Hingham Savings Reports Third Quarter 2018 Results

HINGHAM, Mass., Oct. 12, 2018 (GLOBE NEWSWIRE) — HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced third quarter results for 2018.

Net income for the quarter ended September 30, 2018 was $8,848,000 or $4.15 per share basic and $4.05 per share diluted, as compared to $6,484,000 or $3.04 per share basic and $2.97 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the third quarter of 2018 was 17.06%, and the annualized return on average assets was 1.52%, as compared to 14.60% and 1.21% for the same period in 2017.  Net income per share (diluted) for the third quarter of 2018 increased 36% over the same period of 2017. 

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the third quarter of 2018 was $8,424,000 or $3.95 per share basic and $3.85 per share diluted, as compared to $6,484,000 or $3.04 per share basic and $2.97 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the third quarter of 2018 was 16.24%, and the annualized core return on average assets was 1.45%, as compared to 14.60% and 1.21% for the same period in 2017.  Core net income per share (diluted) for the third quarter of 2018 increased by 30% over the same period in 2017.

Net income for the nine months ended September 30, 2018 was $25,735,000 or $12.07 per share basic and $11.77 per share diluted, as compared to $19,066,000 or $8.94 per share basic and $8.75 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the first nine months of 2018 was 17.17%, and the annualized return on average assets was 1.49%, as compared to 14.81% and 1.22% for the same period last year.  Net income per share (diluted) for the first nine months of 2018 increased 35% over the same period in 2017.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the nine months ended September 30, 2018 was $24,729,000 or $11.60 per share basic and $11.31 per share diluted, as compared to $19,017,000 or $8.92 per share basic and $8.72 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the first nine months of 2018 was 16.50% and the annualized core return on average assets was 1.43%, as compared to 14.77% and 1.22% for the same period last year.  Core net income per share (diluted) for the first nine months of 2018 increased by 30% over the same period in 2017.

Growth in the first nine months of 2018 was generally satisfactory, as deposits increased to $1.715 billion at September 30, 2018, representing 19% annualized growth year-to-date and 18% growth from September 30, 2017.  This growth reflected modest growth in retail and business deposits as well as the increasing use of more attractively priced wholesale deposits in lieu of comparable Federal Home Loan Bank advances.  Net loans increased to $1.976 billion, representing 10% annualized growth year-to-date and 12% growth from September 30, 2017.  Total assets increased to $2.370 billion, representing 5% annualized growth year-to-date and 7% growth from September 30, 2017.  During the first nine months of 2018, the Bank used a portion of its cash balances to reduce outstanding Federal Home Loan Bank advances and listing services time deposits, in order to minimize the carrying cost of its on-balance sheet liquidity.  Book value per share was $98.35 as of September 30, 2018, representing 17% annualized growth year-to-date and 17% growth from September 30, 2017.  In addition to the increase in book value per share, the Bank declared $1.73 in dividends per share since September 30, 2017, including a special dividend of $0.34 per share declared during the fourth quarter of 2017.  The Bank announced increases in its regular quarterly dividend in both June and September 2018.

Key credit and operational metrics remained strong in the third quarter of 2018.  At September 30, 2018, non-performing assets totaled 0.02% of total assets, compared to 0.07% at December 31, 2017 and 0.05% at September 30, 2017.  Non-performing loans as a percentage of the total loan portfolio totaled 0.02% at September 30, 2018, compared to 0.09% at December 31, 2017 and 0.06% at September 30, 2017.  The Bank recorded $1,000 in net recoveries for the first nine months of 2018 and 2017.  At September 30, 2018, December 31 and September 30, 2017, the Bank did not own any foreclosed property.  The efficiency ratio was 29.17% for the third quarter of 2018, as compared to 29.37% for the same period last year.  Non-interest expense as a percentage of average assets fell to 0.86% in the third quarter of 2018, as compared to 0.90% for the same period last year.   

Chairman Robert H. Gaughen, Jr. stated, “We are pleased to report that returns on equity and assets remained satisfactory in the third quarter of 2018, although balance sheet growth was modest relative to capital generation.  We remain focused on careful capital allocation, defensive underwriting and disciplined cost control – we believe these are the keys to generating sustained value for our ownership.”

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 provides commercial mortgage lending and private banking services in the Greater Washington D.C. metropolitan 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   Nine Months Ended
   September 30,      September 30,
  2017   2018   2017   2018
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 1.21 %   1.52 %   1.22 %   1.49 %
Return on average equity (1) 14.60     17.06     14.81     17.17  
Core return on average assets (1) (5) 1.21     1.45     1.22     1.43  
Core return on average equity (1) (5) 14.60     16.24     14.77     16.50  
Interest rate spread (1) (2) 2.89     2.67     2.93     2.72  
Net interest margin (1) (3) 3.04     2.93     3.08     2.93  
Non-interest expense to average assets (1) 0.90     0.86     0.94     0.88  
Efficiency ratio (4) 29.37     29.17     30.58     29.84  
Average equity to average assets 8.26     8.91     8.25     8.69  
Average interest-earning assets to average interest-bearing liabilities 117.69     119.39     117.32     118.61  
                       

  September 30,
2017 
    December 31,
2017
    September 30,
2018
(Unaudited)              
               
Asset Quality Ratios              
Allowance for loan losses/total loans 0.68%   0.68%   0.68%
Allowance for loan losses/non-performing loans 1,078.04   735.74   2,807.44
           
Non-performing loans/total loans 0.06   0.09   0.02
Non-performing loans/total assets 0.05   0.07   0.02
Non-performing assets/total assets 0.05   0.07   0.02
           
Share Related          
Book value per share $ 84.27   $ 87.29   $  98.35 
Market value per share $ 190.27   $ 207.00   $  219.81
Shares outstanding at end of period 2,132,750   2,132,750   2,132,750

(1) Annualized.

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

(3) Net interest margin represents net interest income divided by average interest-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 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

 

(Dollars in thousands, except per share data)

September 30,
 2017
  December 31,
2017
September 30,
 2018
(Unaudited)                    
ASSETS                    
                 
Cash and due from banks  $ 9,792   $ 10,852   $ 10,043
Federal Reserve and other short-term investments   341,294     344,377     286,449
  Cash and cash equivalents    351,086     355,229     296,492
                 
CRA investment   7,390     7,341     7,605
Debt securities available for sale   19     17     15
Other marketable equity securities   24,892     26,946     32,099
Securities, at fair value   32,301     34,304     39,719
Federal Home Loan Bank stock, at cost   26,863     27,102     21,682
Loans, net of allowance for loan losses of $12,128 at September 30, 2017, $12,537 at December 31, 2017 and $13,588 at September 30, 2018    

1,769,830

     

1,833,987

     

1,976,422

Foreclosed assets          
Bank-owned life insurance    12,158     12,221     12,414
Premises and equipment, net    14,049     14,068     14,458
Accrued interest receivable   4,079     4,398     5,066
Deferred income tax asset, net   1,601     1,301     1,128
Other assets   2,973     1,989     2,981
  Total assets $ 2,214,940   $ 2,284,599   $ 2,370,362
                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing deposits $ 1,277,157   $ 1,320,487   $ 1,494,193
Non-interest-bearing deposits 171,382   185,375   220,943
Total deposits 1,448,539   1,505,862   1,715,136
Federal Home Loan Bank advances 574,395   579,164   431,242
Mortgage payable 826   812   766
Mortgagors’ escrow accounts 6,228   6,424   6,901
Accrued interest payable 457   575   1,687
Other liabilities 4,777   5,604   4,883
Total liabilities 2,035,222   2,098,441   2,160,615
           
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 2,133   2,133   2,133
Additional paid-in capital 11,706   11,750   11,843
Undivided profits 161,554   165,596   195,771
Accumulated other comprehensive income 4,325   6,679  
Total stockholders’ equity 179,718   186,158   209,747
Total liabilities and stockholders’ equity $ 2,214,940   $ 2,284,599   $ 2,370,362
           


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
(In thousands, except per share amounts)   2017     2018   2017   2018
                   
(Unaudited)  
Interest and dividend income:                    
Loans $ 19,211   $ 22,523   $ 55,663   $ 64,306
Equity securities   396     503     1,116     1,487
Federal Reserve and other short-term investments   1,079     1,317     2,515     3,814
Total interest and dividend income   20,686     24,343     59,294     69,607
Interest expense:                      
Deposits   2,854     5,291     8,084     13,202
Federal Home Loan Bank advances   1,742     2,294     3,979     6,653
Mortgage payable   12     12     38     36
Total interest expense   4,608     7,597     12,101     19,891
Net interest income   16,078     16,746     47,193     49,716
Provision for loan losses   558     350     1,098     1,050
  Net interest income, after provision for loan losses   15,520     16,396     46,095     48,666
Other income:                      
Customer service fees on deposits   216     216     662     638
Increase in bank-owned life insurance   67     65     196     193
Gain on equity securities, net       544     77     1,290
Miscellaneous   44     42     136     129
Total other income   327     867     1,071     2,250
Operating expenses:                      
Salaries and employee benefits   3,008     3,146     9,245     9,534
Occupancy and equipment   422     421     1,305     1,313
Data processing   321     353     929     1,042
Deposit insurance   279     258     795     757
Foreclosure   11     (33)     14     (41)
Marketing   85     136     325     428
Other general and administrative   692     698     2,121     2,088
Total operating expenses   4,818     4,979     14,734     15,121
Income before income taxes   11,029     12,284     32,432     35,795
Income tax provision   4,545     3,436     13,366     10,060
Net income $ 6,484   $ 8,848   $ 19,066   $ 25,735
                       
Cash dividends declared per share $ 0.34   $ 0.36   $ 0.98   $ 1.05
                       
Weighted average shares outstanding:                      
Basic   2,133     2,133     2,133     2,133
Diluted   2,180     2,188     2,180     2,187
                       
Earnings per share:                      
Basic $ 3.04   $ 4.15   $ 8.94   $ 12.07
Diluted $ 2.97   $ 4.05   $ 8.75   $ 11.77


HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

  Three Months Ended September 30,
  2017     2018  
  AVERAGE
BALANCE
  INTEREST    YIELD/
RATE (8)
      AVERAGE
BALANCE
  INTEREST   YIELD/
RATE (8)
 
(Dollars in thousands)                            
(Unaudited)                            
                             
Loans (1) (2) $ 1,733,650   $ 19,211   4.43 %     $ 1,973,987   $ 22,523   4.56 %
Securities (3) (4) 50,696   396   3.12       52,166   503   3.86  
Federal Reserve and other short-term investments 332,367   1,079   1.30       262,943   1,317   2.00  
Total interest-earning assets 2,116,713   20,686   3.91       2,289,096   24,343   4.25  
Other assets 35,471               38,380          
Total assets $ 2,152,184               $ 2,327,476          
                             
Interest-bearing deposits (5) $ 1,265,731   2,854   0.90       $ 1,503,771   5,291   1.41  
Borrowed funds 532,836   1,754   1.32       413,497   2,306   2.23  
Total interest-bearing liabilities 1,798,567   4,608   1.02       1,917,268   7,597   1.58  
Demand deposits 171,680               197,838          
Other liabilities 4,242               4,927          
Total liabilities 1,974,489               2,120,033          
                             
Stockholders’ equity 177,695               207,443          
Total liabilities and stockholders’ equity $ 2,152,184               $ 2,327,476          
Net interest income     $ 16,078               $ 16,746      
                             
Weighted average spread         2.89 %             2.67 %
                             
Net interest margin (6)         3.04 %             2.93 %
                             
Average interest-earning assets to average interest-bearing liabilities (7)         117.69 %             119.39 %


(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,
 
  2017   2018  
  AVERAGE BALANCE   INTEREST   YIELD/
RATE (8)
    AVERAGE BALANCE   INTEREST   YIELD/
RATE (8)
 
(Dollars in thousands)                          
(Unaudited)                          
                           
Loans (1) (2) $ 1,675,563   $ 55,663   4.43 %   $ 1,918,239   $ 64,306   4.47 %
Securities (3) (4) 49,202   1,116   3.02     52,870   1,487   3.75  
Federal Reserve and other short-term investments 321,335   2,515   1.04     289,018   3,814   1.76  
Total interest-earning assets 2,046,100   59,294   3.86     2,260,127   69,607   4.11  
Other assets 35,261             38,668          
Total assets $ 2,081,361             $ 2,298,795          
                           
Interest-bearing deposits (5) $ 1,252,938   8,084   0.86     $ 1,430,524   13,202   1.23  
Borrowed funds 491,114   4,017   1.09     475,050   6,689   1.88  
Total interest-bearing liabilities 1,744,052   12,101   0.93     1,905,574   19,891   1.39  
Demand deposits 161,037             188,441          
Other liabilities 4,613             4,954          
Total liabilities 1,909,702             2,098,969          
Stockholders’ equity 171,659             199,826          
Total liabilities and stockholders’ equity $ 2,081,361             $ 2,298,795          
Net interest income     $ 47,193             $ 49,716      
                           
Weighted average spread         2.93 %           2.72 %
                           
Net interest margin (6)         3.08 %           2.93 %
                           
Average interest-earning assets to average  interest-bearing liabilities (7)         117.32 %           118.61 %

(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.

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