U.S. Markets closed

Hingham Savings Reports 2018 Results

HINGHAM, Mass., Jan. 17, 2019 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2018.

Net income for the year ended December 31, 2018 was $30,399,000 or $14.25 per share basic and $13.90 per share diluted, as compared to $25,757,000 or $12.08 per share basic and $11.81 per share diluted for the same period last year.  The Bank’s return on average equity for the year ended December 31, 2018 was 14.97%, and the return on average assets was 1.32%, as compared to 14.73% and 1.21% for the same period in 2017.  Net income per share (diluted) for 2018 increased 18% over the same period in 2017.  Net income for the year ended December 31, 2017 included an additional $218,000 in income tax provision as a result of the Tax Cut and Jobs Act enacted in December 2017, which required the Bank to remeasure its deferred tax assets and liabilities.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the year ended December 31, 2018 was $32,776,000 or $15.37 per share basic and $14.99 per share diluted, as compared to $25,708,000 or $12.05 per share basic and $11.79 per share diluted for the same period last year.  The Bank’s core return on average equity for the year ended December 31, 2018 was 16.14%, and the core return on average assets was 1.42%, as compared to 14.70% and 1.21% for the same period in 2017.  Core net income per share (diluted) for 2018 increased by 27% over the same period in 2017.

Net income for the quarter ended December 31, 2018 was $4,664,000 or $2.18 per share basic and $2.13 per share diluted, as compared to $6,691,000 or $3.14 per share basic and $3.06 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the fourth quarter of 2018 was 8.78%, and the annualized return on average assets was 0.80%, as compared to 14.51% and 1.18% for the same period last year.  Net income per share (diluted) for the fourth quarter of 2018 decreased 30% compared to the same period in 2017.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the quarter ended December 31, 2018 was $8,046,000 or $3.77 per share basic and $3.68 per share diluted, as compared to $6,691,000 or $3.14 per share basic and $3.06 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the fourth quarter of 2018 was 15.14% and the annualized core return on average assets was 1.38%, as compared to 14.51% and 1.18% for the same period last year.  Core net income per share (diluted) for the fourth quarter of 2018 increased by 20% over the same period in 2017.

Growth in 2018 was modest, as deposits increased to $1.573 billion at December 31, 2018, representing 4% growth from 2017.  This growth reflected modest growth in retail and business deposits.  Net loans increased to $2.009 billion, representing 10% growth from 2017.  Total assets increased to $2.409 billion, representing 5% growth from 2017.  During 2018, the Bank reduced the balance of excess reserves held at the Federal Reserve Bank, in order to minimize the carrying cost of its on-balance sheet liquidity.  Book value per share was $99.67 as of December 31, 2018, representing 14% growth from December 31, 2017.  In addition to the increase in book value per share, the Bank declared $1.92 in dividends per share in 2018, including a special dividend of $0.50 per share declared during the fourth quarter of 2018.  The Bank announced increases in its regular quarterly dividend in June, September and November of 2018.  The trailing five year compound annual growth rate in book value per share, an important measure of long-term value creation, rose to 15.5%.

Key credit and operational metrics remained strong in 2018.  At December 31, 2018, non-performing assets totaled 0.02% of total assets, compared to 0.07% at December 31, 2017.  Non-performing loans as a percentage of the total loan portfolio totaled 0.02% at December 31, 2018, compared to 0.09% at December 31, 2017.  The Bank recorded $1,000 in net recoveries in 2018 and $2,000 in net recoveries in 2017.  At December 31, 2018 and 2017, the Bank did not own any foreclosed property.  The efficiency ratio fell slightly to 29.89% in 2018, as compared to 30.06% in 2017.  Operating expenses as a percentage of average assets improved to 0.87% in 2018, as compared to 0.92% in 2017.  These metrics reflect the Bank’s disciplined focus on credit quality and expense management.

Chairman Robert H. Gaughen, Jr. stated, “Returns on equity and assets were adequate in 2018, although competitive pressure remains acute.  The real test of performance in banking is a company’s record of compounding shareholder capital over time through the disciplined management of credit risk and operational expense.  On this measure, our team strives to set a high bar.

In 2018, the decline in the market value of our equity investments, concentrated in financial services, ratings, and payments companies, was decremental to our book value per share, as opposed to prior years in which these investments were accretive to our core business.  As noted before, the Bank views these equity investments as long-term partnership interests in operating companies and consequently does not view short-term fluctuation in market value, whether positive or negative, as necessarily indicative of the change in the intrinsic value of the businesses in which we invest.”

Hingham Institution for Savings is a Massachusetts-chartered savings bank located in Hingham, Massachusetts.  Incorporated in 1834, it is one of America’s oldest banks.  The Bank’s Main Office is located in Hingham and the Bank maintains offices on the South Shore, in Boston (South End and Beacon Hill), and on the island of Nantucket.  The Bank also provides commercial mortgage lending and private banking services in the Greater Washington D.C. metropolitan area.

The Bank’s shares of common stock are listed and traded on The NASDAQ Stock Market under the symbol HIFS.


HINGHAM INSTITUTION FOR SAVINGS
Selected Financial Ratios

  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
  2017   2018   2017   2018
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 1.18 %   0.80 %   1.21 %   1.32 %
Return on average equity (1) 14.51     8.78     14.73     14.97  
Core return on average assets (1) (5) 1.18     1.38     1.21     1.42  
Core return on average equity (1) (5) 14.51     15.14     14.70     16.14  
Interest rate spread (1) (2) 2.83     2.48     2.91     2.66  
Net interest margin (1) (3) 2.99     2.79     3.05     2.90  
Operating expenses to average assets (1) 0.86     0.84     0.92     0.87  
Efficiency ratio (4) 28.58     30.07     30.06     29.89  
Average equity to average assets 8.16     9.09     8.22     8.80  
Average interest-earning assets to average interest-bearing liabilities 117.59     121.08     117.39     119.23  
                       


  December 31, 2017    December 31, 2018 
(Unaudited)          
           
Asset Quality Ratios          
Allowance for loan losses/total loans   0.68 %   0.68 %
Allowance for loan losses/non-performing loans   735.74     2,852.89  
             
Non-performing loans/total loans   0.09     0.02  
Non-performing loans/total assets   0.07     0.02  
Non-performing assets/total assets   0.07     0.02  
             
Share Related            
Book value per share $ 87.29     $ 99.67  
Market value per share $ 207.00     $ 197.74  
Shares outstanding at end of period   2,132,750       2,132,750  

(1) Annualized for the three months ended December 31, 2017 and 2018.

(2) Interest rate spread represents the difference between the yield on interest-earning assets and cost of interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average interest-earning assets.

(4) The efficiency ratio represents total operating expenses, divided by the sum of net interest income and total other income (loss), excluding gain (loss) on equity securities, net.

(5) Non-GAAP measurements that represent return on average assets and return on average equity, excluding the after-tax gain (loss) on equity securities, net.


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets

(Dollars in thousands, except per share data)   December 31, 2017    December 31, 2018
(Unaudited)  
ASSETS  
             
Cash and due from banks    $ 10,852   $ 8,004
Federal Reserve and other short-term investments     344,377     287,971
Cash and cash equivalents      355,229     295,975
             
CRA investment     7,341     7,680
Debt securities available for sale     17     14
Other marketable equity securities     26,946     30,766
Securities, at fair value     34,304     38,460
Federal Home Loan Bank stock, at cost     27,102     28,696
Loans, net of allowance for loan losses of $12,537 at December 31, 2017 and $13,808 at December 31, 2018     1,833,987     2,009,288
Foreclosed assets        
Bank-owned life insurance      12,221     12,476
Premises and equipment, net      14,068     14,553
Accrued interest receivable     4,398     4,581
Deferred income tax asset, net     1,301     2,258
Other assets     1,989     2,300
Total assets   $ 2,284,599   $ 2,408,587
             
LIABILITIES AND STOCKHOLDERS’ EQUITY            
             
Interest-bearing deposits   $ 1,320,487   $ 1,359,581
Non-interest-bearing deposits     185,375     213,573
Total deposits     1,505,862     1,573,154
Federal Home Loan Bank advances     579,164     606,600
Mortgage payable     812     751
Mortgagors’ escrow accounts     6,424     7,402
Accrued interest payable     575     2,187
Other liabilities     5,604     5,917
Total liabilities     2,098,441     2,196,011
             
Stockholders’ equity:            
Preferred stock, $1.00 par value, 2,500,000 shares authorized, none issued        
Common stock, $1.00 par value, 5,000,000 shares authorized; 2,132,750 shares issued and outstanding     2,133     2,133
Additional paid-in capital     11,750     11,863
Undivided profits     165,596     198,580
Accumulated other comprehensive income     6,679    
Total stockholders’ equity     186,158     212,576
Total liabilities and stockholders’ equity   $ 2,284,599   $ 2,408,587
             


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income

    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
(In thousands, except per share amounts)     2017       2018     2017     2018  
(Unaudited)                    
Interest and dividend income:                          
Loans   $ 20,180     $ 22,716     $ 75,843     $ 87,022  
Debt securities     1       1       1       1  
Equity securities     414       498       1,530       1,985  
Federal Reserve and other short-term investments   1,170       1,347       3,685       5,161  
Total interest and dividend income     21,765       24,562       81,059       94,169  
Interest expense:                        
Deposits     3,282       5,777       11,366       18,979  
Federal Home Loan Bank advances     1,866       2,705       5,845       9,358  
Mortgage payable     12       11       50       47  
Total interest expense     5,160       8,493       17,261       28,384  
Net interest income     16,605       16,069       63,798       65,785  
Provision for loan losses     407       220       1,505       1,270  
  Net interest income, after provision for loan losses   16,198       15,849       62,293       64,515  
Other income (loss):                        
Customer service fees on deposits     227       222       889       860  
Increase in bank-owned life insurance     63       62       259       255  
Gain (loss) on equity securities, net           (4,313 )     77       (3,023 )
Miscellaneous     49       44       185       173  
Total other income (loss)     339       (3,985 )     1,410       (1,735 )
Operating expenses:                        
Salaries and employee benefits     3,055       3,124       12,300       12,658  
Occupancy and equipment     460       461       1,765       1,774  
Data processing     341       360       1,270       1,402  
Deposit insurance     285       220       1,080       977  
Foreclosure     (27 )     9       (13 )     (32 )
Marketing     73       142       398       570  
Other general and administrative     655       614       2,776       2,702  
Total operating expenses     4,842       4,930       19,576       20,051  
Income before income taxes     11,695       6,934       44,127       42,729  
Income tax provision     5,004       2,270       18,370       12,330  
Net income   $ 6,691     $ 4,664     $ 25,757     $ 30,399  
                         
Cash dividends declared per share   $ 0.68     $ 0.87     $ 1.66     $ 1.92  
                         
Weighted average shares outstanding:                        
Basic     2,133       2,133       2,133       2,133  
Diluted     2,184       2,186       2,181       2,187  
                         
Earnings per share:                        
Basic   $ 3.14     $ 2.18     $ 12.08     $ 14.25  
Diluted   $ 3.06     $ 2.13     $ 11.81     $ 13.90  
                                 


HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

  Three Months Ended December 31,  
  2017     2018  
  AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)     AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,816,754   $ 20,180   4.44 %   $ 2,009,174   $ 22,716   4.52 %
Securities (3) (4)   52,513     415   3.16       53,603     499   3.72  
Federal Reserve and other short-term investments   353,393     1,170   1.32       237,371     1,347   2.27  
Total interest-earning assets   2,222,660     21,765   3.92       2,300,148     24,562   4.27  
Other assets   36,854                 37,433            
Total assets $ 2,259,514               $ 2,337,581            
                                   
Interest-bearing deposits (5) $ 1,334,198     3,282   0.98     $ 1,469,637     5,777   1.57  
Borrowed funds   555,953     1,878   1.35       430,121     2,716   2.53  
Total interest-bearing liabilities   1,890,151     5,160   1.09       1,899,758     8,493   1.79  
Demand deposits   180,088                 218,621            
Other liabilities   4,819                 6,606            
Total liabilities   2,075,058                 2,124,985            
Stockholders’ equity   184,456                 212,596            
Total liabilities and stockholders’ equity $ 2,259,514               $ 2,337,581            
Net interest income       $ 16,605               $ 16,069      
                                   
Weighted average spread             2.83 %               2.48 %
                                   
Net interest margin (6)             2.99 %               2.79 %
                                   
Average interest-earning assets to average interest-bearing liabilities (7)             117.59 %               121.08 %


(1)   Before allowance for loan losses.
(2)   Includes non-accrual loans.
(3)   Excludes the impact of the average net unrealized gain or loss on securities.
(4)   Includes Federal Home Loan Bank stock.
(5)   Includes mortgagors' escrow accounts.
(6)   Net interest income divided by average total interest-earning assets.
(7)   Total interest-earning assets divided by total interest-bearing liabilities.
(8)   Annualized.


HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

  Twelve Months Ended December 31,  
  2017     2018  
  AVERAGE BALANCE    

INTEREST
  YIELD/ RATE     AVERAGE BALANCE    

INTEREST
  YIELD/ RATE  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,711,152   $ 75,843   4.43 %   $ 1,941,159   $ 87,022   4.48 %
Securities (3) (4)   50,036     1,531   3.06       53,055     1,986   3.74  
Federal Reserve and other short-term investments   329,415     3,685   1.12       276,000     5,161   1.87  
Total interest-earning assets   2,090,603     81,059   3.88       2,270,214     94,169   4.15  
Other assets   35,662                 38,357            
Total assets $ 2,126,265               $ 2,308,571            
                                   
Interest-bearing deposits (5) $ 1,273,420     11,366   0.89     $ 1,440,383     18,979   1.32  
Borrowed funds   507,457     5,895   1.16       463,726     9,405   2.03  
Total interest-bearing liabilities   1,780,877     17,261   0.97       1,904,109     28,384   1.49  
Demand deposits   165,839                 196,048            
Other liabilities   4,665                 5,369            
Total liabilities   1,951,381                 2,105,526            
Stockholders’ equity   174,884                 203,045            
Total liabilities and stockholders’ equity $ 2,126,265               $ 2,308,571            
Net interest income       $ 63,798               $ 65,785      
                                   
Weighted average spread             2.91 %               2.66 %
                                   
Net interest margin (6)             3.05 %               2.90 %
                                   
Average interest-earning assets to average interest-bearing liabilities (7)             117.39 %               119.23 %


(1)   Before allowance for loan losses.
(2)   Includes non-accrual loans.
(3)   Excludes the impact of the average net unrealized gain or loss on securities.
(4)   Includes Federal Home Loan Bank stock.
(5)   Includes mortgagors' escrow accounts.
(6)   Net interest income divided by average total interest-earning assets.
(7)   Total interest-earning assets divided by total interest-bearing liabilities.


CONTACT:
Patrick R. Gaughen
President and Chief Operating Officer
(781) 783-1761