HIFS Hingham Institution for Savings

HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), Hingham, Massachusetts announced second quarter earnings for 2017.

Net income for the quarter ended June 30, 2017 was $6,470,000 or $3.03 per share basic and $2.97 per share diluted as compared to $5,867,000 or $2.75 per share basic and $2.73 per share diluted for the same period last year.  Net income per share (diluted) for the second quarter of 2017 increased 9% over the same period of 2016.  The Bank’s annualized return on average equity for the second quarter of 2017 was 15.08%, and the annualized return on average assets was 1.25% as compared to 15.96% and 1.21% for the same period in 2016.  Net income for the 2017 and 2016 periods included after-tax realized gains on investments of approximately $49,000 and $221,000 respectively, which were unrelated to the Bank’s core business operations. 

Net income for the six months ended June 30, 2017 was $12,582,000 or $5.90 per share basic and $5.77 per share diluted as compared to $11,191,000 or $5.25 per share basic and $5.21 per share diluted for the same period last year.  Net income per share (diluted) for the first six months of 2017 increased 11% over the same period in 2016.  The Bank’s annualized return on average equity for the first six months of 2017 was 14.93% and the annualized return on average assets was 1.23%.  The Bank’s annualized return on average equity for the first six months of 2016 was 15.51%, and the annualized return on average assets was 1.20%.

Balance sheet growth trends of recent years continued, as deposits were $1.424 billion at June 30, 2017, representing 8% annualized growth year-to-date and 8% growth from June 30, 2016.  Net loans were $1.666 billion at June 30, 2017, representing 8% annualized growth year-to-date and 9% growth from June 30, 2016.  Total assets were $2.111 billion at June 30, 2017, representing 10% annualized growth year-to-date and 10% growth from June 30, 2016.  Book value per share increased to $81.05 per share at June 30, 2017, representing a 15% annualized growth rate year-to-date and a 16% increase from June 30, 2016.  In addition to the increase in book value per share, the Bank has declared $1.60 in dividends per share since June 30, 2016.

Key credit and operational metrics remained steady in the second quarter of 2017.  At June 30, 2017, non-performing assets totaled 0.18% of total assets, compared with 0.09% at December 31, 2016 and 0.18% at June 30, 2016.  Non-performing loans as a percentage of the total loan portfolio totaled 0.22% at June 30, 2017, as compared to 0.11% at December 31, 2016 and 0.22% at June 30, 2016.  At June 30, 2017 and 2016, the Bank did not own any foreclosed property.  The efficiency ratio improved to 29.97% for the second quarter of 2017, as compared to 32.96% for the same period last year.  Non-interest expense (annualized) as a percentage of average assets fell to 0.93% for the second quarter of 2017, as compared to 1.00% for the same period last year.  These metrics reflect the Bank’s disciplined focus on credit and expense management.

President Robert H. Gaughen, Jr. stated, “We are pleased to report that our current quarterly diluted earnings per share represent a 9% increase over the second quarter of 2016 and that returns on equity and assets remain satisfactory.  At Hingham, we take our role as stewards of the shareholders’ capital seriously.  Our emphasis on careful capital allocation, defensive and conservative underwriting, and disciplined cost control continues to serve our owners well.  More important than performance in any one period, however, is a company’s record of compounding shareholder capital over time and through credit cycles.  On this measure, our team strives to set a high bar.”

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 also maintains offices on the South Shore, in Boston (South End and 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
Selected Financial Ratios
	Three Months EndedJune 30,						Six Months EndedJune 30,
	2016			2017			2016			2017
(Unaudited)
Key Performance Ratios
Return on average assets (1)	1.21	%		1.25	%		1.20	%		1.23	%
Return on average equity (1)	15.96			15.08			15.51			14.93
Interest rate spread (1) (2)	2.90			2.94			2.96			2.97
Net interest margin (1) (3)	3.01			3.08			3.07			3.10
Non-interest expense to average assets (1)	1.00			0.93			1.04			0.97
Efficiency ratio (4)	32.96			29.97			33.66			31.20
Average equity to average assets	7.59			8.27			7.73			8.24
Average interest-earning assets to average interest-   bearing liabilities	115.55			117.45			115.83			117.12

	June 30, 2016					December 31, 2016				June 30, 2017
(Unaudited)
Asset Quality Ratios
Allowance for loan losses/total loans		0.68	%			0.68		%				0.69	%
Allowance for loan losses/non-performing loans		302.09				614.43						310.63
Non-performing loans/total loans		0.22				0.11						0.22
Non-performing loans/total assets		0.18				0.09						0.18
Non-performing assets/total assets		0.18				0.09						0.18
Share Related
Book value per share	$	69.69				$	75.50			$	81.05
Market value per share	$	122.92				$	196.78			$	181.93
Shares outstanding at end of period		2,130,750					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 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 sale of securities. 

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
	June 30,			December 31,			June 30,
(Dollars in thousands, except per share data)	2016			2016			2017
(Unaudited)
ASSETS
Cash and due from banks	$	10,788		$	7,816		$	8,312
Federal Reserve and other short-term investments		287,009			315,116			346,999
Cash and cash equivalents		297,797			322,932			355,311
Certificates of deposit		2,630			—			—
CRA investment		7,092			6,839			7,383
Other securities available for sale		25,857			20,329			21,974
Securities available for sale, at fair value		32,949			27,168			29,357
Federal Home Loan Bank stock, at cost		24,203			24,472			25,297
Loans, net of allowance for loan losses of $10,413
at June 30, 2016, $11,030 at December 31, 2016
and $11,571 at June 30, 2017		1,525,407			1,605,647			1,666,172
Foreclosed assets		—			—			—
Bank-owned life insurance		11,838			11,962			12,091
Premises and equipment, net		14,774			14,462			14,169
Accrued interest receivable		3,498			3,529			3,645
Deferred income tax asset, net		3,146			2,489			2,190
Other assets		2,423			1,938			2,784
Total assets	$	1,918,665		$	2,014,599		$	2,111,016
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits	$	1,183,353		$	1,218,360		$	1,263,923
Non-interest-bearing deposits		136,272			147,749			159,702
Total Deposits		1,319,625			1,366,109			1,423,625
Federal Home Loan Bank advances		440,392			475,318			503,242
Mortgage payable		896			868			840
Mortgagors’ escrow accounts		4,970			5,585			5,735
Accrued interest payable		388			400			531
Other liabilities		3,897			5,295			4,181
Total liabilities		1,770,168			1,853,575			1,938,154
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; 2,130,750 shares issued and outstanding at
June 30, 2016 and 2,132,750 shares issued and
outstanding at December 31, 2016 and June 30, 2017		2,131			2,133			2,133
Additional paid-in capital		11,319			11,575			11,662
Undivided profits		134,394			144,580			155,796
Accumulated other comprehensive income		653			2,736			3,271
Total stockholders’ equity		148,497			161,024			172,862
Total liabilities and stockholders’ equity	$	1,918,665		$	2,014,599		$	2,111,016

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
								Three Months Ended							Six Months Ended
								June 30,							June 30,
(In thousands, except per share amounts)									2016			2017			2016				2017
(Unaudited)
Interest and dividend income:
		Loans						$	16,983		$	18,484			$	33,413			$		36,452
		Debt securities							18			—				46					—
		Equity securities							285			367				529					720
		Federal Reserve and other short-term investments							418			827				744					1,436
			Total interest and dividend income						17,704			19,678				34,732					38,608
Interest expense:
		Deposits							2,400			2,712				4,690					5,230
		Federal Home Loan Bank advances							959			1,277				1,849					2,237
		Mortgage payable							13			13				27					26
			Total interest expense						3,372			4,002				6,566					7,493
			Net interest income						14,332			15,676				28,166					31,115
Provision for loan losses									255			285				510					540
Net interest income, after provision for loan losses									14,077			15,391				27,656					30,575
Other income:
	Customer service fees on deposits								236			227				452					446
	Increase in bank-owned life insurance								74			62				141					129
	Gain on sale of securities								344			77				344					77
	Miscellaneous								48			47				97					92
			Total other income						702			413				1,034					744
Operating expenses:
		Salaries and employee benefits							2,991			3,091				6,061					6,237
		Occupancy and equipment							484			419				955					883
		Data processing							303			311				608					608
		Deposit insurance							264			258				506					516
		Foreclosure							26			(40)				82					3
		Marketing							109			116				225					240
		Other general and administrative							665			643				1,275					1,429
			Total operating expenses						4,842			4,798				9,712					9,916
Income before income taxes									9,937			11,006				18,978					21,403
Income tax provision									4,070			4,536				7,787					8,821
			Net income					$	5,867		$	6,470			$	11,191			$		12,582
Cash dividends declared per share								$	0.30		$	0.32			$	0.60			$		0.64
Weighted average shares outstanding:
		Basic							2,131			2,133				2,130					2,133
		Diluted							2,149			2,179				2,148					2,180
Earnings per share:
		Basic						$	2.75		$	3.03			$	5.25			$		5.90
		Diluted						$	2.73		$	2.97			$	5.21			$		5.77

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
	Three Months Ended June 30,
	2016									2017
	AVERAGE BALANCE			INTEREST			YIELD/ RATE (8)			AVERAGE BALANCE			INTEREST			YIELD/ RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)	$	1,507,171		$	16,983		4.51	%		$	1,666,327		$	18,484		4.44	%
Securities (3) (4)		61,766			303		1.96				49,233			367		2.98
Federal Reserve and other short-term investments		335,064			418		0.50				322,239			827		1.03
Total interest-earning assets		1,904,001			17,704		3.72				2,037,799			19,678		3.86
Other assets		33,532									35,894
Total assets	$	1,937,533								$	2,073,693
Interest-bearing deposits (5)	$	1,177,674			2,400		0.82			$	1,263,209			2,712		0.86
Borrowed funds		470,110			972		0.83				471,805			1,290		1.09
Total interest-bearing liabilities		1,647,784			3,372		0.82				1,735,014			4,002		0.92
Demand deposits		137,837									162,339
Other liabilities		4,889									4,755
Total liabilities		1,790,510									1,902,108
Stockholders’ equity		147,023									171,585
Total liabilities and stockholders’ equity	$	1,937,533								$	2,073,693
Net interest income				$	14,332								$	15,676
Weighted average spread							2.90	%								2.94	%
Net interest margin (6)							3.01	%								3.08	%
Average interest-earning assets to average  interest-bearing liabilities (7)							115.55	%								117.45	%

(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 interest-earning assets.
(7	)		Total interest-earning assets divided by total interest-bearing liabilities.
(8	)		Annualized

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
	Six  Months Ended June 30,
	2016									2017
	AVERAGE BALANCE			INTEREST			YIELD/ RATE (8)			AVERAGE BALANCE			INTEREST			YIELD/ RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)	$	1,473,583		$	33,413		4.53	%		$	1,646,040		$	36,452		4.43	%
Securities (3) (4)		61,404			575		1.87				48,442			720		2.97
Federal Reserve and other short-term investments		297,866			744		0.50				315,727			1,436		0.91
Total interest-earning assets		1,832,853			34,732		3.79				2,010,209			38,608		3.84
Other assets		33,344									35,153
Total assets	$	1,866,197								$	2,045,362
Interest-bearing deposits (5)	$	1,149,165			4,690		0.82			$	1,246,436			5,230		0.84
Borrowed funds		433,244			1,876		0.87				469,907			2,263		0.96
Total interest-bearing liabilities		1,582,409			6,566		0.83				1,716,343			7,493		0.87
Demand deposits		134,524									155,627
Other liabilities		4,918									4,802
Total liabilities		1,721,851									1,876,772
Stockholders’ equity		144,346									168,590
Total liabilities and stockholders’ equity	$	1,866,197								$	2,045,362
Net interest income				$	28,166								$	31,115
Weighted average spread							2.96	%								2.97	%
Net interest margin (6)							3.07	%								3.10	%
Average interest-earning assets to average  interest-bearing liabilities (7)							115.83	%								117.12	%

(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 interest-earning assets.
(7	)		Total interest-earning assets divided by total interest-bearing liabilities.
(8	)		Annualized

 

CONTACT:
Patrick R. Gaughen, Executive Vice President (781) 783-1761