Hingham Savings Reports 2019 Results


HINGHAM, Mass., Jan. 16, 2020 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2019.

Net income for the year ended December 31, 2019 was $38,927,000 or $18.24 per share basic and $17.83 per share diluted, as compared to $30,399,000 or $14.25 per share basic and $13.90 per share diluted for the same period last year.  The Bank’s return on average equity for the year ended December 31, 2019 was 16.82%, and the return on average assets was 1.55%, as compared to 14.97% and 1.32% for the same period in 2018.  Net income per share (diluted) for 2019 increased 28% over the same period in 2018.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the year ended December 31, 2019 was $32,996,000 or $15.46 per share basic and $15.12 per share diluted, as compared to $32,776,000 or $15.37 per share basic and $14.99 per share diluted for the same period last year.  The Bank’s core return on average equity for the year ended December 31, 2019 was 14.26%, and the core return on average assets was 1.32%, as compared to 16.14% and 1.42% for the same period in 2018.  Core net income per share (diluted) for 2019 increased by 1% over the same period in 2018.

Net income for the quarter ended December 31, 2019 was $11,364,000 or $5.32 per share basic and $5.20 per share diluted, as compared to $4,664,000 or $2.18 per share basic and $2.13 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the fourth quarter of 2019 was 18.64%, and the annualized return on average assets was 1.81%, as compared to 8.78% and 0.80% for the same period last year.  Net income per share (diluted) for the fourth quarter of 2019 increased by 144% compared to the same period in 2018.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the quarter ended December 31, 2019 was $8,814,000 or $4.13 per share basic and $4.04 per share diluted, as compared to $8,046,000 or $3.77 per share basic and $3.68 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the fourth quarter of 2019 was 14.46% and the annualized core return on average assets was 1.40%, as compared to 15.14% and 1.38% for the same period last year.  Core net income per share (diluted) for the fourth quarter of 2019 increased by 10% over the same period in 2018.

Balance sheet growth in 2019 was strong, as deposits increased to $1.821 billion at December 31, 2019, representing 16% growth from 2018.  This reflected strong growth in retail and business deposits of $173.3 million, as well $74.4 million growth in wholesale deposits.  Net loans increased to $2.227 billion, representing 11% growth from 2018.  Total assets increased to $2.590 billion, representing 8% growth from 2018.  During 2019, the Bank used a portion of its cash balances to reduce outstanding Federal Home Loan Bank advances, in order to minimize the carrying cost of its on-balance sheet liquidity.  Book value per share was $115.75 as of December 31, 2019, representing 16% growth from December 31, 2018.  In addition to the increase in book value per share, the Bank declared $2.18 in dividends per share in 2019, including a special dividend of $0.60 per share declared during the fourth quarter of 2019.  The Bank announced increases in its regular quarterly dividend in March, June, September and November of 2019.  The trailing five year compound annual growth rate in book value per share, an important measure of long-term value creation, was 15.2%.

Key credit and operational metrics remained strong in 2019.  At December 31, 2019, non-performing assets totaled 0.22% of total assets, compared to 0.02% at December 31, 2018.  Non-performing loans as a percentage of the total loan portfolio totaled 0.25% at December 31, 2019, compared to 0.02% at December 31, 2018.  A single non-performing residential loan on Nantucket comprised the substantial majority of non-performing assets at year-end and the Bank is actively exercising its full range of remedies, including foreclosure proceedings against the collateral as well as direct litigation against each of the borrowers individually.  The Bank recorded $1,000 in net recoveries in both 2019 and 2018.  At December 31, 2019 and 2018, the Bank did not own any foreclosed property.  The efficiency ratio increased slightly to 30.26% in 2019, as compared to 29.89% in 2018.  Operating expenses as a percentage of average assets improved to 0.82% in 2019, as compared to 0.87% in 2018.  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 2019, although competitive pressures remain acute.  Performance in any one period, especially a period in which tailwinds are blowing strongly in our favor, should be viewed cautiously.  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 annual and quarterly financial results are summarized in this earnings release, but shareholders are encouraged to read the Bank’s annual report on Form 10-K, which is generally available several weeks after the earnings release.  The Bank expects to file Form 10-K for the year ended December 31, 2019 with the FDIC on or about March 4, 2020.

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 banking 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
December 31,
 Twelve Months Ended
December 31,
 2018 2019 2018 2019
(Unaudited)           
            
Key Performance Ratios           
Return on average assets (1)0.80% 1.81% 1.32% 1.55%
Return on average equity (1)8.78  18.64  14.97  16.82 
Core return on average assets (1) (5)1.38  1.40  1.42  1.32 
Core return on average equity (1) (5)15.14  14.46  16.14  14.26 
Interest rate spread (1) (2)2.48  2.45  2.66  2.38 
Net interest margin (1) (3)2.79  2.79  2.90  2.72 
Operating expenses to average assets (1)0.84  0.81  0.87  0.82 
Efficiency ratio (4)30.07  29.00  29.89  30.26 
Average equity to average assets9.09  9.70  8.80  9.24 
Average interest-earning assets to average interest-
  bearing liabilities
 

121.08
   

122.02
   

119.23
   

120.74
 
            


 December 31,
2018
 December 31,
2019
 
(Unaudited)     
      
Asset Quality Ratios     
Allowance for loan losses/total loans 0.68% 0.69%
Allowance for loan losses/non-performing loans 2,852.89  274.57 
       
Non-performing loans/total loans 0.02  0.25 
Non-performing loans/total assets 0.02  0.22 
Non-performing assets/total assets 0.02  0.22 
       
Share Related      
Book value per share$99.67  $115.75 
Market value per share$197.74  $210.20 
Shares outstanding at end of period 2,132,750   2,135,750 
  1. Annualized for the three months ended December 31, 2018 and 2019.
     
  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 (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 share amounts)
 December 31,
2018
 December 31,
 2019
(Unaudited) 
ASSETS 
       
Cash and due from banks  $8,004 $9,057
Federal Reserve and other short-term investments  287,971  243,090
  Cash and cash equivalents   295,975  252,147
       
CRA investment  7,680  7,910
Debt securities available for sale  14  11
Other marketable equity securities  30,766  39,265
  Securities, at fair value  38,460  47,186
Federal Home Loan Bank stock, at cost  28,696  24,890
Loans, net of allowance for loan losses of $13,808 at December 31, 
  2018 and $15,376 at December 31, 2019
   

2,009,288
   

2,227,062
Foreclosed assets    
Bank-owned life insurance   12,476  12,727
Premises and equipment, net   14,553  14,548
Accrued interest receivable  4,581  4,926
Deferred income tax asset, net  2,258  1,213
Other assets  2,300  5,647
  Total assets $2,408,587 $2,590,346

LIABILITIES AND STOCKHOLDERS’ EQUITY

       
Interest-bearing deposits $1,359,581 $1,583,280
Non-interest-bearing deposits  213,573  237,554
  Total deposits  1,573,154  1,820,834
Federal Home Loan Bank advances  606,600  505,200
Mortgage payable  751  687
Mortgagors’ escrow accounts  7,402  7,815
Accrued interest payable  2,187  960
Other liabilities  5,917  7,627
  Total liabilities  2,196,011  2,343,123
       
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 December 31, 2018 and 2,135,750 shares issued and outstanding at December 31, 2019   

2,133
   

2,136
  Additional paid-in capital  11,863  12,234
  Undivided profits  198,580  232,853
  Accumulated other comprehensive income    
  Total stockholders’ equity  212,576  247,223
  Total liabilities and stockholders’ equity $2,408,587 $2,590,346

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income

      Three Months Ended Twelve Months Ended
      December 31, December 31,
(In thousands, except per share amounts)  2018   2019 2018  2019
(Unaudited)          
Interest and dividend income:             
 Loans   $22,716  $25,330 $87,022  $99,379
 Debt securities    1   1  1   1
 Equity securities    498   493  1,985   1,996
 Federal Reserve and other short-term investments 1,347   860  5,161   5,576
  Total interest and dividend income  24,562   26,684  94,169   106,952
Interest expense:              
 Deposits    5,777   6,014  18,979   26,819
 Federal Home Loan Bank advances    2,705   3,422  9,358   13,188
 Mortgage payable   11   10  47   43
  Total interest expense   8,493   9,446  28,384   40,050
  Net interest income   16,069   17,238  65,785   66,902
Provision for loan losses   220   285  1,270   1,567
  Net interest income, after provision for loan losses 15,849   16,953  64,515   65,335
Other income (loss):              
 Customer service fees on deposits  222   205  860   803
 Increase in bank-owned life insurance    62   66  255   251
 Gain (loss) on equity securities, net    (4,313)  3,271  (3,023)  7,608
 Miscellaneous    44   41  173   166
  Total other income (loss)   (3,985)  3,583  (1,735)  8,828
Operating expenses:              
 Salaries and employee benefits   3,124   3,212  12,658   12,826
 Occupancy and equipment    461   459  1,774   1,813
 Data processing    360   432  1,402   1,586
 Deposit insurance    220   4  977   534
 Foreclosure    9   16  (32)  117
 Marketing    137   198  625   695
 Other general and administrative    619   768  2,647   3,044
  Total operating expenses   4,930   5,089  20,051   20,615
Income before income taxes   6,934   15,447  42,729   53,548
Income tax provision    2,270   4,083  12,330   14,621
  Net income   $4,664  $11,364 $30,399  $38,927
                 
Cash dividends declared per share $0.87  $1.01 $1.92  $2.18
             
Weighted average shares outstanding:            
 Basic    2,133   2,134  2,133   2,134
 Diluted    2,186   2,183  2,187   2,183
                 
Earnings per share:             
 Basic   $2.18  $5.32 $14.25  $18.24
 Diluted   $2.13  $5.20 $13.90  $17.83

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

 Three Months Ended December 31,  
 2018  2019 
 AVERAGE BALANCE  INTEREST YIELD/ RATE (8)  AVERAGE BALANCE INTEREST YIELD/ RATE (8) 
(Dollars in thousands)                 
(Unaudited)                 
                  
Loans (1) (2)$2,009,174 $22,716 4.52% $2,198,689 $25,330 4.61%
Securities (3) (4) 53,603  499 3.72   62,938  494 3.14 
Federal Reserve and other short-term investments 237,371  1,347 2.27   208,197  860 1.65 
  Total interest-earning assets 2,300,148  24,562 4.27   2,469,824  26,684 4.32 
Other assets 37,433        42,766      
  Total assets$2,337,581       $2,512,590      
                  
Interest-bearing deposits (5)$1,469,637  5,777 1.57  $1,425,114  6,014 1.69 
Borrowed funds 430,121  2,716 2.53   599,025  3,432 2.29 
  Total interest-bearing liabilities 1,899,758  8,493 1.79   2,024,139  9,446 1.87 
Non-interest-bearing deposits 218,621        237,039      
Other liabilities 6,606        7,594      
  Total liabilities 2,124,985        2,268,772      
Stockholders’ equity 212,596        243,818      
  Total liabilities and stockholders’ equity$2,337,581       $2,512,590      
Net interest income   $16,069       $17,238   
                  
Weighted average spread      2.48%       2.45%
                  
Net interest margin (6)      2.79%       2.79%
                  
Average interest-earning assets to average
  interest-bearing liabilities (7)
  

121.08
 

%
        

122.02
 

%
     


(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,  
 2018  2019 
 AVERAGE BALANCE  INTEREST YIELD/ RATE   AVERAGE BALANCE INTEREST YIELD/ RATE  
(Dollars in thousands)                 
(Unaudited)                 
                  
Loans (1) (2)$1,941,159 $87,022 4.48% $2,150,445 $99,379 4.62%
Securities (3) (4) 53,055  1,986 3.74   58,585  1,997 3.41 
Federal Reserve and other short-term investments 276,000  5,161 1.87   255,082  5,576 2.19 
  Total interest-earning assets 2,270,214  94,169 4.15   2,464,112  106,952 4.34 
Other assets 38,357        41,806      
  Total assets$2,308,571       $2,505,918      
                  
Interest-bearing deposits (5)$1,440,383  18,979 1.32  $1,517,625  26,819 1.77 
Borrowed funds 463,726  9,405 2.03   523,235  13,231 2.53 
  Total interest-bearing liabilities 1,904,109  28,384 1.49   2,040,860  40,050 1.96 
Non-interest-bearing deposits 196,048        225,999      
Other liabilities 5,369        7,619      
  Total liabilities 2,105,526        2,274,478      
Stockholders’ equity 203,045        231,440      
  Total liabilities and stockholders’ equity$2,308,571       $2,505,918      
Net interest income   $65,785       $66,902   
                  
Weighted average spread      2.66%       2.38%
                  
Net interest margin (6)      2.90%       2.72%
                  
Average interest-earning assets to average
  interest-bearing liabilities (7)
  

119.23
 

%
        

120.74
 

%
     


(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.



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