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Heritage Financial Group, Inc. Reports Third Quarter Net Income Increases 48% to $2.0 Million or $0.26 Per Diluted Share

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Heritage Financial Group, Inc. (NASDAQ:HBOS) , the holding company for HeritageBank of the South, today announced unaudited financial results for the quarter ended September 30, 2014. Key highlights of the Company’s report for the third quarter of 2014 include:

  • Net income of $2.0 million or $0.26 per diluted share, up 11% from $1.8 million or $0.23 per diluted share for the linked quarter, and up 48% from $1.3 million or $0.18 per diluted share for the year-earlier quarter;
  • Net income, excluding special items for each quarter, of $3.2 million or $0.42 per diluted share, up 35% from $2.4 million or $0.31 per diluted share for the linked quarter, and up 84% from $1.7 million or $0.23 per diluted share for the year-earlier quarter (see non-GAAP reconciliation);
  • The successful completion of the Company’s first open-bank acquisition, Alarion Financial Services, Inc. and its subsidiary Alarion Bank (“Alarion”), on September 30, 2014;
  • Loan growth, excluding acquired loans, of $29.3 million or 4% on a linked-quarter basis and $108.5 million or 16% compared with the year-earlier quarter;
  • A decline in nonperforming loans, excluding acquired loans, of 2% on a linked-quarter basis and 37% compared with the year-earlier quarter;
  • An increase in the provision for loan losses, excluding acquired loans, to $575,000, up from $510,000 for the linked quarter and up 64% compared with $350,000 for the year-earlier quarter; and
  • An increase in mortgage originations to $292.6 million, up $42.7 million or 17% from the linked quarter and up $177.3 million or 154% from the year-earlier quarter.

Commenting on the announcement, Leonard Dorminey, President and Chief Executive Officer, said, “Results for this past quarter reflected significant progress in the growth of our business and the execution of our expansion strategies – most notably with the completion of the Alarion acquisition, which facilitated our entry into the Gainesville, Florida market. Additionally, HeritageBank Mortgage has experienced continued growth, recording its second consecutive profitable quarter, and, with a record level of loan locks at quarter’s end, is on track to finish the year strong. All aspects of our operations continue to perform well, as indicated by ongoing organic loan growth and continued momentum in loan production across most of our markets, which keeps us on pace for another year of double-digit growth. This progress, coupled with further improvements in credit quality measures, has greatly strengthened our banking operations.

“Subsequent to quarter’s end, we were pleased to announce an agreement to purchase our first branch in the Metro Atlanta area,” Dorminey continued. “The branch, to be acquired from The PrivateBank and Trust Company (“PrivateBank”), a wholly owned subsidiary of Chicago-based PrivateBancorp, Inc., is located on the northeast area of the city. It is expected to give us greater visibility and access to an attractive number of small- and medium-sized businesses, which will allow us to pursue a niche-focused commercial bank model and will provide the footing for further expansion in metro Atlanta. We are excited about this opportunity, especially considering Brian Schmitt has joined our company as Executive Vice President, Atlanta Market CEO and Director of Mergers & Acquisitions. Schmitt has over 30 years of experience in the Atlanta market and will be a tremendous asset in support of our growth plans.”

Dorminey also noted that the Company’s Board of Directors has declared a regular quarterly cash dividend of $0.07 per share, which will be paid on November 26, 2014, to stockholders of record as of November 12, 2014.

Alarion Merger

On September 30, 2014, the Company successfully completed the merger of Alarion Financial Services, Inc. and its subsidiary Alarion Bank with and into Heritage Financial Group, Inc. and subsidiary HeritageBank of the South. In connection with the merger, the Company issued 1,158,147 shares for exchange of Alarion’s shares and recorded $6.8 million in goodwill. The Company acquired $160.5 million in non-credit impaired loans, $38.7 million in credit impaired loans, $2.0 million in other real estate owned (“OREO”), and $230.7 million in total deposits. Immediately following the merger, the Company redeemed all of Alarion’s preferred stock in exchange for $4.5 million in cash and 178,267 shares of the Company’s common stock. The Company expects to complete Alarion’s system conversion during the fourth quarter of 2014.

Third Quarter 2014 Results of Operations

The $187,000 increase in reported quarterly earnings for the third quarter of 2014 compared with the linked quarter resulted primarily from the following items:

  • Solid growth in revenue from mortgage banking activities of $1.7 million;
  • Decreased FDIC loss-share clawback expenses of $917,000;
  • Reduced negative accretion of the FDIC loss-share receivable of $708,000;
  • Increased gain on sales of securities of $490,000; offset by
  • Increased acquisition-related expenses of $2.4 million, driven primarily by the Alarion merger; and
  • Increased salaries and employee benefits of $1.1 million, driven primarily by mortgage banking expansion.

The $637,000 increase in reported quarterly earnings for the third quarter of 2014 compared with the year-earlier quarter primarily reflected the following items:

  • Solid growth in revenue from mortgage banking activities of $4.8 million;
  • Increased interest income of $2.6 million;
  • Increased gain on sales of securities of $628,000; offset by
  • Increased salaries and employee benefits of $3.3 million;
  • Increased acquisition-related expenses of $2.3 million; and
  • Increased negative accretion of the FDIC loss-share receivable of $1.2 million

Net interest income for the third quarter of 2014 increased 17% to $15.9 million from $13.6 million in the year-earlier quarter, primarily reflecting an increase in interest-earning assets related to acquisitions and organic growth. The Company’s net interest margin was 4.80% for the third quarter of 2014, an increase of seven basis points from 4.73% for the year-earlier period. The increase in net interest margin for the third quarter of 2014 compared with the year-earlier quarter was driven by an improvement in the interest-earning asset mix, which increased the yield on interest earning assets by five basis points coupled with a one basis point decline in the cost of interest-bearing liabilities. Excluding acquired credit impaired loan discount adjustments from the net interest margin, the core net interest margin was 3.29% for the third quarter of 2014, an improvement of six basis points from 3.23% for the year-earlier quarter. The improvement in the core net interest margin was driven primarily by an improvement in the interest-earning asset mix compared with the year-earlier quarter.

In the third quarter of 2014, the Company continued to achieve loan growth, with its non-acquired loan portfolio increasing $29.3 million organically on a linked-quarter basis and advancing $108.5 million overall compared with the year-earlier quarter. For the third quarter of 2014, the Company’s loan portfolio, including acquired loans, totaled $1.069 billion, increasing $224.0 million on a linked-quarter basis from $845.1 million and $280.0 million from $789.1 million compared with the year-earlier quarter, driven primarily by the Alarion merger and to a lesser extent organic loan growth. The organic loan growth from the linked quarter reflected primarily growth in the South Atlanta, Statesboro, Macon, Birmingham, Auburn/Columbus, and Ocala markets. Total deposits stood at $1.341 billion at the end of the third quarter of 2014, up 11% from $1.209 billion on a linked-quarter basis, and up 27% from $1.052 billion for the year-earlier quarter, driven primarily by the Alarion merger, which was offset in part by a large withdrawal by a municipal depositor.

For the third quarter of 2014, the Company’s loans held for sale totaled $147.9 million, increasing $20.7 million or 16% on a linked-quarter basis from $127.2 million, and increasing $109.8 million or 289% from $38.0 million compared with the year-earlier quarter. The increase in the loans held for sale for the current quarter occurred as production outpaced loan sales. Loan sales to agencies in the third quarter totaled $195.4 million and, separately, the Company recorded a gain of $1.9 million related to the mortgage servicing rights for those loans. Total mortgage production for the third quarter was $292.6 million, up 17% on a linked-quarter basis from $249.9 million and up 154% from $115.3 million compared with the year-earlier quarter.

Noninterest income for the third quarter of 2014 improved 111% to $8.3 million from $3.9 million in the year-earlier quarter, driven primarily by increases in revenue from mortgage banking activities of $4.8 million and gain on sales of securities of $628,000 offset in part by an increase in negative accretion of the FDIC loss-share receivable of $1.2 million. Noninterest expense for the third quarter of 2014 increased 34% to $20.6 million from $15.3 million in the year-earlier quarter, driven primarily by increases in salaries and employee benefits of $3.3 million related to the expansion of the mortgage division and an increase in acquisition-related expenses of $2.3 million primarily related to the Alarion merger.

Accounting for Acquired Assets

The Company performs ongoing assessments of the estimated cash flows of its acquired credit impaired loan portfolios. The fair value of the acquired loan portfolios consisted of $92.1 million in non-covered and $42.4 million in covered loans at the end of the third quarter of 2014 compared with $69.7 million in non-covered and $53.8 million in covered loans for the year-earlier quarter. The outstanding principal balance of the FDIC-acquired loan portfolios totaled $188.8 million at the end of the third quarter of 2014 compared with $195.5 million for the year-earlier quarter. The details of the accounting for the acquired credit impaired loan portfolios for the third quarter of 2014 are as follows:

  • Covered loans decreased $1.0 million and non-covered loans increased $35.2 million from the linked quarter;
  • The negative accretion for the FDIC loss-share receivable was $2.7 million and the FDIC loss-share clawback accrual decreased to $35,000;
  • Provision expense for covered loans increased to $65,000; and
  • Loan discount accretion recognized in interest income increased to $4.6 million.

For the third quarter of 2014, credit impaired loan discount accretion recognized in interest income declined to $4.62 million from $4.64 million for the linked quarter, but improved 24% from $3.7 million for the year-earlier quarter. Provision expense of $65,000 was recorded for loan charge-offs on acquired credit impaired covered loans individually assessed and not provided for by the discount, with approximately 80% of the charge-offs reimbursable by the FDIC. The provision expense for these covered loans did not affect the Company’s loan loss reserve. The FDIC loss-share receivable associated with acquired assets covered decreased 16% to $27.9 million from $33.2 million for the linked quarter and declined 37% from $44.5 million for the year-earlier quarter. The reduction in the FDIC loss-share receivable for the linked quarter was driven primarily by negative accretion of $2.7 million, affecting the loss-share receivable asset associated with the improvement in expected cash flows of the acquired credit impaired performing loan portfolios covered and by FDIC reimbursements received of $2.6 million. A decrease to the FDIC clawback liability accrual was recorded as a reduction to the expense for the current quarter of $35,000, which decreased the total accrual to $3.3 million. This FDIC clawback liability was caused by improvement in the estimates of expected cash flows for acquired credit impaired loans covered under loss-sharing agreements.

The acquired credit impaired loan covered discount affecting the loss-share receivable was $25.7 million, or 91.9% of the loss-share receivable, for the third quarter of 2014 compared with $42.7 million, or 95.9% of the loss-share receivable, for the year-earlier quarter. The gross balance of acquired assets covered decreased to $82.8 million for the third quarter of 2014 compared with $116.2 million for the year-earlier quarter. The FDIC loss-share receivable as a percent of the acquired assets covered decreased to 33.8% compared with 38.3% for the year-earlier quarter.

Asset Quality

Total nonperforming assets, excluding acquired assets, decreased to $7.5 million, or 0.43% of total assets, compared with $7.5 million, or 0.50% of total assets, for the linked quarter and declined from $13.6 million, or 1.03% of total assets, for the year-earlier quarter. Annualized net charge-offs to average outstanding loans, excluding acquired loans, were 0.06% for the third quarter of 2014 compared with annualized net charge-offs of 0.05% for the linked quarter and annualized net charge-offs of 0.31% for the year-earlier quarter. Nonperforming loans, excluding acquired loans, totaled $6.9 million for the third quarter of 2014, down from $7.0 million for the linked quarter and down from $11.0 million for the year-earlier quarter. OREO and repossessed assets, excluding acquired assets, totaled $648,000 for the third quarter of 2014, up from $507,000 for the linked quarter, but down from $2.7 million for the year-earlier quarter.

The provision for loan losses on non-acquired loans increased to $575,000 for the third quarter of 2014 from $510,000 for the linked quarter and from $350,000 for the year-earlier quarter, primarily driven by core loan growth. For the third quarter of 2014, the allowance for loan losses represented 1.28% of total loans outstanding, excluding acquired loans, versus 1.27% for the linked quarter and 1.34% for the year-earlier quarter.

Capital Management Initiatives

The Company intends to maintain its capital strength at the current level to support growth and its acquisition activities. Accordingly, future stock buybacks and future dividends will be premised largely on the Company’s future earnings power rather than a return of capital to stockholders.

The Company’s estimated total risk-based capital ratio at September 30, 2014, was 12.8%, 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 8.2% as of September 30, 2014.

Investor Presentation

The Company will make available to investors a presentation, updated for third quarter results, on the Company’s website at www.eheritagebank.com under the “Investors” tab and will remain available for 90 days.

About Heritage Financial Group, Inc. and HeritageBank of the South

Heritage Financial Group, Inc. is the holding company for HeritageBank of the South, a community-oriented bank serving primarily Georgia, Florida and Alabama through 36 banking locations, 20 mortgage offices, and 5 investment offices. As of September 30, 2014, the Company reported total assets of approximately $1.8 billion and total stockholders’ equity of approximately $160 million. For more information about the Company, visit HeritageBank of the South on the Web at www.eheritagebank.com under the “Investors” tab.

Cautionary Note Regarding Forward Looking Statements

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. These statements can be identified by the fact that they do not relate strictly to historical or current facts and often use words or phrases “opportunities,” “prospects,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends” or similar expressions. The forward-looking statements made herein represent the current expectations, plans or forecasts of the Company’s future results and revenues. The Company intends 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 includes this statement for purposes of these safe harbor provisions. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond the Company’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. Investors should not place undue reliance on any forward-looking statement and should consider the uncertainties and risks, discussed under Item 1A. “Risk Factors” of the Company’s 2013 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. Further information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in its other filings with the SEC.

HERITAGE FINANCIAL GROUP, INC.

Unaudited Reconciliation of Non-GAAP Measures Presented in Earnings Release

(Dollars in thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2014 2013 2014 2014 2013
Total noninterest income $ 8,274 $ 3,918 $ 5,286 $ 17,047 $ 13,875
Gain on sale of securities (628 ) (138 ) (766 )
Gain on acquisitions (4,188 )
Adjusted noninterest income $ 7,646 $ 3,918 $ 5,148 $ 16,281 $ 9,687
Total noninterest expense $ 20,597 $ 15,334 $ 18,116 $ 54,188 $ 43,242
Acquisition-related expenses (2,543 ) (280 ) (101 ) (2,696 ) (1,220 )

Accrual of FDIC acquisitions estimated clawback liability

35 (286 ) (882 ) (1,390 ) (978 )
Adjusted noninterest expense $ 18,089 $ 14,768 $ 17,133 $ 50,102 $ 41,044
Net income as reported $ 1,959 $ 1,322 $ 1,772 $ 5,074 $ 7,910
Total adjustments, net of tax* 1,242 418 606 2,324 (1,413 )
Adjusted net income $ 3,201 $ 1,740 $ 2,378 $ 7,398 $ 6,497
Diluted earnings per share $ 0.26 $ 0.18 $ 0.23 $ 0.68 $ 1.07
Total adjustments, net of tax* 0.16 0.05 0.08 0.29 (0.21 )
Adjusted diluted earnings per share $ 0.42 $ 0.23 $ 0.31 $ 0.97 $ 0.86

* The effective tax rate for the period presented is used to determine net of tax amounts.

Net Income and Diluted Earnings Per Share are presented in accordance with Generally Accepted Accounting Principles (“GAAP”). Adjusted Noninterest Income, Adjusted Noninterest Expense, Adjusted Net Income and Adjusted Diluted Earnings Per Share are non-GAAP financial measures. The Company believes that these non-GAAP measures aid in understanding and comparing current-year and prior-year results, both of which include unusual items of different natures. These non-GAAP measures should be viewed in addition to, and not as a substitute for, the Company’s reported results.

Heritage Financial Group, Inc. and Subsidiary
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
(Unaudited)
September 30, December 31,
2014 2013*

ASSETS

Cash and due from banks $ 26,793 $ 34,804
Interest-bearing deposits in banks 10,945 3,249
Federal funds sold 1,434 130
Cash and cash equivalents 39,172 38,183
Securities available for sale, at fair value 339,189 294,299
Federal Home Loan Bank stock, at cost 9,950 7,342
Other equity securities, at cost 1,010 1,010
Loans held for sale 147,867 110,669
Loans:
Non-acquired loans 774,108 684,544
Acquired non-credit impaired loans 160,502
Acquired credit impaired loans non-covered 92,051 63,318
Acquired credit impaired loans covered 42,447 50,891
Less allowance for non-acquired loans 9,916 8,955
Loans, net 1,059,192 789,798
Non-acquired other real estate owned 648 1,789
Acquired non-covered other real estate owned 3,296 1,693
Acquired covered other real estate owned 5,281 7,053
Total other real estate owned 9,225 10,535
FDIC loss-share receivable 27,929 41,306
Premises and equipment, net 49,922 37,978
Goodwill and intangible assets 16,702 4,253
Cash surrender value of bank owned life insurance 24,749 24,183
Other assets 30,627 21,369
Total assets $ 1,755,534 $ 1,380,925

LIABILITIES AND SHAREHOLDERS’ EQUITY

Non-interest-bearing deposits $ 199,336 $ 148,253
Interest-bearing deposits 1,141,925 928,168
Total deposits 1,341,261 1,076,421
Federal funds purchased
Federal funds purchased and securities sold under repurchase agreements 42,815 37,648
Other borrowings 190,440 131,394
Other liabilities 21,070 10,399
Total liabilities 1,595,586 1,255,862
Shareholders’ equity:
Preferred stock, par value; $0.01; 5,000,000 shares authorized; none issued

Common stock, par value $0.01; 45,000,000 shares authorized; 9,183,574 and 7,834,537 shares issued and outstanding, respectively

92 78
Capital surplus 106,510 78,566
Retained earnings 61,262 57,614
Accumulated other comprehensive loss, net of tax of $3,292 and $5,175, respectively (4,937) (7,762)
Unearned employee stock ownership plan (ESOP), 292,559 and 332,535 shares, respectively (2,979) (3,433)
Total shareholders’ equity 159,948 125,063
Total liabilities & shareholders’ equity $ 1,755,534 $ 1,380,925

* Derived from Audited Consolidated Financial Statements.

Heritage Financial Group, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2014 2013 2014 2013

Interest income:

Interest and fees on loans $ 14,901 $ 13,452 $ 42,981 $ 42,523
Interest on loans held for sale 1,493 434 3,984 839
Interest on taxable securities 1,180 1,155 3,600 3,116
Interest on nontaxable securities 381 318 1,103 911
Interest on federal funds sold 2 4 4 7
Interest on deposits in other banks 20 30 69 140
Total interest income 17,977 15,393 51,741 47,536

Interest expense:

Interest on deposits 1,192 982 3,508 3,077
Interest on other borrowings 856 853 2,560 2,446
Total interest expense 2,048 1,835 6,068 5,523
Net interest income 15,929 13,558 45,673 42,013
Provision for loan losses 640 350 1,284 1,503
Net interest income after provision for loan losses 15,289 13,208 44,389 40,510

Noninterest income:

Service charges on deposit accounts 1,612 1,577 4,558 4,028
Bankcard services income 919 852 2,749 2,445
Other service charges, commissions and fees 178 126 494 370
Brokerage fees 644 561 1,825 1,578
Mortgage banking activities 6,723 1,963 13,915 7,582
Bank-owned life insurance 190 200 566 603
Gain on sales of securities 628 766
Gain on acquisitions 4,188
Accretion of FDIC loss-share receivable (2,669 ) (1,499 ) (8,077 ) (7,275 )
Other 49 138 251 356
Total noninterest income 8,274 3,918 17,047 13,875

Noninterest expense:

Salaries and employee benefits 11,382 8,108 30,272 22,723
Equipment and occupancy 2,234 1,932 6,382 5,436
Advertising and marketing 288 335 737 871
Professional fees 446 340 1,420 857
Information services expenses 1,080 1,335 3,430 3,824
Net loss on sales and write-downs of other real estate owned 8 335 433 368
Net gain on sales and write-downs of acquired other real estate owned (37 ) (206 ) (128 ) (433 )
Foreclosed asset expenses 77 337 246 779
Foreclosed acquired asset expenses 217 366 835 1,087
FDIC insurance and other regulatory fees 274 293 817 827
Acquisition related expenses 2,543 280 2,696 1,220
Deposit intangible expenses 186 204 574 609
FDIC loss-share clawback expenses (35 ) 286 1,390 978
Other operating expenses 1,934 1,389 5,084 4,096
Total noninterest expense 20,597 15,334 54,188 43,242
Income before income taxes 2,966 1,792 7,248 11,143
Applicable income tax 1,007 470 2,174 3,233
Net income $ 1,959 $ 1,322 $ 5,074 $ 7,910

Earnings per common share:

Basic earnings per share $ 0.26 $ 0.18 $ 0.68 $ 1.07
Diluted earnings per share $ 0.26 $ 0.18 $ 0.67 $ 1.05

Weighted average-common shares outstanding:

Basic 7,485,528 7,371,804 7,448,329 7,425,940
Diluted 7,676,233 7,483,812 7,622,378 7,519,664
Heritage Financial Group, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except share and per share data)
Five Quarter Comparison
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013

Interest income:

Interest and fees on loans $ 14,901 $ 14,730 $ 13,350 $ 15,911 $ 13,452
Interest on loans held for sale 1,493 1,466 1,025 619 434
Interest on taxable securities 1,180 1,215 1,206 1,231 1,155
Interest on nontaxable securities 381 368 354 337 318
Interest on federal funds sold 2 1 1 2 4
Interest on deposits in other banks 20 30 19 15 30
Total interest income 17,977 17,810 15,955 18,115 15,393

Interest expense:

Interest on deposits 1,192 1,176 1,140 1,000 982
Interest on other borrowings 856 860 844 862 853
Total interest expense 2,048 2,036 1,984 1,862 1,835
Net interest income 15,929 15,774 13,971 16,253 13,558
Provision for loan losses – non-acquired 575 510 65 220 350
Provision for loan losses – acquired covered 65 25
Provision for loan losses – acquired non-covered (61 ) 105 12
Net interest income after provision for loan losses 15,289 15,300 13,801 16,021 13,208

Noninterest income:

Service charges on deposit accounts 1,612 1,503 1,443 1,642 1,577
Bankcard services income 919 941 889 890 852
Other service charges, commissions and fees 178 154 162 121 126
Brokerage fees 644 615 566 560 561
Mortgage banking activities 6,723 5,026 2,166 2,949 1,963
Bank-owned life insurance 190 187 189 198 200
Gain on sales of securities 628 138 85
Accretion of FDIC loss-share receivable (2,669 ) (3,377 ) (2,031 ) (2,021 ) (1,499 )
Other 49 99 103 112 138
Total noninterest income 8,274 5,286 3,487 4,536 3,918

Noninterest expense:

Salaries and employee benefits 11,382 10,310 8,580 8,722 8,108
Equipment and occupancy 2,234 2,153 1,995 1,922 1,932
Advertising and marketing 288 221 228 299 335
Professional fees 446 523 451 559 340
Information services expenses 1,080 1,150 1,200 1,285 1,335
Net loss on sales and write-downs of other real estate owned 8 107 318 38 335
Net (gain) loss on sales and write-downs of acquired other real estate owned (37 ) 173 (264 ) (536 ) (206 )
Foreclosed asset expenses 77 82 87 240 337
Foreclosed acquired asset expenses 217 285 333 286 366
FDIC insurance and other regulatory fees 274 299 244 254 293
Impairment loss on assets held for sale 328
Acquisition related expenses 2,543 101 52 102 280
Deposit intangible expenses 186 192 196 200 204
FDIC loss-share clawback expenses (35 ) 882 543 261 286
Other operating expenses 1,934 1,638 1,513 1,746 1,389
Total noninterest expense 20,597 18,116 15,476 15,706 15,334
Income before income taxes 2,966 2,470 1,812 4,851 1,792
Applicable income tax 1,007 698 469 1,446 470
Net income $ 1,959 $ 1,772 $ 1,343 $ 3,405 $ 1,322

Earnings per common share:

Basic earnings per share $ 0.26 $ 0.24 $ 0.18 $ 0.46 $ 0.18
Diluted earnings per share $ 0.26 $ 0.23 $ 0.18 $ 0.45 $ 0.18
Dividends $ 0.07 $ 0.07 $ 0.07 $ $

Weighted average-common shares outstanding:

Basic 7,485,528 7,436,717 7,422,044 7,407,722 7,371,804
Diluted 7,676,233 7,607,501 7,581,775 7,530,606 7,483,812

Other Financial Items:

Fixed compensation 5,787 5,431 5,092 4,979 5,175
Variable compensation 3,321 3,074 1,617 1,531 1,336
Employee benefits and taxes 2,274 1,805 1,871 2,212 1,597
Heritage Financial Group, Inc. and Subsidiary
Condensed Average Balances, Interest Rates and Yields
(Unaudited)
(Dollars in thousands)
Three Months Ended September 30,
2014 2013
Average Average Average Average
Balance Interest Rate Balance Interest Rate

Interest-earning assets:

Loans(1)(2) $ 999,848 $ 16,399 6.51 % $ 817,366 $ 13,891 6.74 %
Investment securities (2) 301,646 1,691 2.22 % 303,349 1,582 2.07 %
Other short-term investments 27,367 22 0.32 % 26,862 34 0.50 %
Total interest-earning assets 1,328,861 18,112 5.41 % 1,147,577 15,507 5.36 %
Non-interest earning assets 155,007 179,188
Total assets $ 1,483,868 $ 1,326,765

Interest-bearing liabilities:

Deposits:

Interest checking, money market and savings $ 659,883 $ 377 0.23 % $ 549,561 $ 306 0.22 %
Time deposits 366,918 815 0.88 % 359,631 676 0.75 %
Total interest-bearing deposits 1,026,801 1,192 0.46 % 909,192 982 0.43 %
Federal Funds purchased and securities sold under repurchase agreements 37,480 339 3.59 % 33,965 335 3.91 %
Other Borrowings 111,829 517 1.83 % 101,814 518 2.02 %
Total interest-bearing liabilities 1,176,110 2,048 0.69 % 1,044,971 1,835 0.70 %

Non-interest bearing liabilities:

Demand Deposits 162,917 150,840
Other Liabilities 11,353 12,120
Total non-interest bearing liabilities 174,270 162,960
Total liabilities 1,350,380 1,207,931
Shareholders’ equity 133,488 118,834
Total liabilities & shareholders’ equity $ 1,483,868 $ 1,326,765
Net interest income $ 16,064 $ 13,672
Interest rate spread 4.72 % 4.66 %

Net yield on interest-earning assets (net interest margin)

4.80 % 4.73 %
Core net interest margin (non-GAAP):
Loans(1)(2) $ 999,848 $ 16,399 6.51 % $ 817,366 $ 13,891 6.74 %

Acquired credit impaired loan discount adjustments(3)

50,607 4,621 36.23 % 75,023 3,718 19.66 %
Adjusted loans 1,050,455 11,778 4.45 % 892,389 10,173 4.52 %
Adjusted total interest-earning assets $ 1,379,468 13,491 3.88 % $ 1,222,600 11,789 3.83 %
Total interest-bearing liabilities $ 1,176,110 2,048 0.69 % $ 1,044,971 1,835 0.70 %
Core Net interest income $ 11,443 $ 9,954
Core Interest rate spread 3.19 % 3.13 %

Core Net yield on interest-earning assets (net interest margin non-GAAP)

3.29 % 3.23 %
(1) Average loan balances includes nonaccrual loans for the periods presented.
(2) Fully Taxable Equivalent (“FTE”) at the rate of 34%. The FTE basis adjusts for the tax benefits of income on certain tax-exempt loans and investments using the federal statutory rate of 34% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
(3) Acquired credit impaired loan discount adjustments include the reduction of interest income for discount accretion excluding contractual interest payments and the increase of core loans for the total balance of acquired credit impaired loan discounts.
Heritage Financial Group, Inc. and Subsidiary
Condensed Average Balances, Interest Rates and Yields
(Unaudited)
(Dollars in thousands)
Nine Months Ended September 30,
2014 2013
Average Average Average Average
Balance Interest Rate Balance Interest Rate

Interest-earning assets:

Loans(1)(2) $ 953,249 $ 46,977 6.59 % $ 770,383 $ 43,371 7.53 %
Investment securities (2) 301,729 5,078 2.25 % 278,438 4,337 2.08 %
Other short-term investments 29,195 73 0.33 % 50,941 147 0.39 %
Total interest-earning assets 1,284,173 52,128 5.43 % 1,099,762 47,855 5.82 %
Non-interest earning assets 159,311 177,064
Total assets $ 1,443,484 $ 1,276,826

Interest-bearing liabilities:

Deposits:

Interest checking, money market and savings $ 608,483 $ 1,062 0.23 % $ 532,053 $ 918 0.23 %
Time deposits 376,457 2,446 0.87 % 348,095 2,159 0.83 %
Total interest-bearing deposits 984,940 3,508 0.48 % 880,148 3,077 0.47 %

Federal Funds purchased and securities sold under repurchase agreements

35,967 999 3.71 % 33,846 995 3.93 %
Other Borrowings 121,204 1,561 1.72 % 90,096 1,451 2.15 %
Total interest-bearing liabilities 1,142,111 6,068 0.71 % 1,004,090 5,523 0.74 %

Non-interest bearing liabilities:

Demand Deposits 161,326 139,208
Other Liabilities 9,243 13,091
Total non-interest bearing liabilities 170,569 152,299
Total liabilities 1,312,680 1,156,389
Shareholders’ equity 130,804 120,437
Total liabilities & shareholders’ equity $ 1,443,484 $ 1,276,826
Net interest income $ 46,060 $ 42,332
Interest rate spread 4.72 % 5.08 %

Net yield on interest-earning assets (net interest margin)

4.80 % 5.15 %
Core net interest margin (non-GAAP):
Loans(1)(2) $ 953,249 $ 46,977 6.59 % $ 770,383 $ 43,371 7.53 %
Acquired credit impaired loan discount adjustments(3) 55,998 13,115 31.31 % 75,118 14,450 25.72 %
Adjusted loans 1,009,247 33,862 4.49 % 845,501 28,921 4.57 %
Adjusted total interest-earning assets $ 1,340,171 39,013 3.89 % $ 1,174,880 33,405 3.80 %
Total interest-bearing liabilities $ 1,142,111 6,068 0.71 % $ 1,004,090 5,523 0.74 %
Core Net interest income $ 32,945 $ 27,882
Core Interest rate spread 3.18 % 3.07 %

Core Net yield on interest-earning assets (net interest margin non-GAAP)

3.29 % 3.17 %
(1) Average loan balances includes nonaccrual loans for the periods presented.
(2) Fully Taxable Equivalent (“FTE”) at the rate of 34%. The FTE basis adjusts for the tax benefits of income on certain tax-exempt loans and investments using the federal statutory rate of 34% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
(3) Acquired credit impaired loan discount adjustments include the reduction of interest income for discount accretion excluding contractual interest payments and the increase of core loans for the total balance of acquired credit impaired loan discounts.
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands except share and per share data)
Five Quarter Comparison

Financial Condition Data:

9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Total loans $ 1,069,108 $ 845,101 $ 810,028 $ 798,753 $ 789,092
Loans held for sale 147,867 127,186 126,436 110,669 38,042
Acquired credit impaired loans covered 42,447 43,442 47,684 50,891 53,843
Allowance for loan losses 9,916 9,457 9,145 8,955 8,894
Total other real estate owned 9,225 7,710 8,727 10,535 10,244
Acquired other real estate owned covered 5,281 5,865 6,095 7,053 5,909
FDIC loss-share receivable 27,929 33,239 37,637 41,306 44,527
Goodwill and intangible assets 16,702 5,786 4,757 4,253 4,251
Total assets 1,755,534 1,487,431 1,413,540 1,380,925 1,322,309
Non-interest-bearing deposits 199,336 168,666 163,090 148,253 153,163
Interest-bearing deposits 1,141,925 1,040,134 963,564 928,168 899,318
Other borrowings 190,440 100,789 116,127 131,394 101,667

Federal funds purchased and securities sold under agreement to repurchase

42,815 35,350 33,785 37,648 35,393
Stockholders’ equity 159,948 131,660 127,984 125,063 120,534
Total shares outstanding 9,183,574 7,851,296 7,834,517 7,834,537 7,834,765
Unearned ESOP shares 292,559 305,885 319,210 332,535 345,860
Total shares outstanding net of unearned ESOP 8,891,015 7,545,411 7,515,307 7,502,002 7,488,905
Book value per share $ 17.99 $ 17.45 $ 17.03 $ 16.67 $ 16.10

Book value per share including unearned ESOP (non-GAAP)

17.42 16.77 16.34 15.96 15.38
Tangible book value per share (non-GAAP) 16.11 16.68 16.40 16.10 15.53
Tangible book value per share, including unearned ESOP (non-GAAP) 15.60 16.03 15.73 15.42 14.84
Market value per share 20.19 19.83 19.65 19.25 17.42
Five Quarter Comparison
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013

Key Financial Ratios and other information:

Performance Ratios
Annualized return on average assets 0.52 % 0.49 % 0.39 % 1.00 % 0.40 %
Annualized return on average equity 5.82 % 5.42 % 4.26 % 11.10 % 4.41 %
Net interest margin 4.80 % 4.92 % 4.66 % 5.50 % 4.73 %
Net interest spread 4.72 % 4.84 % 4.59 % 5.43 % 4.66 %
Efficiency ratio 84.80 % 82.07 % 84.20 % 71.66 % 82.29 %
Capital Ratios
Average stockholders’ equity to average assets 9.0 % 9.0 % 9.2 % 9.0 % 9.0 %
Tangible equity to tangible assets (non-GAAP) 8.2 % 8.5 % 8.7 % 8.8 % 8.8 %
Tier 1 leverage ratio 10.3 % 9.1 % 9.0 % 9.5 % 9.4 %
Tier 1 risk-based capital ratio 12.0 % 13.0 % 12.8 % 13.5 % 14.3 %
Total risk-based capital ratio 12.8 % 14.0 % 13.8 % 14.5 % 15.4 %
Other Information
Full-time equivalent employees 586 490 455 426 412
Banking 371 312 305 306 308
Mortgage 209 171 143 113 97
Investments 6 7 7 7 7
Number of banking offices 36 29 29 27 27
Mortgage loan offices 20 15 15 14 12
Investment offices 5 5 5 4 4
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands)
Five Quarter Comparison

Loans

9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Construction and land $ 73,137 $ 57,863 $ 53,138 $ 50,167 $ 48,808
Farmland 29,441 28,502 30,116 23,420 22,561
Permanent 1 – 4 176,191 174,026 173,581 174,565 169,105
Permanent 1 – 4 – junior liens and revolving 39,694 35,827 34,661 32,038 30,180
Multifamily 28,742 26,436 25,718 22,650 27,468
Nonresidential 284,218 277,295 262,753 256,567 250,859
Commercial business 121,073 116,926 101,696 101,161 95,108
Consumer and other 21,612 27,918 20,907 23,976 21,499
Total non-acquired loans $ 774,108 $ 744,793 $ 702,570 $ 684,544 $ 665,588
Allowance for non-acquired loans 9,916 9,457 9,145 8,955 8,894
Net non-acquired loans $ 764,192 $ 735,336 $ 693,425 $ 675,589 $ 656,694
Acquired non-credit impaired loans 160,502
Acquired credit impaired non-covered 92,051 56,866 59,774 63,318 69,661
Acquired credit impaired covered 42,447 43,442 47,684 50,891 53,843
Total acquired credit impaired loans 134,498 100,308 107,458 114,209 123,504
Net loans $ 1,059,192 $ 835,644 $ 800,883 $ 789,798 $ 780,198

Loan Balances by Geographical Region (excluding acquired loans):

Five Quarter Comparison
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Albany $ 314,875 $ 321,566 $ 302,664 $ 294,033 $ 288,089
Valdosta 102,751 103,231 103,479 100,936 101,729
Ocala 64,678 55,231 57,322 58,343 58,115
Statesboro 135,861 128,421 121,636 122,928 124,667
Auburn/Columbus 41,092 36,023 36,171 36,130 31,485
Macon 86,041 80,323 75,722 68,638 60,197
Birmingham 14,798 10,834 2,091 1,590 344
South Atlanta 14,012 9,164 3,485 1,946 962
$ 774,108 $ 744,793 $ 702,570 $ 684,544 $ 665,588
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands)

Asset Quality Data (excluding acquired loans):

Five Quarter Comparison
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Nonaccrual loans $ 6,895 $ 7,003 $ 9,245 $ 9,435 $ 10,986
Loans – 90 days past due & still accruing
Total non-performing loans 6,895 7,003 9,245 9,435 10,986
OREO 648 507 1,104 1,789 2,654
Total non-performing assets $ 7,543 $ 7,510 $ 10,349 $ 11,224 $ 13,640
Trouble debt restructuring – nonaccrual $ 3,097 $ 3,426 $ 5,702 $ 5,763 $ 5,840
Trouble debt restructuring – accruing 4,683 4,392 1,968 1,983 1,996
Total trouble debt restructuring $ 7,780 $ 7,818 $ 7,670 $ 7,746 $ 7,836
Accruing past due loans $ 1,065 $ 752 $ 830 $ 1,001 $ 669
Total criticized assets 23,737 21,553 22,026 22,741 26,116
Total classified assets 19,280 18,573 18,717 19,582 23,048
Allowance for loan losses 9,916 9,457 9,145 8,955 8,894
Net charge-offs (recoveries) $ 117 $ 92 $ (20 ) $ 160 $ 503

Asset Quality Ratios:

Allowance for loan losses to total non-acquired loans 1.28 % 1.27 % 1.30 % 1.31 % 1.34 %
Allowance for loan losses to average non-acquired loans 1.30 % 1.31 % 1.32 % 1.33 % 1.37 %
Allowance for loan losses to non-performing loans 143.81 % 135.04 % 98.92 % 94.91 % 80.96 %
Non-performing loans to total non-acquired loans 0.89 % 0.94 % 1.32 % 1.38 % 1.65 %
Non-performing assets to total assets 0.43 % 0.50 % 0.73 % 0.81 % 1.03 %
Net charge-offs (recoveries) to average non-acquired loans (annualized) 0.06 % 0.05 % -0.01 % 0.10 % 0.31 %
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands)
Five Quarter Comparison

Acquired credit impaired assets

9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013

Acquired credit impaired loans non-covered:

Commercial real estate $ 47,409 $ 21,020 $ 21,269 $ 22,268 $ 25,027
Residential real estate 30,446 26,456 28,115 30,134 32,318
Construction and land 5,309 4,934 5,573 5,156 5,195
Commercial and industrial 5,796 1,800 1,926 2,604 3,638
Consumer and other 3,091 2,656 2,891 3,156 3,483
Total 92,051 56,866 59,774 63,318 69,661

Acquired credit impaired loans covered:

Commercial real estate 12,344 12,295 14,044 14,161 14,956
Residential real estate 19,219 19,637 22,372 23,886 25,082
Construction and land 10,126 10,679 10,332 11,642 12,469
Commercial and industrial 680 762 801 864 924
Consumer and other 78 69 135 338 412
Total 42,447 43,442 47,684 50,891 53,843
Total carrying value of acquired credit impaired loans $ 134,498 $ 100,308 $ 107,458 $ 114,209 $ 123,504
Non-accrete discount for acquired credit impaired loans 22,729 16,600 30,818 36,746 48,545
Accretable discount for acquired credit impaired loans 31,540 36,066 27,492 26,860 23,445
Total discount for acquired credit impaired loans 54,269 52,666 58,310 63,606 71,990
Outstanding principal balance for acquired credit impaired loans $ 188,767 $ 152,974 $ 165,768 $ 177,815 $ 195,494

Acquired OREO:

Non-covered $ 3,296 $ 1,338 $ 1,527 $ 1,694 $ 1,680
Covered 5,281 5,865 6,095 7,053 5,909
Total carrying value of acquired OREO $ 8,577 $ 7,203 $ 7,622 $ 8,747 $ 7,589
Total discount for acquired OREO 7,340 7,593 10,255 11,186 12,038
Gross carrying value of acquired OREO $ 15,917 $ 14,796 $ 17,877 $ 19,933 $ 19,627

Total credit impaired loan discount accretion recognized in income:

Individual assessed discount accretion $ 300 $ 1,681 $ 808 $ 3,132 $ 791
Pooled assessed discount accretion 4,320 2,963 3,042 3,140 2,927
Total credit impaired loan discount accretion recognized in income $ 4,620 $ 4,644 $ 3,850 $ 6,272 $ 3,718

Acquired credit impaired ratios:

Total discount to principal balance for acquired loans 28.7 % 34.4 % 35.2 % 35.8 % 36.8 %
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands)

Five Quarter Comparison

Acquired credit impaired assets non-covered

9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013

Outstanding principal balance:

Acquired loan pools non-covered $ 81,787 $ 54,899 $ 58,294 $ 61,893 $ 66,294
Acquired loans individually assessed non-covered 33,774 19,497 20,644 22,214 27,627
Total outstanding principal loan balance non-covered 115,561 74,396 78,938 84,107 93,921
Gross carrying value for acquired OREO non-covered 6,373 3,892 4,254 4,470 4,993
Total gross balance of assets non-covered $ 121,934 $ 78,288 $ 83,192 $ 88,577 $ 98,914

Non-accretable discount for estimated credit losses non-covered:

Acquired loan pools non-covered $ 6,293 $ 2,883 $ 7,337 $ 8,932 $ 9,297
Acquired loans individually assessed non-covered 7,224 3,524 4,283 5,397 12,294
Total non-accretable discount non-covered 13,517 6,407 11,620 14,329 21,591
Acquired OREO discount non-covered 3,077 2,554 2,728 2,776 3,313
Total discount for estimated credit losses non-covered $ 16,594 $ 8,961 $ 14,348 $ 17,105 $ 24,904

Accretable discount non-covered:

Accretable discount for improvement in cash flows non-covered $ 9,200 $ 10,270 $ 6,603 $ 5,458 $ 380
Other accretable discount non-covered 793 855 941 1,002 2,288
Total accretable discount non-covered 9,993 11,125 7,544 6,460 2,668
Total discount non-covered $ 26,587 $ 20,086 $ 21,892 $ 23,565 $ 27,572

Loan discount accretion recognized in income non-covered:

Individual assessed discount accretion $ 18 $ 690 $ 428 $ 2,375 $ 619
Pooled assessed discount accretion 475 321 187 249 184

Total discount accretion recognized in income non-covered

$ 493 $ 1,011 $ 615 $ 2,624 $ 803

Acquired ratios non-covered:

Total discount to principal balance for acquired assets non-covered 21.8 % 25.7 % 26.3 % 26.6 % 27.9 %
Gross balance of loans non-covered to total acquired loans 61.2 % 48.6 % 47.6 % 47.3 % 48.0 %
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands)

Acquired credit impaired assets covered

9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013

Outstanding principal balance:

Acquired loan pools covered $ 53,733 $ 57,567 $ 63,789 $ 69,192 $ 74,020
Acquired loans individually assessed covered 19,473 21,010 23,041 24,517 27,554
Total outstanding principal loan balance covered 73,206 78,577 86,830 93,709 101,574
Gross carrying value for acquired OREO covered 9,544 10,904 13,622 15,463 14,634
Total gross balance of assets covered $ 82,750 $ 89,481 $ 100,452 $ 109,172 $ 116,208

Non-accretable discount for estimated credit losses covered:

Acquired loan pools covered

$ 5,027 $ 5,401 $ 12,215 $ 15,284 $ 16,281
Acquired loans individually assessed covered 4,184 4,792 6,983 7,133 10,673
Total non-accretable discount covered 9,211 10,193 19,198 22,417 26,954
Acquired OREO discount covered 4,263 5,039 7,528 8,410 8,725
Total discount for estimated credit losses covered $ 13,474 $ 15,232 $ 26,726 $ 30,827 $ 35,679

Accretable discount covered:

Accretable discount for improvement in cash flows covered $ 18,597 $ 22,084 $ 18,156 $ 18,012 $ 17,676
Other accretable discount covered 2,951 2,858 1,792 2,389 3,101
Total accretable discount covered 21,548 24,942 19,948 20,401 20,777
Total discount covered $ 35,022 $ 40,174 $ 46,674 $ 51,228 $ 56,456

Loan discount accretion recognized in income covered:

Individual assessed accretion $ 282 $ 991 $ 380 $ 757 $ 172
Pooled assessed accretion 3,845 2,642 2,855 2,891 2,743
Total discount accretion recognized in income covered $ 4,127 $ 3,633 $ 3,235 $ 3,648 $ 2,915

Acquired ratios covered:

Total discount to principal balance for acquired assets covered 42.3 % 44.9 % 46.5 % 46.9 % 48.6 %
Five Quarter Comparison

FDIC loss-share receivable

9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013

FDIC loss-share receivable:

Single family estimated credit losses $ 6,524 $ 7,506 $ 8,446 $ 8,995 $ 9,134
Non-single family estimated credit losses 19,133 22,347 27,459 30,077 33,550
Pending reimbursements and other 2,272 3,386 1,732 2,234 1,843
Total $ 27,929 $ 33,239 $ 37,637 $ 41,306 $ 44,527
FDIC loss-share clawback liability $ 3,332 $ 3,366 $ 2,484 $ 1,941 $ 1,681
Total covered discount $ 35,022 $ 40,174 $ 46,674 $ 51,228 $ 56,456
Total covered discount impacting FDIC loss-share receivable $ 32,071 $ 37,316 $ 44,882 $ 48,839 $ 53,355
Total covered discount impacting FDIC loss-share receivable at 80% $ 25,657 $ 29,853 $ 35,906 $ 39,071 $ 42,684

FDIC loss-share receivable ratios:

FDIC receivable as % of gross balance of covered assets 33.8 % 37.1 % 37.5 % 37.8 % 38.3 %
Covered discount at 80% as % of FDIC receivable 91.9 % 89.8 % 95.4 % 94.6 % 95.9 %
Heritage Financial Group, Inc. and Subsidiary
Consolidated Financial Highlights
(Unaudited)

Mortgage Segment Information

Five Quarter Comparison
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Net interest income $ 716 $ 924 $ 825 $ 114 $ 218
Provision for loan losses
Noninterest income 6,892 6,153 2,392 2,951 1,952
Noninterest expense 7,103 6,178 3,815 3,149 2,968
Income tax expense (benefit) 157 278 (185 ) (26 ) (247 )
Mortgage profit (loss) $ 348 $ 621 $ (413 ) $ (58 ) $ (551 )
Mortgage segment assets $ 158,277 $ 139,024 $ 136,662 $ 120,716 $ 44,588

Other Financial Items:

Fixed compensation $ 1,594 $ 1,375 $ 1,106 $ 1,037 $ 1,010
Variable compensation 3,433 2,832 1,402 1,311 1,121

Mortgage Segment Selected Other Information:

Five Quarter Comparison
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Retail production $ 207,315 $ 187,669 $ 98,554 $ 84,381 $ 83,657
Wholesale production 85,294 62,228 36,941 36,030 31,646
Total production $ 292,609 $ 249,897 $ 135,495 $ 120,411 $ 115,303
Purchase as a % of total production 78 % 84 % 80 % 78 % 76 %
Refi as a % of total production 22 % 16 % 20 % 22 % 24 %
End of period locks $ 135,963 $ 117,940 $ 71,121 $ 43,054 $ 47,871

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