HIFS Hingham Institution for Savings

HINGHAM INSTITUTION FOR SAVINGS (NASDAQ – HIFS), announced second quarter earnings for 2014. Net income for the quarter ended June 30, 2014 was $3,873,000 or $1.82 per share (basic and diluted) as compared to $3,275,000 or $1.54 per share (basic and diluted) in earnings for the second quarter of 2013. The Bank’s annualized return on average equity for the second quarter of 2014 was 13.51%, and the annualized return on average assets was 1.08%.

Net income for the six months ended June 30, 2014 was $13,248,000 or $6.22 per share (basic and diluted) as compared to $6,480,000 or $3.05 per share basic and $3.04 per share diluted for the same period last year. Earnings for first six months of 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 $7,507,000 or $3.53 per share basic and $3.52 per share diluted for the first six months of 2014, representing a 16% increase in net income over same period last year.

The Bank’s return on average equity for the first six months of 2014 was 23.86%, and the return on average assets was 1.88%. Excluding the $5.7 million event, the Bank’s return on average equity for the first six months of 2014 was 13.52%, and the return on average assets was 1.06% as compared to return on average equity of 13.44% and a return on average assets of 1.07% for the first six months of 2013.

Strong growth trends of recent years continued, as deposits increased by $83.8 million from December 31, 2013 and $132.9 million from June 30, 2013, representing an 18% annualized growth year to date and 15% from June 30, 2013. Net loans increased by $109.3 million from December 31, 2013 and $197.3 million from June 30, 2013, representing 20% annualized growth year to date and 20% growth from June 30, 2013. Total assets increased by $124.5 million from December 31, 2013 and $225.3 million from June 30, 2013, representing an 18% annualized growth year to date and 18% from June 30, 2013. Stockholders’ equity increased to $115.6 million as of June 30, 2014, representing a 24% annualized growth year to date and an 18% increase from June 30, 2013. Book value per share increased to $54.32 per share at June 30, 2014 from $48.49 per share at December 31, 2013 and $46.08 per share at June 30, 2013.

At June 30, 2014, non-performing assets totaled 0.44% of total assets, compared with 0.46% at December 31, 2013 and 0.38% at June 30, 2013. For the quarter ended June 30, 2014, a provision of $175,000 was made to the allowance for loan losses compared to $100,000 for the same period in 2013.

President Robert H. Gaughen, Jr. stated, “We are pleased to report that our current quarterly earnings represent an 18% increase over the second quarter of 2013. Improvement in our net interest margin, combined with effective cost control and solid growth in our balance sheet continue to produce some of the strongest earnings in the industry. This is a reflection of our continued commitment to shareholder value through quality growth and effective cost control.”

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, 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)

June 30,2014

December 31,2013

June 30,2013

(Unaudited) ASSETS   Cash and due from banks $ 8,140 $ 11,922 $ 8,570 Short-term investments   120,647   90,925   87,195 Cash and cash equivalents 128,787 102,847 95,765   Certificates of deposit 14,209 13,011 13,055 Securities available for sale, at fair value 97,331 106,369 103,580 Federal Home Loan Bank stock, at cost 16,983 15,978 14,043 Loans, net of allowance for loan losses of $8,834

at June 30, 2014, $8,509 at December 31, 2013

and $8,330 at June 30, 2013

 

1,188,157

 

1,078,879

 

990,831

Foreclosed assets 425 271 471 Bank-owned life insurance 11,272 15,375 15,160 Premises and equipment, net 15,537 15,854 15,101 Accrued interest receivable 3,112 2,792 3,119 Deferred income tax asset, net 2,981 2,934 2,676 Other assets   2,166   2,131   1,848 Total assets $ 1,480,960 $ 1,356,441 $ 1,255,649                  

LIABILITIES AND STOCKHOLDERS’ EQUITY

    Deposits $ 1,024,673 $ 940,906 $ 891,772 Federal Home Loan Bank advances 331,668 302,732 257,795 Mortgage payable 997 1,020 1,043 Mortgagors’ escrow accounts 3,956 3,709 3,092 Accrued interest payable 379 490 448 Other liabilities   3,645   4,367   3,473 Total liabilities   1,365,318   1,253,224   1,157,623   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 at June 30,2014 and December 31, 2013 and 2,127,250 sharesissued and outstanding at June 30, 2013

 

 

2,129

 

 

2,129

 

 

2,127

Additional paid-in capital 10,896 10,659 10,587 Undivided profits 102,548 90,449 85,303 Accumulated other comprehensive income   69   (20)   9 Total stockholders’ equity   115,642   103,217   98,026 Total liabilities and stockholders’ equity $ 1,480,960 $ 1,356,441 $ 1,255,649          

HINGHAM INSTITUTION FOR SAVINGS

Consolidated Statements of Income

  Three Months Ended Six Months Ended June 30, June 30, 2014   2013 2014   2013 (Unaudited) (In thousands, except per share amounts) Interest and dividend income: Loans $ 13,543 $ 11,991 $ 26,489 $ 23,779 Debt securities 92 104 183 213 Equity securities 116 38 230 76 Short-term investments and certificates of deposit   82   66   151   134 Total interest and dividend income   13,833   12,199   27,053   24,202 Interest expense: Deposits 1,519 1,405 2,956 2,834 Federal Home Loan Bank advances 901 1,209 1,956 2,417 Mortgage payable   15   15   30   31 Total interest expense   2,435   2,629   4,942   5,282 Net interest income 11,398 9,570 22,111 18,920 Provision for loan losses   175   100   325   200 Net interest income, after provision for loan losses   11,223   9,470   21,786   18,270 Other income: Customer service fees on deposits 256 256 499 494 Increase in bank-owned life insurance 72 106 165 215 Life insurance death benefit — — 6,302 — Miscellaneous   125   57   193   107 Total other income   453   419   7,159   816 Operating expenses: Salaries and employee benefits 2,904 2,604 6,691 5,158 Data processing 302 240 585 479 Occupancy and equipment 526 459 1,036 940 Deposit insurance 197 168 387 335 Foreclosure 106 119 296 199 Marketing 119 130 255 208 Other general and administrative   938   637   1,577   1,256 Total operating expenses   5,092   4,357   10,827   8,575 Income before income taxes 6,584 5,532 18,118 10,961 Income tax provision   2,711   2,257   4,870   4,481 Net income $ 3,873 $ 3,275 $ 13,248 $ 6,480   Weighted average common shares outstanding: Basic   2,129   2,127   2,129   2,127 Diluted   2,130   2,129   2,130   2,129   Earnings per common share: Basic $ 1.82 $ 1.54 $ 6.22 $ 3.05 Diluted $ 1.82 $ 1.54 $ 6.22 $ 3.04        

HINGHAM INSTITUTION FOR SAVINGS

Net Interest Income Analysis

  Three Months Ended June 30, 2014   2013

AVERAGEBALANCE

 

INTEREST

 

YIELD/RATE

AVERAGEBALANCE

 

INTEREST

 

YIELD/RATE

(Dollars in thousands) (Unaudited)   Loans (1) (2) $ 1,168,189 $ 13,543 4.64 % $ 984,444 $ 11,991 4.87 % Securities (3) (4) 117,791 208 0.71 113,924 142 0.50 Short-term investments and certificates of deposit   116,911   82 0.28   85,227   66 0.31 Total earning assets 1,402,891   13,833 3.94 1,183,595   12,199 4.12 Other assets   37,923   36,535 Total assets $ 1,440,814 $ 1,220,130   Interest-bearing deposits (5) $ 917,070 1,519 0.66 $ 793,668 1,405 0.71 Borrowed funds   306,186   916 1.20   243,374   1,224 2.01 Total interest-bearing liabilities 1,223,256   2,435 0.80 1,037,042   2,629 1.01 Demand deposits 99,194 82,166 Other liabilities   3,725   3,559 Total liabilities 1,326,175 1,122,767 Stockholders’ equity   114,639   97,363 Total liabilities and stockholders’ equity $ 1,440,814 $ 1,220,130 Net interest income $ 11,398 $ 9,570   Weighted average spread 3.14 % 3.11 %   Net interest margin (6) 3.25 % 3.23 %  

Average interest-earning assets to averageinterest-bearing liabilities (7)

 

114.68

%

114.13

%

 

(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

  Six Months Ended June 30, 2014   2013

AVERAGEBALANCE

 

INTEREST

 

YIELD/RATE

AVERAGEBALANCE

 

INTEREST

 

YIELD/RATE

(Dollars in thousands) (Unaudited)   Loans (1) (2) $ 1,141,363 $ 26,489 4.64 % $ 971,146 $ 23,779 4.90 % Securities (3) (4) 118,485 413 0.70 114,812 289 0.50 Short-term investments and certificates of deposit   111,985   151 0.27   89,444   134 0.30 Total earning assets 1,371,833   27,053 3.94 1,175,402   24,202 4.12 Other assets   38,070   36,234 Total assets $ 1,409,903 $ 1,211,636   Interest-bearing deposits (5) $ 893,272 2,956 0.66 $ 793,801 2,834 0.71 Borrowed funds   306,752   1,986 1.29   239,102   2,448 2.05 Total interest-bearing liabilities 1,200,024   4,942 0.82 1,032,903   5,282 1.02 Demand deposits 95,719 79,188 Other liabilities   3,105   3,102 Total liabilities 1,298,848 1,115,193 Stockholders’ equity   111,055   96,443 Total liabilities and stockholders’ equity $ 1,409,903 $ 1,211,636 Net interest income $ 22,111 $ 18,920   Weighted average spread 3.12 % 3.10 %   Net interest margin (6) 3.22 % 3.22 %  

Average interest-earning assets to averageinterest-bearing liabilities (7)

 

114.32

%

113.80

%

 

(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

June 30,

Six Months Ended

June 30,

2014     2013 2014     2013 (Unaudited)   Key Performance Ratios Return on average assets (1) 1.08 % 1.07 % 1.88 % 1.07 % Return on average equity (1) 13.51 13.45 23.86 13.44 Interest rate spread (1) (2) 3.14 3.11 3.12 3.10 Net interest margin (1) (3) 3.25 3.23 3.22 3.22 Non-interest expense to average assets (1) 1.41 1.43 1.54 1.42 Efficiency ratio (4) 42.97 43.62 36.99 43.45 Average equity to average assets 7.96 7.98 7.88 7.96

Average interest-bearing assets to average interestbearing liabilities

 

114.68

114.13

114.32

113.80

      June 30,

2014

December 31,2013

June 30,

2013

(Unaudited)     Asset Quality Ratios Allowance for loan losses/total loans 0.74 % 0.78 %   0.83 % Allowance for loan losses/non-performing loans 144.14 143.37 191.32   Non-performing loans/total loans 0.51 0.55 0.44 Non-performing loans/total assets 0.41 0.44 0.35 Non-performing assets/total assets 0.44 0.46 0.38   Share Related Book value per share $ 54.32 $ 48.49 $ 46.08 Market value per share $ 79.40 $ 78.49 67.88 Shares outstanding at end of period 2,128,750 2,128,750 $ 2,127,250  

(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.

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