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Hingham Savings Reports Second Quarter 2019 Results

HINGHAM, Mass., July 12, 2019 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (HIFS), Hingham, Massachusetts announced second quarter results for 2019.

Net income for the quarter ended June 30, 2019 was $8,706,000 or $4.08 per share basic and $3.99 per share diluted, as compared to $7,975,000 or $3.74 per share basic and $3.64 per share diluted for the same period last year. The Bank’s annualized return on average equity for the second quarter of 2019 was 15.32%, and the annualized return on average assets was 1.37%, as compared to 15.97% and 1.40% for the same period in 2018. Net income per share (diluted) for the second quarter of 2019 increased 10% over the same period of 2018. 

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the second quarter of 2019 was $7,794,000 or $3.65 per share basic and $3.57 per share diluted, as compared to $8,147,000 or $3.82 per share basic and $3.73 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the second quarter of 2019 was 13.71%, and the annualized core return on average assets was 1.23%, as compared to 16.31% and 1.43% for the same period in 2018. Core net income per share (diluted) for the second quarter of 2019 declined by 4% over the same period in 2018.

Net income for the six months ended June 30, 2019 was $18,530,000 or $8.69 per share basic and $8.49 per share diluted, as compared to $16,887,000 or $7.92 per share basic and $7.72 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first six months of 2019 was 16.62%, and the annualized return on average assets was 1.50%, as compared to 17.24% and 1.48% for the same period last year. Net income per share (diluted) for the first six months of 2019 increased 10% over the same period in 2018.

Excluding the after-tax gains on securities, both realized and unrealized, core net income for the six months ended June 30, 2019 was $15,381,000 or $7.21 per share basic and $7.05 per share diluted, as compared to $16,305,000 or $7.65 per share basic and $7.46 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first six months of 2019 was 13.80% and the annualized core return on average assets was 1.25%, as compared to 16.64% and 1.43% for the same period last year. Core net income per share (diluted) for the first six months of 2019 declined by 5% over the same period in 2018.

Balance sheet growth was mixed, as deposits increased to $1.658 billion at June 30, 2019, representing 11% annualized growth year-to-date and 1% growth from June 30, 2018. The growth during the first half of 2019 reflected moderate growth in retail and business deposits as well as the use of wholesale deposits to fund balance sheet growth. Net loans increased to $2.171 billion, representing 16% annualized growth year-to-date and 12% growth from June 30, 2018. Total assets increased to $2.614 billion, representing 17% annualized growth year-to-date and 13% growth from June 30, 2018. Book value per share was $107.59 as of June 30, 2019, representing 16% annualized growth year-to-date and 14% growth from June 30, 2018. In addition to the increase in book value per share, the Bank declared $2.00 in dividends per share since June 30, 2018, including a special dividend of $0.50 per share declared during the fourth quarter of 2018.

Key credit and operational metrics remained strong in the second quarter. At June 30, 2019, non-performing assets totaled 0.02% of total assets, compared to 0.02% at December 31, 2018 and 0.05% at June 30, 2018. Non-performing loans as a percentage of the total loan portfolio totaled 0.03% at June 30, 2019, compared to 0.02% at December 31, 2018 and 0.06% at June 30, 2018. The Bank recorded $1,000 in net charge-offs for the first six months of 2019, as compared to zero net charge-offs for the same period last year. At June 30, 2019, December 31 and June 30, 2018, the Bank did not own any foreclosed property. The efficiency ratio was 31.10% for the second quarter of 2019, as compared to 29.95% for the same period last year. Operating expenses as a percentage of average assets fell to 0.82% in the second quarter of 2019, as compared to 0.88% for the same period last year.   

Chairman Robert H. Gaughen Jr. stated, “Although returns on equity and assets were adequate in the second quarter of 2019, we continue to face significant headwinds from a now-inverted yield curve and an extraordinarily competitive market for both high-quality lending and deposit relationships. Given the unique structure and composition of our balance sheet, this is a particularly challenging environment. As always, we remain focused on careful capital allocation, defensive underwriting, and disciplined cost control - the keys to compounding shareholder capital through all stages of the credit cycle.”

The Bank’s quarterly financial results are summarized in the earnings release, but shareholders are encouraged to read the Bank’s quarterly reports on Form 10-Q, which are generally available several weeks after the earnings release. The Bank expects to file Form 10-Q for the second quarter of 2019 with the FDIC on or about August 7th, 2019.

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 maintains a commercial lending office in Washington, D.C. 

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
June 30,
  Six Months Ended
June 30,
  2018   2019   2018   2019
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 1.40 %   1.37 %   1.48 %   1.50 %
Return on average equity (1) 15.97     15.32     17.24     16.62  
Core return on average assets (1) (5) 1.43     1.23     1.43     1.25  
Core return on average equity (1) (5) 16.31     13.71     16.64     13.80  
Interest rate spread (1) (2) 2.72     2.28     2.74     2.32  
Net interest margin (1) (3) 2.94     2.62     2.94     2.65  
Operating expenses to average assets (1) 0.88     0.82     0.89     0.84  
Efficiency ratio (4) 29.95     31.10     30.18     31.47  
Average equity to average assets 8.74     8.97     8.58     9.03  
Average interest-earning assets to average interest-bearing liabilities 118.57     119.92     118.20     120.22  
                       


  June 30,
2018
  December 31,
2018
  June 30,
2019
           
                     
                   
(Unaudited)            
   
                   
Asset Quality Ratios                  
Allowance for loan losses/total loans   0.68 %   0.68 %   0.68  
Allowance for loan losses/non-performing loans   1,064.92     2,852.89     2,130.47   
                   
Non-performing loans/total loans   0.06     0.02     0.03  
Non-performing loans/total assets   0.05     0.02     0.02  
Non-performing assets/total assets   0.05     0.02     0.02  
                   
Share Related                  
Book value per share $ 94.55     $ 99.67   $  07.59  
Market value per share $ 219.70     $ 197.74   $  198.01  
Shares outstanding at end of period   2,132,750       2,132,750     2,133,750  


(1) Annualized.
   
(2) Interest rate spread represents the difference between the yield on interest-earning assets and the 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, 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

 (In thousands, except share amounts) June 30,
2018
  December 31,
2018
  June 30,
2019
(Unaudited)      
   
ASSETS  
                 
Cash and due from banks $ 9,342   $ 8,004   $ 9,951
Federal Reserve and other short-term investments   265,695     287,971     318,356
Cash and cash equivalents   275,037     295,975     328,307
                 
CRA investment   7,665     7,680     7,888
Debt securities available for sale   16     14     12
Other marketable equity securities   30,328     30,766     36,960
Securities, at fair value   38,009     38,460     44,860
Federal Home Loan Bank stock, at cost   24,530     28,696     31,231
Loans, net of allowance for loan losses of $13,237 at June 30, 2018, $13,808 at December 31, 2018 and $14,787 at June 30, 2019    1,933,915      2,009,288      2,171,130
Foreclosed assets          
Bank-owned life insurance   12,349     12,476     12,600
Premises and equipment, net   14,479     14,553     14,410
Accrued interest receivable   4,630     4,581     5,691
Deferred income tax asset, net   1,165     2,258     1,368
Other assets   3,505     2,300     4,874
Total assets $ 2,307,619   $ 2,408,587   $ 2,614,471

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 
Interest-bearing deposits $ 1,453,401   $ 1,359,581   $ 1,429,998
Non-interest-bearing deposits   192,918     213,573     228,306
Total deposits   1,646,319     1,573,154     1,658,304
Federal Home Loan Bank advances   446,283     606,600     710,300
Mortgage payable   782     751     720
Mortgagors’ escrow accounts   6,659     7,402     7,274
Accrued interest payable   1,233     2,187     1,991
Other liabilities   4,697     5,917     6,302
Total liabilities   2,105,973     2,196,011     2,384,891
                 
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 at June 30 and December 31, 2018 and 2,133,750 shares issued and outstanding at June 30, 2019    2,133      2,133      2,134
Additional paid-in capital   11,822     11,863     11,980
Undivided profits   187,691     198,580     215,466
Accumulated other comprehensive income          
Total stockholders’ equity   201,646     212,576     229,580
Total liabilities and stockholders’ equity $ 2,307,619   $ 2,408,587   $ 2,614,471


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income


  Three Months Ended   Six Months Ended
  June 30,   June 30,
(In thousands, except per share amounts)   2018   2019   2018   2019
(Unaudited)                  
Interest and dividend income:                      
Loans $ 21,366     $ 24,816   $ 41,783     $ 47,896
Equity securities   505       496     984       985
Federal Reserve and other short-term investments   1,256       1,629     2,497       3,189
Total interest and dividend income   23,127       26,941     45,264       52,070
Interest expense:                      
Deposits   4,344       7,074     7,911       13,220
Federal Home Loan Bank advances   2,266       3,539     4,359       6,667
Mortgage payable   12       11     24       22
Total interest expense   6,622       10,624     12,294       19,909
Net interest income   16,505       16,317     32,970       32,161
Provision for loan losses   415       555     700       980
Net interest income, after provision for loan losses   16,090       15,762     32,270       31,181
Other income:                      
Customer service fees on deposits   216       199     422       385
Increase in bank-owned life insurance   60       57     128       124
Gain (loss) on equity securities, net   (220 )     1,170     746       4,039
Miscellaneous   43       43     87       83
Total other income   99       1,469     1,383       4,631
Operating expenses:                      
Salaries and employee benefits   3,176       3,177     6,388       6,324
Occupancy and equipment   426       447     892       901
Data processing   348       301     689       735
Deposit insurance   226       265     499       508
Foreclosure   (13 )     44     (8 )     67
Marketing   182       177     349       309
Other general and administrative   694       756     1,333       1,465
Total operating expenses   5,039       5,167     10,142       10,309
Income before income taxes   11,150       12,064     23,511       25,503
Income tax provision   3,175       3,358     6,624       6,973
Net income $ 7,975     $ 8,706   $ 16,887     $ 18,530
                       
Cash dividends declared per share $ 0.35     $ 0.39   $ 0.69     $ 0.77
                       
Weighted average shares outstanding:                      
Basic   2,133       2,134     2,133       2,133
Diluted   2,187       2,182     2,186       2,182
                       
Earnings per share:                      
Basic $ 3.74     $ 4.08   $ 7.92     $ 8.69
Diluted $ 3.64     $ 3.99   $ 7.72     $ 8.49


HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis


  Three Months Ended June 30,  
  2018     2019  
  AVERAGE
BALANCE
   INTEREST   YIELD/
RATE (8)
    AVERAGE
BALANCE
   INTEREST   YIELD/
RATE (8)
 
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,913,404   $ 21,366   4.47 %   $ 2,161,278   $ 24,816   4.59 %
Securities (3) (4)   52,941     505   3.82       58,311     496   3.40  
Federal Reserve and other short-term investments   278,434     1,256   1.80       272,453     1,629   2.39  
Total interest-earning assets   2,244,779     23,127   4.12       2,492,042     26,941   4.32  
Other assets   39,619                 41,700            
Total assets $ 2,284,398               $ 2,533,742            
                                   
Interest-bearing deposits (5) $ 1,423,682     4,344   1.22     $ 1,543,247     7,074   1.83  
Borrowed funds   469,476     2,278   1.94       534,809     3,550   2.66  
Total interest-bearing liabilities   1,893,158     6,622   1.40       2,078,056     10,624   2.04  
Demand deposits   186,919                 221,051            
Other liabilities   4,555                 7,271            
Total liabilities   2,084,632                 2,306,378            
Stockholders’ equity   199,766                 227,364            
Total liabilities and stockholders’ equity $ 2,284,398               $ 2,533,742            
Net interest income       $ 16,505               $ 16,317      
                                   
Weighted average spread             2.72 %               2.28 %
                                   
Net interest margin (6)             2.94 %               2.62 %
                                   
Average interest-earning assets to average interest-bearing liabilities (7)   118.57 %               119.92 %          


(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


  Six Months Ended June 30,  
  2018     2019  
  AVERAGE
BALANCE
   INTEREST   YIELD/
RATE (8)
    AVERAGE
BALANCE
  INTEREST   YIELD/
RATE (8)
 
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,889,901   $ 41,783   4.42 %   $ 2,105,144   $ 47,896   4.55 %
Securities (3) (4)   53,228     984   3.70       56,602     985   3.48  
Federal Reserve and other short-term investments   302,272     2,497   1.65       266,348     3,189   2.39  
Total interest-earning assets   2,245,401     45,264   4.03       2,428,094     52,070   4.29  
Other assets   38,815                 40,418            
Total assets $ 2,284,216               $ 2,468,512            
                                   
Interest-bearing deposits (5) $ 1,393,294     7,911   1.14     $ 1,514,553     13,220   1.75  
Borrowed funds   506,337     4,383   1.73       505,176     6,689   2.65  
Total interest-bearing liabilities   1,899,631     12,294   1.29       2,019,729     19,909   1.97  
Demand deposits   183,665                 218,099            
Other liabilities   4,965                 7,697            
Total liabilities   2,088,261                 2,245,525            
Stockholders’ equity   195,955                 222,987            
Total liabilities and stockholders’ equity $ 2,284,216               $ 2,468,512            
Net interest income       $ 32,970               $ 32,161      
                                   
Weighted average spread             2.74 %               2.32 %
                                   
Net interest margin (6)             2.94 %               2.65 %
                                   
Average interest-earning assets to average interest-bearing liabilities (7)   118.20 %               120.22 %          


(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.

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