Highlands Bancorp, Inc. (OTCQB:HSBK) parent company of Highlands State Bank, reported fourth quarter net income of $325,000 in 2015 compared to net income of $60,000 for the same period of 2014. Fourth quarter net income available to common stockholders was $307,000 or $.17 per diluted share in 2015 compared to $42,000 or $.02 per diluted share for the same period in 2014. 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. Net income for the full year 2015 was $1,510,000 compared to 680,000 for the full year 2014. Net income available to common stockholders for the full year 2015 was $1,441,000 or $.78 per diluted share compared to $611,000 or $.33 per diluted share for the year of 2014. The Company recently completed a $7.5 million subordinated debt issuance which has a ten-year maturity and bears a fixed interest rate of 6.9375% per annum. The Company will use the funds to redeem its Senior Non-Cumulative Perpetual Preferred Stock, Series C issued under the U.S. Treasury’s Small Business Lending Fund (SBLF) and to supplement the Bank’s regulatory capital levels to support future growth.

Steven C. Ackmann, the Company’s President and Chief Executive Officer commented, “2015 was an important year for our Company. Growth in both assets and earnings continues to be our focus, and we made solid advances in these critical areas. The addition of the subordinated debt we obtained in the fourth quarter of 2015 will enable us to augment our capital and sustain our progress.”

Net interest income increased by $296,000 to $2,733,000 for the fourth quarter of 2015 compared to net interest income of $2,437,000 for the fourth quarter of 2014. For the year ended December 31, 2015, net interest income increased to $10,637,000 from $9,177,000 for 2014 as a result of loan portfolio growth. The provision for loan losses was $191,000 for the quarter and $711,000 for the year ended December 31, 2015. In 2014, the Company’s provision totaled $194,000 and $671,000 for the fourth quarter and year respectively. The provision for loan losses reflects management’s continued assessment of the reserves maintained on non-performing loans. Charge-offs for the year ended December 31, 2015 were $127,000 compared to charge-offs of $500,000 in 2014. Recoveries of previously charged off loans totaled $2,000 in 2015, and $2,000 in 2014. The ratio of non-performing loans and performing TDRs to total loans declined to .87% at year end 2015 from 1.43% at year end 2014.

Non-interest income was $715,000 for the fourth quarter of 2015, compared to $787,000 for the fourth quarter of 2014, and reflected lower gains from sales of mortgage loans attributable to the Bank’s subsidiary, Secure Lending Solutions, Inc. (“SLS”) and insufficient fund fee income. For the year ended December 31, 2015, non-interest income was $3,257,000 increasing $1,022,000 from $2,235,000 for the year ended December 31, 2014. This increase for 2015 was primarily the result of higher gains on sales of mortgage loans, gains on the sale of investment securities, and fee income from loans, merchant settlements services and debit card transactions. Gains on the sales of loans generated by SLS totaled $466,000 and $2,119,000, respectively, for the three months and year ended December 31, 2015. This compares to gains on sales of loans of $498,000 and $1,294,000, respectively for the three months and year ended December 31, 2014. In addition, 2015 reflected a $67,000 charge relating to the consolidation and closure of one of the Bank’s Sparta branch offices and a $13,000 write-down on foreclosed properties. The 2014 results also included a $58,000 write-down on foreclosed assets. Non-interest expenses for the twelve months of 2015 increased $1,231,000 when compared to the same period in 2014. SLS was acquired in early 2014 and therefore 2014 includes a partial year’s results for their operations. SLS’s addition of the LCD Mortgage Company (“LCD Mortgage”) lending group in June 2015 impacted employee salary, benefit and equipment expenses. Also, additions made to staff, the introduction of 401K employer match retirement plan, additional leased office space, and higher charges for data processing, audit, consulting, and loan expenses resulted in higher costs for 2015, which were partially offset by lower legal, stock option, and employee benefit expenses.

Total assets were $315.6 million on December 31, 2015, an increase of $43.0 million or 15.8% from $272.6 million on December 31, 2014. Deposits increased $26.3 million or 11.2% from $234.4 on December 31, 2014 to $260.7 million on December 31, 2015. Net loans outstanding, including loans held for sale, increased $47.3 million or 19.7% to $286.9 million as of December 31, 2015 from $239.6 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,
  2015     2014     2015     2014  
INCOME STATEMENT
Net interest income $ 2,733 $ 2,437 $ 10,637 $ 9,177
Provision for loan losses 191 194 711 671
Non-interest income 715 787 3,257 2,235
Non-interest expense   2,762     2,931     10,839     9,608  
Net income before income tax 495 99 2,344 1,133
Income tax (expense) benefit   (170 )   (39 )   (834 )   (453 )
Net income 325 60 1,510 680
Preferred stock dividends and accretion   (18 )   (18 )   (69 )   (69 )
Net income available to
common stockholders $ 307   $ 42   $ 1,441   $ 611  
 
EARNINGS PER COMMON SHARE:
Net income available to
common stockholders:
Basic $ 0.17   $ 0.02   $ 0.80   $ 0.34  
Diluted $ 0.17   $ 0.02   $ 0.78   $ 0.33  
 
Weighted average common shares
Basic   1,788,872     1,796,679     1,792,978     1,795,342  
Diluted   1,844,126     1,845,188     1,845,697     1,847,330  
 
SELECTED BALANCE SHEET DATA
AT END OF PERIOD   12/31/2015     12/31/2014  
Total loans $ 287,622 $ 237,916
Allowance for loan losses 3,356 2,770
Loans held for sale 2,622 4,456
Investment securities 3,799 10,877
Total Assets 315,562 272,622
Total Deposits 260,713 234,372
Stockholders' Equity 24,107 22,811
Goodwill 1,151 992
Intangible Assets Other Than Goodwill 175 175
 
Book value per common share $ 9.65 $ 8.88
Tangible book value per common share $ 8.90 $ 8.23
 
ASSET QUALITY
Non-accrual loans $ 2,011 $ 2,559
Loans past due 90 days and
still accruing - -
Troubled debt restructurings (TDRs)
currently in compliance with new terms 490 843
OREO property 488 610
Allowance for loan losses to total loans 1.17 % 1.16 %
Non-performing loans and performing TDRs
to total loans 0.87 % 1.43 %