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Hingham Savings Reports Third Quarter 2019 Results

HINGHAM, Mass., Oct. 11, 2019 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (HIFS), Hingham, Massachusetts announced third quarter results for 2019.

Net income for the quarter ended September 30, 2019 was $9,033,000 or $4.23 per share basic and $4.14 per share diluted, as compared to $8,848,000 or $4.15 per share basic and $4.05 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the third quarter of 2019 was 15.33%, and the annualized return on average assets was 1.40%, as compared to 17.06% and 1.52% for the same period in 2018.  Net income per share (diluted) for the third quarter of 2019 increased by 2% over the same period of 2018. 

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the third quarter of 2019 was $8,801,000 or $4.12 per share basic and $4.03 per share diluted, as compared to $8,424,000 or $3.95 per share basic and $3.85 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the third quarter of 2019 was 14.94%, and the annualized core return on average assets was 1.37%, as compared to 16.24% and 1.45% for the same period in 2018.  Core net income per share (diluted) for the third quarter of 2019 increased by 5% over the same period in 2018.

Net income for the nine months ended September 30, 2019 was $27,563,000 or $12.92 per share basic and $12.63 per share diluted, as compared to $25,735,000 or $12.07 per share basic and $11.77 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the first nine months of 2019 was 16.17%, and the annualized return on average assets was 1.47%, as compared to 17.17% and 1.49% for the same period last year.  Net income per share (diluted) for the first nine months of 2019 increased by 7% over the same period in 2018.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the nine months ended September 30, 2019 was $24,182,000 or $11.33 per share basic and $11.08 per share diluted, as compared to $24,729,000 or $11.60 per share basic and $11.31 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the first nine months of 2019 was 14.19% and the annualized core return on average assets was 1.29%, as compared to 16.50% and 1.43% for the same period last year.  Core net income per share (diluted) for the first nine months of 2019 declined by 2% over the same period in 2018.

Balance sheet growth was mixed, as deposits were $1.706 billion at September 30, 2019, representing 11% annualized growth year-to-date and 1% decline from September 30, 2018.  The growth during the first nine months of 2019 reflected strong growth in retail and business deposits.  The decline over the trailing year was driven by a substantial decline in wholesale deposits, offset by growth in retail and business deposits.  Net loans were $2.141 billion at September 30, 2019, representing 9% annualized growth year-to-date and 8% growth from September 30, 2018.  Total assets were $2.480 billion, representing 4% annualized growth year-to-date and 5% growth from September 30, 2018.  During the third quarter of 2019, the Bank used a portion of its cash balances to reduce outstanding Federal Home Loan Bank advances and brokered time deposits, in order to minimize the carrying cost of its on-balance sheet liquidity.  Book value per share was $111.47 as of September 30, 2019, representing 16% annualized growth year-to-date and 13% growth from September 30, 2018.  In addition to the increase in book value per share, the Bank declared $2.04 in dividends per share since September 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 third quarter of 2019.  At September 30, 2019, non-performing assets totaled 0.05% of total assets, compared to 0.02% at December 31, 2018 and 0.02% at September 30, 2018.  Non-performing loans as a percentage of the total loan portfolio totaled 0.06% at September 30, 2019, compared to 0.02% at December 31, 2018 and 0.02% at September 30, 2018.  The Bank recorded $1,000 in net recoveries for both the first nine months of 2019 and 2018.  At September 30, 2019, December 31 and September 30, 2018, the Bank did not own any foreclosed property.  The efficiency ratio was 29.28% for the third quarter of 2019, as compared to 29.17% for the same period last year.  Operating expenses as a percentage of average assets fell to 0.81% in the third quarter of 2019, as compared to 0.86% for the same period last year.  

Chairman Robert H. Gaughen, Jr. stated, “Although returns on equity and assets were adequate in the third 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 third quarter of 2019 with the FDIC on or about November 5, 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
September 30,
  Nine Months Ended
September 30,
  2018   2019   2018   2019
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 1.52 %   1.40 %   1.49 %   1.47 %
Return on average equity (1) 17.06     15.33     17.17     16.17  
Core return on average assets (1) (5) 1.45     1.37     1.43     1.29  
Core return on average equity (1) (5) 16.24     14.94     16.50     14.19  
Interest rate spread (1) (2) 2.67     2.42     2.72     2.36  
Net interest margin (1) (3) 2.93     2.77     2.93     2.69  
Operating expenses to average assets (1) 0.86     0.81     0.88     0.83  
Efficiency ratio (4) 29.17     29.28     29.84     30.70  
Average equity to average assets 8.91     9.16     8.69     9.08  
Average interest-earning assets to average interest-                      
bearing liabilities 119.39     120.49     118.61     120.31  
                       


  September 30,
2018

 
  December 31,
2018

  September 30,
2019
(Unaudited)                      
                       
Asset Quality Ratios                      
Allowance for loan losses/total loans   0.68 %   0.68 %     0.70 %
Allowance for loan losses/non-performing loans   2,807.44     2,852.89       1,138.01  
                     
Non-performing loans/total loans   0.02     0.02       0.06  
Non-performing loans/total assets   0.02     0.02       0.05  
Non-performing assets/total assets   0.02     0.02       0.05  
                     
Share Related                    
Book value per share $ 98.35     $ 99.67     $   111.47  
Market value per share $ 219.81     $ 197.74     $   189.00  
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 on equity securities, net.

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

 

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
 
           
 
(In thousands, except share amounts)
September 30,
2018
  December 31,
2018
  September 30,
2019
(Unaudited)                 
ASSETS                
                 
Cash and due from banks  $ 10,043   $ 8,004   $ 10,233
Federal Reserve and other short-term investments   286,449     287,971     221,022
Cash and cash equivalents    296,492     295,975     231,255
                 
CRA investment   7,605     7,680     7,948
Debt securities available for sale   15     14     11
Other marketable equity securities   32,099     30,766     38,981
Securities, at fair value   39,719     38,460     46,940
Federal Home Loan Bank stock, at cost   21,682     28,696     23,615
Loans, net of allowance for loan losses of $13,588                
at September 30, 2018, $13,808 at December 31, 2018                
and $15,090 at September 30, 2019   1,976,422     2,009,288     2,140,514
Foreclosed assets          
Bank-owned life insurance    12,414     12,476     12,661
Premises and equipment, net    14,458     14,553     14,339
Accrued interest receivable   5,066     4,581     4,912
Deferred income tax asset, net   1,128     2,258     1,303
Other assets   2,981     2,300     4,833
Total assets $ 2,370,362   $ 2,408,587   $ 2,480,372


LIABILITIES AND STOCKHOLDERS’ EQUITY

                 
Interest-bearing deposits $ 1,494,193   $ 1,359,581   $ 1,474,113
Non-interest-bearing deposits   220,943     213,573     231,616
Total deposits   1,715,136     1,573,154     1,705,729
Federal Home Loan Bank advances   431,242     606,600     519,900
Mortgage payable   766     751     703
Mortgagors’ escrow accounts   6,901     7,402     7,544
Accrued interest payable   1,687     2,187     2,198
Other liabilities   4,883     5,917     6,445
Total liabilities   2,160,615     2,196,011     2,242,519
                 
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   2,133     2,133     2,134
September 30 and December 31, 2018 and 2,133,750 shares                
issued and outstanding at September 30, 2019                
Additional paid-in capital   11,843     11,863     12,073
Undivided profits   195,771     198,580     223,646
Accumulated other comprehensive income          
Total stockholders’ equity   209,747     212,576     237,853
Total liabilities and stockholders’ equity $ 2,370,362   $ 2,408,587   $ 2,480,372


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
 
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
(In thousands, except per share amounts)  2018    2019   2018
  2019
(Unaudited)                      
Interest and dividend income:                      
Loans $ 22,523   $ 26,153   $ 64,306   $ 74,049
Equity securities   503     518     1,487     1,503
Federal Reserve and other short-term investments   1,317     1,527     3,814     4,716
Total interest and dividend income   24,343     28,198     69,607     80,268
Interest expense:                      
Deposits   5,291     7,585     13,202     20,805
Federal Home Loan Bank advances   2,294     3,099     6,653     9,766
Mortgage payable   12     11     36     33
Total interest expense   7,597     10,695     19,891     30,604
Net interest income   16,746     17,503     49,716     49,664
Provision for loan losses   350     302     1,050     1,282
Net interest income, after provision for loan losses   16,396     17,201     48,666     48,382
Other income:                      
Customer service fees on deposits   216     213     638     598
Increase in bank-owned life insurance   65     61     193     185
Gain on equity securities, net   544     298     1,290     4,337
Miscellaneous   42     42     129     125
Total other income   867     614     2,250     5,245
Operating expenses:                      
Salaries and employee benefits   3,146     3,290     9,534     9,614
Occupancy and equipment   421     453     1,313     1,354
Data processing   353     419     1,042     1,154
Deposit insurance   258     22     757     530
Foreclosure   (33)     34     (41)     101
Marketing   139     188     488     497
Other general and administrative   695     811     2,028     2,276
Total operating expenses   4,979     5,217     15,121     15,526
Income before income taxes   12,284     12,598     35,795     38,101
Income tax provision   3,436     3,565     10,060     10,538
Net income $ 8,848   $ 9,033   $ 25,735   $ 27,563
                       
Cash dividends declared per share $ 0.36   $ 0.40   $ 1.05   $ 1.17
                       
Weighted average shares outstanding:                      
Basic   2,133     2,134     2,133     2,133
Diluted   2,188     2,183     2,187     2,182
                       
Earnings per share:                      
Basic $ 4.15   $ 4.23   $ 12.07   $ 12.92
Diluted $ 4.05   $ 4.14   $ 11.77   $ 12.63


HINGHAM INSTITUTION FOR SAVINGS  
Net Interest Income Analysis  
   
  Three Months Ended September 30,  
  2018     2019  
  AVERAGE       YIELD/     AVERAGE    
  YIELD/  
  BALANCE   INTEREST   RATE (8)     BALANCE   INTEREST   RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,973,987   $ 22,523   4.56 %   $ 2,191,324   $ 26,153   4.77 %
Securities (3) (4)   52,166     503   3.86       58,133     518   3.56  
Federal Reserve and other short-term investments   262,943     1,317   2.00       279,802     1,527   2.18  
Total interest-earning assets   2,289,096     24,343   4.25       2,529,259     28,198   4.46  
Other assets   38,380                 43,578            
Total assets $ 2,327,476               $ 2,572,837            
                                   
Interest-bearing deposits (5) $ 1,503,771     5,291   1.41     $ 1,616,151     7,585   1.88  
Borrowed funds   413,497     2,306   2.23       482,975     3,110   2.58  
Total interest-bearing liabilities   1,917,268     7,597   1.58       2,099,126     10,695   2.04  
Demand deposits   197,838                 230,505            
Other liabilities   4,927                 7,514            
Total liabilities   2,120,033                 2,337,145            
Stockholders’ equity   207,443                 235,692            
Total liabilities and stockholders’ equity $ 2,327,476               $ 2,572,837            
Net interest income       $ 16,746               $ 17,503      
                                   
Weighted average spread             2.67 %               2.42 %
                                   
Net interest margin (6)             2.93 %               2.77 %
                                   
Average interest-earning assets to average                                  
interest-bearing liabilities (7)   119.39 %               120.49 %          


(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  
   
  Nine Months Ended September 30,  
  2018     2019  
  AVERAGE
BALANCE
  INTEREST   YIELD/
RATE (8)
    AVERAGE
BALANCE
  INTEREST   YIELD/
RATE (8)
 
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,918,239   $ 64,306   4.47 %   $ 2,134,186   $ 74,049   4.63 %
Securities (3) (4)   52,870     1,487   3.75       57,118     1,503   3.51  
Federal Reserve and other short-term investments   289,018     3,814   1.76       270,882     4,716   2.32  
Total interest-earning assets   2,260,127     69,607   4.11       2,462,186     80,268   4.35  
Other assets   38,668                 41,483            
Total assets $ 2,298,795               $ 2,503,669            
                                   
Interest-bearing deposits (5) $ 1,430,524     13,202   1.23     $ 1,548,791     20,805   1.79  
Borrowed funds   475,050     6,689   1.88       497,694     9,799   2.63  
Total interest-bearing liabilities   1,905,574     19,891   1.39       2,046,485     30,604   1.99  
Demand deposits   188,441                 222,280            
Other liabilities   4,954                 7,635            
Total liabilities   2,098,969                 2,276,400            
Stockholders’ equity   199,826                 227,269            
Total liabilities and stockholders’ equity $ 2,298,795               $ 2,503,669            
Net interest income       $ 49,716               $ 49,664      
                                   
Weighted average spread             2.72 %               2.36 %
                                   
Net interest margin (6)             2.93 %               2.69 %
                                   
Average interest-earning assets to average                                  
interest-bearing liabilities (7)   118.61 %               120.31 %          


(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