HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), Hingham,
Massachusetts announced earnings for the first quarter ended March
31, 2018.
Net income for the quarter ended March 31, 2018
was $8,912,000 or $4.18 per share basic and $4.08 per share
diluted, as compared to $6,112,000 or $2.87 per share basic and
$2.80 per share diluted for the same period last year. For
the first quarter of 2018, the Bank’s annualized return on average
equity was 18.56% and the annualized return on average assets was
1.56%, as compared to 14.77% and 1.21%, respectively, for the same
period in 2017. This represents a 46% increase in diluted
earnings per share over the same period last year.
Effective January 1, 2018, the Bank adopted
Financial Accounting Standards Board Accounting Standards Update
(“ASU”) 2016-01, Financial Instruments – Overall, (Subtopic
825-10), which requires changes in the unrealized gains on certain
equity securities, net of deferred taxes, to be recognized through
the income statement. Prior to the adoption of ASU 2016-01,
these changes were recorded in stockholders’ equity through
accumulated other comprehensive income, and only realized gains on
sale of securities were recognized through the income
statement. Excluding the after-tax gains on securities, both
realized and unrealized, net income for the first quarter of 2018
was $8,159,000 or $3.83 per share basic and $3.73 per share
diluted, representing a core return on average equity of 16.99% and
a core return on average assets of 1.43%. This represents a
33% increase in diluted earnings per share over the same period
last year.
Growth in the first quarter of 2018 was modest,
as deposits increased to $1.532 billion at March 31, 2018,
representing 7% annualized growth year-to-date and 9% growth from
March 31, 2017. Net loans increased to $1.872 billion,
representing 8% annualized growth year-to-date and 15% growth from
March 31, 2017. Total assets decreased to $2.240 billion,
representing a 2% decline from December 31, 2017. During the
first quarter 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. Total assets have increased
10% from March 31, 2017. Book value per share was $91.14 as
of March 31, 2018, representing 18% annualized growth year-to-date
and 16% growth from March 31, 2017. In addition to the
increase in book value per share, the Bank declared $1.68 in
dividends per share since March 31, 2017, including a special
dividend of $0.34 per share declared during the fourth quarter of
2017.
Key credit and operational metrics remained
strong in the first quarter. At March 31, 2018,
non-performing assets totaled 0.08% of total assets, compared to
0.07% at December 31, 2017 and 0.09% at March 31, 2017.
Non-performing loans as a percentage of the total loan portfolio
totaled 0.10% at March 31, 2018, compared to 0.09% at December 31,
2017 and 0.08% at March 31, 2017. The Bank recorded $1,000 of net
recoveries for the first three months of 2018, as compared to zero
net charge-offs for the same period last year. At March 31,
2018 and December 31, 2017, the Bank did not own any foreclosed
property and at March 31, 2017, the Bank owned only one piece of
foreclosed property valued at $563,000. The efficiency ratio
improved to 30.41% for the first quarter of 2018, as compared to
32.45% for the same period last year. Non-interest expense as
a percentage of average assets fell to 0.89% in the first quarter
of 2018, as compared to 1.02% for the same period last
year.
President Robert H. Gaughen Jr. stated, “We are
pleased to report that returns on equity and assets remained
satisfactory in the first quarter of 2018. At Hingham, we
take seriously our role as stewards of shareholders’ capital.
Our emphasis on careful capital allocation, defensive underwriting,
process improvement, and disciplined cost control continues to
serve our owners well. Performance in any one period should
be viewed cautiously. The real test of performance in banking
is a company’s record of compounding shareholder capital through
all stages of the credit cycle. On this measure, our team
strives to set a high bar.
Beginning this quarter, we are confronted by a
communication challenge because of the new accounting standard
impacting our equity investments. The Bank views its equity
investments as long-term partnership interests in operating
companies and consequently does not view short-term fluctuation in
market value, whether positive as it was this quarter, or negative
as it surely will be at some point in the future, as indicative of
the change in the intrinsic value of the portfolio holdings.
The performance of these holdings should be evaluated on the basis
of their contribution to growth in book value per share over time,
not via quarterly adjustments to net income. We have historically
avoided reporting adjustments to our GAAP income, as such
adjustments are often used by management teams to obscure rather
than clarify the real economic performance of a company. We
believe that in this instance, however, it is important that our
owners understand that quarterly changes in the value of the equity
portfolio, whether gains or losses, are impostors just the
same.”
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 is also an active commercial real estate lender 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 EndedMarch
31, |
|
2017 |
|
2018 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Ratios |
|
|
|
|
|
Return on average
assets (1) |
1.21 |
% |
|
1.56 |
% |
Return on average
equity (1) |
14.77 |
|
|
18.56 |
|
Core return on average
assets (1) (5) |
1.21 |
|
|
1.43 |
|
Core return on average
equity (1) (5) |
14.77 |
|
|
16.99 |
|
Interest rate spread
(1) (2) |
3.00 |
|
|
2.75 |
|
Net interest margin (1)
(3) |
3.12 |
|
|
2.93 |
|
Non-interest expense to
average assets (1) |
1.02 |
|
|
0.89 |
|
Efficiency ratio
(4) |
32.45 |
|
|
30.41 |
|
Average equity to
average assets |
8.21 |
|
|
8.41 |
|
Average
interest-earning assets to average interest bearing
liabilities |
116.78 |
|
|
117.83 |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017 |
December 31,2017 |
March 31, 2018 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality
Ratios |
|
|
|
|
|
|
|
|
|
Allowance for loan
losses/total loans |
|
0.69 |
% |
0.68 |
% |
|
0.68 |
% |
Allowance for loan
losses/non-performing loans |
|
846.59 |
|
735.74 |
|
|
691.27 |
|
|
|
|
|
|
|
|
|
|
Non-performing
loans/total loans |
|
0.08 |
|
0.09 |
|
|
0.10 |
|
Non-performing
loans/total assets |
|
0.07 |
|
0.07 |
|
|
0.08 |
|
Non-performing
assets/total assets |
|
0.09 |
|
0.07 |
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
Share
Related |
|
|
|
|
|
|
|
|
Book value per
share |
$ |
78.29 |
|
$ |
87.29 |
|
$ |
91.14 |
|
Market value per
share |
$ |
176.85 |
|
$ |
207.00 |
|
$ |
206.00 |
|
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.
(5) Non-GAAP measurements that represent return on average
assets and return on average equity, excluding the after-tax gain
on equity securities.
|
HINGHAM INSTITUTION FOR SAVINGS |
Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
(In thousands, except
share amounts) |
March 31,2017 |
|
December 31,2017 |
|
March 31,2018 |
(Unaudited) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
Cash and due from
banks |
$ |
6,548 |
|
$ |
10,852 |
|
$ |
8,901 |
Federal Reserve and
other short-term investments |
|
310,130 |
|
|
344,377 |
|
|
262,367 |
Cash and
cash equivalents |
|
316,678 |
|
|
355,229 |
|
|
271,268 |
|
|
|
|
|
|
|
|
|
CRA investment |
|
7,341 |
|
|
7,341 |
|
|
7,724 |
Debt securities
available for sale |
|
26 |
|
|
17 |
|
|
17 |
Other equity
securities |
|
21,343 |
|
|
26,946 |
|
|
30,089 |
Securities, at fair value |
|
28,710 |
|
|
34,304 |
|
|
37,830 |
Federal Home Loan Bank
stock, at cost |
|
24,920 |
|
|
27,102 |
|
|
24,530 |
Loans, net of allowance
for loan losses of $11,285 at March 31, 2017, $12,537 at
December 31, 2017 and $12,823 at March 31, 2018 |
|
1,634,263 |
|
|
1,833,987 |
|
|
1,872,114 |
Foreclosed assets |
|
563 |
|
|
— |
|
|
— |
Bank-owned life
insurance |
|
12,029 |
|
|
12,221 |
|
|
12,289 |
Premises and equipment,
net |
|
14,314 |
|
|
14,068 |
|
|
13,947 |
Accrued interest
receivable |
|
3,576 |
|
|
4,398 |
|
|
4,240 |
Deferred income tax
asset, net |
|
2,226 |
|
|
1,301 |
|
|
1,103 |
Other assets |
|
2,217 |
|
|
1,989 |
|
|
2,816 |
Total
assets |
$ |
2,039,496 |
|
$ |
2,284,599 |
|
$ |
2,240,137 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits |
$ |
1,248,381 |
|
$ |
1,320,487 |
|
$ |
1,345,639 |
Non-interest-bearing
deposits |
|
154,622 |
|
|
185,375 |
|
|
186,169 |
Total
deposits |
|
1,403,003 |
|
|
1,505,862 |
|
|
1,531,808 |
Federal Home Loan Bank
advances |
|
455,281 |
|
|
579,164 |
|
|
499,124 |
Mortgage payable |
|
855 |
|
|
812 |
|
|
797 |
Mortgagors’ escrow
accounts |
|
5,787 |
|
|
6,424 |
|
|
6,551 |
Accrued interest
payable |
|
396 |
|
|
575 |
|
|
774 |
Other liabilities |
|
7,207 |
|
|
5,604 |
|
|
6,695 |
Total
liabilities |
|
1,872,529 |
|
|
2,098,441 |
|
|
2,045,749 |
|
|
|
|
|
|
|
|
|
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 |
|
11,619 |
|
|
11,750 |
|
|
11,794 |
Undivided
profits |
|
150,008 |
|
|
165,596 |
|
|
180,461 |
Accumulated other comprehensive income |
|
3,207 |
|
|
6,679 |
|
|
— |
Total
stockholders’ equity |
|
166,967 |
|
|
186,158 |
|
|
194,388 |
Total
liabilities and stockholders’ equity |
$ |
2,039,496 |
|
$ |
2,284,599 |
|
$ |
2,240,137 |
|
|
|
|
|
|
|
|
|
|
HINGHAM INSTITUTION FOR SAVINGS |
Consolidated Statements of Income |
|
|
|
Three Months EndedMarch
31, |
(In thousands, except
per share amounts) |
2017 |
|
2018 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend
income: |
|
|
|
|
|
Loans |
$ |
17,968 |
|
$ |
20,417 |
Debt
securities |
|
— |
|
|
— |
Equity
securities |
|
353 |
|
|
479 |
Federal
Reserve and other short-term investments |
|
609 |
|
|
1,241 |
Total
interest and dividend income |
|
18,930 |
|
|
22,137 |
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
Deposits |
|
2,518 |
|
|
3,567 |
Federal
Home Loan Bank advances |
|
960 |
|
|
2,093 |
Mortgage
payable |
|
13 |
|
|
12 |
Total
interest expense |
|
3,491 |
|
|
5,672 |
Net
interest income |
|
15,439 |
|
|
16,465 |
Provision for loan
losses |
|
255 |
|
|
285 |
Net
interest income, after provision for loan losses |
|
15,184 |
|
|
16,180 |
Other income: |
|
|
|
|
|
Customer
service fees on deposits |
|
219 |
|
|
206 |
Increase
in cash surrender value of bank-owned life insurance |
|
67 |
|
|
68 |
Gain on
equity securities |
|
— |
|
|
966 |
Miscellaneous |
|
45 |
|
|
44 |
Total
other income |
|
331 |
|
|
1,284 |
Operating
expenses: |
|
|
|
|
|
Salaries
and employee benefits |
|
3,146 |
|
|
3,212 |
Occupancy
and equipment |
|
464 |
|
|
466 |
Data
processing |
|
297 |
|
|
341 |
Deposit
insurance |
|
258 |
|
|
273 |
Foreclosure |
|
43 |
|
|
5 |
Marketing |
|
124 |
|
|
138 |
Other
general and administrative |
|
786 |
|
|
668 |
Total
operating expenses |
|
5,118 |
|
|
5,103 |
Income before income
taxes |
|
10,397 |
|
|
12,361 |
Income tax
provision |
|
4,285 |
|
|
3,449 |
Net
income |
$ |
6,112 |
|
$ |
8,912 |
|
|
|
|
|
|
Cash dividends declared
per common share |
$ |
0.32 |
|
$ |
0.34 |
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
Basic |
|
2,133 |
|
|
2,133 |
Diluted |
|
2,181 |
|
|
2,186 |
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
Basic |
$ |
2.87 |
|
$ |
4.18 |
Diluted |
$ |
2.80 |
|
$ |
4.08 |
|
|
|
|
|
|
|
HINGHAM INSTITUTION FOR SAVINGS |
Net Interest Income Analysis |
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
|
2018 |
|
|
AVERAGEBALANCE |
|
INTEREST |
|
YIELD/RATE (8) |
|
|
AVERAGEBALANCE |
|
INTEREST |
|
YIELD/RATE (8) |
|
(Dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (1) (2) |
$ |
1,625,525 |
|
$ |
17,968 |
|
4.42 |
% |
|
$ |
1,866,138 |
|
$ |
20,417 |
|
4.38 |
% |
Securities (3) (4) |
|
47,643 |
|
|
353 |
|
2.96 |
|
|
|
53,517 |
|
|
479 |
|
3.58 |
|
Federal Reserve and
other short-term investments |
|
309,143 |
|
|
609 |
|
0.79 |
|
|
|
326,375 |
|
|
1,241 |
|
1.52 |
|
Total
interest-earning assets |
|
1,982,311 |
|
|
18,930 |
|
3.82 |
|
|
|
2,246,030 |
|
|
22,137 |
|
3.94 |
|
Other assets |
|
34,405 |
|
|
|
|
|
|
|
|
38,003 |
|
|
|
|
|
|
Total
assets |
$ |
2,016,716 |
|
|
|
|
|
|
|
$ |
2,284,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits (5) |
$ |
1,229,476 |
|
|
2,518 |
|
0.82 |
|
|
$ |
1,362,569 |
|
|
3,567 |
|
1.05 |
|
Borrowed funds |
|
467,988 |
|
|
973 |
|
0.83 |
|
|
|
543,607 |
|
|
2,105 |
|
1.55 |
|
Total
interest-bearing liabilities |
|
1,697,464 |
|
|
3,491 |
|
0.82 |
|
|
|
1,906,176 |
|
|
5,672 |
|
1.19 |
|
Demand deposits |
|
148,841 |
|
|
|
|
|
|
|
|
180,375 |
|
|
|
|
|
|
Other liabilities |
|
4,849 |
|
|
|
|
|
|
|
|
5,381 |
|
|
|
|
|
|
Total
liabilities |
|
1,851,154 |
|
|
|
|
|
|
|
|
2,091,932 |
|
|
|
|
|
|
Stockholders’
equity |
|
165,562 |
|
|
|
|
|
|
|
|
192,101 |
|
|
|
|
|
|
Total
liabilities and stockholders’ equity |
$ |
2,016,716 |
|
|
|
|
|
|
|
$ |
2,284,033 |
|
|
|
|
|
|
Net interest
income |
|
|
|
$ |
15,439 |
|
|
|
|
|
|
|
$ |
16,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
spread |
|
|
|
|
|
|
3.00 |
% |
|
|
|
|
|
|
|
2.75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
(6) |
|
|
|
|
|
|
3.12 |
% |
|
|
|
|
|
|
|
2.93 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
interest-earning assets to average interest-bearing
liabilities (7) |
|
|
|
|
|
|
116.78 |
% |
|
|
|
|
|
|
|
117.83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
Hingham Institution for ... (NASDAQ:HIFS)
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