HBOS (MM)

Company Declares Quarterly Cash Dividend of $0.07 Per Share

Heritage Financial Group, Inc. (NASDAQ: HBOS), the holding company for HeritageBank of the South, today announced unaudited financial results for the quarter ended March 31, 2015. Key highlights of the Company's report for the first quarter of 2015 include:

• Net income of $3.9 million or $0.43 per diluted share, up 56% from $2.5 million or $0.28 per diluted share for the linked quarter, and up 189% from $1.3 million or $0.18 per diluted share for the year-earlier quarter;
• Net income, excluding special items for each quarter, of $4.0 million or $0.44 per diluted share, up 36% from $2.9 million or $0.32 per diluted share for the linked quarter, and up 123% from $1.8 million or $0.24 per diluted share for the year-earlier quarter (see non-GAAP reconciliation);
• Core net interest margin expanded to 3.60%, up 16 basis points from 3.44% for the linked quarter and up 37 basis points from 3.23% for the year-earlier quarter;
• Loan growth, excluding acquired loans, of $7.3 million or 1% on a linked-quarter basis and $104.5 million or 15% compared with the year-earlier quarter;
• A decline in nonperforming loans, excluding acquired loans, of 9% on a linked-quarter basis and 40% compared with the year-earlier quarter;
• A decrease in the provision for loan losses, excluding acquired loans, to $75,000 from $285,000 for the linked-quarter, but up from $65,000 for the year-earlier quarter; and
• An increase in mortgage originations to $448.1 million, up $103.4 million or 30% from the linked-quarter and up $312.6 million or 231% from the year-earlier quarter.

Commenting on the announcement, Leonard Dorminey, President and Chief Executive Officer, said, "During the first quarter of 2015, our company continued to make significant and meaningful progress on a number of fronts. First, and most important, we were pleased to see continued improvement in our operations, building on the momentum evident in our business as 2014 came to an end. We continue to successfully assimilate the purchase of a branch of The PrivateBank in our Atlanta market and the acquisition of Alarion Bank, which provided for our entry into the Gainesville market and expanded our presence in Ocala. Additionally, we continue to see solid growth in our mortgage lending business. Together, these factors helped drive attractive earnings growth for the Company in the first quarter of 2015.

"Another area in which we have made important headway during 2015 is with our previously announced merger with Renasant Bank," Dorminey continued. "Both companies have scheduled special meetings of stockholders for June 16, 2015, to consider and approve the merger, and we currently expect to mail proxy materials for that meeting to stockholders on or about May 1, 2015. Pending stockholder approvals, and other conditions set forth in the merger agreement, we expect the merger to close during the third quarter of 2015."

Dorminey 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 May 22, 2015, to stockholders of record as of May 8, 2015.

First Quarter 2015 Results of Operations

The $1.4 million increase in reported quarterly earnings for the first quarter of 2015 compared with the linked-quarter resulted primarily from the following items:

• Increased net interest income of $976,000;
• Growth in revenue from mortgage banking activities of $3.1 million;
• Decreased acquisition-related expenses of $173,000; offset by
• Increased salaries and employee benefits of $1.1 million, driven primarily by mortgage banking expansion;
• Decreased gain on sales of securities of $190,000; and
• Decreased service charges on deposit accounts of $243,000.

The $2.5 million increase in reported quarterly earnings for the first quarter of 2015 compared with the year-earlier quarter primarily reflected the following items:

• Increased salaries and employee benefits of $7.1 million due primarily to personnel additions related to mortgage banking expansion and the Alarion merger;
• Increased equipment and occupancy expense of $709,000; offset by
• Growth in revenue from mortgage banking activities of $8.9 million; and
• Increased net interest income of $4.5 million.

Net interest income for the first quarter of 2015 increased 32% to $18.4 million from $14.0 million in the year-earlier quarter, primarily reflecting an increase in interest-earning assets related to acquisitions, mortgage and organic growth. The Company's net interest margin was 4.80% for the first quarter of 2015, an increase of 13 basis points from 4.67% for the year-earlier period. The increase in the net interest margin for the first quarter of 2015 compared with the year-earlier quarter was driven by a decline in the yield on interest-bearing liabilities of 14 basis points, reflecting lower cost of deposits and borrowings. Excluding acquired credit impaired loan discount adjustments from the net interest margin, the core net interest margin was 3.60% for the first quarter of 2015, an improvement of 37 basis points from 3.23% for the year-earlier quarter.

In the first quarter of 2015, the Company continued to achieve loan growth, with its non-acquired loan portfolio increasing $7.3 million organically on a linked-quarter basis and advancing $104.5 million overall compared with the year-earlier quarter. For the first quarter of 2015, the Company's loan portfolio, including acquired loans, totaled $1.104 billion, increasing $28.8 million on a linked-quarter basis from $1.075 billion and $303.4 million from $800.1 million compared with the year-earlier quarter, driven primarily by the Alarion merger and to a lesser extent The PrivateBank branch acquisition and organic loan growth. The organic loan growth from the linked-quarter reflected primarily growth in the Gainesville/Ocala, Macon, Birmingham, Auburn/Columbus, and Atlanta markets. Total deposits stood at $1.394 billion at the end of the first quarter of 2015, up 5% from $1.322 billion on a linked-quarter basis, and up 24% from $1.127 billion for the year-earlier quarter, driven primarily by the Alarion merger and The PrivateBank branch acquisition.

For the first quarter of 2015, the Company's loans held for sale totaled $233.5 million, increasing $72.4 million or 45% on a linked-quarter basis from $161.1 million, and increasing $107.0 million or 85% from $126.4 million compared with the year-earlier quarter. The increase in the loans held for sale is due to the increase in mortgage loan production. Total mortgage production for the first quarter was $448.1 million, up 30% on a linked-quarter basis from $344.7 million and up 231% from $135.5 million compared with the year-earlier quarter.

Noninterest income for the first quarter of 2015 improved 234% to $11.7 million from $3.5 million in the year-earlier quarter, primarily reflecting increases in revenue from mortgage banking activities of $8.9 million. Noninterest expense for the first quarter of 2015 increased 56% to $24.1 million from $15.5 million in the year-earlier quarter, driven primarily by increases in salaries and employee benefits of $7.1 million related to the expansion of the mortgage division and the Alarion merger.

Asset Quality

Total nonperforming assets, excluding acquired assets, increased to $7.5 million, or 0.41% of total assets compared with $6.7 million or 0.39% of total assets, for the linked-quarter and declined from $10.3 million or 0.73% of total assets for the year-earlier quarter. Annualized net charge-offs to average outstanding loans, excluding acquired loans, were 0.04% for the first quarter of 2015 compared with annualized net charge-offs of 0.07% for the linked-quarter and annualized net recoveries of 0.01% for the year-earlier quarter. Nonperforming loans, excluding acquired loans, totaled $5.6 million for the first quarter of 2015, down from $6.1 million for the linked-quarter and down from $9.2 million for the year-earlier quarter. Other real estate owned and repossessed assets, excluding acquired assets, totaled $2.0 million for the first quarter of 2015, up from $577,000 for the linked-quarter and from $1.1 million for the year-earlier quarter.

The provision for loan losses on non-acquired loans decreased to $75,000 for the first quarter of 2015 from $285,000 for the linked-quarter, primarily driven by lower loan growth, but increased from $65,000 for the year-earlier quarter. For the first quarter of 2015, the allowance for loan losses represented 1.24% of total loans outstanding, excluding acquired loans, versus 1.25% for the linked quarter and 1.30% for the year-earlier quarter.

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, 21 mortgage offices, and 5 investment offices. As of March 31, 2015, the Company reported total assets of approximately $1.8 billion and total stockholders' equity of approximately $164 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 such as "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 2014 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 March 31, December 31, 2015 2014 2014 Total noninterest income $ 11,657 $ 3,487 $ 9,551 Gain on sale of securities – – (190 ) Gain on acquisitions   –     –     –   Adjusted noninterest income $ 11,657   $ 3,487   $ 9,361   Total noninterest expense $ 24,100 $ 15,476 $ 23,165 Acquisition-related expenses (253 ) (52 ) (426 ) Impairment loss on assets held for sale – – (172 )

Realized loss on the disposition of assets held for sale

– – (6 )

Accrual of FDIC acquisitions estimated clawback liability

  (11 )   (543 )   (191 ) Adjusted noninterest expense $ 23,836   $ 14,881   $ 22,370   Net income as reported $ 3,884 $ 1,343 $ 2,494 Total adjustments, net of tax*   91     441     422   Adjusted net income $ 3,975   $ 1,784   $ 2,916   Diluted earnings per share $ 0.43 $ 0.18 $ 0.28 Total adjustments, net of tax*   0.01     0.06     0.04   Adjusted diluted earnings per share $ 0.44   $ 0.24   $ 0.32    

* 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) March 31, December 31, 2015 2014*

ASSETS

Cash and due from banks $ 31,947 $ 29,107 Interest-bearing deposits in banks 3,419 6,135 Federal funds sold   979     141   Cash and cash equivalents 36,345 35,383 Securities available for sale, at fair value 262,856 269,678 Federal Home Loan Bank stock, at cost 9,139 8,510 Other equity securities, at cost 1,010 1,010 Loans held for sale 233,466 161,104 Loans: Non-acquired loans 807,101 799,793 Acquired non-credit impaired loans 182,213 156,513 Acquired credit impaired loans non-covered 84,123 86,763 Acquired credit impaired loans covered 40,834 42,404 Less allowance for non-acquired loans   10,010     10,034   Loans, net   1,104,261     1,075,439   Non-acquired other real estate owned 1,951 577 Acquired non-covered other real estate owned 2,623 2,721 Acquired covered other real estate owned   4,714     5,107   Total other real estate owned   9,288     8,405   FDIC loss-share receivable 20,170 23,837 Premises and equipment, net 49,810 50,041 Goodwill and intangible assets 24,889 18,177 Cash surrender value of bank owned life insurance 25,114 24,931 Other assets   31,480     29,100   Total assets $ 1,807,828   $ 1,705,615  

LIABILITIES AND SHAREHOLDERS' EQUITY

Non-interest-bearing deposits $ 253,811

$

217,869 Interest-bearing deposits   1,140,300     1,104,240   Total deposits   1,394,111     1,322,109   Federal funds purchased Federal funds purchased and securities sold under repurchase agreements 41,128 43,339 Other borrowings 181,981 159,247 Other liabilities   26,750     20,902   Total liabilities   1,643,970     1,545,597   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; 9,239,498 and 9,238,973 shares issued and outstanding, respectively

92 92 Capital surplus 106,331 105,965 Retained earnings 66,527 63,289 Accumulated other comprehensive loss, net of tax of $4,277 and $4,333, respectively (6,415 ) (6,500 ) Unearned employee stock ownership plan (ESOP), 265,909 and 279,234 shares, respectively   (2,677 )   (2,828 ) Total shareholders' equity   163,858     160,018   Total liabilities & shareholders' equity $ 1,807,828   $ 1,705,615    

* 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 March 31, March 31, 2015 2014

Interest income:

Interest and fees on loans $ 17,376 $ 13,350 Interest on loans held for sale 1,730 1,025 Interest on taxable securities 958 1,206 Interest on nontaxable securities 351 354 Interest on federal funds sold 2 1 Interest on deposits in other banks   12     19   Total interest income   20,429     15,955  

Interest expense:

Interest on deposits 1,202 1,140 Interest on other borrowings   778     844   Total interest expense   1,980     1,984   Net interest income 18,449 13,971 Provision for loan losses   75     170   Net interest income after provision for loan losses   18,374     13,801  

Noninterest income:

Service charges on deposit accounts 1,386 1,443 Bankcard services income 923 889 Other service charges, commissions and fees 261 162 Brokerage fees 597 566 Mortgage banking activities 11,080 2,166 Bank-owned life insurance 182 189 Accretion of FDIC loss-share receivable (2,883 ) (2,031 ) Other   111     103   Total noninterest income   11,657     3,487  

Noninterest expense:

Salaries and employee benefits 15,654 8,580 Equipment and occupancy 2,704 1,995 Advertising and marketing 392 228 Professional fees 272 451 Information services expenses 1,594 1,200 Net loss on sales and write-downs of other real estate owned 123 318 Net gain on sales and write-downs of acquired other real estate owned (98 ) (264 ) Foreclosed asset expenses 113 87 Foreclosed acquired asset expenses 120 333 FDIC insurance and other regulatory fees 334 244 Acquisition related expenses 253 52 Deposit intangible expenses 321 196 FDIC loss-share clawback expenses 11 543 Other operating expenses   2,307     1,513   Total noninterest expense   24,100     15,476   Income before income taxes 5,931 1,812 Applicable income tax   2,047     469   Net income $ 3,884   $ 1,343  

Earnings per common share:

Basic earnings per share $ 0.44   $ 0.18   Diluted earnings per share $ 0.43   $ 0.18  

Weighted average-common shares outstanding:

Basic   8,889,252     7,422,044   Diluted   9,117,388     7,581,775               Heritage Financial Group, Inc. and Subsidiary Consolidated Statements of Income (Unaudited) (Dollars in thousands except share and per share data)   Five Quarter Comparison 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014

Interest income:

Interest and fees on loans $ 17,376 $ 16,372 $ 14,901 $ 14,730 $ 13,350 Interest on loans held for sale 1,730 1,759 1,493 1,466 1,025 Interest on taxable securities 958 1,143 1,180 1,215 1,206 Interest on nontaxable securities 351 380 381 368 354 Interest on federal funds sold 2 2 2 1 1 Interest on deposits in other banks   12     14     20     30     19   Total interest income   20,429     19,670     17,977     17,810     15,955  

Interest expense:

Interest on deposits 1,202 1,337 1,192 1,176 1,140 Interest on other borrowings   778     860     856     860     844   Total interest expense   1,980     2,197     2,048     2,036     1,984   Net interest income 18,449 17,473 15,929 15,774 13,971 Provision for loan losses - non-acquired 75 285 575 510 65 Provision for loan losses - acquired covered - - 65 25 - Provision for loan losses - acquired non-covered   -     -     -     (61 )   105   Net interest income after provision for loan losses   18,374     17,188     15,289     15,300     13,801  

Noninterest income:

Service charges on deposit accounts 1,386 1,629 1,612 1,503 1,443 Bankcard services income 923 950 919 941 889 Other service charges, commissions and fees 261 185 178 154 162 Brokerage fees 597 611 644 615 566 Mortgage banking activities 11,080 7,946 6,723 5,026 2,166 Bank-owned life insurance 182 182 190 187 189 Gain on sales of securities - 190 628 138 - Accretion of FDIC loss-share receivable (2,883 ) (2,349 ) (2,669 ) (3,377 ) (2,031 ) Other   111     207     49     99     103   Total noninterest income   11,657     9,551     8,274     5,286     3,487  

Noninterest expense:

Salaries and employee benefits 15,654 14,559 11,382 10,310 8,580 Equipment and occupancy 2,704 2,589 2,234 2,153 1,995 Advertising and marketing 392 359 288 221 228 Professional fees 272 472 446 523 451 Information services expenses 1,594 1,404 1,080 1,150 1,200 Net loss on sales and write-downs of other real estate owned 123 92 8 107 318 Net (gain) loss on sales and write-downs of acquired other real estate owned (98 ) (216 ) (37 ) 173 (264 ) Foreclosed asset expenses 113 45 77 82 87 Foreclosed acquired asset expenses 120 331 217 285 333 FDIC insurance and other regulatory fees 334 332 274 299 244 Impairment loss on assets held for sale - 172 - - - Acquisition related expenses 253 426 2,543 101 52 Deposit intangible expenses 321 305 186 192 196 FDIC loss-share clawback expenses 11 191 (35 ) 882 543 Other operating expenses   2,307     2,104     1,934     1,638     1,513   Total noninterest expense   24,100     23,165     20,597     18,116     15,476   Income before income taxes 5,931 3,574 2,966 2,470 1,812 Applicable income tax   2,047     1,080     1,007     698     469   Net income $ 3,884   $ 2,494   $ 1,959   $ 1,772   $ 1,343  

Earnings per common share:

Basic earnings per share $ 0.44   $ 0.28   $ 0.26   $ 0.24   $ 0.18   Diluted earnings per share $ 0.43   $ 0.28   $ 0.26   $ 0.23   $ 0.18   Dividends $ 0.07   $ 0.07   $ 0.07   $ 0.07   $ 0.07  

Weighted average-common shares outstanding:

Basic   8,889,252     8,826,740     7,485,528     7,436,717     7,422,044   Diluted   9,117,388     9,057,258     7,676,233     7,607,501     7,581,775  

Other Financial Items:

Fixed compensation $ 6,677 $ 6,841 $ 5,787 $ 5,431 $ 5,092 Variable compensation $ 5,097 $ 4,201 $ 3,321 $ 3,074 $ 1,617 Employee benefits and taxes $ 3,880 $ 3,517 $ 2,274 $ 1,805 $ 1,871               Heritage Financial Group, Inc. and Subsidiary Condensed Average Balances, Interest Rates and Yields (Unaudited)   (Dollars in thousands)   Three Months Ended December 31, 2014 2013 Average Average Average Average Balance Interest Rate Balance Interest Rate

Interest-earning assets:

Loans(1)(2) $ 1,286,665 $ 19,108 6.02 % $ 903,153 $ 14,379 6.46 % Investment securities (2) 267,574 1,429 2.17 % 301,407 1,680 2.26 % Other short-term investments   13,930   14 0.41 %   20,715   20 0.39 % Total interest-earning assets   1,568,169   20,551 5.31 %   1,225,275   16,079 5.32 % Non-interest earning assets   193,889   163,312 Total assets $ 1,762,058 $ 1,388,587

Interest-bearing liabilities:

Deposits:

Interest checking, money market and savings $ 670,843 $ 385 0.23 % $ 555,828 $ 327 0.24 % Time deposits   473,479   814 0.70 %   382,486   813 0.86 % Total interest-bearing deposits   1,144,322   1,199 0.42 %   938,314   1,140 0.49 %

Federal funds purchased and securities sold under repurchase agreements

42,860 290 2.74 % 35,977 329 3.70 % Other borrowings   149,631   487 1.32 %   119,413   515 1.75 % Total interest-bearing liabilities   1,336,813   1,976 0.60 %   1,093,704   1,984 0.74 %

Non-interest bearing liabilities:

Demand deposits 237,896 158,583 Other liabilities   25,061   8,475 Total non-interest bearing liabilities   262,957   167,058 Total liabilities   1,599,770   1,260,762 Shareholders' equity 162,288 127,825 Total liabilities & shareholders' equity $ 1,762,058 $ 1,388,587 Net interest income $ 18,575 $ 14,095 Interest rate spread 4.72 % 4.59 %

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

4.80 % 4.67 % Core net interest margin (non-GAAP): Loans(1)(2) $ 1,286,665 $ 19,108 6.02 % $ 903,153 $ 14,379 6.46 % Acquired credit impaired loan discount adjustments(3)   48,129   4,246 35.78 %   61,056   3,850 25.57 % Adjusted loans   1,334,794   14,862 4.52 %   964,209   10,529 4.43 % Adjusted total interest-earning assets $ 1,616,298   16,305 4.09 % $ 1,286,331   12,229 3.86 % Total interest-bearing liabilities $ 1,336,813   1,976 0.60 % $ 1,093,704   1,984 0.74 % Core net interest income $ 14,329 $ 10,245 Core interest rate spread 3.49 % 3.12 %

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

3.60 % 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 Consolidated Financial Highlights (Unaudited)   (Dollars in thousands except share and per share data)   Five Quarter Comparison

Financial Condition Data:

3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014 Total loans $ 1,114,271 $ 1,085,473 $ 1,069,108 $ 845,101 $ 810,028 Loans held for sale 233,466 161,104 147,867 127,186 126,436 Acquired credit impaired loans covered 40,834 86,763 42,447 43,442 47,684 Allowance for loan losses 10,010 10,034 9,916 9,457 9,145 Total other real estate owned 9,288 8,405 9,225 7,710 8,727 Acquired other real estate owned covered 4,714 5,107 5,281 5,865 6,095 FDIC loss-share receivable 20,170 23,837 27,929 33,239 37,637 Goodwill and intangible assets 24,889 18,177 16,702 5,786 4,757 Total assets 1,807,828 1,705,614 1,755,534 1,487,431 1,413,540 Non-interest-bearing deposits 253,811 217,869 199,336 168,666 163,090 Interest-bearing deposits 1,140,300 1,104,240 1,141,925 1,040,134 963,564 Other borrowings 181,981 159,247 190,440 100,789 116,127

Federal funds purchased and securities sold under agreement to repurchase

41,128 43,339 42,815 35,350 33,785 Stockholders' equity 163,858 160,017 159,948 131,660 127,984 Total shares outstanding 9,239,498 9,238,973 9,183,574 7,851,296 7,834,517 Unearned ESOP shares   265,908   279,234   292,559   305,885   319,210 Total shares outstanding net of unearned ESOP   8,973,590   8,959,739   8,891,015   7,545,411   7,515,307 Book value per share $ 18.26 $ 17.86 $ 17.99 $ 17.45 $ 17.03 Book value per share including unearned ESOP (non-GAAP) 17.73 17.32 17.42 16.77 16.34 Tangible book value per share (non-GAAP) 15.49 15.83 16.11 16.68 16.40

Tangible book value per share including unearned ESOP (non-GAAP)

15.04 15.35 15.60 16.03 15.73 Market value per share 27.23 25.90 20.19 19.83 19.65                       Five Quarter Comparison 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014

Key Financial Ratios and other information:

Performance Ratios Annualized return on average assets 0.89 % 0.57 % 0.52 % 0.49 % 0.39 % Annualized return on average equity 9.71 % 6.10 % 5.82 % 5.42 % 4.26 % Net interest margin 4.80 % 4.48 % 4.80 % 4.92 % 4.66 % Net interest spread 4.72 % 4.40 % 4.72 % 4.84 % 4.59 % Core net interest margin 3.60 % 3.44 % 3.29 % 3.34 % 3.23 % Core net interest spread 3.49 % 3.35 % 3.19 % 3.23 % 3.12 % Efficiency ratio 77.81 % 83.15 % 84.80 % 82.07 % 84.20 % Capital Ratios Average stockholders' equity to average assets 9.0 % 9.3 % 9.0 % 9.0 % 9.2 % Tangible equity to tangible assets (non-GAAP) 7.8 % 8.4 % 8.2 % 8.5 % 8.7 % Tier 1 leverage ratio 8.3 % 8.8 % 10.3 % 9.1 % 9.0 % Tier 1 risk-based capital ratio 11.6 % 12.2 % 12.0 % 13.0 % 12.8 % Total risk-based capital ratio 12.4 % 13.0 % 12.8 % 14.0 % 13.8 % Other Information Full-time equivalent employees 579 568 586 490 455 Banking 337 343 371 312 305 Mortgage 236 219 209 171 143 Investments 6 6 6 7 7 Number of banking offices 36 36 36 29 29 Mortgage loan offices 21 21 20 15 15 Investment offices 5 5 5 5 5             Heritage Financial Group, Inc. and Subsidiary Consolidated Financial Highlights (Unaudited)   (Dollars in thousands)   Five Quarter Comparison

Loans

3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014 Construction and land $ 87,844 $ 81,547 $ 73,137 $ 57,863 $ 53,138 Farmland 26,810 26,821 29,441 28,502 30,116 Permanent 1 - 4 182,258 180,692 176,191 174,026 173,581 Permanent 1 - 4 - junior liens and revolving 42,665 40,741 39,694 35,827 34,661 Multifamily 28,706 29,309 28,742 26,436 25,718 Nonresidential 298,022 286,992 284,218 277,295 262,753 Commercial business 116,696 120,933 121,073 116,926 101,696 Consumer and other   24,100   32,758   21,612   27,918   20,907 Total non-acquired loans $ 807,101 $ 799,793 $ 774,108 $ 744,793 $ 702,570 Allowance for non-acquired loans   10,010   10,034   9,916   9,457   9,145 Net non-acquired loans $ 797,091 $ 789,759 $ 764,192 $ 735,336 $ 693,425 Acquired non-credit impaired loans 182,213 156,513 160,502 - - Acquired credit impaired non-covered 84,123 86,763 92,051 56,866 59,774 Acquired credit impaired covered   40,834   42,404   42,447   43,442   47,684 Total acquired credit impaired loans   124,957   129,167   134,498   100,308   107,458 Net loans $ 1,104,261 $ 1,075,439 $ 1,059,192 $ 835,644 $ 800,883              

Loan Balances by Geographical Region (excluding acquired loans):

  Five Quarter Comparison 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014 Albany $ 309,399 $ 325,697 $ 314,875 $ 321,566 $ 302,664 Valdosta 99,739 100,873 102,751 103,231 103,479 Ocala 72,657 62,719 64,678 55,231 57,322 Statesboro 129,249 133,669 135,861 128,421 121,636 Auburn/Columbus 47,928 45,766 41,092 36,023 36,171 Macon 103,899 94,305 86,041 80,323 75,722 Birmingham 24,369 20,243 14,798 10,834 2,091 South Atlanta   19,861   16,521   14,012   9,164   3,485 $ 807,101 $ 799,793 $ 774,108 $ 744,793 $ 702,570             Heritage Financial Group, Inc. and Subsidiary Consolidated Financial Highlights (Unaudited)   (Dollars in thousands)  

Asset Quality Data (excluding acquired loans):

Five Quarter Comparison 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014 Nonaccrual loans $ 5,550 $ 6,083 $ 6,895 $ 7,003 $ 9,245 Loans - 90 days past due & still accruing   -     -     -     -     -   Total non-performing loans   5,550     6,083     6,895     7,003     9,245   OREO   1,951     577     648     507     1,104   Total non-performing assets $ 7,501   $ 6,660   $ 7,543   $ 7,510   $ 10,349   Trouble debt restructuring - nonaccrual $ 2,160 $ 3,074 $ 3,097 $ 3,426 $ 5,702 Trouble debt restructuring - accruing   5,548     5,594     4,683     4,392     1,968   Total trouble debt restructuring $ 7,708   $ 8,668   $ 7,780   $ 7,818   $ 7,670   Accruing past due loans $ 498 $ 1,805 $ 1,065 $ 752 $ 830 Total criticized assets $ 27,065 $ 25,575 $ 23,737 $ 21,553 $ 22,026 Total classified assets $ 18,168 $ 17,449 $ 19,280 $ 18,573 $ 18,717 Allowance for loan losses $ 10,010 $ 10,034 $ 9,916 $ 9,457 $ 9,145 Net charge-offs (recoveries) $ 99 $ 165 $ 117 $ 92 $ (20 )

Asset Quality Ratios:

Allowance for loan losses to total non-acquired loans 1.24 % 1.26 % 1.28 % 1.27 % 1.30 % Allowance for loan losses to average non-acquired loans 1.02 % 1.02 % 1.30 % 1.31 % 1.32 % Allowance for loan losses to non-performing loans 180.36 % 164.95 % 143.81 % 135.04 % 98.92 % Non-performing loans to total non-acquired loans 0.69 % 0.76 % 0.89 % 0.94 % 1.32 % Non-performing assets to total assets 0.41 % 0.39 % 0.43 % 0.50 % 0.73 %

Net charge-offs (recoveries) to average non-acquired loans (annualized)

0.04 % 0.07 % 0.06 % 0.05 % -0.01 %             Heritage Financial Group, Inc. and Subsidiary Consolidated Financial Highlights (Unaudited)  

Mortgage Segment Information

Five Quarter Comparison 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014 Net interest income $ 547 $ 887 $ 716 $ 924 $ 825 Provision for loan losses - - - - - Noninterest income 11,954 8,806 6,892 6,153 2,392 Noninterest expense 11,265 9,192 7,103 6,178 3,815 Income tax expense (benefit)   427     155     157     278     (185 ) Mortgage profit (loss) $ 809   $ 346   $ 348   $ 621   $ (413 ) Mortgage segment assets $ 260,566   $ 184,606   $ 158,277   $ 139,024   $ 136,662  

Other Financial Items:

Fixed compensation $ 2,030 $ 1,861 $ 1,594 $ 1,375 $ 1,106 Variable compensation $ 7,219 $ 5,682 $ 3,433 $ 2,832 $ 1,402  

Mortgage Segment Selected Other Information:

Five Quarter Comparison 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014 Retail production $ 321,012 $ 255,822 $ 207,315 $ 187,669 $ 98,554 Wholesale production   127,078     88,913     85,294     62,228     36,941   Total production $ 448,090 $ 344,735 $ 292,609 $ 249,897 $ 135,495 Purchase as a % of total production 59 % 77 % 78 % 84 % 80 % Refi as a % of total production 41 % 23 % 22 % 16 % 20 % End of period locks $ 235,472 $ 176,262 $ 135,963 $ 117,940 $ 71,121

Heritage Financial Group, Inc.T. Heath Fountain, 229-878-2055Executive Vice President and Chief Financial Officer