Highlands Bancorp, Inc. (OTCQB:HSBK) parent company of Highlands State Bank, reported fourth quarter net income of $60,000 in 2014 compared to net income of $563,000 for the same period of 2013. Net income for the fourth quarter of 2014 was negatively impacted by a write off related to a wire transfer fraud totaling $393,000 which resulted in a decrease of $.13 per diluted share. Fourth quarter net income available to common stockholders was $42,000 or $.02 per diluted share in 2014 compared to $545,000 or $.30 per diluted share for the same period in 2013. Net income for the full year 2014 was $680,000 compared to $2,270,000 for the full year 2013. Net income available to common stockholders for the full year 2014 was $611,000 or $.33 per diluted share compared to $2,201,000 or $1.23 per diluted share for the year of 2013. The quarterly and annual results for 2013 were positively impacted by partial reversals of the Company’s valuation allowance on deferred tax assets which resulted in tax benefits of $333,000 or $.19 per share for the fourth quarter of 2013 and $1,310,000 or $.73 per share for the full year of 2013. On a pre-tax operating basis, without giving effect to the 2013 valuation reversal or the 2014 wire fraud related charge, pre-tax net income in 2014 increased by $566,000 to $1,526,000 compared to $960,000 in 2013, an increase of 58.9%.

Steven C. Ackmann, the Company’s President and Chief Executive Officer commented, “We believe our pre-tax operating income is a better indication of the Bank’s core business and the progress and growth we have achieved here at Highlands. With regard to the wire fraud, we are encouraged by the fact that the fraud did not involve any intrusion or breach into any of our systems or data environment, but was instead the result of the theft of a customer’s identification and breach of their e-mail account. We are examining all avenues of recovery, including insurance coverage, but can give no assurance that we will be successful in our efforts to recover our loss”.

Net interest income increased by $314,000 to $2,437,000 for the fourth quarter of 2014 compared to net interest income of $2,123,000 for the fourth quarter of 2013. For the year ended December 31, 2014, net interest income increased to $9,177,000 from $8,036,000 for 2013 as a result of loan portfolio growth. The provision for loan losses was $194,000 for the quarter and $671,000 for the year ended December 31, 2014. In 2013, the Company’s provision totaled $339,000 and $727,000 for the fourth quarter and year respectively. The decrease in the provision for loan losses reflects improvement in non-performing loans and management’s continued assessment of the reserves maintained on non-performing loans. Charge-offs for the year ended December 31, 2014 were $500,000 compared to charge-offs of $762,000 in 2013. Recoveries of previously charged off loans totaled $2,000 in 2014, compared to $2,000 in 2013. The ratio of non-performing loans and performing TDRs to total loans declined to 1.40% at year end 2014 from 2.69% at year end 2013.

Non-interest income was $787,000 for the fourth quarter of 2014, compared to $139,000 for the fourth quarter of 2013. For the year ended December 31, 2014, non-interest income was $2,235,000 increasing $2,055,000 from $180,000 for the year ended December 31, 2013. This increase for 2014 was primarily the result of gains on sales of mortgage loans and loan fee income attributable to the Bank’s subsidiary, Secure Lending Solutions, Inc. (“SLS”), which was acquired in the first quarter of 2014. Gains on the sales of loans generated by SLS totaled $498,000 and $1,294,000, respectively, for the three months and year ended December 31, 2014. In addition, 2014 reflected increased gains from the sales of investment securities, higher overdraft income, and lower write-downs on foreclosed properties. The 2013 results also included a $76,000 loss on fixed assets relating to the sublease of excess space in one of the Company’s branch locations, as well as a $68,000 loss on the sale of foreclosed assets. Non-interest expenses for the twelve months of 2014 increased $3,079,000 when compared to the same period in 2013. Our addition of SLS in early 2014 impacted all expense categories, especially employee salary and benefit costs and loan expenses. In addition, the opening of our new Denville office in 2014 lead to increases in occupancy and equipments costs. The overall expansion of our operations resulted as well in higher professional fees, data processing, deposit insurance, loan, and advertising costs.

Total assets were $272.6 million on December 31, 2014, an increase of $49.1 million or 22.0% from $223.5 million on December 31, 2013. Deposits increased $38.3 million or 19.5% from $196.1 on December 31, 2013 to $234.4 million on December 31, 2014. Net loans outstanding, including loans held for sale, increased $50.3 million or 26.5% to $239.6 million as of December 31, 2014 from $189.3 million the previous year end.

Forward-Looking Statements

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond the company’s control and could impede its ability to achieve these goals. These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors.

 
Highlands Bancorp, Inc.
Financial Highlights
(Unaudited)
(Dollars in thousands, except per share data)
                 
Three Months Ended Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
INCOME STATEMENT
Net interest income $ 2,437 $ 2,123 $ 9,177 $ 8,036
Provision for loan losses 194 339 671 727
Non-interest income 787 139 2,235 180
Non-interest expense   2,931     1,693     9,608     6,529  
Net income before income tax 99 230 1,133 960
Income tax (expense) benefit   (39 )   333     (453 )   1,310  
Net income 60 563 680 2,270
Preferred stock dividends and accretion   (18 )   (18 )   (69 )   (69 )
Net income available to
common stockholders $ 42   $ 545   $ 611   $ 2,201  
 
EARNINGS PER COMMON SHARE:
Net income available to
common stockholders:
Basic $ 0.02   $ 0.30   $ 0.34   $ 1.23  
Diluted $ 0.02   $ 0.30   $ 0.33   $ 1.21  
 
Weighted average common shares
Basic   1,796,679     1,788,262     1,795,342     1,788,262  
Diluted   1,845,188     1,820,800     1,847,330     1,819,724  
 
SELECTED BALANCE SHEET DATA
AT END OF PERIOD 12/31/2014 12/31/2013
Total loans $ 242,372 $ 191,943
Allowance for loan losses 2,770 2,597
Investment securities 10,877 14,658
Total Assets 272,622 223,538
Total Deposits 234,372 196,114
Stockholders' Equity 22,811 22,016
 
Book value per common share $ 8.88 $ 8.48
Tangible book value per common share $ 8.23 $ 8.03
 
ASSET QUALITY
Non-accrual loans $ 2,559 $ 4,409
Loans past due 90 days and
still accruing - -
Troubled debt restructurings (TDRs)
currently in compliance with new terms 843 752
OREO property 610 609
Allowance for loan losses to total loans 1.14 % 1.35 %
Non-performing loans and performing TDRs
to total loans 1.40 % 2.69 %