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Press Release

Heritage Southeast Bancorporation, Inc. Reports First Quarter Results

Company Release - 5/6/2020 7:00 AM ET

JONESBORO, Ga.--(BUSINESS WIRE)-- Heritage Southeast Bancorporation, Inc. (OTCQX: HSBI) (“HSBI” or the “Company”) today reported net income of $1.6 million or $0.23 per diluted share for the first quarter of 2020 compared to $2.7 million or $0.37 per diluted share for the fourth quarter 2019. The reduction in earnings was primarily due to an additional provision for loan losses of $1.5 million related to the current economic uncertainty.

Commenting on the announcement, Leonard Moreland, Chief Executive Officer of HSBI, said, “We are pleased with our second full quarter results under the newly formed entity. The momentum we carried over from 2019 was abruptly halted in March by the worst pandemic of our lifetime. The Company’s focus immediately shifted to the health of our employees, servicing the needs of customers and supporting our communities. Our entire organization responded flawlessly as contingency plans were activated throughout the footprint. Flexible work schedules, alternative delivery channels and appropriate social distancing initiatives were deployed with little impact to our clients. We are active participants in the Paycheck Protection Program and modifying loan terms for customers directly impacted by COVID-19. These programs were well received and will provide needed support to our communities. We anticipate earnings pressure to continue for the remainder of this year and believe we are well positioned to absorb the downturn.”

About Heritage Southeast Bancorporation, Inc. and Heritage Southeast Bank:

Heritage Southeast Bancorporation, Inc. (OTCQX: HSBI) serves as the holding company for Heritage Southeast Bank, which is headquartered in Jonesboro, GA and operates under the names “Heritage Bank,” “The Heritage Bank,” and “Providence Bank” in its various markets. With approximately $1.3 billion in assets, the bank provides a well-rounded offering of commercial and consumer products through its 24 locations. For additional information, visit the HSBI website.

While the branches of each of the three combined legacy institutions operate under their respective legacy names, all such branches are branches of the same single insured depository institution, Heritage Southeast Bank, and a customer’s deposits in branches operating under different trade names will be commonly insured and subject to the same FDIC insurance limits.

Cautionary Note Regarding Forward-Looking Statements

Statements included in this press release, which are not historical in nature, are intended to be, and hereby are identified as, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “will,” “may,” “anticipate,” “create,” “plan,” “expect,” “should,” and “could” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions, include, among others, the following:

  • the possibility that the anticipated benefits of the transaction, including anticipated improved product and service offerings, efficiencies and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the three companies or as a result of the strength of the economy, competitive factors in the areas where the combined company does business, or as a result of other unexpected factors or events;
  • the impact of purchase accounting with respect to the transaction, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;
  • the integration of the businesses and operations of the three companies, which may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to the combined company’s business; and
  • other factors that may affect future results of the combined company, including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; actions of the Federal Reserve Board; and other legislative and regulatory actions and reforms.

Heritage Southeast Bancorporation, Inc. and its subsidiary disclaim any obligation to update or revise any forward-looking statements contained in this press release, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by law.

 
Heritage Southeast Bancorporation, Inc.
Consolidated Balance Sheets
(in thousands)
 
 
03/31/2012/31/19 (1)9/30/19 (1)
(Unaudited)(Unaudited)
Assets
Cash and due from banks

$

37,192

 

$

30,458

 

$

26,633

 

Interest-earning deposits with banks

 

95,446

 

 

142,552

 

 

113,293

 

Investment securities

 

133,520

 

 

125,479

 

 

104,265

 

Other investments

 

1,451

 

1,322

 

 

1,322

 

Loans, net of unearned income:
Originated

 

565,365

 

 

508,671

 

 

469,700

 

Acquired

 

363,930

 

 

403,179

 

 

443,606

 

Less reserve for loan losses

 

8,330

 

 

5,946

 

 

5,523

 

Loans, net

 

920,965

 

 

905,904

 

 

907,783

 

 
Premises and equipment, net

 

34,537

 

 

34,443

 

 

34,192

 

Other real estate owned

 

9,029

 

 

9,293

 

 

11,838

 

Goodwill and other intangibles

 

37,219

 

 

37,457

 

 

37,773

 

Other assets

 

49,596

 

 

49,143

 

 

49,057

 

$

1,318,955

 

$

1,336,051

 

$

1,286,156

 

 
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing

$

312,203

 

$

296,851

 

$

304,342

 

NOW

 

199,585

 

 

234,334

 

 

189,500

 

Money market and savings

 

299,901

 

 

291,778

 

 

284,047

 

Time

 

317,571

 

 

331,515

 

 

328,830

 

Total deposits

 

1,129,260

 

 

1,154,478

 

 

1,106,719

 

 
FHLB borrowings

 

4,667

 

 

5,167

 

 

5,667

 

Repurchase agreements

 

13,310

 

 

12,295

 

 

11,418

 

Junior subordinated debentures

 

9,135

 

 

9,096

 

 

9,045

 

Other borrowings

 

14,688

 

 

9,088

 

 

9,088

 

Other liabilities

 

8,443

 

 

9,992

 

 

10,746

 

Total liabilities

 

1,179,503

 

 

1,200,116

 

 

1,152,683

 

 
Shareholders' Equity:
Common stock

 

702

 

 

703

 

 

702

 

Additional paid-in capital

 

116,201

 

 

116,234

 

 

116,089

 

Retained earnings

 

21,157

 

 

19,541

 

 

16,914

 

Other comprehensive income (loss)

 

1,392

 

 

(543

)

 

(232

)

Total shareholders' equity

 

139,452

 

 

135,935

 

 

133,473

 

$

1,318,955

 

$

1,336,051

 

$

1,286,156

 

 
(1) Acquired loans, goodwill and other assets changed from previously reported due to adjustments of fair value estimates related to the Heritage Bancorporation, Inc. acquisition.
 
 
Heritage Southeast Bancorporation, Inc.
Consolidated Income Statements
(in thousands)
   
 For three months ended
 03/31/20 12/31/19
 (Unaudited) (Unaudited)
Interest income:  
Loans, including fees 

$

13,564

 

$

13,903

Deposits with other banks 

 

327

 

 

380

Other 

 

20

 

 

26

Investment securities 

 

618

 

 

606

Total interest income 

 

14,529

 

 

14,915

   
Interest expense:  
Deposits 

 

2,022

 

 

2,116

Junior subordinated debentures 

 

121

 

 

143

Other borrowings 

 

173

 

 

179

Total interest expense 

 

2,316

 

 

2,438

   
Net interest income 

 

12,213

 

 

12,477

   
Provision for loan losses 

 

2,550

 

 

560

   
Net interest income after provision for loan losses 

 

9,663

 

 

11,917

   
Noninterest income:  
Service charges on deposits 

 

1,698

 

 

1,727

Gain on sale of investment securities 

 

572

 

 

-

Gain on sale of loans 

 

551

 

 

184

Interchange and ATM fees 

 

1,268

 

 

1,315

Other 

 

639

 

 

628

Total noninterest income 

 

4,728

 

 

3,854

   
Noninterest expense:  
Salaries & employee benefits 

 

6,856

 

 

6,125

Occupancy & equipment 

 

1,292

 

 

1,376

Other real estate owned 

 

73

 

 

44

Other 

 

4,098

 

 

4,324

Total noninterest expense 

 

12,319

 

 

11,869

   
Income before taxes 

 

2,072

 

 

3,902

   
Income tax provision 

 

456

 

 

1,162

   
Net income 

$

1,616

 

$

2,740

   
Heritage Southeast Bancorporation, Inc.
Other Highlights
(dollars in thousands, except for share and per share data)
 
 
For three months ended
03/31/2012/31/19
(Unaudited)(Unaudited)
Profitability
Net income

$

1,616

 

$

2,740

 

Earnings per share - diluted

$

0.23

 

$

0.37

 

Net interest margin

 

4.21

%

 

4.29

%

Cost of funds

 

0.79

%

 

0.84

%

Return on average assets

 

0.49

%

 

0.83

%

Return on average equity

 

4.71

%

 

8.06

%

 
 
Balance as of
03/31/2012/31/19 (2)
Asset Quality
Classified assets

$

25,724

 

$

28,021

 

Nonperforming assets (NPAs)

$

24,346

 

$

25,389

 

NPAs to total assets

 

1.84

%

 

1.90

%

Net charge-offs to average loans

 

0.07

%

 

0.06

%

 
 
Capital (1)
Leverage ratio

 

8.92

%

 

8.54

%

Common equity tier 1 risk based ratio

 

10.58

%

 

10.24

%

Total risk based ratio

 

11.36

%

 

10.81

%

 
 
Tangible book value per common share

$

14.14

 

$

13.60

 

Shares outstanding

 

7,017,709

 

 

7,029,033

 

 
 
(1) Ratios for Heritage Southeast Bank.
(2) Information changed from previously reported due to adjustments of fair value estimates related to the Heritage Bancorporation, Inc. acquisition.
 

 

Leonard A. Moreland
Chief Executive Officer
or
Philip F. Resch
Chief Financial Officer
(770) 824-9934

Source: Heritage Southeast Bancorporation, Inc.

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