Hingham Savings Announces 17% Increase in Annual Operating

HINGHAM, Mass., Jan. 19, 2016 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), announced net income for the year ended December 31, 2015 was $19,346,000 or $9.09 per share basic and $9.02 per share diluted as compared to $22,264,000 or $10.46 per share basic and $10.44 per share diluted for 2014. Annual earnings for 2014 included a one-time net gain of approximately $5.7 million related to a non-taxable life insurance transaction, the details of which were reported in the Bank’s 2014 Annual Report on Form 10-K. Excluding this event, the Bank’s operating earnings was $16,523,000 or $7.76 per share basic and $7.75 per share fully diluted for 2014. Net income per share (basic) for 2015 increased 17% over 2014, excluding the impact of the life insurance transaction.

The Bank’s return on average equity for the year ended December 31, 2015 was 14.81% and the return on average assets was 1.18%. Excluding the impact of the life insurance transaction, the Bank’s return on average equity for the year ended December 31, 2014 was 14.32% and the return on average assets was 1.13%.

Net income for the fourth quarter of 2015 was $5,234,000 or $2.46 per share basic and $2.44 per share diluted; a 15% increase over $4,535,000 or $2.13 per share basic and $2.12 per share diluted for the fourth quarter of 2014. The Bank’s return on average equity for the quarter ending December 31, 2015 was 15.30% and the return on average assets was 1.21%, an improvement from 15.01% and 1.18% for the same quarter last year.

The Bank produced strong growth in deposits, loans, and book value per share in 2015. Deposits increased by 12% to $1.217 billion. Net loans increased by 13% to $1.406 billion. Total assets increased by 14% to $1.769 billion. Book value per share increased by 14% to $64.83. This increase in book value per share excludes capital returned to the ownership through regular and special dividends; the Bank declared $1.46 in regular and special dividends in 2015.

Key credit and operational metrics continued to improve in 2015. At December 31, 2015, non-performing assets totaled 0.10% of total assets compared to 0.20% of total assets at December 31, 2014. Non-performing loans as a percentage of the total loan portfolio totaled 0.13% at December 31, 2015 as compared to 0.18% at December 31, 2014. At December 31, 2015, the Bank did not own any foreclosed real estate. The efficiency ratio improved to 36.32% in 2015 as compared to 37.12% in 2014. Operating expenses as a percentage of average assets improved to 1.16% in 2015 as compared to 1.37% in 2014. Both the efficiency ratio and operating expenses as a percentage of average assets reached new record lows in 2015 and reflect the Bank’s particular focus on disciplined expense management.

Robert H. Gaughen Jr., President and Chairman of the Board of Directors, stated “At Hingham, we take our role as stewards of the shareholders’ capital seriously. We are pleased to report a strong return on that capital in 2015. Our emphasis on careful capital allocation, conservative underwriting, disciplined cost control and measured growth continues to serve our shareholders well. More important than performance in any one year, however, is a company’s record of compounding shareholder capital over time and through credit cycles. On this measure, our team strives to set a high bar.”

Hingham Institution for Savings is a Massachusetts-chartered savings bank located in Hingham, Massachusetts. Incorporated in 1834, it is the oldest financial institution headquartered in Hingham and one of the oldest continuously operating banks in the United States. The Bank’s main offices are located on Main Street in Hingham. The Bank also maintains branch offices in South Hingham and the neighboring towns of Cohasset, Hull, Norwell, Scituate and Weymouth, as well as branches in the South End of Boston, on Beacon Hill and on the island of Nantucket. 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				Twelve Months Ended
	December 31,				December 31,
	2014		2015		2014		2015
(Unaudited)

Key Performance Ratios
Return on average assets (1)	1.18	%	1.21	%	1.52	%	1.18	%
Return on average equity (1)	15.01		15.30		19.30		14.81
Interest rate spread (1) (2)	3.12		3.02		3.13		3.06
Net interest margin (1) (3)	3.23		3.14		3.23		3.17
Non-interest expense to average assets (1)	1.24		1.09		1.37		1.16
Efficiency ratio (4)	37.95		34.55		37.12		36.32
Average equity to average assets	7.83		7.90		7.87		7.97
Average interest-bearing assets to average interest bearing liabilities	115.74		115.90		114.92		115.85


	December 31,			December 31,
	2014			2015
(Unaudited)

Asset Quality Ratios
Allowance for loan losses/total loans		0.73	%	0.70		%
Allowance for loan losses/non-performing loans		397.04		540.37

Non-performing loans/total loans		0.18		0.13
Non-performing loans/total assets		0.15		0.10
Non-performing assets/total assets		0.20		0.10

Share Related
Book value per share	$	57.08		$	64.83
Market value per share	$	87.01		$	119.80
Shares outstanding at end of period		2,128,750			2,128,750

(1) Annualized

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

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

(4) The efficiency ratio represents non-interest expense, divided by the sum of net interest income and non-interest income, excluding gain on sale of securities.


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets

	December 31,		December 31,
(Dollars in thousands, except per share data)	2014		2015
(Unaudited)
ASSETS

Cash and due from banks	$	6,917	$	6,944
Short-term investments		170,305		254,069
Cash and cash equivalents		177,222		261,013

Certificates of deposit		12,926		6,206
Securities available for sale, at fair value		70,570		40,603
Federal Home Loan Bank stock, at cost		17,855		19,796
Loans, net of allowance for loan losses of $9,108 at
December 31, 2014 and $9,905 at December 31, 2015		1,238,656		1,405,533
Foreclosed real estate		786		—
Bank-owned life insurance		11,416		11,697
Premises and equipment, net		15,211		15,094
Accrued interest receivable		2,959		3,270
Deferred income tax asset, net		2,642		3,281
Other assets		1,962		2,035
Total assets	$	1,552,205	$	1,768,528

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits	$	1,089,217	$	1,217,027
Federal Home Loan Bank advances		329,602		402,464
Mortgage payable		973		922
Mortgagors’ escrow accounts		4,476		4,850
Accrued interest payable		350		303
Other liabilities		6,072		4,947
Total liabilities		1,430,690		1,630,513

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; 2,128,750 shares issued and outstanding		2,129		2,129
Additional paid-in capital		10,942		11,052
Undivided profits		108,243		124,481
Accumulated other comprehensive income		201		353
Total stockholders’ equity		121,515		138,015
Total liabilities and stockholders’ equity	$	1,552,205	$	1,768,528


		HINGHAM INSTITUTION FOR SAVINGS
		Consolidated Statements of Net Income

				Three Months Ended					Twelve Months Ended
				December 31,					December 31,
(In thousands, except per share amounts)				2014			2015		2014		2015
(Unaudited)
Interest and dividend income:
		Loans		$	14,392	$		15,810	$	54,990	$	60,260
		Debt securities			73			33		336		195
		Equity securities			145			250		491		795
		Short-term investments and certificates of deposit			130			185		376		609
			Total interest and dividend income		14,740			16,278		56,193		61,859
Interest expense:
		Deposits			1,760			2,197		6,314		7,945
		Federal Home Loan Bank advances			760			746		3,562		2,908
		Mortgage payable			15			14		60		57
			Total interest expense		2,535			2,957		9,936		10,910
			Net interest income		12,205			13,321		46,257		50,949
Provision for loan losses					150			100		625		625
		Net interest income, after provision for loan losses			12,055			13,221		45,632		50,324
Other income:
	Customer service fees on deposits				258			247		1,014		978
	Increase in bank-owned life insurance				70			69		308		281
	Gain on life insurance distribution				—			—		6,302		—
	Gain on sale of securities				—			—		—		29
	Miscellaneous				57			53		239		195
			Total other income		385			369		7,863		1,483
Operating expenses:
		Salaries and employee benefits			2,846			2,931		12,424		11,632
		Data processing			304			291		1,197		1,182
		Occupancy and equipment			496			471		1,968		2,057
		Deposit insurance			211			240		803		902
		Foreclosure			29			10		263		72
		Marketing			203			105		557		489
		Other general and administrative			682			682		2,877		2,697
			Total operating expenses		4,771			4,730		20,089		19,031
Income before income taxes					7,669			8,860		33,406		32,776
Income tax provision					3,134			3,626		11,142		13,430
			Net income	$	4,535	$		5,234	$	22,264	$	19,346

Weighted average common shares outstanding:
		Basic			2,129			2,129		2,129		2,129
		Diluted			2,136			2,149		2,133		2,145

Earnings per common share:
		Basic		$	2.13	$		2.46	$	10.46	$	9.09
		Diluted		$	2.12	$		2.44	$	10.44	$	9.02

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

	Three Months Ended December 31,
	2014						2015
	AVERAGE				YIELD/		AVERAGE				YIELD/
	BALANCE		INTEREST		RATE		BALANCE		INTEREST		RATE
(Dollars in thousands)
(Unaudited)

Loans (1) (2)	$	1,228,130	$	14,392	4.69	%	$	1,381,732	$	15,810	4.58	%
Securities (3) (4)		96,852		218	0.90			64,082		283	1.77
Short-term investments and certificates of deposit		185,211		130	0.28			253,716		185	0.29
Total earning assets		1,510,193		14,740	3.90			1,699,530		16,278	3.83
Other assets		33,565						33,138
Total assets	$	1,543,758					$	1,732,668

Interest-bearing deposits (5)	$	965,990		1,760	0.73		$	1,087,721		2,197	0.81
Borrowed funds		338,841		775	0.91			378,621		760	0.80
Total interest-bearing liabilities		1,304,831		2,535	0.78			1,466,342		2,957	0.81
Demand deposits		111,821						124,994
Other liabilities		6,245						4,499
Total liabilities		1,422,897						1,595,835
Stockholders’ equity		120,861						136,833
Total liabilities and stockholders’ equity	$	1,543,758					$	1,732,668
Net interest income			$	12,205					$	13,321

Weighted average spread					3.12	%					3.02	%

Net interest margin (6)					3.23	%					3.14	%

Average interest-earning assets to average interest-bearing liabilities (7)					115.74	%					115.90	%


(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 available for sale.
(4	)	Includes Federal Home Loan Bank stock.
(5	)	Includes mortgagors' escrow accounts.
(6	)	Net interest income divided by average total earning assets.
(7	)	Total earning assets divided by total interest-bearing liabilities.

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

	Twelve Months Ended December 31,
	2014						2015
	AVERAGE				YIELD/		AVERAGE				YIELD/
	BALANCE		INTEREST		RATE		BALANCE		INTEREST		RATE
(Dollars in thousands)
(Unaudited)

Loans (1) (2)	$	1,179,865	$	54,990	4.66	%	$	1,307,871	$	60,260	4.61	%
Securities (3) (4)		110,021		827	0.75			76,193		990	1.30
Short-term investments and certificates of deposit		140,393		376	0.27			221,807		609	0.27
Total earning assets		1,430,279		56,193	3.93			1,605,871		61,859	3.85
Other assets		35,824						33,014
Total assets	$	1,466,103					$	1,638,885

Interest-bearing deposits (5)	$	923,550		6,314	0.68		$	1,038,016		7,945	0.77
Borrowed funds		321,068		3,622	1.13			348,094		2,965	0.85
Total interest-bearing liabilities		1,244,618		9,936	0.80			1,386,110		10,910	0.79
Demand deposits		101,974						117,741
Other liabilities		4,130						4,387
Total liabilities		1,350,722						1,508,238
Stockholders’ equity		115,381						130,647
Total liabilities and stockholders’ equity	$	1,466,103					$	1,638,885
Net interest income			$	46,257					$	50,949

Weighted average spread					3.13	%					3.06	%

Net interest margin (6)					3.23	%					3.17	%

Average interest-earning assets to average interest-bearing liabilities (7)					114.92	%					115.85	%

(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 available for sale.
(4	)	Includes Federal Home Loan Bank stock.
(5	)	Includes mortgagors' escrow accounts.
(6	)	Net interest income divided by average total earning assets.
(7	)	Total earning assets divided by total interest-bearing liabilities.

Hingham Savings Announces 17% Increase in Annual Operating Earnings

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