[October 19, 2018]

Highlands Bancorp, Inc. Reports Increase in Net Income for the Nine Months Ended September 30, 2018

Highlands Bancorp, Inc. (OTCPink: HSBK) parent company of Highlands State Bank, reported net income available to common stockholders for the third quarter and nine months ended September 30, 2018 was $987,000 or $.35 per basic and diluted share, and $2,727,000 or $1.00 per basic and $.97 per diluted share, respectively. This compares to net income of $761,000 or $.28 per basic and $.27 per diluted share for the third quarter of 2017, and $1,977,000 or $.73 per basic and $.71 per diluted share for the nine months ended September 30, 2017. Net income available to common stockholders increased $226,000 or 29.7% when comparing the quarters ended September 30, 2018 and 2017, and increased $750,000 or 37.9% when comparing the nine months ended September 30, 2018 and 2017.

Net interest income increased by $476,000 to $3,826,000 for the three months ended September 30, 2018 when compared to $3,350,000 for the three months ended September 30, 2017. Net interest income increased by $1,309,000 to $11,015,000 for the first nine months of 2018 when compared to $9,706,000 for the first nine months of 2017. These increases in net interest income were primarily the result of growth in average interest-earning asset balances and yields. Total average interest-earning assets for the third quarter 2018 increased by $46.6 million or 11.3% to $460.6 million when compared to $414.0 million for the same period of 2017, and by $39.9 million or 9.7% to $449.1 million for the nine months ended September 30, 2018 when compared to $409.2 million for the comparable period of 2017. Average loans outstanding increased $60.0 million or 16.0% to $434.1 million for the third quarter 2018 when compared to $374.1 million for the third quarter 2017, and increased $46.3 million or 12.4% to $418.6 million for the first nine months of 2018 when compared to $372.3 million for the same period in 2017. These increases were partially offset by higher average interest-bearing liabilities and interest costs from ongoing deposit promotions. Net interest spread for the third quarter 2018 increased to 2.94% from 2.93% for the third quarter of 2017, and the net interest margin increased to 3.32% from 3.24% when comparing the three months ended September 30, 2018 and 2017. Net interest spread increased to 2.92% for the nine months ended September 30, 2018, when compared to 2.85% for the same period in 2017, and the net interest margin increased to 3.27% from 3.16% when comparing the nine months ended September 30, 2018 and 2017.

The provision for loan losses for the third quarter of 2018 of $78,000 reflected an increase of $21,000 when compared to $57,000 for the third quarter of 2017, but decreased for the nine-month period by $150,000 to $397,000 for 2018 when compared to $547,000 for the same period in 2017. These changes in the provision for loan losses level are the result of management's continued assessment of the reserves maintained on non-performing loans. There were no loan charge-offs or recoveries for the third quarter 2018 or the nine months ending September 30, 2018. This compares to $10,000 in charge-offs and $1,000 in recoveries for period ending September 30, 2017. Non-interest income for the third quarter of 2018 decreased $66,000 to $658,000 when compared to $724,000 for the third quarter of 2017 primarily due to lower gains on sales of loans, which were partially offset by higher insufficient fund fees and debit card interchange. Non-interest income increased $20,000 to $2,347,000 for first nine months of 2018 when compared to $2,327,000 for the same period of 2017 due to increased fees and charges, which were partially offset by lower gains on sales of loans. Non-interest expenses increased by $239,000 to $3,060,000 for the third quarter of 2018, and increased $970,000 to $9,339,000 for the nine months ended September 30, 2018 when compared to similar periods of 2017 due to higher salary and benefit costs as a result of additions made to staff, increased legal and consulting expenses, higher data processing, deposit insurance, and miscellaneous charges relating to deposit account write-offs.

Total assets were $487.9 million on September 30, 2018, increasing $38.9 million or 8.7% when compared to total assets of $449.0 million at December 31, 2017. Deposits increased $16.2 million or 4.2% from $389.1 million on December 31, 2017 to $405.3 million on September 30, 2018. Total loans outstanding on September 30, 2018 were $430.1 million compared to $400.9 million on December 31, 2017, increasing $29.2 million or 7.3%. During the third quarter of 2018 the Company sold a loan participation pool totaling $10.6 million. Non-accrual loans totaled $2.8 million at September 30, 2018 compared to $3.1 million at December 31, 2017. Non-performing loans and performing TDRs as a percentage of total loans were .81% at September 30, 2018, down from .96% at December 31, 2017.

The Company serves as the holding company for Highlands State Bank. Highlands State Bank is a full service community bank headquartered in Vernon, New Jersey with branch offices in Sparta, Totowa, and Denville New Jersey. Highlands State Bank provides deposit and loan banking services to consumers and businesses in northern New Jersey.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181019005526/en/

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