November 2008

Dear Heritage Bank Customer,

As we near the end of 2008, I believe we all can agree that this has been a tumultuous year for many banks and other financial institutions. The liquidity problems in the banking industry have been caused by a lack of transparency in major bank balance sheets. This lack of transparency stems from a lack of full disclosure by those banks of the problems and losses associated with their bond portfolios.

These losses created instability in markets never seen since the great depression. This has resulted in a massive government bailout that, although probably necessary, will be a huge cost burden to all of us as taxpayers. Consequently, I thought it would be appropriate to communicate with you as a Heritage Bank customer about our bank, how far removed we are from having any of the problems you have read and heard about for other banks, and how safe your deposits are with us.

First, let me share a few facts. Heritage Bank is a locally owned Nebraska based bank with locations in eight central Nebraska communities. Our bank is a strong, profitable and well-capitalized bank, and of course is a member of the Federal Deposit Insurance Corporation ("FDIC"). FDIC has increased coverage on your deposits up to $250,000 until December 31, 2009. Furthermore, our holding company, Heritage Group, Inc. that owns 100% of Heritage Bank, has over $50 Million of capital. Our financial performance regarding return on equity and return on assets continually ranks in the top 10% of all Nebraska banks. We have strong liquidity, strong equity, strong earnings and we have practiced sound loan underwriting to the same commercial businesses and farmers that have been our customers for the past fifty-six years.

As I mentioned before, the problems on "Wall Street" that you have heard and read about stem from credit issues we saw coming several years ago due to poor lending decisions being made by others. Sub prime lending for mortgages and autos wherein little, if any, credit underwriting was done is the root of the cause. Heritage Bank did not participate in sub prime lending, nor will we ever. We did not buy bonds for our investment portfolio that were backed by sub prime mortgages, nor will we ever. We do not own CDO's, SIV's, CLO's, derivatives, credit default swaps or other questionable assets.

Since we were founded in 1952, Heritage Bank has always exhibited a strong credit culture. It is important for me to emphasize how well that strong credit culture has served us for over fifty-six years and how important it now is for you as a customer to have peace of mind about your deposits in your bank. Additionally, we fully expect to deliver to the many farmers, small business owners and consumers that we serve, the credit that they need to run their operations. We are proud of our borrowers for handling their credit needs professionally and appropriately.

In conclusion, all of us at Heritage are proud that you have chosen us to be your bank. We are proud of our strong capital, liquidity and earnings because it is not an easy task to accomplish. However, we work hard for the benefit of you, our customer, and our shareholders. It is during times like these that the hard work to maintain a strong and healthy bank serves everyone's best interest.

Thank you.

Respectfully,

Sam L. Moyer
Chairman, President & CEO
Heritage Bank

On May 20, 2009, President Barack Obama signed the Helping Families Save Their Homes Act, which extends the temporary increase in the standard maximum deposit insurance amount (SMDIA) to $250,000 per depositor through December 31, 2013. This extension of the temporary $250,000 coverage limit became effective immediately upon the President's signature. The legislation provides that the SMDIA will return to $100,000 on January 1, 2014.