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Heritage Financial Group, Inc. Signs Definitive Agreement To Acquire Ocala-Based Alarion Financial Services, Inc.

Heritage Financial Group, Inc. ("Heritage" or the "Company,") (NASDAQ: HBOS), the holding company for HeritageBank of the South ("HeritageBank"), today announced it has entered into a definitive agreement to acquire all of the common stock of Alarion Financial Services, Inc. ("Alarion"), the holding company for Alarion Bank, in a stock transaction valued at approximately $22.1 million.

Alarion, headquartered in Ocala, Florida, is the holding company for Alarion Bank, which operates six branches in Ocala, Gainesville and Alachua (suburban Gainesville). As of March 31, 2014, Alarion reported approximately $283 million in assets, $200 million in loans, $241 million in deposits and $18 million in tangible common equity. Upon completion of the transaction, Heritage is expected to have approximately $1.7 billion in assets, $1.0 billion in loans, and $1.4 billion in deposits. The transaction is expected to be immediately accretive to Heritage Financial Group's fully diluted earnings per share, excluding deal costs.

Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Alarion's shareholders will receive 0.44 shares of the Company's common stock for each share of Alarion common stock owned, resulting in the issuance of a total of approximately 1,159,000 shares in the exchange. Additionally, in connection with the transaction, affiliates of Jacobs Asset Management, LLC that are investors in both Heritage and the preferred stock of Alarion will exchange approximately $3.5 million of Alarion preferred stock and accrued but unpaid dividends for approximately 178,000 shares of Heritage common stock. The transaction, which is subject to regulatory approval, the approval of the shareholders of Alarion and other customary conditions, is expected to close in the third quarter of 2014.

Commenting on the announcement, Leonard Dorminey, President and Chief Executive Officer of Heritage Financial Group, said, "We are pleased to announce the acquisition of Alarion, our first open-bank acquisition following a number of FDIC-assisted transactions and other branch acquisitions. This transaction will greatly increase our footprint in North Central Florida, expanding our presence in the Ocala market and providing us with an initial entry into the Gainesville area – both attractive markets for HeritageBank. The combination with Alarion will triple the number of branches we have in North Central Florida and is expected to move our deposit market share into the top 10 in both Ocala and Gainesville. Lastly, the acquisition of Alarion, with its strong mortgage banking operations, fits nicely with our efforts to expand those services across our markets.

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