HIFS Hingham Institution for Savings

HINGHAM INSTITUTION FOR SAVINGS (NASDAQ – HIFS), Hingham, Massachusetts announced first quarter earnings for 2014. Net income for the quarter ended March 31, 2014 was $9,375,000 or $4.40 per share (basic and diluted) as compared to $3,205,000 or $1.51 per share (basic and diluted) for the same period last year. Earnings for 2014 included a one-time net gain of approximately $5.7 million related to non-taxable life insurance death benefit income of $6,302,000 less an accrual of $949,000 for a contractual death benefit liability, and $388,000 in related income tax benefit.

Excluding this event, the Bank earned $3,636,000 or $1.71 per share (basic and diluted), representing a 13% increase in net income over last year. The Bank’s return on average equity for the first quarter of 2014 was 18.87%, and the return on average assets was 1.47%. Excluding the $5.7 million event, the Bank’s return on average equity for the first quarter of 2014 was 13.53%, and the return on average assets was 1.05% as compared to return on average equity of 13.42% and a return on average assets of 1.07% for the first quarter of 2013.

Strong growth trends of recent years continued, as deposits increased by $133.5 million representing a 15% increase from March 31, 2013. Net loans increased by 18% and total assets increased by 17% as compared to March 31, 2013. Stockholders’ equity increased $16.7 million from March 31, 2013 to March 31, 2014, representing a 17% increase, with a related increase in book value per share from $44.88 to $52.70.

President Robert H. Gaughen Jr. stated, “We continue to create value for our owners through measured balance sheet growth, cost discipline, and careful capital allocation. Our earnings, among the strongest in our industry, are the product of these practices. We remain committed to the fundamentally conservative strategies that have produced long-term value without undue risk.”

It was with great grief, however, that we learned of the death of Deborah Jackson, our former Senior Vice President and Treasurer, in March 2014. She was a remarkable person and a key element of our success. We took great pleasure in her success as President and Chief Operating Officer of East Boston Savings Bank, where she led that bank in a period of rapid growth. She will be remembered by all of us at Hingham and our deepest condolences go to her family.”

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 in the Commonwealth. The Bank’s main offices are located on Main Street, Hingham, Massachusetts 02043, phone (781) 749-2200. 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 and 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

Consolidated Balance Sheets

     

(Dollars in thousands except per share data)

March 31,2014

December 31,2013

March 31,2013

(Unaudited) ASSETS   Cash and due from banks $ 17,409 $ 11,922 $ 6,262 Short-term investments   110,830   90,925     91,061 Cash and cash equivalents 128,239 102,847 97,323   Certificates of deposit 12,763 13,011 12,999 Securities available for sale, at fair value 105,443 106,369 102,561 Federal Home Loan Bank stock, at cost 16,007 15,978 13,824 Loans, net of allowance for loan losses of $8,660

at March 31, 2014, $8,509 at December 31, 2013

and $8,216 at March 31, 2013

 

1,130,902

 

1,078,879

 

961,051

Foreclosed assets 983 271 471 Bank-owned life insurance 11,201 15,375 15,054 Premises and equipment, net 15,686 15,854 14,330 Accrued interest receivable 2,877 2,792 3,063 Deferred income tax asset, net 2,842 2,934 2,580 Other assets   12,630   2,131     2,765 Total assets $ 1,439,573 $ 1,356,441   $ 1,226,021  

LIABILITIES AND STOCKHOLDERS’ EQUITY

  Deposits $ 1,010,347 $ 940,906 $ 876,876 Federal Home Loan Bank advances 303,715 302,732 244,325 Mortgage payable 1,008 1,020 1,054 Mortgagors’ escrow accounts 3,993 3,709 3,136 Accrued interest payable 424 490 477 Other liabilities   7,905   4,367     4,676 Total liabilities   1,327,392   1,253,224     1,130,544   Stockholders’ equity: Preferred stock, $1.00 par value,

2,500,000 shares authorized, none issued

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—

—

Common stock, $1.00 par value, 5,000,000 shares

authorized; 2,128,750 shares issued and outstanding as of March 31, 2014 and December 31, 2013 and 2,127,250 shares issued and outstanding as of March 31, 2013

 

 

2,129

 

 

2,129

 

 

2,127

Additional paid-in capital 10,659 10,659 10,587 Undivided profits 99,250 90,449 82,582 Accumulated other comprehensive income (loss)   143   (20 )   181 Total stockholders’ equity   112,181   103,217     95,477 Total liabilities and stockholders’ equity $ 1,439,573 $ 1,356,441   $ 1,226,021  

HINGHAM INSTITUTION FOR SAVINGS

Consolidated Statements of Income

  Three Months Ended

March 31,

(Dollars in thousands, except per share amounts) 2014   2013 (Unaudited)   Interest and dividend income: Loans $ 12,946 $ 11,788 Debt securities 91 109 Equity securities 114 38 Short-term investments and certificates of deposit   69   68 Total interest and dividend income   13,220   12,003   Interest expense: Deposits 1,437 1,429 Federal Home Loan Bank advances 1,055 1,208 Mortgage payable   15   16 Total interest expense   2,507   2,653 Net interest income 10,713 9,350 Provision for loan losses   150   100 Net interest income, after provision for loan losses   10,563   9,250 Other income: Customer service fees on deposits 243 238 Increase in cash surrender value of life insurance 93 109 Life insurance death benefit 6,302 — Miscellaneous   68   50 Total other income   6,706   397 Operating expenses: Salaries and employee benefits 3,786 2,554 Data processing 283 239 Occupancy and equipment 510 481 Deposit insurance 190 167 Foreclosure 190 80 Marketing 136 78 Other general and administrative   640   619 Total operating expenses   5,735   4,218 Income before income taxes 11,534 5,429 Income tax provision   2,159   2,224 Net income $ 9,375 $ 3,205   Cash dividends declared per common share $ 0.27 $ 0.26   Weighted average shares outstanding: Basic   2,129   2,127 Diluted   2,131   2,129   Earnings per share: Basic $ 4.40 $ 1.51 Diluted $ 4.40 $ 1.51  

HINGHAM INSTITUTION FOR SAVINGS

Net Interest Income Analysis

  Three Months Ending March 31, 2014   2013

AVERAGEBALANCE

 

INTEREST

 

YIELD/RATE*

AVERAGEBALANCE

 

INTEREST

 

YIELD/RATE*

(Dollars in thousands) (Unaudited)   Loans (1) (2) $ 1,114,240 $ 12,946 4.65 % $ 957,700 $ 11,788 4.92 % Securities (3) (4) 119,187 205 0.69 115,709 147 0.51 Short-term investments and certificates of deposit   107,004   69 0.26   93,708   68 0.29 Total earning assets 1,340,431   13,220 3.94 1,167,117   12,003 4.11 Other assets   38,219   35,930 Total assets $ 1,378,650 $ 1,203,047   Interest-bearing deposits (5) $ 869,209 1,437 0.66 $ 793,936 1,429 0.72 Borrowed funds   307,325   1,070 1.39   234,782   1,224 2.09 Total interest-bearing liabilities 1,176,534   2,507 0.85 1,028,718   2,653 1.03 Demand deposits 92,206 76,176 Other liabilities   2,438   2,629 Total liabilities 1,271,178 1,107,523 Stockholders’ equity   107,472   95,524 Total liabilities and stockholders’ equity $ 1,378,650 $ 1,203,047 Net interest income $ 10,713 $ 9,350   Weighted average spread 3.09 % 3.08 %   Net interest margin (6) 3.20 % 3.20 %   Average interest-earning assets to average

interest-bearing liabilities (7)

113.93

%

113.45

%

* Annualized

(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

Selected Financial Ratios

  Three Months Ended

March 31,

2014   2013 (Unaudited)   Key Performance Ratios Return on average assets (1) 1.47 % 1.07 % Return on average equity (1) 18.87 13.42 Interest rate spread (2) 3.09 3.08 Net interest margin (3) 3.20 3.20 Non-interest expense to average assets (1) 1.46 1.40 Efficiency ratio (4) 43.05 43.27 Average equity to average assets 7.80 7.94 Average interest-bearing assets to average interest

bearing liabilities

113.93

113.45

   

March 31,2014

 

December 31,2013

 

March 31,2013

(Unaudited)   Asset Quality Ratios Allowance for loan losses/total loans 0.76 % 0.78 %   0.85 % Allowance for loan losses/non-performing loans 135.12 143.37 209.38   Non-performing loans/total loans 0.56 0.55 0.41 Non-performing loans/total assets 0.45 0.44 0.32 Non-performing assets/total assets 0.51 0.46 0.36   Share Related Book value per share $ 52.70 $ 48.49 $ 44.88 Market value per share $ 78.50 $ 78.49 $ 69.70 Shares outstanding at end of period 2,128,750 2,128,750 2,127,250  

(1) Annualized, except for the applicable elements of the one-time $5.7 million insurance event in 2014 which were included but not annualized.

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

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

(4) The efficiency ratio represents operating expenses divided by the sum of net interest income and other income. The ratio for 2014 excludes the $6.3 million life insurance death benefit from other income and $949,000 in salaries and benefits expense for the related one-time accrual of a contractual death benefit liability.

Hingham Institution for SavingsRobert H. Gaughen, Jr., 781-749-2200PresidentorRobert A. Bogart, 781-749-2200Vice President & Treasurer