JONESBORO, Ga., Oct. 21, 2021 (GLOBE NEWSWIRE) -- Heritage Southeast Bancorporation, Inc. ("Company") HSBI today announced quarterly net income of $3.5 million or $0.49 per diluted share for the third quarter ended September 30, 2021, compared to $2.9 million or $0.40 per diluted share for the prior quarter. Third quarter earnings included higher net interest income and lower operating expenses relative to the prior quarter, though expenses remain elevated from transaction costs associated with the pending acquisition by VyStar Credit Union.
Highlights of the Company's results for the quarter ended September 30, 2021 and status of the VyStar Credit Union acquisition include the following:
- All regulatory applications have been submitted and remain pending.
- Pre-tax core earnings increased to $4.8 million for the third quarter ended September 30, 2021 from $4.6 million for the second quarter ended June 30, 2021. Net income excluding transaction costs was $4.4 million for the third quarter ended September 30, 2021 versus $4.1 million in the previous quarter.
- Loans (excluding PPP) were up $45.8 million, or 4.6% from the previous quarter and $95.5 million, or 10.1% from the third quarter one year earlier.
- Loan loss provisions remained at zero for the quarter ended September 30, 2021, reflecting the overall improved credit outlook.
"Earnings improved during the quarter, as we continue normal banking operations through the approval process of our acquisition by VyStar Credit Union," said Leonard Moreland, Chief Executive Officer. "While we have received shareholder approval in July, we are still waiting regulatory approvals from the FDIC, Georgia Department of Banking and Finance, the NCUA and Florida Office of Financial Regulation. We are very proud that the team remains focused on serving clients and delivering solid results during this transitionary period with VyStar."
Net Interest Income
The Company's net interest income increased to $13.2 million during the third quarter of 2021 from $12.7 million in the second quarter. The Company's reported net interest margin increased 9 basis points to 3.45% for the third quarter of 2021 from 3.36% for the preceding quarter. Net interest margin was positively impacted by the accretion of PPP related fees of approximately $904,000 and $825,000 for the third quarter and second quarter of 2021, respectively. The earning asset yield increased 6 basis points to 3.78% during the third quarter of 2021 while the cost of funds decreased 3 basis points to 0.33% over the same time frame. The net interest margin excluding PPP loans increased to 3.28% for the third quarter from 3.26% one quarter earlier primarily due to changes in earning asset mix.
Loan Loss Provisions
The Company did not recognize any loan loss provisions for the third quarter. Management believes the improved economic and pandemic climate has provided better clarity on the ability of borrowers to meet their loan obligations. As such, the current level of reserves is believed to be sufficient as of September 30, 2021.
Non-interest Income
Third quarter non-interest income decreased to $4.5 million from $4.6 million for the second quarter of 2021. Higher deposit service charges and fees were more than offset by lower interchange and ATM fees and gains on the sale of SBA loans.
Non-interest Expense
Non-interest expense decreased $567,000 to $12.9 million for the third quarter of 2021 from $13.5 million the prior quarter. The third quarter included approximately $1.1 million in costs associated with the proposed transaction with VyStar Credit Union versus $1.6 million the prior quarter.
Balance Sheet
Total assets declined to $1.64 billion at September 30, 2021, relative to $1.65 billion the previous quarter. Liquidity levels remained elevated, but cash and cash equivalents decreased $18.5 million to $287.5 million, from $306.1 million three months earlier. Securities available for sale decreased slightly by $1.8 million to $171.8 million at September 30, 2021 from $173.6 million three months earlier. Loans, excluding PPP loans, increased $45.8 million to $1.04 billion at September 30, 2021 from $999.1 million at June 30, 2021. Meanwhile, PPP loans decreased to $23.1 million at September 30, 2021 from $59.2 million three months earlier.
Total deposits declined slightly to $1.41 billion at September 30, 2021 from $1.44 billion one quarter earlier. Non-interest bearing deposits remain the largest component of the deposit portfolio representing 34.7% of total deposits followed by money market and savings deposits at 30.2%, interest-bearing demand deposits at 18.3% and time deposits at 16.8%.
Asset Quality
Classified assets, which include nonperforming assets and accruing classified loans, totaled $4.1 million at September 30, 2021, compared with $3.7 million at June 30, 2021. The increase during the third quarter reflected an increase of $781,000 in non-performing loans offset by a decrease of $405,000 in other real estate owned. Nonperforming assets, which exclude accruing classified loans, totaled $3.3 million at September 30, 2021, or 0.20% of total assets compared to $2.9 million, or 0.18% during the prior quarter.
The allowance for loan losses decreased slightly to $14.8 million, or 1.39% of total loans at September 30, 2021 from $15.2 million, or 1.43% of total loans at June 30, 2021. Excluding PPP loans, which are supported by guarantees from the SBA, the allowance for loans losses were 1.42% of total loans at September 30, 2021.
Capital
Total shareholder equity increased to $152.3 million at September 30, 2021 from $149.1 million one quarter earlier. Shareholder equity relative to total assets was 9.29% and tangible shareholder equity relative to tangible assets was 7.26% at September 30, 2021. Tangible book value per share was $16.13 at September 30, 2021, an increase of 10.9% from September 30, 2020. At September 30, 2021, the Bank's Leverage Ratio was 9.40%, its Common Equity Tier I and Tier 1 Capital ratios were 12.29%, and its Total Risk-Based Capital ratio was 13.50%. These regulatory capital ratios are significantly above levels required to be considered "well capitalized," which is the highest possible regulatory designation.
About Heritage Southeast Bancorporation, Inc.
Heritage Southeast Bancorporation, Inc. 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 $1.6 billion in assets, the Bank provides a well-rounded offering of commercial and consumer products through its 23 locations. For additional information, visit the HSBI website at www.myhsbi.com.
Forward Looking Statements:
This press release contains forward-looking statements. These forward-looking statements include, but are not limited to, statements about the benefits of the proposed acquisition of HSBI by VyStar, statements related to the expected timing of the completion of the acquisition, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Forward-looking statements may be identified by terminology such as "may," "will," "should," "scheduled," "plans," "intends," "anticipates," "expects," "believes," estimates," "potential," or "continue" or negatives of such terms or other comparable terminology. All forward-looking statements in this press release, or in any other written or oral communication that relates to the proposed acquisition or to matters that may affect such proposed acquisition are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of HSBI or VyStar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others, (1) disruption from the proposed acquisition with customers, suppliers, employees or other business partners, (2) the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement, (3) the ability by the parties to obtain required governmental approvals of the acquisition (4) the failure of the closing conditions in the agreement to be satisfied, or any unexpected delay in closing the acquisition, and (5) general competitive, economic, political and market conditions.
HSBI disclaims any obligation to update or revise any forward-looking statements contained in this communication (which statements speak only as of the date hereof), or in any other written or oral communication that relates to the proposed combination or to matters that may affect such proposed combination, whether as a result of new information, future events or otherwise.
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.
CONTACT
Leonard A. Moreland Philip F. Resch
Chief Executive Officer Chief Financial Officer
Heritage Southeast Bancorporation, Inc.
101 North Main Street
P.O. Box 935
Jonesboro, GA 30236
(770) 824-9934
| HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY | |||||||||||||||
| Financial Highlights | |||||||||||||||
| (Unaudited) (in thousands, except per share data) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||
| Earnings: | |||||||||||||||
| Net Interest Income | $ | 13,152 | $ | 12,727 | $ | 12,769 | $ | 12,530 | $ | 11,901 | |||||
| Net Income | 3,503 | 2,869 | 4,333 | 977 | 901 | ||||||||||
| Net Income excluding transaction costs | 4,368 | 4,146 | 4,333 | 977 | 901 | ||||||||||
| Per Share Data: | |||||||||||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 0.50 | $ | 0.41 | $ | 0.62 | $ | 0.14 | $ | 0.13 | |||||
| Diluted | $ | 0.49 | $ | 0.40 | $ | 0.60 | $ | 0.14 | $ | 0.13 | |||||
| Diluted excluding transaction costs | $ | 0.60 | $ | 0.57 | $ | 0.60 | $ | 0.14 | $ | 0.13 | |||||
| Weighted average number of shares: | |||||||||||||||
| Basic | 6,976 | 6,967 | 6,956 | 6,924 | 6,921 | ||||||||||
| Diluted | 7,222 | 7,212 | 7,179 | 7,139 | 7,139 | ||||||||||
| Period-end number of shares (1) | 7,220 | 7,220 | 7,222 | 7,227 | 7,229 | ||||||||||
| Book value per share (period-end) | $ | 21.91 | $ | 20.65 | $ | 20.18 | $ | 19.76 | $ | 19.62 | |||||
| Tangible book value per share (period-end) | $ | 16.13 | $ | 15.65 | $ | 15.16 | $ | 14.71 | $ | 14.54 | |||||
| Key Ratios (percent): | |||||||||||||||
| Return on average assets | 0.84 | % | 0.69 | % | 1.10 | % | 0.25 | % | 0.24 | % | |||||
| Return on average assets excluding transaction costs | 1.05 | % | 1.00 | % | 1.10 | % | 0.25 | % | 0.24 | % | |||||
| Return on average tangible equity | 12.15 | % | 10.34 | % | 16.28 | % | 3.66 | % | 3.44 | % | |||||
| Return on average tangible equity excluding transaction costs | 15.15 | % | 14.95 | % | 16.28 | % | 3.66 | % | 3.44 | % | |||||
| Yield on interest earning assets | 3.78 | % | 3.72 | % | 4.00 | % | 4.05 | % | 4.03 | % | |||||
| Cost of funds | 0.33 | % | 0.36 | % | 0.42 | % | 0.52 | % | 0.60 | % | |||||
| Net interest margin | 3.45 | % | 3.36 | % | 3.58 | % | 3.53 | % | 3.43 | % | |||||
| Net interest margin, excluding PPP loans | 3.28 | % | 3.26 | % | 3.48 | % | 3.50 | % | 3.67 | % | |||||
| Non-interest income as a percent of total revenue | 25.4 | % | 26.6 | % | 26.0 | % | 26.7 | % | 24.7 | % | |||||
| Efficiency ratio | 72.0 | % | 76.5 | % | 67.2 | % | 83.1 | % | 75.1 | % | |||||
| Efficiency ratio excluding transaction costs | 65.9 | % | 67.2 | % | 67.2 | % | 83.1 | % | 75.1 | % | |||||
| Tangible common equity to tangible assets | 7.26 | % | 6.99 | % | 6.81 | % | 6.93 | % | 7.04 | % | |||||
| Asset Quality (period-end): | |||||||||||||||
| Allowance for loan losses to total loans | 1.39 | % | 1.43 | % | 1.41 | % | 1.32 | % | 1.23 | % | |||||
| Allowance for loan losses to loans, excluding PPP loans | 1.42 | % | 1.52 | % | 1.53 | % | 1.44 | % | 1.36 | % | |||||
| Allowance for loan losses to total nonperforming loans | 692.3 | % | 1113.0 | % | 731.0 | % | 143.1 | % | 118.6 | % | |||||
| Nonperforming assets to total assets | 0.20 | % | 0.18 | % | 0.24 | % | 0.79 | % | 1.04 | % | |||||
| Net charge-offs (annualized) to average loans | 0.12 | % | 0.04 | % | -0.43 | % | 0.19 | % | 0.15 | % | |||||
| Net charge-offs (annualized) to average loans, excluding PPP loans | 0.13 | % | 0.04 | % | -0.46 | % | 0.21 | % | 0.17 | % | |||||
| Capital (period-end): | |||||||||||||||
| Heritage Southeast Bank (HSB) risk based capital ratios: | |||||||||||||||
| CET1 | 12.29 | % | 12.32 | % | 12.02 | % | 11.95 | % | 12.10 | % | |||||
| Tier 1 | 12.29 | % | 12.32 | % | 12.02 | % | 11.95 | % | 12.10 | % | |||||
| Total | 13.50 | % | 13.57 | % | 13.27 | % | 13.19 | % | 13.26 | % | |||||
| Leverage | 9.40 | % | 9.01 | % | 9.10 | % | 8.98 | % | 9.08 | % | |||||
| Other (period-end): | |||||||||||||||
| Branches | 23 | 22 | 22 | 22 | 24 | ||||||||||
| FTE | 278 | 276 | 278 | 288 | 289 | ||||||||||
| (1) Includes restricted stock and shares yet to be issued under a supplemental executive retirement plan. | |||||||||||||||
| HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY | |||||||||||
| Consolidated Statements of Income | |||||||||||
| (Unaudited) (in thousands, except per share data) | |||||||||||
| Three Months Ended | |||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||
| Interest and dividend revenue: | |||||||||||
| Loans, including fees | $ | 12,705 | $ | 12,592 | $ | 12,625 | $ | 12,938 | $ | 12,806 | |
| PPP loans, including fees | 1,014 | 1,024 | 1,071 | 984 | 666 | ||||||
| Investment securities | 564 | 376 | 516 | 393 | 426 | ||||||
| Fed funds sold, deposits in banks and other | 107 | 79 | 55 | 61 | 76 | ||||||
| Total interest and dividend revenue | 14,390 | 14,071 | 14,267 | 14,376 | 13,974 | ||||||
| Interest expense: | |||||||||||
| Deposits | 760 | 843 | 986 | 1,256 | 1,457 | ||||||
| Fed funds purchased and repurchase agreements | 8 | 6 | 10 | 15 | 21 | ||||||
| Federal Home Loan Bank advances | - | - | - | - | 1 | ||||||
| Line of credit | 192 | 124 | 110 | 181 | 196 | ||||||
| Subordinated notes | 198 | 290 | 310 | 310 | 313 | ||||||
| Junior subordinated debentures | 80 | 81 | 82 | 84 | 85 | ||||||
| Total interest expense | 1,238 | 1,344 | 1,498 | 1,846 | 2,073 | ||||||
| Net interest income | 13,152 | 12,727 | 12,769 | 12,530 | 11,901 | ||||||
| Provision for loan losses | - | - | - | 1,700 | 2,550 | ||||||
| Net interest revenue after provision for loan losses | 13,152 | 12,727 | 12,769 | 10,830 | 9,351 | ||||||
| Noninterest revenue: | |||||||||||
| Service charges and fees | 1,571 | 1,291 | 1,285 | 1,574 | 1,433 | ||||||
| Interchange and ATM fees | 1,517 | 1,665 | 1,536 | 1,480 | 1,524 | ||||||
| Gain on sale of SBA loans | 652 | 738 | 906 | 924 | 275 | ||||||
| Other | 741 | 913 | 765 | 579 | 678 | ||||||
| Total noninterest revenue | 4,481 | 4,607 | 4,492 | 4,557 | 3,910 | ||||||
| Operating expenses: | |||||||||||
| Salaries and employee benefits | 6,760 | 6,551 | 6,528 | 8,309 | 6,477 | ||||||
| Occupancy and equipment | 1,434 | 1,443 | 1,402 | 1,404 | 1,454 | ||||||
| Other real estate expenses, including losses | |||||||||||
| on sales and impairments, net | 27 | 165 | 7 | 391 | 113 | ||||||
| Transaction costs | 1,069 | 1,612 | - | - | - | ||||||
| Other | 3,634 | 3,720 | 3,904 | 4,335 | 4,070 | ||||||
| Total other operating expenses | 12,924 | 13,491 | 11,841 | 14,439 | 12,114 | ||||||
| Income before income tax expense | 4,709 | 3,843 | 5,420 | 948 | 1,147 | ||||||
| Income tax expense | 1,206 | 974 | 1,087 | (29 | ) | 246 | |||||
| Net income | $ | 3,503 | $ | 2,869 | $ | 4,333 | $ | 977 | $ | 901 | |
| Weighted-average number of shares outstanding: | |||||||||||
| Basic | 6,976 | 6,967 | 6,956 | 6,924 | 6,921 | ||||||
| Diluted | 7,222 | 7,212 | 7,179 | 7,139 | 7,139 | ||||||
| Earnings per share: | |||||||||||
| Basic | $ | 0.50 | $ | 0.41 | $ | 0.62 | $ | 0.14 | $ | 0.13 | |
| Diluted | $ | 0.49 | $ | 0.40 | $ | 0.60 | $ | 0.14 | $ | 0.13 | |
| HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY | ||||
| Consolidated Statements of Income | ||||
| (in thousands, except per share data) | ||||
| Nine Months Ended | ||||
| (Unaudited) | (Unaudited) | |||
| September 30, | September 30, | |||
| 2021 | 2020 | |||
| Interest and dividend revenue: | ||||
| Loans, including fees | $ | 37,923 | $ | 39,118 |
| PPP loans, including fees | 3,109 | 1,189 | ||
| Investment securities | 1,456 | 1,438 | ||
| Fed funds sold, deposits in banks and other | 241 | 463 | ||
| Total interest and dividend revenue | 42,729 | 42,208 | ||
| Interest expense: | ||||
| Deposits | 2,589 | 5,152 | ||
| Fed funds purchased and repurchase agreements | 24 | 91 | ||
| Federal Home Loan Bank advances | - | 38 | ||
| Line of credit | 426 | 431 | ||
| Subordinated debt | 798 | 313 | ||
| Junior subordinated debentures | 244 | 300 | ||
| Total interest expense | 4,081 | 6,325 | ||
| Net interest income | 38,648 | 35,883 | ||
| Provision for loan losses | - | 7,650 | ||
| Net interest revenue after provision for loan losses | 38,648 | 28,233 | ||
| Noninterest revenue: | ||||
| Service charges and fees | 4,147 | 4,349 | ||
| Interchange and ATM fees | 4,719 | 4,219 | ||
| Securities gains, net | - | 1,313 | ||
| Gain on sale of SBA loans | 2,296 | 887 | ||
| Other | 2,417 | 2,013 | ||
| Total noninterest revenue | 13,579 | 12,781 | ||
| Operating expenses: | ||||
| Salaries and employee benefits | 19,839 | 19,210 | ||
| Occupancy and equipment | 4,279 | 4,128 | ||
| Other real estate expenses, including losses | ||||
| on sales and impairments, net | 198 | 805 | ||
| Transaction costs | 2,681 | - | ||
| Other | 11,258 | 12,327 | ||
| Total other operating expenses | 38,255 | 36,470 | ||
| Income before income tax expense | 13,972 | 4,544 | ||
| Income tax expense | 3,267 | 1,079 | ||
| Net income | $ | 10,705 | $ | 3,465 |
| Weighted-average number of shares oustanding: | ||||
| Basic | 6,968 | 6,906 | ||
| Diluted | 7,214 | 7,126 | ||
| Earnings per share: | ||||
| Basic | $ | 1.54 | $ | 0.50 |
| Diluted | $ | 1.48 | $ | 0.49 |
| HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||
| Consolidated Balance Sheets | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||||
| Assets | ||||||||||||||||
| Cash and due from banks | $ | 28,201 | $ | 27,722 | $ | 23,851 | $ | 29,092 | $ | 23,001 | ||||||
| Interest-bearing deposits with banks | 259,342 | 278,360 | 246,824 | 189,533 | 178,473 | |||||||||||
| Cash and cash equivalents | 287,543 | 306,082 | 270,675 | 218,625 | 201,474 | |||||||||||
| Securities available for sale, at fair value | 171,804 | 173,606 | 174,785 | 169,329 | 157,045 | |||||||||||
| Other investments | 786 | 786 | 786 | 1,203 | 1,203 | |||||||||||
| Loans: | ||||||||||||||||
| Loans, excluding PPP loans | 1,044,938 | 999,127 | 994,251 | 980,257 | 949,473 | |||||||||||
| PPP loans | 23,051 | 59,233 | 88,201 | 87,775 | 103,402 | |||||||||||
| Allowance for loan losses | (14,837 | ) | (15,159 | ) | (15,256 | ) | (14,117 | ) | (12,925 | ) | ||||||
| Loans, net | 1,053,152 | 1,043,201 | 1,067,196 | 1,053,915 | 1,039,950 | |||||||||||
| Premises and equipment, net | 35,770 | 36,114 | 37,220 | 37,165 | 37,154 | |||||||||||
| Bank owned life insurance | 34,404 | 34,174 | 33,925 | 28,734 | 28,536 | |||||||||||
| Other real estate owned | 1,128 | 1,533 | 1,839 | 2,593 | 5,043 | |||||||||||
| Goodwill | 28,275 | 28,275 | 28,275 | 28,275 | 28,275 | |||||||||||
| Core deposit intangible, net | 7,521 | 7,758 | 7,995 | 8,232 | 8,470 | |||||||||||
| Deferred tax asset, net | 12,261 | 13,313 | 14,362 | 14,900 | 14,989 | |||||||||||
| Other assets | 7,366 | 7,423 | 8,140 | 8,219 | 8,058 | |||||||||||
| Total Assets | $ | 1,640,010 | $ | 1,652,265 | $ | 1,645,198 | $ | 1,571,190 | $ | 1,530,197 | ||||||
| Liabilities | ||||||||||||||||
| Deposits: | ||||||||||||||||
| Noninterest-bearing | $ | 490,341 | $ | 488,877 | $ | 479,653 | $ | 415,476 | $ | 427,389 | ||||||
| Interest-bearing demand | 259,811 | 270,380 | 269,517 | 283,009 | 237,710 | |||||||||||
| Money market and savings | 427,272 | 425,371 | 422,904 | 385,246 | 355,308 | |||||||||||
| Time | 237,292 | 250,839 | 261,710 | 278,825 | 290,521 | |||||||||||
| Total deposits | 1,414,716 | 1,435,467 | 1,433,784 | 1,362,556 | 1,310,928 | |||||||||||
| Securities sold under agreements to repurchase | 23,424 | 15,241 | 13,413 | 13,187 | 15,407 | |||||||||||
| Line of credit | 23,688 | 22,688 | 14,688 | 14,688 | 24,688 | |||||||||||
| Subordinated notes | 8,674 | 13,165 | 19,656 | 19,646 | 19,637 | |||||||||||
| Junior subordinated debentures | 9,365 | 9,327 | 9,288 | 9,250 | 9,211 | |||||||||||
| Accrued expenses and other liabilities | 7,862 | 7,312 | 8,598 | 9,030 | 8,441 | |||||||||||
| Total liabilities | 1,487,729 | 1,503,200 | 1,499,427 | 1,428,357 | 1,388,312 | |||||||||||
| Shareholders' Equity | ||||||||||||||||
| Common stock | 702 | 702 | 702 | 702 | 702 | |||||||||||
| Additional paid in capital | 117,298 | 117,151 | 116,972 | 116,825 | 116,628 | |||||||||||
| Retained earnings | 34,689 | 31,186 | 28,316 | 23,983 | 23,007 | |||||||||||
| Other comprehensive income (loss) | (408 | ) | 26 | (219 | ) | 1,323 | 1,548 | |||||||||
| Total Shareholders' Equity | 152,281 | 149,065 | 145,771 | 142,833 | 141,885 | |||||||||||
| Total Liabilities and Shareholders' Equity | $ | 1,640,010 | $ | 1,652,265 | $ | 1,645,198 | $ | 1,571,190 | $ | 1,530,197 | ||||||
| HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY | |||||||||||||||
| GAAP to Non-GAAP Reconciliation | |||||||||||||||
| (Unaudited) (in thousands) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||
| Income before income tax expense (GAAP) | $ | 4,709 | $ | 3,843 | $ | 5,420 | $ | 948 | $ | 1,147 | |||||
| Provision for loan losses | - | - | - | 1,700 | 2,550 | ||||||||||
| Other real estate expenses, including losses on sales and impairments, net | 27 | 165 | 7 | 391 | 113 | ||||||||||
| Loss on sub-lease | - | - | - | 800 | - | ||||||||||
| Employee restructuring costs | - | - | - | 1,310 | - | ||||||||||
| Transaction costs | 1,069 | 1,612 | - | - | - | ||||||||||
| PPP impact | (1,014 | ) | (1,024 | ) | (1,396 | ) | (984 | ) | (666 | ) | |||||
| Pre-tax core earnings | $ | 4,791 | $ | 4,596 | $ | 4,031 | $ | 4,165 | $ | 3,144 | |||||
| HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY | |||||||||||||||
| Loan Portfolio | |||||||||||||||
| (Unaudited) (in thousands) | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||
| Real estate loans: | |||||||||||||||
| Construction and land development | $ | 154,487 | $ | 144,263 | $ | 152,889 | $ | 142,513 | $ | 136,313 | |||||
| Single-family residential | 163,412 | 162,996 | 165,362 | 171,153 | 166,673 | ||||||||||
| Commercial - owner occupied | 275,220 | 260,186 | 266,258 | 259,592 | 255,277 | ||||||||||
| Commercial - other | 228,229 | 214,995 | 198,965 | 192,808 | 191,313 | ||||||||||
| Multifamily | 13,826 | 14,017 | 6,746 | 14,171 | 11,849 | ||||||||||
| Total real estate loans | 835,174 | 796,457 | 790,220 | 780,237 | 761,425 | ||||||||||
| Commercial loans (not secured by real estate) | 197,084 | 190,095 | 190,365 | 184,509 | 171,251 | ||||||||||
| Consumer loans (not secured by real estate) | 14,015 | 13,874 | 14,861 | 16,677 | 17,844 | ||||||||||
| Gross loans | 1,046,273 | 1,000,426 | 995,446 | 981,423 | 950,520 | ||||||||||
| Unearned income | (1,335 | ) | (1,299 | ) | (1,195 | ) | (1,166 | ) | (1,047 | ) | |||||
| Loans, net of unearned income | $ | 1,044,938 | $ | 999,127 | $ | 994,251 | $ | 980,257 | $ | 949,473 | |||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||
| PPP loans: | |||||||||||||||
| Up to $50,000 | $ | 2,344 | $ | 7,033 | $ | 11,718 | $ | 11,701 | $ | 12,762 | |||||
| $50,001 - $150,000 | 3,936 | 15,438 | 24,231 | 23,448 | 27,371 | ||||||||||
| $150,001 - $2 million | 15,328 | 26,384 | 35,498 | 36,357 | 47,724 | ||||||||||
| Greater than $2 million | 2,155 | 11,963 | 17,953 | 17,953 | 17,953 | ||||||||||
| Total PPP loans (1) | 23,763 | 60,818 | 89,400 | 89,459 | 105,810 | ||||||||||
| Unearned income | (712 | ) | (1,585 | ) | (1,199 | ) | (1,684 | ) | (2,408 | ) | |||||
| PPP loans, net of unearned income | $ | 23,051 | $ | 59,233 | $ | 88,201 | $ | 87,775 | $ | 103,402 | |||||
| (1) September 30, 2021 includes $17.8 million and $6.0 million of loans originated in 2021 and 2020, respectively. | |||||||||||||||
| HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||
| Asset Quality Information | ||||||||||||||||
| (Unaudited) (in thousands) | ||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||||
| Classified assets: | ||||||||||||||||
| Nonperforming loans | $ | 2,143 | $ | 1,362 | $ | 2,087 | $ | 9,866 | $ | 10,902 | ||||||
| Other real estate owned | 1,128 | 1,533 | 1,839 | 2,593 | 5,043 | |||||||||||
| Total nonperforming assets | 3,271 | 2,895 | 3,926 | 12,459 | 15,945 | |||||||||||
| Accruing classified loans | 804 | 811 | 835 | 888 | 1,634 | |||||||||||
| Total classified assets | $ | 4,075 | $ | 3,706 | $ | 4,761 | $ | 13,347 | $ | 17,579 | ||||||
| Classified assets to HSB Tier 1 capital plus ALL | 2.5 | % | 2.3 | % | 3.1 | % | 8.9 | % | 11.9 | % | ||||||
| Nonperforming assets to total assets | 0.20 | % | 0.18 | % | 0.24 | % | 0.79 | % | 1.04 | % | ||||||
| Allowance for loan losses: | ||||||||||||||||
| Balance at beginning of period | $ | 15,159 | $ | 15,256 | $ | 14,117 | $ | 12,925 | $ | 10,772 | ||||||
| Provision for loan losses | - | - | - | 1,700 | 2,550 | |||||||||||
| Charge-offs | (403 | ) | (195 | ) | (198 | ) | (860 | ) | (403 | ) | ||||||
| Recoveries | 81 | 98 | 1,337 | 352 | 6 | |||||||||||
| Balance at end of period | $ | 14,837 | $ | 15,159 | $ | 15,256 | $ | 14,117 | $ | 12,925 | ||||||
| Loans, excluding PPP loans | $ | 1,044,938 | $ | 999,127 | $ | 994,251 | $ | 980,257 | $ | 949,473 | ||||||
| PPP loans | 23,051 | 59,233 | 88,201 | 87,775 | 103,402 | |||||||||||
| Performing past due loans | 3,541 | 1,464 | 2,500 | 2,472 | 2,193 | |||||||||||
| Allowance as % of loans | 1.39 | % | 1.43 | % | 1.41 | % | 1.32 | % | 1.23 | % | ||||||
| Allowance as % of loans, excluding PPP loans | 1.42 | % | 1.52 | % | 1.53 | % | 1.44 | % | 1.36 | % | ||||||
| Allowance as a % of nonperforming loans | 692.3 | % | 1113.0 | % | 731.0 | % | 143.1 | % | 118.6 | % | ||||||
| Average loans, excluding PPP loans | 1,017,213 | 993,346 | 988,230 | 960,808 | 947,177 | |||||||||||
| Average PPP loans | 40,910 | 77,325 | 83,489 | 100,725 | 102,396 | |||||||||||
| Net charge-offs (annualized) to average loans | 0.12 | % | 0.04 | % | -0.43 | % | 0.19 | % | 0.15 | % | ||||||
| Net charge-offs (annualized) to average loans, excluding PPP loans | 0.13 | % | 0.04 | % | -0.46 | % | 0.21 | % | 0.17 | % | ||||||
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