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HINGHAM, Mass., Oct. 11, 2019 (GLOBE NEWSWIRE) — HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced third quarter results for 2019.

Net income for the quarter ended September 30, 2019 was $9,033,000 or $4.23 per share basic and $4.14 per share diluted, as compared to $8,848,000 or $4.15 per share basic and $4.05 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the third quarter of 2019 was 15.33%, and the annualized return on average assets was 1.40%, as compared to 17.06% and 1.52% for the same period in 2018.  Net income per share (diluted) for the third quarter of 2019 increased by 2% over the same period of 2018. 

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the third quarter of 2019 was $8,801,000 or $4.12 per share basic and $4.03 per share diluted, as compared to $8,424,000 or $3.95 per share basic and $3.85 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the third quarter of 2019 was 14.94%, and the annualized core return on average assets was 1.37%, as compared to 16.24% and 1.45% for the same period in 2018.  Core net income per share (diluted) for the third quarter of 2019 increased by 5% over the same period in 2018.

Net income for the nine months ended September 30, 2019 was $27,563,000 or $12.92 per share basic and $12.63 per share diluted, as compared to $25,735,000 or $12.07 per share basic and $11.77 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the first nine months of 2019 was 16.17%, and the annualized return on average assets was 1.47%, as compared to 17.17% and 1.49% for the same period last year.  Net income per share (diluted) for the first nine months of 2019 increased by 7% over the same period in 2018.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the nine months ended September 30, 2019 was $24,182,000 or $11.33 per share basic and $11.08 per share diluted, as compared to $24,729,000 or $11.60 per share basic and $11.31 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the first nine months of 2019 was 14.19% and the annualized core return on average assets was 1.29%, as compared to 16.50% and 1.43% for the same period last year.  Core net income per share (diluted) for the first nine months of 2019 declined by 2% over the same period in 2018.

Balance sheet growth was mixed, as deposits were $1.706 billion at September 30, 2019, representing 11% annualized growth year-to-date and 1% decline from September 30, 2018.  The growth during the first nine months of 2019 reflected strong growth in retail and business deposits.  The decline over the trailing year was driven by a substantial decline in wholesale deposits, offset by growth in retail and business deposits.  Net loans were $2.141 billion at September 30, 2019, representing 9% annualized growth year-to-date and 8% growth from September 30, 2018.  Total assets were $2.480 billion, representing 4% annualized growth year-to-date and 5% growth from September 30, 2018.  During the third quarter of 2019, the Bank used a portion of its cash balances to reduce outstanding Federal Home Loan Bank advances and brokered time deposits, in order to minimize the carrying cost of its on-balance sheet liquidity.  Book value per share was $111.47 as of September 30, 2019, representing 16% annualized growth year-to-date and 13% growth from September 30, 2018.  In addition to the increase in book value per share, the Bank declared $2.04 in dividends per share since September 30, 2018, including a special dividend of $0.50 per share declared during the fourth quarter of 2018.

Key credit and operational metrics remained strong in the third quarter of 2019.  At September 30, 2019, non-performing assets totaled 0.05% of total assets, compared to 0.02% at December 31, 2018 and 0.02% at September 30, 2018.  Non-performing loans as a percentage of the total loan portfolio totaled 0.06% at September 30, 2019, compared to 0.02% at December 31, 2018 and 0.02% at September 30, 2018.  The Bank recorded $1,000 in net recoveries for both the first nine months of 2019 and 2018.  At September 30, 2019, December 31 and September 30, 2018, the Bank did not own any foreclosed property.  The efficiency ratio was 29.28% for the third quarter of 2019, as compared to 29.17% for the same period last year.  Operating expenses as a percentage of average assets fell to 0.81% in the third quarter of 2019, as compared to 0.86% for the same period last year.  

Chairman Robert H. Gaughen, Jr. stated, “Although returns on equity and assets were adequate in the third quarter of 2019, we continue to face significant headwinds from a now-inverted yield curve and an extraordinarily competitive market for both high-quality lending and deposit relationships.  Given the unique structure and composition of our balance sheet, this is a particularly challenging environment.  As always, we remain focused on careful capital allocation, defensive underwriting, and disciplined cost control – the keys to compounding shareholder capital through all stages of the credit cycle.”

The Bank’s quarterly financial results are summarized in the earnings release, but shareholders are encouraged to read the Bank’s quarterly reports on Form 10-Q, which are generally available several weeks after the earnings release.  The Bank expects to file Form 10-Q for the third quarter of 2019 with the FDIC on or about November 5, 2019.

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 also maintains a commercial lending office in 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 SAVINGS
Selected Financial Ratios
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019
(Unaudited)
Key Performance Ratios
Return on average assets (1)	1.52	%		1.40	%		1.49	%		1.47	%
Return on average equity (1)	17.06			15.33			17.17			16.17
Core return on average assets (1) (5)	1.45			1.37			1.43			1.29
Core return on average equity (1) (5)	16.24			14.94			16.50			14.19
Interest rate spread (1) (2)	2.67			2.42			2.72			2.36
Net interest margin (1) (3)	2.93			2.77			2.93			2.69
Operating expenses to average assets (1)	0.86			0.81			0.88			0.83
Efficiency ratio (4)	29.17			29.28			29.84			30.70
Average equity to average assets	8.91			9.16			8.69			9.08
Average interest-earning assets to average interest-
bearing liabilities	119.39			120.49			118.61			120.31

	September 30, 2018					December 31, 2018				September 30, 2019
(Unaudited)
Asset Quality Ratios
Allowance for loan losses/total loans		0.68	%			0.68		%				0.70	%
Allowance for loan losses/non-performing loans		2,807.44				2,852.89						1,138.01
Non-performing loans/total loans		0.02				0.02						0.06
Non-performing loans/total assets		0.02				0.02						0.05
Non-performing assets/total assets		0.02				0.02						0.05
Share Related
Book value per share	$	98.35				$	99.67			$	111.47
Market value per share	$	219.81				$	197.74			$	189.00
Shares outstanding at end of period		2,132,750					2,132,750				2,133,750

(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, excluding gain on equity securities, net.

(5) Non-GAAP measurements that represent return on average assets and return on average equity, excluding the after-tax gain on equity securities, net.

 

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
(In thousands, except share amounts)	September 30, 2018			December 31, 2018				September 30, 2019
(Unaudited)
ASSETS
Cash and due from banks	$	10,043		$	8,004			$	10,233
Federal Reserve and other short-term investments		286,449			287,971				221,022
Cash and cash equivalents		296,492			295,975				231,255
CRA investment		7,605			7,680				7,948
Debt securities available for sale		15			14				11
Other marketable equity securities		32,099			30,766				38,981
Securities, at fair value		39,719			38,460				46,940
Federal Home Loan Bank stock, at cost		21,682			28,696				23,615
Loans, net of allowance for loan losses of $13,588
at September 30, 2018, $13,808 at December 31, 2018
and $15,090 at September 30, 2019		1,976,422			2,009,288				2,140,514
Foreclosed assets		—			—				—
Bank-owned life insurance		12,414			12,476				12,661
Premises and equipment, net		14,458			14,553				14,339
Accrued interest receivable		5,066			4,581				4,912
Deferred income tax asset, net		1,128			2,258				1,303
Other assets		2,981			2,300				4,833
Total assets	$	2,370,362		$	2,408,587			$	2,480,372

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing deposits	$	1,494,193		$	1,359,581		$	1,474,113
Non-interest-bearing deposits		220,943			213,573			231,616
Total deposits		1,715,136			1,573,154			1,705,729
Federal Home Loan Bank advances		431,242			606,600			519,900
Mortgage payable		766			751			703
Mortgagors’ escrow accounts		6,901			7,402			7,544
Accrued interest payable		1,687			2,187			2,198
Other liabilities		4,883			5,917			6,445
Total liabilities		2,160,615			2,196,011			2,242,519
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 at		2,133			2,133			2,134
September 30 and December 31, 2018 and 2,133,750 shares
issued and outstanding at September 30, 2019
Additional paid-in capital		11,843			11,863			12,073
Undivided profits		195,771			198,580			223,646
Accumulated other comprehensive income		—			—			—
Total stockholders’ equity		209,747			212,576			237,853
Total liabilities and stockholders’ equity	$	2,370,362		$	2,408,587		$	2,480,372

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
(In thousands, except per share amounts)	2018				2019			2018			2019
(Unaudited)
Interest and dividend income:
Loans	$		22,523		$	26,153		$	64,306		$		74,049
Equity securities			503			518			1,487				1,503
Federal Reserve and other short-term investments			1,317			1,527			3,814				4,716
Total interest and dividend income			24,343			28,198			69,607				80,268
Interest expense:
Deposits			5,291			7,585			13,202				20,805
Federal Home Loan Bank advances			2,294			3,099			6,653				9,766
Mortgage payable			12			11			36				33
Total interest expense			7,597			10,695			19,891				30,604
Net interest income			16,746			17,503			49,716				49,664
Provision for loan losses			350			302			1,050				1,282
Net interest income, after provision for loan losses			16,396			17,201			48,666				48,382
Other income:
Customer service fees on deposits			216			213			638				598
Increase in bank-owned life insurance			65			61			193				185
Gain on equity securities, net			544			298			1,290				4,337
Miscellaneous			42			42			129				125
Total other income			867			614			2,250				5,245
Operating expenses:
Salaries and employee benefits			3,146			3,290			9,534				9,614
Occupancy and equipment			421			453			1,313				1,354
Data processing			353			419			1,042				1,154
Deposit insurance			258			22			757				530
Foreclosure			(33)			34			(41)				101
Marketing			139			188			488				497
Other general and administrative			695			811			2,028				2,276
Total operating expenses			4,979			5,217			15,121				15,526
Income before income taxes			12,284			12,598			35,795				38,101
Income tax provision			3,436			3,565			10,060				10,538
Net income	$		8,848		$	9,033		$	25,735		$		27,563
Cash dividends declared per share	$		0.36		$	0.40		$	1.05		$		1.17
Weighted average shares outstanding:
Basic			2,133			2,134			2,133				2,133
Diluted			2,188			2,183			2,187				2,182
Earnings per share:
Basic	$		4.15		$	4.23		$	12.07		$		12.92
Diluted	$		4.05		$	4.14		$	11.77		$		12.63

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
	Three Months Ended September 30,
	2018									2019
	AVERAGE						YIELD/			AVERAGE						YIELD/
	BALANCE			INTEREST			RATE (8)			BALANCE			INTEREST			RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)	$	1,973,987		$	22,523		4.56	%		$	2,191,324		$	26,153		4.77	%
Securities (3) (4)		52,166			503		3.86				58,133			518		3.56
Federal Reserve and other short-term investments		262,943			1,317		2.00				279,802			1,527		2.18
Total interest-earning assets		2,289,096			24,343		4.25				2,529,259			28,198		4.46
Other assets		38,380									43,578
Total assets	$	2,327,476								$	2,572,837
Interest-bearing deposits (5)	$	1,503,771			5,291		1.41			$	1,616,151			7,585		1.88
Borrowed funds		413,497			2,306		2.23				482,975			3,110		2.58
Total interest-bearing liabilities		1,917,268			7,597		1.58				2,099,126			10,695		2.04
Demand deposits		197,838									230,505
Other liabilities		4,927									7,514
Total liabilities		2,120,033									2,337,145
Stockholders’ equity		207,443									235,692
Total liabilities and stockholders’ equity	$	2,327,476								$	2,572,837
Net interest income				$	16,746								$	17,503
Weighted average spread							2.67	%								2.42	%
Net interest margin (6)							2.93	%								2.77	%
Average interest-earning assets to average
interest-bearing liabilities (7)		119.39	%								120.49	%

(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 SAVINGS
Net Interest Income Analysis
	Nine Months Ended September 30,
	2018									2019
	AVERAGE BALANCE			INTEREST			YIELD/ RATE (8)			AVERAGE BALANCE			INTEREST			YIELD/ RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)	$	1,918,239		$	64,306		4.47	%		$	2,134,186		$	74,049		4.63	%
Securities (3) (4)		52,870			1,487		3.75				57,118			1,503		3.51
Federal Reserve and other short-term investments		289,018			3,814		1.76				270,882			4,716		2.32
Total interest-earning assets		2,260,127			69,607		4.11				2,462,186			80,268		4.35
Other assets		38,668									41,483
Total assets	$	2,298,795								$	2,503,669
Interest-bearing deposits (5)	$	1,430,524			13,202		1.23			$	1,548,791			20,805		1.79
Borrowed funds		475,050			6,689		1.88				497,694			9,799		2.63
Total interest-bearing liabilities		1,905,574			19,891		1.39				2,046,485			30,604		1.99
Demand deposits		188,441									222,280
Other liabilities		4,954									7,635
Total liabilities		2,098,969									2,276,400
Stockholders’ equity		199,826									227,269
Total liabilities and stockholders’ equity	$	2,298,795								$	2,503,669
Net interest income				$	49,716								$	49,664
Weighted average spread							2.72	%								2.36	%
Net interest margin (6)							2.93	%								2.69	%
Average interest-earning assets to average
interest-bearing liabilities (7)		118.61	%								120.31	%

(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.

Patrick R. Gaughen, President and Chief Operating Officer (781) 783-1761