HINGHAM, Mass., April 14, 2022 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced results for the quarter ended March 31, 2022.
Earnings
Net income for the quarter ended March 31, 2022 was $11,864,000 or $5.54 per share basic and $5.38 per share diluted, as compared to $16,350,000 or $7.65 per share basic and $7.45 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first quarter of 2022 was 13.10%, and the annualized return on average assets was 1.37%, as compared to 21.72% and 2.32% for the same period last year. Net income per share (diluted) for the first quarter of 2022 decreased by 28% compared to the same period in 2021.
Core net income for the quarter ended March 31, 2022, which represents net income excluding the after-tax gains and losses on equity securities, both realized and unrealized, was $15,105,000 or $7.05 per share basic and $6.85 per share diluted, as compared to $13,725,000 or $6.42 per share basic and $6.25 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first quarter of 2022 was 16.68% and the annualized core return on average assets was 1.74%, as compared to 18.23% and 1.95% for the same period last year. Core net income per share (diluted) for the first quarter of 2022 increased by 10% over the same period in 2021.
See Page 8 for a Non-GAAP reconciliation between net income and core net income. In calculating core net income, the Bank did not make any adjustments other than those relating to after-tax gains and losses on equity securities, realized and unrealized.
Balance Sheet and Capital Management
Total assets were $3.647 billion at March 31, 2022, representing 25% annualized growth year-to-date and 28% growth from March 31, 2021.
Net loans increased to $3.177 billion at March 31, 2022, representing 24% annualized growth year-to-date and 27% growth from March 31, 2021. Growth was concentrated in the Bank’s commercial real estate portfolio.
Total deposits, including wholesale deposits, were $2.395 billion at March 31, 2022, in line with December 31, 2021 and 5% higher than March 31, 2021. Total retail and business deposits increased to $1.797 billion at March 31, 2022, representing 21% annualized growth year-to-date and 11% growth from March 31, 2021. Non-interest-bearing deposits, included in retail and business deposits, increased to $404.0 million at March 31, 2022, representing 15% annualized growth year-to-date and 23% growth from March 31, 2021. Total retail and business deposits growth was impacted by a continued decline in retail time deposits, as the Bank allowed higher rate maturing time deposits to roll off. In 2022, the Bank continued to carefully monitor the balance of excess reserves held at the Federal Reserve Bank and managed its wholesale funding mix between wholesale time deposits and Federal Home Loan Bank advances in order to achieve a lower cost of funds.
Book value per share was $170.49 as of March 31, 2022, representing 12% annualized growth year-to-date and 18% growth from March 31, 2021. In addition to the increase in book value per share, the Bank declared $2.91 in dividends per share since March 31, 2021, including a special dividend of $0.75 per share declared during the fourth quarter of 2021. The Bank announced increases in its regular quarterly dividend in each of the last four quarters.
On March 30, 2022, the Bank declared a regular cash dividend of $0.57 per share. This represented an increase of 4% over the previous regular quarterly dividend of $0.55 per share. This dividend will be paid on May 11, 2022 to stockholders of record as of May 2, 2022. This was the Bank’s 113th consecutive quarterly dividend and the Bank has consistently increased regular quarterly cash dividends over the last twenty-seven years. The Bank has also declared special cash dividends in each of the last twenty-seven years, typically in the fourth quarter.
The Bank sets the level of the special dividend based on the Bank’s capital requirements and the prospective return on other capital allocation options. This may result in special dividends, if any, significantly above or below the regular quarterly dividend. Future regular and special dividends will be considered by the Board of Directors on a quarterly basis.
Operational Performance Metrics
The net interest margin for the quarter ended March 31, 2022 decreased 24 basis points to 3.30%, as compared to 3.54% for the same period last year. This decline was driven by a declining yield on interest-earning assets, resulting primarily from a lower yield on loans, partially offset by a lower cost of interest-bearing liabilities.
Key credit and operational metrics remained strong in the first quarter. At March 31, 2022, non-performing assets totaled 0.00% of total assets, compared to 0.01% at December 31, 2021 and 0.02% at March 31, 2021. Non-performing loans as a percentage of the total loan portfolio totaled 0.00% at March 31, 2022, compared to 0.01% at December 31, 2021 and 0.02% at March 31, 2021. The Bank did not record any charge-offs in the first three months of 2022, as compared to $1,000 in net charge-offs for the same period last year.
The Bank did not own any foreclosed property at March 31, 2022, December 31, 2021 and March 31, 2021.
The efficiency ratio, as defined on page 4 below, fell to 21.82% for the first quarter of 2022, as compared to 22.02% for the same period last year. Operating expenses as a percentage of average assets fell to 0.72% for the first quarter of 2022, as compared to 0.77% for the same period last year. The Bank remains focused on reducing waste through an ongoing process of continuous improvement and standard work that supports operational leverage.
These operational metrics reflect the Bank’s disciplined focus on credit quality and expense management.
Annual Meeting
The Bank will hold its Annual Meeting of Stockholders (the “Meeting”) at 2:00PM EST on Thursday, April 28, 2022 at the Old Derby Academy, located at 34 Main Street, Hingham, Massachusetts. Stockholders may also attend the Meeting by means of remote communication via a video conference. Immediately following the business meeting, the Bank will hold an informal meeting to discuss the results of the prior year and the operations of the Bank, as well as a question and answers session. We strongly encourage all shareholders to vote by proxy. Electronic voting will not be available. Registration for the meeting is available on the Bank’s website (click here). In addition to participating in the meeting itself, we also encourage shareholders to submit questions in writing in advance using the form on the Bank’s website.
Chairman Robert H. Gaughen Jr. stated, “Returns on equity and assets were adequate in the first quarter of 2022. We remain focused on careful capital allocation, defensive underwriting and disciplined cost control - the building blocks for compounding shareholder capital through all stages of the economic cycle. These remain constant, regardless of the macroeconomic environment in which we operate.”
The Bank’s quarterly financial results are summarized in this earnings release, but shareholders are encouraged to read the Bank’s quarterly report on Form 10-Q, which is generally available several weeks after the earnings release. The Bank expects to file Form 10-Q for the quarter ended March 31, 2022 with the Federal Deposit Insurance Corporation (FDIC) on or about May 6, 2022.
Incorporated in 1834, Hingham Institution for Savings is one of America’s oldest banks. The Bank maintains offices in Boston, Nantucket, and Washington, D.C., and provides commercial mortgage and banking services in the San Francisco Bay 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 March 31, | |||||
| 2021 | 2022 | ||||
| (Unaudited) | |||||
| Key Performance Ratios | |||||
| Return on average assets (1) | 2.32 | % | 1.37 | % | |
| Return on average equity (1) | 21.72 | 13.10 | |||
| Core return on average assets (1) (5) | 1.95 | 1.74 | |||
| Core return on average equity (1) (5) | 18.23 | 16.68 | |||
| Interest rate spread (1) (2) | 3.44 | 3.24 | |||
| Net interest margin (1) (3) | 3.54 | 3.30 | |||
| Operating expenses to average assets (1) | 0.77 | 0.72 | |||
| Efficiency ratio (4) | 22.02 | 21.82 | |||
| Average equity to average assets | 10.70 | 10.45 | |||
| Average interest-earning assets to average interest bearing liabilities | 126.10 | 125.86 | |||
| March 31, 2021 | December 31, 2021 | March 31, 2022 | ||||||||||
| (Unaudited) | ||||||||||||
| Asset Quality Ratios | ||||||||||||
| Allowance for loan losses/total loans | 0.70 | % | 0.68 | % | 0.68 | % | ||||||
| Allowance for loan losses/non-performing loans | 2,870.29 | 4,784.78 | 16,606.92 | |||||||||
| Non-performing loans/total loans | 0.02 | 0.01 | — | |||||||||
| Non-performing loans/total assets | 0.02 | 0.01 | — | |||||||||
| Non-performing assets/total assets | 0.02 | 0.01 | — | |||||||||
| Share Related | ||||||||||||
| Book value per share | $ | 144.12 | $ | 165.52 | $ | 170.49 | ||||||
| Market value per share | $ | 283.76 | $ | 419.88 | $ | 343.20 | ||||||
| Shares outstanding at end of period | 2,139,400 | 2,142,400 | 2,142,400 | |||||||||
(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 (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
| (In thousands, except share amounts) | March 31, 2021 | December 31, 2021 | March 31, 2022 | ||||||
| (Unaudited) | |||||||||
| ASSETS | |||||||||
| Cash and due from banks | $ | 6,267 | $ | 5,428 | $ | 5,371 | |||
| Federal Reserve and other short-term investments | 208,206 | 265,733 | 291,497 | ||||||
| Cash and cash equivalents | 214,473 | 271,161 | 296,868 | ||||||
| CRA investment | 9,412 | 9,306 | 8,874 | ||||||
| Other marketable equity securities | 59,448 | 79,167 | 83,190 | ||||||
| Securities, at fair value | 68,865 | 88,473 | 92,064 | ||||||
| Securities available for sale, at fair value | 5 | — | — | ||||||
| Securities held to maturity, at amortized cost | — | 3,500 | 3,500 | ||||||
| Federal Home Loan Bank stock, at cost | 14,185 | 29,908 | 35,508 | ||||||
| Loans, net of allowance for loan losses of $17,681 at March 31, 2021, $20,431 at December 31, 2021 and $21,589 at March 31, 2022 | 2,507,873 | 2,999,096 | 3,176,975 | ||||||
| Bank-owned life insurance | 12,738 | 12,980 | 13,073 | ||||||
| Premises and equipment, net | 15,247 | 15,825 | 16,210 | ||||||
| Accrued interest receivable | 5,109 | 5,467 | 5,887 | ||||||
| Deferred income tax asset, net | 203 | — | 387 | ||||||
| Other assets | 5,421 | 4,755 | 6,394 | ||||||
| Total assets | $ | 2,844,114 | $ | 3,431,165 | $ | 3,646,866 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY
| Interest-bearing deposits | $ | 1,946,327 | $ | 2,003,717 | $ | 1,990,848 | ||
| Non-interest-bearing deposits | 327,279 | 389,148 | 404,045 | |||||
| Total deposits | 2,273,606 | 2,392,865 | 2,394,893 | |||||
| Federal Home Loan Bank advances | 246,200 | 665,000 | 865,000 | |||||
| Mortgagors’ escrow accounts | 9,052 | 9,183 | 9,646 | |||||
| Accrued interest payable | 154 | 198 | 298 | |||||
| Deferred income tax liability, net | — | 536 | — | |||||
| Other liabilities | 6,761 | 8,771 | 11,768 | |||||
| Total liabilities | 2,535,773 | 3,076,553 | 3,281,605 | |||||
| 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; 2,139,400 shares issued and outstanding at March 31, 2021, 2,142,400 shares issued and outstanding at December 31, 2021 and March 31, 2022 | 2,139 | 2,142 | 2,142 | |||||
| Additional paid-in capital | 12,556 | 12,728 | 12,735 | |||||
| Undivided profits | 293,646 | 339,742 | 350,384 | |||||
| Accumulated other comprehensive income | — | — | — | |||||
| Total stockholders’ equity | 308,341 | 354,612 | 365,261 | |||||
| Total liabilities and stockholders’ equity | $ | 2,844,114 | $ | 3,431,165 | $ | 3,646,866 |
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
| Three Months Ended March 31, | |||||||
| (In thousands, except per share amounts) | 2021 | 2022 | |||||
| (Unaudited) | |||||||
| Interest and dividend income: | |||||||
| Loans | $ | 26,749 | $ | 29,760 | |||
| Debt securities | — | 33 | |||||
| Equity securities | 218 | 258 | |||||
| Federal Reserve and other short-term investments | 52 | 110 | |||||
| Total interest and dividend income | 27,019 | 30,161 | |||||
| Interest expense: | |||||||
| Deposits | 2,107 | 1,504 | |||||
| Federal Home Loan Bank advances | 444 | 492 | |||||
| Total interest expense | 2,551 | 1,996 | |||||
| Net interest income | 24,468 | 28,165 | |||||
| Provision for loan losses | 278 | 1,158 | |||||
| Net interest income, after provision for loan losses | 24,190 | 27,007 | |||||
| Other income (loss): | |||||||
| Customer service fees on deposits | 181 | 175 | |||||
| Increase in cash surrender value of bank-owned life insurance | 81 | 93 | |||||
| Gain (loss) on equity securities, net | 3,367 | (4,157 | ) | ||||
| Miscellaneous | 15 | 26 | |||||
| Total other income (loss) | 3,644 | (3,863 | ) | ||||
| Operating expenses: | |||||||
| Salaries and employee benefits | 3,526 | 3,644 | |||||
| Occupancy and equipment | 406 | 374 | |||||
| Data processing | 461 | 614 | |||||
| Deposit insurance | 223 | 283 | |||||
| Foreclosure and related | (82 | ) | (21 | ) | |||
| Marketing | 124 | 191 | |||||
| Other general and administrative | 792 | 1,124 | |||||
| Total operating expenses | 5,450 | 6,209 | |||||
| Income before income taxes | 22,384 | 16,935 | |||||
| Income tax provision | 6,034 | 5,071 | |||||
| Net income | $ | 16,350 | $ | 11,864 | |||
| Cash dividends declared per common share | $ | 0.49 | $ | 0.57 | |||
| Weighted average shares outstanding: | |||||||
| Basic | 2,138 | 2,142 | |||||
| Diluted | 2,195 | 2,206 | |||||
| Earnings per share: | |||||||
| Basic | $ | 7.65 | $ | 5.54 | |||
| Diluted | $ | 7.45 | $ | 5.38 | |||
HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
| Three Months Ended March 31, | |||||||||||||||||
| 2021 | 2022 | ||||||||||||||||
| AVERAGE BALANCE | INTEREST | YIELD/ RATE (8) | AVERAGE BALANCE | INTEREST | YIELD/ RATE (8) | ||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Loans (1) (2) | $ | 2,497,119 | $ | 26,749 | 4.28 | % | $ | 3,077,644 | $ | 29,760 | 3.87 | % | |||||
| Securities (3) (4) | 63,927 | 218 | 1.36 | 94,899 | 291 | 1.23 | |||||||||||
| Federal Reserve and other short-term investments | 204,887 | 52 | 0.10 | 240,755 | 110 | 0.18 | |||||||||||
| Total interest-earning assets | 2,765,933 | 27,019 | 3.91 | 3,413,298 | 30,161 | 3.53 | |||||||||||
| Other assets | 47,705 | 52,987 | |||||||||||||||
| Total assets | $ | 2,813,638 | $ | 3,466,285 | |||||||||||||
| Interest-bearing deposits (5) | $ | 1,882,830 | 2,107 | 0.45 | $ | 2,028,082 | 1,504 | 0.30 | |||||||||
| Borrowed funds | 310,683 | 444 | 0.57 | 683,920 | 492 | 0.29 | |||||||||||
| Total interest-bearing liabilities | 2,193,513 | 2,551 | 0.47 | 2,712,002 | 1,996 | 0.29 | |||||||||||
| Non-interest-bearing deposits | 311,800 | 383,816 | |||||||||||||||
| Other liabilities | 7,246 | 8,267 | |||||||||||||||
| Total liabilities | 2,512,559 | 3,104,085 | |||||||||||||||
| Stockholders’ equity | 301,079 | 362,200 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,813,638 | $ | 3,466,285 | |||||||||||||
| Net interest income | $ | 24,468 | $ | 28,165 | |||||||||||||
| Weighted average spread | 3.44 | % | 3.24 | % | |||||||||||||
| Net interest margin (6) | 3.54 | % | 3.30 | % | |||||||||||||
| Average interest-earning assets to average interest-bearing liabilities (7) | 126.10 | % | 125.86 | % | |||||||||||||
(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
Non-GAAP Reconciliation
The table below presents the reconciliation between net income and core net income, a non-GAAP measurement that represents net income excluding the after-tax gain (loss) on equity securities.
| Three Months Ended March 31, | |||||||
| (In thousands, unaudited) | 2021 | 2022 | |||||
| Non-GAAP reconciliation: | |||||||
| Net Income | $ | 16,350 | $ | 11,864 | |||
| (Gain) loss on equity securities, net | (3,367 | ) | 4,157 | ||||
| Income tax expense (benefit) (1) | 742 | (916 | ) | ||||
| Core Net Income | $ | 13,725 | $ | 15,105 | |||
(1) The equity securities are held in a tax-advantaged subsidiary corporation. The income tax effect of the (gain) loss on equity securities, net, was calculated using the effective tax rate applicable to the subsidiary.
