Heritage Southeast Bancorporation : Quarterly Report - HSBI Quarterly Earnings 12.31.21

HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY Financial Highlights

(Unaudited) (in thousands, except per share data)

Earnings:

Net Interest Income Net Income

Net Income excluding transaction costs

Per Share Data:

Earnings per share: Basic

Diluted

Diluted excluding transaction costs Weighted average number of shares: Basic

Diluted

Period-end number of shares (1) Book value per share (period-end) Tangible book value per share (period-end)

Key Ratios (percent):

Return on average assets

Return on average assets excluding transaction costs Return on average tangible equity

Return on average tangible equity excluding transaction costs

Yield on interest earning assets Cost of funds

Net interest margin

Net interest margin, excluding PPP loans Non-interest income as a percent of total revenue Efficiency ratio

Efficiency ratio excluding transaction costs Tangible common equity to tangible assets

Asset Quality (period-end):

Allowance for loan losses to total loans

Allowance for loan losses to loans, excluding PPP loans Allowance for loan losses to total nonperforming loans Nonperforming assets to total assets

Net charge-offs (annualized) to average loans

Net charge-offs (annualized) to average loans, excluding PPP loans

Capital (period-end):

Heritage Southeast Bank (HSB) risk based capital ratios: CET1

Tier 1 Total Leverage

Other (period-end):

December 31, 2021

September 30, 2021

$

12,633 $ 3,108 4,809

$ $ $

0.45 $ 0.43 $ 0.67 $

6,979

7,218

7,220

$ $

21.32 $

16.40 $

0.75% 1.16% 10.61%

16.41%

3.60%

0.29%

3.31%

3.23%

29.9%

77.4%

63.7%

7.31%

1.44%

1.46%

877.7%

0.16%

-0.15% -0.15%

12.67% 12.67% 13.90% 9.81%

Branches

FTE

23 280

(1) Includes restricted stock and shares yet to be issued under a supplemental executive retirement plan.

Three Months Ended

June 30, 2021

March 31, 2021

December 31, 2020

13,152 $ 3,503 4,368

12,727 $ 2,869 4,146

12,769 $ 12,530

4,333 977

4,333 977

0.50 $ 0.49 $ 0.60 $

0.41 $ 0.40 $ 0.57 $

0.62 $ 0.14

0.60 $ 0.14

0.60 $ 0.14

6,976

6,967

6,956 6,924

7,222

7,212

7,179 7,139

7,220

7,220

7,222 7,227

21.09 $

20.65 $

20.18 $ 19.76

16.13 $

15.65 $

15.16 $ 14.71

0.84% 1.05% 12.15%

0.69% 1.00% 10.34%

1.10% 0.25%

1.10% 0.25%

16.28% 3.66%

15.15%

14.95%

16.28% 3.66%

3.78%

3.72%

4.00% 4.05%

0.33%

0.36%

0.42% 0.52%

3.45%

3.36%

3.58% 3.53%

3.28%

3.26%

25.4%

26.6%

3.48% 3.50%

26.0% 26.7%

72.0%

76.5%

67.2% 83.1%

65.9%

67.2%

67.2% 83.1%

7.26%

6.99%

6.81% 6.93%

1.39%

1.43%

1.41% 1.32%

1.42%

1.52%

692.3%

1113.0%

1.53% 1.44%

731.0% 143.1%

0.20%

0.18%

0.24% 0.79%

0.12% 0.13%

0.04% 0.04%

-0.43% 0.19%

-0.46% 0.21%

12.29% 12.29% 13.50% 9.40%

12.32% 12.32% 13.57% 9.01%

12.02% 11.95%

12.02% 11.95%

13.27% 13.19%

9.10% 8.98%

23 278

22 276

22 22

278 288

(Unaudited) (in thousands, except per share data)

Interest and dividend revenue:

Loans, including fees

PPP loans, including fees Investment securities

Fed funds sold, deposits in banks and other

Total interest and dividend revenueInterest expense:

Deposits

Fed funds purchased and repurchase agreements Line of credit

Subordinated notes

Junior subordinated debentures

Total interest expense

Net interest income Provision for loan losses

Net interest revenue after provision for loan lossesNoninterest revenue:

Service charges and fees Interchange and ATM fees Gain on sale of SBA loans Other

Total noninterest revenueOperating expenses:

Salaries and employee benefits Occupancy and equipment

Other real estate expenses, including losses on sales and impairments, net

Transaction costs

Other

Total other operating expenses

Income before income tax expense Income tax expense

Net income

Weighted-average number of shares outstanding:

Basic

Diluted

Earnings per share:

Basic

Three Months EndedDecember 31, 2021

September 30, June 30, 2021 2021

March 31, 2021

December 31, 2020

$

• 12,666 $

• 12,705 $

• 12,592 $

12,625 $ 12,938

428

1,014

1,024

1,071 984

518

564

376

516 393

113

107

79

55 61

13,725

14,390

14,071

14,267 14,376

703

760

843

986 1,256

8

8

6

10 15

253

192

124

110 181

47

198

290

310 310

81

80

81

82 84

1,092 12,633 - 12,633

1,238 13,152 - 13,152

1,344 12,727 - 12,727

1,498 1,846

12,769 12,530

- 1,700

12,769 10,830

1,608

1,571

1,291

1,285 1,574

1,506

1,517

1,665

1,536 1,480

1,521

652

738

906 924

759

741

913

765 579

5,394

4,481

4,607

4,492

4,557

6,692 1,394

6,760 1,434

6,551 1,443

6,528 8,309

1,402 1,404

93

27

165

7 391

2,480

1,069

1,612

-

-

3,538

3,634

3,720

3,904

4,335

14,197

12,924

13,491

11,841

14,439

3,830

4,709

3,843

5,420

948

722

1,206

974

1,087

(29)

$

3,108

$

3,503

$

2,869

$

4,333

$

977

6,979 7,218

6,976 7,222

6,967 7,212

6,956 6,924

7,179 7,139

$ $

0.45 0.43

$ $

0.50 0.49

$ $

0.41 0.40

$ $

0.62 $ 0.14

Diluted

0.60 $ 0.14

(in thousands, except per share data)

Interest and dividend revenue:

Loans, including fees

PPP loans, including fees Investment securities

Fed funds sold, deposits in banks and other

Total interest and dividend revenue

Interest expense:

Deposits

Fed funds purchased and repurchase agreements Federal Home Loan Bank advances

Line of credit

Subordinated debt

Junior subordinated debentures

Total interest expense

Years Ended (Unaudited)

December 31, December 31, 2021 2020

$

50,263 $ 52,056

3,862 2,173

1,975 1,831

354 524

56,454 56,584

3,292 6,408

33 106

- 38

678 612

844 623

325 384

5,172 8,171

Net interest income Provision for loan losses

Net interest revenue after provision for loan lossesNoninterest revenue:

Service charges and fees Interchange and ATM fees Securities gains, net

Gain on sale of SBA loans Other

Total noninterest revenue

Operating expenses:

Salaries and employee benefits Occupancy and equipment

Other real estate expenses, including losses on sales and impairments, net

Transaction costs

Other

Total other operating expenses

Income before income tax expense Income tax expense

Net income

Weighted-average number of shares outstanding:

Basic

Diluted

Earnings per share:

51,282 48,413

- 9,350

51,282 39,063

5,755 5,923

6,225 5,689

- 1,313

3,817 1,811

3,176 2,602

18,973

17,338

26,531 27,519

5,674 5,555

292 1,196

5,160 14,795 52,452

- 16,639 50,909

17,803 5,492

3,989 1,050

$

13,814

$

4,442

6,971 6,911

7,210 7,126

Basic

$ $

1.98 $ 0.64

Diluted

1.92 $ 0.62

HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY Consolidated Balance Sheets

(in thousands)

Assets

Cash and due from banks Interest-bearing deposits with banks

Cash and cash equivalents

Securities available for sale, at fair value Other investments

Loans:

Loans, excluding PPP loans PPP loans

Allowance for loan losses

Loans, net

Premises and equipment, net Bank owned life insurance Other real estate owned Goodwill

Core deposit intangible, net Deferred tax asset, net Other assets

(Unaudited) December 31, 2021

(Unaudited) September 30, 2021

(Unaudited) June 30, 2021

(Unaudited) March 31, 2021

December 31, 2020

$

• 29,689 $

• 28,201 $

• 27,722 $

23,851 $ 29,092

261,513

259,342

278,360

246,824 189,533

291,202

287,543

306,082

270,675 218,625

197,309

171,804

173,606

174,785 169,329

786 1,044,413 10,912

786 1,044,938 23,051

786 999,127 59,233 (15,159) 1,043,201

786 1,203

994,251 980,257

88,201 87,775

(15,228) 1,040,097

(14,837) 1,053,152

(15,256)

(14,117)

1,067,196 1,053,915

35,136

35,770

36,114

37,220 37,165

34,634

34,404

34,174

33,925 28,734

857

1,128

1,533

1,839 2,593

28,275

28,275

28,275

28,275 28,275

7,283

7,521

7,758

7,995 8,232

12,093

12,261

13,313

14,362 14,900

6,893

7,366

7,423

8,140 8,219

Total Assets

$

485,754

$

490,341

$

488,877

$

$

$

1,654,565

$

1,640,010

$

1,652,265

$

1,645,198

$

1,571,190

275,115

259,811

270,380

439,965

427,272

425,371

226,604

237,292

250,839

Liabilities Deposits: Noninterest-bearing Interest-bearing demand Money market and savings Time

Total deposits

Securities sold under agreements to repurchase Line of credit

Subordinated notes

Junior subordinated debentures Accrued expenses and other liabilities

Total liabilities

Shareholders' Equity Common stock Additional paid in capital Retained earnings

Other comprehensive income (loss)

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

479,653 269,517 422,904 261,710

415,476 283,009 385,246 278,825

1,427,438

1,414,716

1,435,467

1,433,784 1,362,556

23,988

23,424

15,241

13,413 13,187

34,188 -

23,688

22,688

14,688 14,688

8,674

13,165

19,656 19,646

9,403

9,365

9,327

9,288 9,250

5,588

7,862

7,312

8,598 9,030

1,500,605

1,487,729

1,503,200

1,499,427

1,428,357

703

702

702

702

702

117,443

117,298

117,151

116,972 116,825

37,798

34,689

31,186

28,316 23,983

(1,984)

(408)

26

(219) 1,323

153,960

152,281

149,065

145,771

142,833

$

1,654,565

$

1,640,010

$

1,652,265

$

1,645,198

$

1,571,190

HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY GAAP to Non-GAAP Reconciliation

(Unaudited) (in thousands)

Income before income tax expense (GAAP) Provision for loan losses

Other real estate expenses, including losses on sales and impairments, net

Three Months Ended
December 31,	September 30,	June 30,	March 31,	December 31,
2021	2021	2021	2021	2020

$

3,830 -$

4,709 -$

3,843

$

5,420

$ 948

- - 1,700

93

27

165

7 391

Loss on sub-lease - - - - 800

Employee restructuring costs Transaction costs

PPP impact

Pre-tax core earnings

311 - - - 1,310

2,480 (428)

$

6,286

$

HERITAGE SOUTHEAST BANCORPORATION, INC. AND SUBSIDIARY Loan Portfolio

(Unaudited) (in thousands)

Real estate loans:

Construction and land development Single-family residential Commercial - owner occupied Commercial - other Multifamily

Total real estate loans

Commercial loans (not secured by real estate) Consumer loans (not secured by real estate)

Gross loans

Unearned income

Loans, net of unearned income

1,069 (1,014)

1,612 (1,024)

- (1,396)

- (984)

4,791

$

4,596

$

4,031

$

4,165

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

$

• 159,630 $

• 154,487 $

• 144,263 $

152,889 $ 142,513

158,667

163,412

162,996

165,362 171,153

265,900

275,220

260,186

266,258 259,592

239,994

228,229

214,995

198,965 192,808

6,592

13,826

14,017

6,746 14,171

830,783

835,174

796,457

790,220 780,237

202,966

197,084

190,095

190,365 184,509

12,081

14,015

13,874

14,861 16,677

1,045,830

1,046,273

1,000,426

995,446

981,423

(1,417)

(1,335)

(1,299)

(1,195)

(1,166)

$

1,044,413

$

1,044,938

$

999,127

$

994,251

$

980,257

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

PPP loans:

Up to $50,000 $50,001 - $150,000 $150,001 - $2 million Greater than $2 million

Total PPP loans (1)

Unearned income

PPP loans, net of unearned income

$

• 644 $

• 2,344 $

804

3,936

9,788 -

15,328

2,155

11,236

23,763

(324)

(712)

$

10,912

$

23,051

(1)

December 31, 2021 includes $10.2 million and $1.0 million of loans originated in 2021 and 2020, respectively.

• 7,033 $

11,718 $ 11,701

15,438

24,231 23,448

26,384

35,498 36,357

11,963

17,953 17,953

60,818

(1,585)

89,400 (1,199)

89,459 (1,684)

$

59,233

$

88,201

$

87,775