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Heritage Financial Group Posts Higher First Quarter Net Income Company Receives Regulatory Approval to Purchase Five Park Avenue Bank Branches from PAB Bankshares

ALBANY, Ga., May 10, 2010 (BUSINESS WIRE) -- Heritage Financial Group (NASDAQ: HBOS), the holding company for HeritageBank of the South, today announced financial results for the first quarter ended March 31, 2010. The Company's first quarter net income totaled $798,000 or $0.08 per diluted share, more than doubling net income of $395,000 or $0.04 per diluted share reported for the year-earlier quarter. Other highlights of the quarter included a strong increase in net interest income versus the year-earlier quarter, a 38% decrease in the loan loss provision -- reflecting stabilizing quality in the Company's loan portfolio, and solid year-over-year advances in total assets, loans receivable, and deposits.

Separately, the Company also announced that it has received regulatory approval on its previously announced purchase of five bank branches from PAB Bankshares, Inc. (NASDAQ: PABK), the Valdosta, Georgia-based holding company for The Park Avenue Bank. These branches, all in Georgia, are located in Statesboro (2), Baxley, Hazlehurst, and Adel. The transaction, which is expected to add approximately $52 million to the Bank's loan portfolio and approximately $98 million to its deposit base, now is expected to close on or about May 24, 2010.

Commenting on the results, Leonard Dorminey, President and Chief Executive Officer of Heritage Financial Group, said, "We are pleased to post a solid start to the new year, with significantly higher earnings for the first quarter and strengthening credit quality. These results also reflect the positive impact of the recent addition of three branches -- one in Florida by acquisition and two in Georgia by means of a FDIC-assisted whole-bank purchase and assumption -- that has contributed to the substantial loan and deposit growth we have experienced since the first quarter of 2009.

"We are excited about the growth opportunities we see for our company and bank," Dorminey added. "Our increased expansion activity over the past year has taken us to new markets, helped fill in our branch footprint between Albany and Ocala, and has allowed us to deploy our capital position. We look forward to continuing these efforts with the conclusion of our purchase of five branches from PAB Bankshares later this month, which will mark nearly a doubling of our branch network in just the past year. We also remain cautiously optimistic about the prospects for an improving economy over the course of the year and the new, organic growth opportunities that may accompany such a recovery." As previously announced, in March 2010 Heritage Financial Group adopted a plan to reorganize from a two-tier mutual holding company to a full stock holding company and will undertake a "second-step" offering of shares of the new holding company's common stock. The conversion and offering is expected to be completed in the third quarter of 2010, subject to regulatory, stockholder and depositor approvals. Keefe Bruyette & Woods will serve as the sole book running manager for the offering and Sterne Agee & Leach will serve as co-manager for the offering.

At the end of the first quarter of 2010, Heritage Financial Group's capital levels remained significantly above the levels required to be considered "well-capitalized" under regulatory standards -- the highest capital rating category a financial institution can achieve. The Company's total risk-based capital ratio at March 31, 2010, was 15.3%, significantly exceeding the required minimum of 10% to be considered a well-capitalized institution. The ratio of tangible common equity to total tangible assets (both non-GAAP measures -- see reconciliation to closest GAAP measures later in this release) was 10.5% as of March 31, 2010. The Company provides this ratio, in addition to those defined by banking regulators, because of its widespread use by investors as a means to evaluate capital adequacy.

Net interest income for the first quarter increased 24% to $4,410,000 from $3,556,000 in the same quarter last year, primarily reflecting a higher level of interest-earning assets combined with lower funding costs. The Company's net interest margin increased 37 basis points to 3.68% in the first quarter of 2010 compared with 3.31% in the year-earlier period due to a higher level of interest-earning assets combined with lower funding costs. On a linked-quarter basis, net interest margin declined four basis points in the first quarter from 3.72% in the fourth quarter of 2009.

Total nonperforming loans and nonperforming assets were $6,518,000 and $10,088,000, respectively, at March 31, 2010, and included nonperforming assets and nonperforming loans of $327,000 and $13,000, respectively, associated with the portfolio acquired from the FDIC in December 2009. The acquired portfolio was not covered by a loss-share agreement, but was subject to a purchase discount totaling $15 million. Total nonperforming loans and nonperforming assets were $7,731,000 and $9,526,000, respectively, at December 31, 2009, and $7,916,000 and $9,319,000, respectively, at March 31, 2009.

In order to provide a more comparable analysis of credit quality issues, the Company provides credit quality information for its core loan portfolio, which excludes the FDIC acquired loan portfolio and is equivalent to prior reported periods. Nonperforming assets in the core portfolio increased to $9,758,000 at March 31, 2010, from $8,427,000 at December 31, 2009, due to an increase in Other Real Estate Owned (OREO) and repossessed assets, which rose to $3,253,000 from $1,190,000 in the fourth quarter of 2009. Nonperforming loans in the core portfolio at the end of the first quarter declined to $6,505,000 from $7,237,000 in the fourth quarter of 2009, primarily reflecting a slowing in the pace of loans being placed on nonperforming status. Nonperforming loans were 2.05% of total loans as of March 31, 2010, versus 2.34% of total loans at December 31, 2009.

Net charge-offs to average outstanding loans in the total portfolio, on an annualized basis, were 0.88% for the first quarter of 2010 versus 7.42% for the fourth quarter of 2009 and 0.42% in the year-earlier period. The higher level of net charge-offs in the fourth quarter of 2009 primarily reflected the Company's action to write down and charge off a significant amount of a single loan on raw land in preparation for a pending sale of the property. While this sale did not occur as planned, the net carrying value of the subject property is now well below appraised value.

Management believes that nonperforming assets and net charge-offs will likely remain at elevated levels, at least in the near term, because of the continued weakness in the economy. However, the Company has continued to reduce its exposure to acquisition, construction and development loans, with those representing only 7% of its core portfolio at March 31, 2010, versus 12% at the end of the first quarter of 2009. Additionally, criticized and classified loans have remained relatively stable over the past several months. Accordingly, the Company's provision for loan losses declined to $500,000 for the first quarter of 2010 from $800,000 in the year-earlier period and $3,700,000 in the fourth quarter of 2009, with the latter reflecting the previously mentioned partial write down and charge off of a single loan. At March 31, 2010, the allowance for loan losses represented 1.70% of total loans outstanding versus 1.81% of total loans outstanding at December 31, 2009, and 1.82% of total loans outstanding at March 31, 2009.

Noninterest income increased 10% to $1,812,000 for the first quarter of 2010 from $1,645,000 in the year-earlier quarter. Noninterest expense for the first quarter of 2010 increased 14% to $4,705,000 from $4,114,000 in the first quarter of 2009, primarily reflecting higher salaries and employee benefits related to the addition of three branches since the first quarter of 2009, as well as higher FDIC insurance premiums. These increases were partially offset by gains on the sale of OREO.

The Company's total assets increased 17% to $574,363,000 at March 31, 2010, from $490,992,000 at March 31, 2009, again primarily reflecting the acquisition of three branches since the year-earlier quarter. Gross loans increased 15% to $342,495,000 at March 31, 2010, from $298,151,000 at March 31, 2009. Deposits rose 33% to $428,403,000 at March 31, 2010, from $321,492,000 at the March 31, 2009. Total stockholders' equity of $61,615,000 at March 31, 2010, was down slightly from $62,421,000 at March 31, 2009.

Heritage Financial Group is the mid-tier holding company for HeritageBank of the South, a community-oriented bank serving primarily South Georgia and North Central Florida through 10 full-service banking offices. As of March 31, 2010, the Company reported total assets of approximately $574 million and total stockholders' equity of approximately $62 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.

Heritage, MHC, a mutual holding company formed in 2002, holds approximately 76% of the shares of Heritage Financial Group. The remaining 24% of Heritage Financial Group's shares are held by public stockholders.

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. We intend 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 include this statement for purposes of these safe harbor provisions.

Further information concerning the Company and its business, including additional factors that could materially affect our financial results, is included in our other filings with the SEC.

T angible Common Equity Ratio (Unaudited) ( Dollars in thousands, except per share amounts) March 31, Dec.

31, March 31, 2010 2009 2009 ------------- ------------- ------------- Total stockholders' equity $ 61,615 $ 60,817 $ 62,421 Less intangible assets 1,540 1,571 1,000 ------- ------- ------- Tangible common equity $ 60,075 $ 59,246 $ 61,421 === ======= === ======= === ======= Total assets $ 574,363 $ 571,948 $ 490,992 Less intangible assets 1,540 1,571 1,000 ------- ------- ------- Tangible assets $ 572,823 $ 570,377 $ 489,992 === ======= === ======= === ======= Total stockholders' equity to total assets 10.7 % 10.6 % 12.7 % Tangible common equity ratio 10.5 % 10.4 % 12.5 % U naudited Financial Highlights ( In thousands, except per share amounts) First Quarter Ended March 31, -------------------------- 2010 2009 ---------------- ---------------- Interest income $ 6,447 $ 6,128 Interest expense 2,037 2,572 ------- ------- Net interest income 4,410 3,556 Provision for loan losses 500 800 ------- ------- Net interest income after provision for loan losses 3,910 2,756 Noninterest income 1,812 1,645 Noninterest expense 4,705 4,114 ------- ------- Loss before income taxes 1,017 287 Income tax benefit 219 (108 ) ------- ------- --- Net income $ 798 $ 395 === ======= === ======= Net income per share: Basic $ 0.08 $ 0.04 === ======= === ======= Diluted $ 0.08 $ 0.04 === ======= === ======= Weighted average shares outstanding: Basic 10,081 10,026 ======= ======= Diluted 10,081 10,026 ======= ======= Dividends declared per share $ 0.09 $ 0.08 === ======= === ======= March 31, Dec.

31, March 31,

2010 2009

2009

------------- ------------- ------------- Total assets $ 574,363 $ 571,948 $ 490,992 Cash and cash equivalents 24,414 14,922 12,563 Interest-bearing deposits in banks 26,988 43,236 651 Securities available for sale 115,552 120,527 128,712 Loans receivable 342,495 334,139 298,151 Allowance for loan losses 5,816 6,060 5,435 Total deposits 428,403 426,607 321,492 Federal Home Loan Bank advances 42,500 42,500 52,500 Stockholders' equity 61,615 60,817 62,421 Heritage Financial Group

First Quarter 2010 Earnings Release Supplement

(Dollars in thousands)

Quarter Ended

March 31,

-------------------------------

2010

2009

--------------- --------------- Income Statement Data

I

nterest income

-------------------------------------------------------------

Loans $ 5,320

$ 4,593 Securities - taxable 776

1,225 Securities - nontaxable 298

293 Federal funds sold 9

17 Interest bearing deposits in banks 44

-

------

------ Total interest income 6,447

6,128

------

------ I

nterest expense

-------------------------------------------------------------

Deposits 1,524

1,888 Other borrowings 513

684

------

------ Total interest expense 2,037

2,572

------

------ Net interest income 4,410

3,556 Provision for loan losses 500

800

------

------ Net interest income after provision for loan losses 3,910

2,756

------

------ N

on-interest income

-------------------------------------------------------------

Service charges on deposit accounts 824

808 Other service charges, fees & commissions 403

360 Brokerage fees 222

194 Mortgage origination fees 38

106 Bank owned life insurance 152

150 Gain (loss) on sale of securities 152

21 Impairment loss on securities -

- Other 21

6

------

------ Total non-interest income 1,812

1,645

------

------ N

on-interest expense

-------------------------------------------------------------

Salaries and employee benefits 2,565

2,198 Equipment 255

273 Occupancy 306

292 Advertising & marketing 120

87 Legal & accounting 149

118 Consulting & other professional fees 71

62 Director fees & retirement 139

153 Telecommunications 69

62 Supplies 58

38 Data processing fees 481

330 ( (231 ) 49 Gain) loss on sale and write-downs of other real estate owned

Foreclosed asset expenses 171

45 FDIC insurance and other regulatory fees 170

81 Impairment loss on premises held for sale -

- Other operating 382

326

------

------ Total non-interest expense 4,705

4,114

------

------ Income before taxes 1,017

287 Applicable income tax (benefit) 219

(108 )

------

------ --- Net income $ 798

$ 395

=== ======

=== ======

Weighted average shares - basic 10,081

10,026 Weighted average shares - diluted 10,081

10,026

Basic earnings per share $ 0.08

$ 0.04 Diluted earnings per share 0.08

0.04 Cash dividend declared per share 0.09

0.08 H

eritage Financial Group

First Quarter 2010 Earnings Release Supplement

(Dollars in thousands)

Quarter Ended

March 31,

---------------------------------

2010

2009

---------------- ---------------- Balance Sheet Data (at period end)

Total loans $ 342,495

$ 298,151 Allowance for loan losses 5,816

5,435 Intangible assets 1,540

1,000 Total assets 574,363

490,992 Non-interest bearing deposits 28,375

18,721 Interest bearing deposits 400,028

302,771 Federal home loan bank advances 42,500

52,500 F 32,778

47,113 ederal funds purchased and securities sold under agreement to

repurchase

Stockholders' equity 61,615

62,421

Total shares outstanding 11,454

11,452 Less treasury shares 1,055

1,041

-------

------- Net shares outstanding 10,399

10,411

=======

=======

Shares held by Heritage, MHC 7,869

7,869 Unearned ESOP shares 231

275

Book value per share $ 6.06

$ 6.16 Tangible book value per share (non-GAAP) 5.91

6.06 Market value per share 12.08

7.25

Quarter Ended

March 31,

---------------------------------

2010

2009

---------------- ---------------- Average Balance Sheet Data

Average interest bearing deposits in banks $ 33,419

$ 536 Average federal funds sold 14,002

26,693 Average investment securities 117,578

126,789 Average loans 336,801

298,705 Average earning assets 501,800

452,723 Average assets 569,898

504,814 Average noninterest bearing deposits 29,171

18,723 Average interest bearing deposits 395,033

319,283 Average total deposits 424,204

338,006 A 33,048

44,793 verage federal funds purchased and securities sold under

agreement to repurchase

Average Federal Home Loan Bank advances 42,500

52,500 Average interest bearing liabilities 470,581

416,576 Average stockholders' equity 61,145

62,879

Performance Ratios

Annualized return on average assets 0.56 % 0.31 % Annualized return on average equity 5.22 % 2.51 % Net interest margin 3.68 % 3.31 % Net interest spread 3.57 % 3.10 % Efficiency ratio 75.62 % 79.10 %

Capital Ratios

Average stockholders' equity to average assets 10.7 % 12.5 % Tangible equity to tangible assets (non-GAAP) 10.5 % 12.4 % Tier 1 leverage ratio 9.3 % 12.7 % Tier 1 risk-based capital ratio 14.0 % 17.8 % Total risk-based capital ratio 15.3 % 19.0 %

Other Information

Full-time equivalent employees 139

117 Number of full-service offices 10

8 H

eritage Financial Group

First Quarter 2010 Earnings Release Supplement

(Dollars in thousands)

Five Quarter Comparison

-------------------------------------------------------------------

3/31/09 6/30/09 9/30/09 12/31/09 3/31/10

------------- ----------- ------------- ------------- ------------- Income Statement Data

I

nterest income

-------------------------------------------------------------

Loans $ 4,593 $

4,528 $ 4,600 $ 4,834 $ 5,320 Securities - taxable 1,225

915 781 682 776 Securities - nontaxable 293

293 296 292 298 Federal funds sold 17

16 7 14 9 Interest bearing deposits in banks -

- 1 13 44

------ ------ ------ ------ ------ Total interest income 6,128

5,752 5,685 5,835 6,447

------ ------ ------ ------ ------ I

nterest expense

-------------------------------------------------------------

Deposits 1,888

1,683 1,479 1,422 1,524 Other borrowings 684

645 500 492 513

------ ------ ------ ------ ------ Total interest expense 2,572

2,328 1,979 1,914 2,037

------ ------ ------ ------ ------ Net interest income 3,556

3,424 3,706 3,921 4,410 Provision for loan losses 800

500 2,500 3,700 500

------ ------ ------ ------ ------ Net interest income after provision for loan losses 2,756

2,924 1,206 221 3,910

------ ------ ------ ------ ------ N

on-interest income

-------------------------------------------------------------

Service charges on deposit accounts 808

837 951 950 824 Other service charges, fees & commissions 360

362 338 345 403 Brokerage fees 194

216 252 252 222 Mortgage origination fees 106

104 66 68 38 Bank owned life insurance 150

159 155 156 152 Gain (loss) on sale of securities 21

345 470 73 152 Impairment loss on securities -

- - - - Other 6

16 12 15 21

------ ------ ------ ------ ------ Total non-interest income 1,645

2,039 2,244 1,859 1,812

------ ------ ------ ------ ------ N

on-interest expense

-------------------------------------------------------------

Salaries and employee benefits 2,198

2,227 2,296 2,177 2,565 Equipment 273

266 221 225 255 Occupancy 292

297 312 297 306 Advertising & marketing 87

111 147 94 120 Legal & accounting 118

155 118 102 149 Consulting & other professional fees 62

91 70 74 71 Director fees & retirement 153

153 155 92 139 Telecommunications 62

54 53 70 69 Supplies 38

46 46 47 58 Data processing fees 330

383 431 461 481 ( 49

255 80 38 (231 ) Gain) loss on sale and write-downs of other real estate owned

Foreclosed asset expenses 45

48 78 86 171 FDIC insurance and other regulatory fees 81

284 136 371 170 Impairment loss on premises held for sale -

- - 502 - Other operating 326

372 307 328 382

------ ------ ------ ------ ------ Total non-interest expense 4,114

4,742 4,450 4,964 4,705

------ ------ ------ ------ ------ Income (loss) before taxes 287

221 (1,000 ) (2,884 ) 1,017 Applicable income tax (benefit) (109 )

66 (533 ) (1,148 ) 219

------ -- ------ ------ -- ------ -- ------ Net income (loss) $ 396 $

155 $ (467 ) $ (1,736 ) $ 798

== ====== === ====== == ====== == == ====== == == ======

Weighted average shares - basic 10,026 10,040 10,072 10,053 10,081 Weighted average shares - diluted 10,026 10,040 10,072 10,053 10,081

Basic earnings (loss) per share $ 0.04 $

0.02 $ (0.05 ) $ (0.17 ) $ 0.08 Diluted earnings (loss) per share 0.04

0.02 (0.05 ) (0.17 ) 0.08 Cash dividend declared per share 0.08

0.08 0.08 0.08 0.09 H

eritage Financial Group

First Quarter 2010 Earnings Release Supplement

(Dollars in thousands)

Five Quarter Comparison

--------------------------------------------------------------------------

3/31/09

6/30/09 9/30/09 12/31/09 3/31/10

-------------- -------------- -------------- -------------- -------------- Balance Sheet Data (at period end)

Total loans $ 298,151 $ 295,881 $ 299,296 $ 334,138 $ 342,495 Allowance for loan losses 5,435

5,747 8,028 6,060 5,816 Intangible assets 1,000

1,000 1,000 1,571 1,540 Total assets 490,992 470,985 470,458 571,948 574,363 Non-interest bearing deposits 18,721

18,747 18,811 28,882 28,375 Interest bearing deposits 302,771 305,177 303,500 397,724 400,028 Federal home loan bank advances 52,500

42,500 42,500 42,500 42,500 F 47,113

34,745 35,211 32,843 32,778 ederal funds purchased and securities sold under agreement to

repurchase

Stockholders' equity 62,421

62,132 62,823 60,817 61,615

Total shares outstanding 11,452

11,452 11,452 11,454 11,454 Less treasury shares 1,041

1,042 1,042 1,055 1,055

------- ------- ------- ------- ------- Net shares outstanding 10,411

10,410 10,410 10,399 10,399

======= ======= ======= ======= =======

Shares held by Heritage, MHC 7,869

7,869 7,869 7,869 7,869 Unearned ESOP shares 275

264 253 242 231

Book value per share $ 6.16 $

6.12 $ 6.19 $ 5.99 $ 6.06 Tangible book value per share (non-GAAP) 6.06

6.03 6.09 5.83 5.91 Market value per share 7.25

8.57 8.28 7.25 12.08

Five Quarter Comparison

--------------------------------------------------------------------------

3/31/09

6/30/09 9/30/09 12/31/09 3/31/10

-------------- -------------- -------------- -------------- -------------- Average Balance Sheet Data

Average interest bearing deposits in banks $ 536 $

468 $ 751 $ 5,954 $ 33,419 Average federal funds sold 26,693

24,362 11,746 21,607 14,002 Average investment securities 126,789 117,813 109,338 103,410 117,578 Average loans 298,705 296,363 296,800 305,694 336,801 Average earning assets 452,723 439,006 418,635 436,665 501,800 Average assets 504,814 493,868 471,517 494,889 569,898 Average noninterest bearing deposits 18,723

20,355 21,212 23,208 29,171 Average interest bearing deposits 319,283 306,540 302,408 325,547 395,033 Average total deposits 338,006 326,895 323,620 348,755 424,204 A 44,793

45,927 35,903 33,827 33,048 verage federal funds purchased and securities sold under

agreement to repurchase

Average Federal Home Loan Bank advances 52,500

51,500 42,500 42,572 42,500 Average interest bearing liabilities 416,576 403,967 380,811 401,946 470,581 Average stockholders' equity 62,879

63,413 62,975 63,067 61,145

Performance Ratios

Annualized return on average assets 0.31 %

-0.38 % -0.40 % -1.40 % 0.56 % Annualized return on average equity 2.52 %

-2.95 % -2.97 % -7.28 % 5.22 % Net interest margin 3.31 %

3.27 % 3.68 % 3.72 % 3.68 % Net interest spread 3.10 %

3.09 % 3.49 % 3.57 % 3.57 % Efficiency ratio 79.10 %

74.79 % 74.79 % 85.88 % 75.62 %

Capital Ratios

Average stockholders' equity to average assets 12.5 %

12.8 % 13.4 % 12.7 % 10.7 % Tangible equity to tangible assets (non-GAAP) 12.5 %

13.2 % 13.2 % 10.4 % 10.5 % Tier 1 leverage ratio 12.7 %

12.9 % 13.2 % 11.2 % 9.3 % Tier 1 risk-based capital ratio 17.8 %

18.6 % 18.0 % 14.2 % 14.0 % Total risk-based capital ratio 19.0 %

19.8 % 19.3 % 15.5 % 15.3 %

Other Information

Full-time equivalent employees 117

118 117 134 139 Number of full-service offices 8

8 8 10 10 Heritage Financial Group

First Quarter 2010 Earnings Release Supplement

(Dollars in thousands)

Quarter Ended

Total Portfolio

March 31,

-----------------------------

2010 2009

-------------- -------------- Loans by Type

Construction and land loans

$ 24,193 $ 36,926 Farmland loans

20,403 5,686 Permanent 1 - 4

92,241 73,606 Permanent 1 - 4 - junior liens and revolving

25,395 23,677 Multifamily

10,254 10,637 Nonresidential

88,476 59,169 Commercial business loans

47,081 42,882 Consumer and other loans

35,397 45,568 Fair market value adjustments

(945 ) -

------- -- -------

342,495 298,151

======= =======

Asset Quality Data

Allowance for loan losses to total loans

1.70 % 1.82 % Allowance for loan losses to average loans

1.73 % 1.82 % Allowance for loan losses to non-performing loans

89.23 % 68.66 % L

$ 1,810 $ 4,054 oans - 30 to 89 days past due & still accruing

Nonaccrual loans

6,518 7,916 Loans - 90 days past due & still accruing

- - Total non-performing loans

6,518 7,916 OREO and repossessed assets

3,567 1,403 Total non-performing assets

10,085 9,319 Non-performing loans to total loans

1.90 % 2.66 % Non-performing assets to total assets

1.76 % 1.90 % Net charge-offs to average loans (annualized)

0.88 % 0.42 % Net charge-offs

$ 744 $ 315

Five Quarter Comparison

--------------------------------------------------------------------------

3/31/09 6/30/09

9/30/09 12/31/09 3/31/10

-------------- -------------- -------------- -------------- -------------- Loans by Type

Construction and land loans $ 36,926 $ 31,414

$ 31,762 $ 31,474 $ 24,193 Farmland loans 5,686 5,743

7,101 16,387 20,403 Permanent 1 - 4 73,606 74,676

75,182 86,511 92,241 Permanent 1 - 4 - junior liens and revolving 23,677 23,697

23,556 25,930 25,395 Multifamily 10,637 10,596

10,899 12,257 10,254 Nonresidential 59,169 64,915

67,771 81,046 88,476 Commercial business loans 42,882 43,345

44,778 48,578 47,081 Consumer and other loans 45,568 41,494

38,424 39,183 35,397 Fair market value adjustments - -

- (7,228 ) (945 )

------- -------

------- ------- -- ------- --

298,151 295,880

299,473 334,138 342,495

======= =======

======= ======= =======

Asset Quality Data

Allowance for loan losses to total loans 1.82 % 1.94 %

2.68 % 1.81 % 1.70 % Allowance for loan losses to average loans 1.82 % 1.94 %

2.70 % 1.98 % 1.73 % Allowance for loan losses to non-performing loans 68.66 % 47.48 %

61.80 % 78.39 % 89.23 % L $ 4,054 $ 1,275

$ 1,277 $ 3,247 $ 1,810 oans - 30 to 89 days past due & still accruing

Nonaccrual loans 7,916 12,105

12,990 7,731 6,518 Loans - 90 days past due & still accruing - -

- - - Total non-performing loans 7,916 12,105

12,990 7,731 6,518 OREO and repossessed assets 1,403 907

898 1,795 3,567 Total non-performing assets 9,319 13,012

13,888 9,526 10,085 Non-performing loans to total loans 2.66 % 4.09 %

4.34 % 2.31 % 1.90 % Non-performing assets to total assets 1.90 % 2.76 %

2.95 % 1.67 % 1.76 % Net charge-offs to average loans (annualized) 0.42 % 0.26 %

0.29 % 7.42 % 0.88 % Net charge-offs $ 315 $ 189

$ 219 $ 5,667 $ 744 H

eritage Financial Group

First Quarter 2010 Earnings Release Supplement

(Dollars in thousands)

Quarter Ended

Core Portfolio

March 31,

-----------------------------

2010 2009

-------------- -------------- Loans by Type

Construction and land loans

$ 22,329 $ 36,926 Farmland loans

12,956 5,686 Permanent 1 - 4

87,420 73,606 Permanent 1 - 4 - junior liens and revolving

24,727 23,677 Multifamily

10,254 10,637 Nonresidential

81,128 59,169 Commercial business loans

44,448 42,882 Consumer and other loans

33,141 45,568 Fair market value adjustments

331 -

------- -------

316,734 298,151

======= =======

Asset Quality Data

L

$ 1,603 $ 4,054 oans - 30 to 89 days past due & still accruing

Nonaccrual loans

6,505 7,916 Loans - 90 days past due & still accruing

- - Total non-performing loans

6,505 7,916 OREO and repossessed assets

3,253 1,403 Total non-performing assets

9,758 9,319 Non-performing loans to total loans

2.05 % 2.66 %

Net charge-offs

$ 744 $ 315

Five Quarter Comparison

--------------------------------------------------------------------------

3/31/09 6/30/09

9/30/09 12/31/09 3/31/10

-------------- -------------- -------------- -------------- -------------- Loans by Type

Construction and land loans $ 36,926 $ 31,414 $

31,762 $ 28,385 $ 22,329 Farmland loans 5,686 5,743

7,101 9,013 12,956 Permanent 1 - 4 73,606 74,676

75,182 81,055 87,420 Permanent 1 - 4 - junior liens and revolving 23,677 23,697

23,556 25,192 24,727 Multifamily 10,637 10,596

10,899 12,135 10,254 Nonresidential 59,169 64,915

67,771 71,158 81,128 Commercial business loans 42,882 43,345

44,778 45,836 44,448 Consumer and other loans 45,568 41,494

38,424 36,575 33,141 Fair market value adjustments - -

- 370 331

------- ------- ------- ------- -------

298,151 295,880 299,473 309,719 316,734

======= ======= ======= ======= =======

Asset Quality Data

L $ 4,054 $ 1,275 $

1,277 $ 1,826 $ 1,603 oans - 30 to 89 days past due & still accruing

Nonaccrual loans 7,916 12,105

12,990 7,237 6,505 Loans - 90 days past due & still accruing - -

- - - Total non-performing loans 7,916 12,105

12,990 7,237 6,505 OREO and repossessed assets 1,403 907

898 1,190 3,253 Total non-performing assets 9,319 13,012

13,888 8,427 9,758 Non-performing loans to total loans 2.66 % 4.09 %

4.34 % 2.34 % 2.05 %

Net charge-offs $ 315 $ 189 $

219 $ 5,667 $ 744 Heritage Financial Group

First Quarter 2010 Earnings Release Supplement

(Dollars in thousands)

Quarter Ended

FDIC Acquired Portfolio

March 31,

-----------------------------------

2010 2009

----------------- ----------------- Loans by Type

Construction and land loans $ 1,864 $ - Farmland loans 7,447 - Permanent 1 - 4 4,821 - Permanent 1 - 4 - junior liens and revolving

668 - Multifamily

- - Nonresidential 7,348 - Commercial business loans 2,633 - Consumer and other loans 2,256 - Fair market value adjustments (1,276 ) -

------ ---- ------

25,761 -

====== ======

Asset Quality Data

L $

207 $ - oans - 30 to 89 days past due & still accruing

Nonaccrual loans

13 - Loans - 90 days past due & still accruing

- - Total non-performing loans

13 - OREO and repossessed assets

314 - Total non-performing assets

327 - Non-performing loans to total loans

1.27 % -

Net charge-offs $

- -

Five Quarter Comparison

--------------------------------------------------------------

3/31/09 6/30/09 9/30/09 12/31/09 3/31/10

------- ------- ------- ----------------- ----------------- Loans by Type

Construction and land loans - - - $ 3,089 $ 1,864 Farmland loans - - - 7,374 7,447 Permanent 1 - 4 - - - 5,456 4,821 Permanent 1 - 4 - junior liens and revolving - - -

738 668 Multifamily - - -

122 - Nonresidential - - - 9,888 7,348 Commercial business loans - - - 2,742 2,633 Consumer and other loans - - - 2,609 2,256 Fair market value adjustments - - - (7,598 ) (1,276 )

------- ------- ------- ------ ---- ------ ----

- - - 24,420 25,761

======= ======= ======= ====== ======

Asset Quality Data

L - - - $ 1,421 $ 207 oans - 30 to 89 days past due & still accruing

Nonaccrual loans - - - 1,226 13 Loans - 90 days past due & still accruing - - -

- - Total non-performing loans - - - 1,226 13 OREO and repossessed assets - - -

605 314 Total non-performing assets - - - 1,831 327 Non-performing loans to total loans - - -

7.50 % 1.27 %

Net charge-offs - - -

- -

N

ote:

-----------------------------------------------------------------------------------------------

Certain prior-period amounts have been reclassified to conform with

current presentation.

For non-GAAP measures see reconciliation to closest GAAP measures

contained in this press release.

SOURCE: Heritage Financial Group CONTACT: Heritage Financial Group T. Heath Fountain, 229-878-2055 Senior Vice President and Chief Financial Officer Copyright Business Wire 2010 -0- KEYWORD: United States

North America

Georgia INDUSTRY KEYWORD: Professional Services

Banking

Finance SUBJECT CODE: Earnings