decreased $6.6 million from $82.9 million for the prior quarter to $76.3 million, primarily driven by reimbursements received from the FDIC of $5.1 million and negative accretion of $858,000 affecting the loss-share receivable asset that was associated with the improvement in expected cash flows of the loss-share performing portfolios.

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