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HeritageBank takes over First Southern

FDIC: Customers should conduct business as usual

HeritageBank takes over First Southern

HeritageBank takes over First Southern

       First Southern National Bank in Statesboro was closed Friday by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation as receiver.
       To protect the bank's depositors, the FDIC entered into a purchase and assumption agreement with HeritageBank of the South, which is based in Albany, Ga., to assume all of the deposits of First Southern.
       Booker Shorter, senior ombudsman specialist for the FDIC, was at the bank on South Main St. Saturday to ensure customers that their deposits were safe, and that access to their money would continue as usual.
       "No one lost any money on deposit as a result of the closure of this bank," he said. "All direct deposits, for example, Social Security checks, payroll, veteran's benefits, welfare and/or disability, unemployment or any payment you receive electronically will continue as usual. There is a handout available here at the bank that can address any customer questions that may arise."
       In the acquisition, HeritageBank of the South assumes approximately $170 million in deposits and acquires $120 million in loans. Also, HeritageBank will purchase essentially all of First Southern's assets. All shares of stock, however, were owned by the holding company, First Southern Bancorp. The holding company was not included in the closing of the bank or the resulting receivership.
      Depositors of First Southern will automatically become depositors of HeritageBank of the South, and deposits will continue to be insured by the FDIC.
       Founded in 2002, First Southern is the 67th FDIC-insured institution to fail in the nation this year, and the 17th in Georgia. Georgia leads the nation with 68 failures since mid-2008, and is leading the nation in failures this year as well.
       It was reported by the Atlanta Journal-Constitution Saturday, that more than a quarter of First Southern's loans were either delinquent, in default or foreclosed as of the end of the second quarter, according to an analysis of FDIC data by FIG Partners in Atlanta.
       First Southern was operating under a Consent Order with the Office of the Comptroller of the Currency since November 2010. A consent order is a formal agreement entered into by a bank and its regulatory agency listing all necessary and appropriate steps to remedy the deficiencies and unsafe or unsound practices of the bank as determined by the regulatory agency.

Tommy David's reaction

       "While we ultimately were unable to save the bank in the face of unyielding market conditions, the board of directors worked tirelessly on behalf of the company and its shareholders and attempted every reasonable solution," said Tommy David, president and CEO of First Southern Bancorp, which owned First Southern National Bank. "These efforts included the negotiation of potential capital investment transactions with various sources. Our board and management team also pursued other transactions, including mergers with other institutions and sales of the bank's assets. Despite our best efforts, the continuing depressed market conditions and constraints on our ability to conduct our business prevented us from completing these transactions."
       Saturday, the sole branch of First Southern on South Main Street opened as a branch of HeritageBank. A team of about 50 professionals from bank regulatory authorities was in the bank working on the transition in addition to 14 members of HeritageBank's staff. Many former First Southern employees also were there conducting the bank's routine Saturday business.

Addressing concerns

       HeritageBank southeast Georgia regional president Gary Johnson was in the lobby greeting customers and addressing their concerns.
       "The recession has caused harm to everybody, and these have been painful, economic times," Johnson said. "I am here to welcome our new First Southern customers. I believe they will find that HeritageBank of the South offers the best of both worlds when it comes to banking: the close, personal attention of a hometown community bank, as well as the financial strength, and product and service capabilities of a much larger financial institution."
       Johnson said that First Southern customers should continue to use the First Southern location and ATM machines during the transition. Customers will be notified of changes as they are scheduled.
       HeritageBank purchased the Tattnall Bank from the FDIC in 2009. In 2010, the bank acquired the two Statesboro branches of the Valdosta-based Park Avenue Bank. In early 2011, it purchased Citizens Bank of Effingham from the FDIC.
       With its most recent acquistion, HeritageBank now operates 22 branch locations in south Georgia and north central Florida. The purchase of First Southern's assets is expected to boost HeritageBank's market ranking, in terms of deposit market share, into the top four banks in Statesboro.
       HeritageBank has acquired the assets of a bank known for its family atmosphere including fresh baked cookies, popcorn, and soft drinks in the lobby. First Southern employees took great pride in the bank's service to the community, and David was known for highlighting the accomplishments and contributions of his staff even in the face of the bank's closing.
       "I would like to thank our customers, shareholders and community for their tremendous support over the nine and a half years that we were open," David said. "I especially want to thank the dedicated members of our First Southern family, who unselfishly exceeded our customers' expectations in this most difficult environment. I love every one of them.
       "The bank may have failed, but the First Southern family did not fail, because we were so much more than a bank. We were a community, a family, a support group, and a prayer group who tried to be a witness by loving our neighbors which we will continue doing. At the end of the day, God is in control and I know He has a plan for all of us."

HeritageBank background

       Heritage Financial Group, Inc. (NASDAQ: HBOS) is the holding company for HeritageBank of the South. As of June 30, 2011, the company reported total assets of approximately $964 million and total stockholders' equity of approximately $122 million. The acquisition of First Southern will boost the company's assets to approximately $1.1 billion.
      The FDIC and HeritageBank have entered into a loss-share agreement under which the FDIC will reimburse HeritageBank of the South for 80 percent of the losses on First Southern's covered loans and other real estate owned. The FDIC estimates the failure will result in a $39.6 million loss to its deposit insurance fund which protects depositors.
       Leonard Dorminey, CEO of HeritageBank of the South said, "With this acquisition, we continue to strategically deploy our capital. First Southern marks the third FDIC-assisted acquisition we have completed, which, along with our other transactions, have greatly expanded our footprint across southern Georgia and have strengthened our presence in attractive markets such as Statesboro. These steps have enhanced our regional footprint and have increased our asset base significantly."
       Dorminey noted that, considering Heritage Financial Group's strong capital position - with a total risk-based capital ratio of 23.4 percent at June 30, 2011, the company remains well positioned to take advantage of possible future acquisition opportunities and FDIC-assisted deals that make sense for HeritageBank of the South's business and markets.
       HeritageBank of the South serves primarily South Georgia and North Central Florida through 22 branch locations, 10 mortgage offices and two investment offices.

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