Capital InitiativesThe Company's estimated total risk-based capital ratio at March 31, 2012, was 22.2%, 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 11.2% as of March 31, 2012. During the first quarter of 2012, the Company repurchased approximately 43,000 shares under its stock repurchase program. The program, which expires in July 2012 unless completed sooner or otherwise extended, has a remaining authorization to repurchase approximately 438,000 shares. Additionally, in February 2012, Heritage Financial Group's Board of Directors increased the Company's quarterly cash dividend 33% to $0.04 per share. First Quarter 2012 Results of Operations The Company reported net income of $1.0 million or $0.12 per diluted share for the first quarter in 2012 compared with net income of $1.2 million or $0.15 per diluted share for the first quarter in 2011. However, the Company's results for the first quarters of 2012 and 2011 included special items that affect comparability. Results for the first quarter of 2012 included acquisition-related expenses of $246,000 net of tax, while the results of the year-earlier quarter included a bargain purchase gain and acquisition-related expenses that together totaled $1.2 million net of tax. Excluding these special items, the Company's adjusted net income for the first quarter of 2012 was $1.2 million or $0.15 per diluted share compared with a net loss of $3,000 or $0.00 per diluted share for the first quarter of 2011 (see reconciliation of non-GAAP items). The $244,000 quarter-over-quarter reduction in reported earnings was primarily the result of the following items:
- Reduced noninterest income of $2.1 million, reflecting a $2.3 million bargain purchase gain associated with the Citizens FDIC-assisted acquisition during the first quarter of 2011 and $498,000 of negative accretion of the FDIC loss-share receivable during the first quarter of 2012, partially offset by improvement in mortgage banking fees of $421,000 and bankcard services income of $238,000;
- Increased noninterest expense of $2.4 million due to higher salaries and employment benefits of $1.2 million and increased equipment and occupancy expense of $528,000, driven by the acquisition-related hiring of an additional 51 full-time equivalent employees, as well as growth in most other noninterest expense categories; offset by
- Improved net interest income of $3.7 million due to growth in interest-earning assets and a reduction in the cost of interest-bearing deposits; and
- Lower provision expense of $200,000 reflecting lower net charge-offs compared with the 2011 quarter.