HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham,
Massachusetts announced results for the quarter ended March 31,
2021.
Earnings
Net income for the quarter ended March 31, 2021
was $16,350,000 or $7.65 per share basic and $7.45 per share
diluted, as compared to $2,185,000 or $1.02 per share basic and
$1.00 per share diluted for the same period last year. The Bank’s
annualized return on average equity for the first quarter of 2021
was 21.72%, and the annualized return on average assets was 2.32%,
as compared to 3.46% and 0.33% for the same period last year. Net
income per share (diluted) for the first quarter of 2021 increased
by 645% compared to the same period in 2020.
Core net income for the quarter ended March 31,
2021, which represents net income excluding the after-tax gains and
losses on securities, both realized and unrealized, was $13,725,000
or $6.42 per share basic and $6.25 per share diluted, as compared
to $8,479,000 or $3.97 per share basic and $3.88 per share diluted
for the same period last year. The Bank’s annualized core return on
average equity for the first quarter of 2021 was 18.23% and the
annualized core return on average assets was 1.95%, as compared to
13.44% and 1.30% for the same period last year. Core net income per
share (diluted) for the first quarter of 2021 increased by 61% over
the same period in 2020.
See Page 8 for a Non-GAAP reconciliation between
net income and core net income. In calculating core net income, the
Bank does not make any adjustments other than those relating to
after-tax gains and losses on securities, realized and
unrealized.
Balance Sheet and Capital
Management
Total assets were $2.844 billion at March 31,
2021, representing a 2% annualized decline year-to-date and 7%
growth from March 31, 2020. Asset growth was below loan growth as
the Bank continued to manage the balance sheet to minimize the
carrying cost of its on-balance sheet liquidity.
Net loans increased to $2.508 billion at March
31, 2021, representing 2% annualized growth year-to-date and 8%
growth from March 31, 2020. Growth was concentrated in the Bank’s
commercial real estate portfolio.
Total deposits, including wholesale deposits,
increased to $2.274 billion at March 31, 2021, representing 25%
annualized growth year-to-date and 33% growth from March 31, 2020.
Total retail and business deposits increased to $1.621 billion at
March 31, 2021, representing 8% annualized growth year-to-date and
9% growth from March 31, 2020. Non-interest-bearing deposits,
included in retail and business deposits, increased to $327.3
million at March 31, 2021, representing 18% annualized growth
year-to-date and 34% growth from March 31, 2020. During the first
quarter of 2021, the Bank continued to manage its wholesale funding
mix between wholesale time deposits and Federal Home Loan Bank
advances in order to reduce the cost of funds.
Book value per share was $144.12 as of March 31,
2021, representing 21% annualized growth year-to-date and 24%
growth from March 31, 2020. In addition to the increase in book
value per share, the Bank declared $2.54 in dividends per share
since March 31, 2020, including a special dividend of $0.70 per
share declared during the fourth quarter of 2020. The Bank
announced increases in its regular quarterly dividend in each of
the last four quarters.
In March 2021, the Bank declared a regular cash
dividend of $0.49 per share. This represented an increase of 4%
over the previous regular quarterly dividend of $0.47 per share.
This dividend will be paid on April 21, 2021 to stockholders of
record as of April 12, 2021. This was the Bank’s 109th consecutive
quarterly dividend and the Bank has consistently increased regular
quarterly cash dividends over the last twenty-six years. The Bank
has also declared special cash dividends in each of the last
twenty-six years, typically in the fourth quarter.
The Bank sets the level of the special dividend
based on the Bank’s capital requirements and the prospective return
on other capital allocation options. This may result in special
dividends, if any, significantly above or below the regular
quarterly dividend. Future regular and special dividends will be
considered by the Board of Directors on a quarterly basis.
The Bank has previously communicated the
declaration of the regular dividend via a separate press release.
Going forward, the announcement of regular and special dividends,
if any, will be communicated along with the quarterly results to
simplify our internal process and reduce our costs.
Operational Performance
Metrics
The net interest margin for the quarter ended
March 31, 2021 increased 72 basis points to 3.54%, as compared to
2.82% for the same period last year. The Bank has benefited from a
sharp decline in the cost of interest-bearing liabilities,
including retail and commercial deposits and wholesale funding. The
Bank has also benefited from continued growth in non-interest
bearing deposit balances. These benefits were partially offset by a
decline in the yield on interest-earning assets, driven primarily
by the decline in the interest on excess reserves held at the
Federal Reserve Bank of Boston and a lower yield on loans during
the same period.
Key credit and operational metrics remained
strong in the first quarter. At March 31, 2021, non-performing
assets totaled 0.02% of total assets, compared to 0.27% at December
31, 2020 and 0.19% at March 31, 2020. Non-performing loans as a
percentage of the total loan portfolio totaled 0.02% at March 31,
2021, compared to 0.16% at December 31, 2020 and 0.06% at March 31,
2020. The Bank recorded $1,000 in net charge-offs in the first
three months of 2021, as compared to $681,000 in net charge-offs
for the same period last year. The prior year charge-off related
exclusively to the foreclosed property discussed below.
At March 31, 2021, the Bank did not own any
foreclosed property, as compared to $3.6 million and $3.8 million
at March 31, 2020 and December 31, 2020, respectively. This prior
holding consisted exclusively of a single residential property that
was purchased at auction in January 2020. The balance at December
31, 2020 included the capitalization of repairs and improvements
completed by the Bank following acquisition, net of a writedown of
$100,000 recorded in the fourth quarter of 2020. The property was
sold during the first quarter of 2021 and the Bank recorded a
$68,000 loss on disposal, included in foreclosure and related
expenses.
The efficiency ratio fell to 22.02% for the
first quarter of 2021, as compared to 30.64% for the same period
last year. Operating expenses as a percentage of average assets
fell to 0.77% for the first quarter of 2021, as compared to 0.86%
for the same period last year. The Bank remains focused on reducing
waste through an ongoing process of continuous improvement.
These operational metrics reflect the Bank’s
disciplined focus on credit quality and expense management.
Annual Meeting
The Bank will hold its Annual Meeting of
Stockholders at 3:00PM EST on Thursday, April 29th, 2021 via Zoom.
Although we anticipate that a handful of Bank staff will be present
at our Main Office for the business section of the meeting, we do
not believe the public health environment will allow the Bank to
hold a traditional in-person meeting in 2021. Immediately following
the business meeting, the Bank will hold an informal meeting to
discuss the results of the prior year and the operations of the
Bank, as well as a questions and answers session. We strongly
encourage all shareholders to vote by proxy. Electronic voting will
not be available. Registration for the meeting is available on the
Bank’s Investor Relations website (click here).
Chairman Robert H. Gaughen Jr. stated, “Returns
on equity and assets were satisfactory in the first quarter of
2021, although performance in any one period should always be
viewed cautiously, especially when tailwinds are blowing strongly
in our favor. These tailwinds will not blow forever and we must be
prepared for environments in which headwinds prevail. In doing so,
we remain focused on careful capital allocation, defensive
underwriting and disciplined cost control - the building blocks for
compounding shareholder capital through all stages of the economic
cycle. These remain constant, regardless of the macroeconomic
environment in which we operate.”
The Bank’s quarterly financial results are
summarized in this earnings release, but shareholders are
encouraged to read the Bank’s quarterly report on Form 10-Q, which
is generally available several weeks after the earnings release.
The Bank expects to file Form 10-Q for the quarter ended March 31,
2021 with the Federal Deposit Insurance Corporation (FDIC) on or
about May 5, 2021.
Incorporated in 1834, Hingham Institution for
Savings is one of America’s oldest banks. The Bank maintains
offices in Boston, Nantucket, and Washington, D.C.
The Bank’s shares of common stock are listed and
traded on The NASDAQ Stock Market under the symbol HIFS.
HINGHAM INSTITUTION FOR
SAVINGSSelected Financial Ratios
|
Three Months EndedMarch 31, |
|
2020 |
|
2021 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Key Performance Ratios |
|
|
|
|
|
Return on average assets
(1) |
0.33 |
% |
|
2.32 |
% |
Return on average equity
(1) |
3.46 |
|
|
21.72 |
|
Core return on average assets
(1) (5) |
1.30 |
|
|
1.95 |
|
Core return on average equity
(1) (5) |
13.44 |
|
|
18.23 |
|
Interest rate spread (1)
(2) |
2.52 |
|
|
3.44 |
|
Net
interest margin (1) (3) |
2.82 |
|
|
3.54 |
|
Operating expenses to average assets (1) |
0.86 |
|
|
0.77 |
|
Efficiency ratio (4) |
30.64 |
|
|
22.02 |
|
Average equity to average
assets |
9.67 |
|
|
10.70 |
|
Average interest-earning
assets to average interest bearing liabilities |
121.37 |
|
|
126.10 |
|
|
|
|
|
|
|
|
March 31, 2020 |
|
December 31,2020 |
|
March 31, 2021 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality
Ratios |
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan
losses/total loans |
|
0.68 |
% |
|
0.69 |
% |
|
|
0.70 |
% |
Allowance for loan
losses/non-performing loans |
|
1,099.51 |
|
|
438.28 |
|
|
|
2,870.29 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans/total
loans |
|
0.06 |
|
|
0.16 |
|
|
|
0.02 |
|
Non-performing loans/total
assets |
|
0.05 |
|
|
0.14 |
|
|
|
0.02 |
|
Non-performing assets/total
assets |
|
0.19 |
|
|
0.27 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
Share
Related |
|
|
|
|
|
|
|
|
|
|
Book value per share |
$ |
116.34 |
|
|
$ |
137.02 |
|
|
$ |
144.12 |
|
Market value per share |
$ |
144.99 |
|
|
$ |
216.00 |
|
|
$ |
283.76 |
|
Shares outstanding at end of
period |
|
2,136,750 |
|
|
|
2,137,900 |
|
|
|
2,139,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Annualized.(2) Interest rate spread
represents the difference between the yield on interest-earning
assets and the cost of interest-bearing liabilities.(3) Net
interest margin represents net interest income divided by average
interest-earning assets.(4) The efficiency ratio represents total
operating expenses, divided by the sum of net interest income and
total other income (loss), excluding gain (loss) on equity
securities, net and gain on disposal of fixed assets. Prior to the
first quarter of 2021, the Bank’s calculation of the efficiency
ratio included gains on disposal of fixed assets. This had the
impact of slightly improving the efficiency ratio in periods in
which the Bank recognized gains on the sale of former branch
locations. The Bank believes it is more conservative to exclude
such transactions. The efficiency ratio for the first quarter of
2020 stated above has been recalculated using this method.(5)
Non-GAAP measurements that represent return on average assets and
return on average equity, excluding the after-tax gain (loss) on
equity securities, net.
HINGHAM INSTITUTION FOR
SAVINGSConsolidated Balance Sheets
(In
thousands, except share amounts) |
March 31, 2020 |
|
December 31, 2020 |
|
March 31, 2021 |
(Unaudited) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
due from banks |
$ |
7,797 |
|
$ |
6,798 |
|
$ |
6,267 |
Federal
Reserve and other short-term investments |
|
203,729 |
|
|
227,188 |
|
|
208,206 |
Cash and cash equivalents |
|
211,526 |
|
|
233,986 |
|
|
214,473 |
|
|
|
|
|
|
|
|
|
CRA
investment |
|
8,532 |
|
|
9,580 |
|
|
9,412 |
Debt
securities available for sale |
|
10 |
|
|
6 |
|
|
5 |
Other
marketable equity securities |
|
38,407 |
|
|
56,282 |
|
|
59,448 |
Securities, at fair value |
|
46,949 |
|
|
65,868 |
|
|
68,865 |
Federal
Home Loan Bank stock, at cost |
|
29,868 |
|
|
19,345 |
|
|
14,185 |
Loans,
net of allowance for loan losses of $15,833 at March 31, 2020,
$17,404 at December 31, 2020 and $17,681 at March 31,
2021 |
|
2,320,369 |
|
|
2,495,331 |
|
|
2,507,873 |
Foreclosed assets |
|
3,600 |
|
|
3,826 |
|
|
— |
Bank-owned life insurance |
|
12,785 |
|
|
12,657 |
|
|
12,738 |
Premises
and equipment, net |
|
15,418 |
|
|
15,248 |
|
|
15,247 |
Accrued
interest receivable |
|
5,183 |
|
|
5,267 |
|
|
5,109 |
Deferred
income tax asset, net |
|
3,153 |
|
|
763 |
|
|
203 |
Other
assets |
|
5,720 |
|
|
4,802 |
|
|
5,421 |
Total assets |
$ |
2,654,571 |
|
$ |
2,857,093 |
|
$ |
2,844,114 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
$ |
1,468,349 |
|
$ |
1,825,700 |
|
$ |
1,946,327 |
Non-interest-bearing deposits |
|
244,546 |
|
|
313,497 |
|
|
327,279 |
Total deposits |
|
1,712,895 |
|
|
2,139,197 |
|
|
2,273,606 |
Federal
Home Loan Bank advances |
|
676,231 |
|
|
408,031 |
|
|
246,200 |
Mortgagors’ escrow accounts |
|
7,894 |
|
|
8,770 |
|
|
9,052 |
Accrued
interest payable |
|
359 |
|
|
252 |
|
|
154 |
Other
liabilities |
|
8,593 |
|
|
7,900 |
|
|
6,761 |
Total liabilities |
|
2,405,972 |
|
|
2,564,150 |
|
|
2,535,773 |
|
|
|
|
|
|
|
|
|
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;
2,136,750 shares issued and outstanding at March 31, 2020,
2,137,900 shares issued and outstanding at December 31, 2020 and
2,139,400 shares issued and outstanding at March 31, 2021 |
|
2,137 |
|
|
2,138 |
|
|
2,139 |
Additional paid-in capital |
|
12,322 |
|
|
12,460 |
|
|
12,556 |
Undivided profits |
|
234,140 |
|
|
278,345 |
|
|
293,646 |
Accumulated other comprehensive income |
|
— |
|
|
— |
|
|
— |
Total stockholders’ equity |
|
248,599 |
|
|
292,943 |
|
|
308,341 |
Total liabilities and stockholders’ equity |
$ |
2,654,571 |
|
$ |
2,857,093 |
|
$ |
2,844,114 |
|
|
|
|
|
|
|
|
|
HINGHAM INSTITUTION FOR
SAVINGSConsolidated Statements of
Income
|
Three Months EndedMarch 31, |
(In thousands, except per
share amounts) |
2020 |
|
2021 |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income: |
|
|
|
|
|
Loans |
$ |
25,710 |
|
|
$ |
26,749 |
|
Equity securities |
|
498 |
|
|
|
218 |
|
Federal Reserve and other short-term investments |
|
741 |
|
|
|
52 |
|
Total interest and dividend income |
|
26,949 |
|
|
|
27,019 |
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
Deposits |
|
5,941 |
|
|
|
2,107 |
|
Federal Home Loan Bank advances |
|
2,947 |
|
|
|
444 |
|
Mortgage payable |
|
3 |
|
|
|
— |
|
Total interest expense |
|
8,891 |
|
|
|
2,551 |
|
Net interest income |
|
18,058 |
|
|
|
24,468 |
|
Provision for loan losses |
|
1,138 |
|
|
|
278 |
|
Net interest income, after provision for loan losses |
|
16,920 |
|
|
|
24,190 |
|
Other income (loss): |
|
|
|
|
|
Customer service fees on deposits |
|
172 |
|
|
|
181 |
|
Increase in cash surrender value of bank-owned life insurance |
|
58 |
|
|
|
81 |
|
Gain (loss) on equity securities, net |
|
(8,074 |
) |
|
|
3,367 |
|
Gain on disposal of fixed assets |
|
218 |
|
|
|
— |
|
Miscellaneous |
|
53 |
|
|
|
15 |
|
Total other income (loss) |
|
(7,573 |
) |
|
|
3,644 |
|
Operating expenses: |
|
|
|
|
|
Salaries and employee benefits |
|
3,380 |
|
|
|
3,526 |
|
Occupancy and equipment |
|
455 |
|
|
|
406 |
|
Data processing |
|
489 |
|
|
|
461 |
|
Deposit insurance |
|
183 |
|
|
|
223 |
|
Foreclosure and related |
|
126 |
|
|
|
(82 |
) |
Marketing |
|
180 |
|
|
|
124 |
|
Other general and administrative |
|
807 |
|
|
|
792 |
|
Total operating expenses |
|
5,620 |
|
|
|
5,450 |
|
Income before income
taxes |
|
3,727 |
|
|
|
22,384 |
|
Income tax provision |
|
1,542 |
|
|
|
6,034 |
|
Net income |
$ |
2,185 |
|
|
$ |
16,350 |
|
|
|
|
|
|
|
Cash dividends declared per
common share |
$ |
0.42 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
Basic |
|
2,136 |
|
|
|
2,138 |
|
Diluted |
|
2,184 |
|
|
|
2,195 |
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic |
$ |
1.02 |
|
|
$ |
7.65 |
|
Diluted |
$ |
1.00 |
|
|
$ |
7.45 |
|
|
|
|
|
|
|
HINGHAM INSTITUTION FOR
SAVINGSNet Interest Income Analysis
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2021 |
|
|
AVERAGE BALANCE |
|
INTEREST |
|
YIELD/ RATE (8) |
|
|
AVERAGE BALANCE |
|
INTEREST |
|
YIELD/ RATE (8) |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
(1) (2) |
$ |
2,271,019 |
|
$ |
25,710 |
|
4.53 |
% |
|
$ |
2,497,119 |
|
$ |
26,749 |
|
4.28 |
% |
Securities (3) (4) |
|
65,302 |
|
|
498 |
|
3.05 |
|
|
|
63,927 |
|
|
218 |
|
1.36 |
|
Federal
Reserve and other short-term investments |
|
228,170 |
|
|
741 |
|
1.30 |
|
|
|
204,887 |
|
|
52 |
|
0.10 |
|
Total interest-earning assets |
|
2,564,491 |
|
|
26,949 |
|
4.20 |
|
|
|
2,765,933 |
|
|
27,019 |
|
3.91 |
|
Other
assets |
|
46,536 |
|
|
|
|
|
|
|
|
47,705 |
|
|
|
|
|
|
Total assets |
$ |
2,611,027 |
|
|
|
|
|
|
|
$ |
2,813,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits (5) |
$ |
1,513,343 |
|
|
5,941 |
|
1.57 |
|
|
$ |
1,882,830 |
|
|
2,107 |
|
0.45 |
|
Borrowed
funds |
|
599,659 |
|
|
2,950 |
|
1.97 |
|
|
|
310,683 |
|
|
444 |
|
0.57 |
|
Total interest-bearing liabilities |
|
2,113,002 |
|
|
8,891 |
|
1.68 |
|
|
|
2,193,513 |
|
|
2,551 |
|
0.47 |
|
Non-interest-bearing deposits |
|
238,005 |
|
|
|
|
|
|
|
|
311,800 |
|
|
|
|
|
|
Other
liabilities |
|
7,589 |
|
|
|
|
|
|
|
|
7,246 |
|
|
|
|
|
|
Total liabilities |
|
2,358,596 |
|
|
|
|
|
|
|
|
2,512,559 |
|
|
|
|
|
|
Stockholders’ equity |
|
252,431 |
|
|
|
|
|
|
|
|
301,079 |
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
$ |
2,611,027 |
|
|
|
|
|
|
|
$ |
2,813,638 |
|
|
|
|
|
|
Net
interest income |
|
|
|
$ |
18,058 |
|
|
|
|
|
|
|
$ |
24,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average spread |
|
|
|
|
|
|
2.52 |
% |
|
|
|
|
|
|
|
3.44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest margin (6) |
|
|
|
|
|
|
2.82 |
% |
|
|
|
|
|
|
|
3.54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to average interest-bearing
liabilities (7) |
|
121.37 |
% |
|
|
|
|
|
|
|
126.10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
SAVINGSNon-GAAP Reconciliation
The table below presents the reconciliation between net income
and core net income, a non-GAAP measurement that represents net
income excluding the after-tax gain (loss) on equity securities,
net.
|
Three Months EndedMarch 31, |
(In thousands, unaudited) |
2020 |
|
2021 |
|
|
|
|
|
|
Non-GAAP
reconciliation: |
|
|
|
|
|
Net Income |
$ |
2,185 |
|
|
$ |
16,350 |
|
(Gain) loss on equity securities, net |
|
8,074 |
|
|
|
(3,367 |
) |
Income tax expense (benefit) (1) |
|
(1,780 |
) |
|
|
742 |
|
Core Net
Income |
$ |
8,479 |
|
|
$ |
13,725 |
|
|
|
|
|
|
|
|
|
(1) The equity securities are held in a
tax-advantaged subsidiary corporation. The income tax effect of the
(gain) loss on equity securities, net, was calculated using the
effective tax rate applicable to the subsidiary.
CONTACT: |
|
Patrick R. Gaughen, President and Chief Operating Officer (781)
783-1761 |
|
|
|
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