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Heritage Financial Group, Inc. Reports Third Quarter Net Income Of $1.3 Million Or $0.18 Per Diluted Share

Operating Initiatives

During the third quarter of 2013, the Company closed its branch in Vincent, Alabama and its Broadway Avenue branch in Sylacauga, Alabama, both of which were added with the FDIC-assisted acquisition of Frontier Bank in March 2013. The Company does not expect to experience a significant reduction in customer relationships and will serve these customers from other nearby locations. Also, the Company completed staffing reductions related to the Frontier acquisition that will result in a decrease of approximately $1.6 million from Frontier's pre-acquisition level of personnel expenses. Separately, the Company reduced Bank staffing by nine full-time equivalent employees, resulting in a one-time charge of $60,000 for severance for the third quarter of 2013, expected severance of $7,000 for the fourth quarter of 2013, and anticipates expense savings of approximately $460,000 per year related to this staffing reduction.

Third Quarter 2013 Results of Operations

The $1.3 million decrease in reported quarterly earnings for the third quarter of 2013 compared with the linked quarter resulted primarily from the following items:
  • Decreased mortgage banking fees of $1.5 million;
  • Decreased loan discount accretion from FDIC-acquired loans of $2.4 million, partially offset by decreased negative accretion of the FDIC loss-share receivable of $1.9 million;
  • Increased legacy other real estate owned write-downs and foreclosed asset expenses of $387,000;
  • Increased acquisition-related expenses of $132,000;
  • Increased FDIC loss-share clawback expenses of $162,000; offset by
  • Increased interest income on core loans and loans held for sale of $320,000;
  • Decreased provision expense of $318,000; and
  • Increased service charges on deposit accounts of $280,000.

Commenting on the third quarter results, Heath Fountain, Executive Vice President and Chief Financial Officer, said, "Loan discount accretion income can vary significantly based on the timing of asset resolutions, and will continue to cause volatility in earnings. However, our loan growth continues to provide momentum for our earnings, and service charges on deposit accounts continue to grow as we expand our customer base. These revenue enhancements, along with our expense management efforts, are driving ongoing improvement in the results of our core bank.

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