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Hingham Announces 21% Increase in Annual Earnings and 15.59% Return on Equity

HINGHAM, Mass., Jan. 17, 2017 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2016.

Net income for the year ended December 31, 2016 was $23,423,000 or $10.99 per share basic and $10.89 per share diluted as compared to $19,346,000 or $9.09 per share basic and $9.02 per share diluted for the year ended December 31, 2015. Net income per share (basic and diluted) for 2016 increased 21% over the same period in 2015. The Bank’s return on average equity for the year ended December 31, 2016 was 15.59% and the return on average assets was 1.22%, as compared to 14.81% and 1.18% for the same period in 2015.

Net income for the quarter ended December 31, 2016 was $6,287,000 or $2.95 per share basic and $2.92 per share diluted as compared to $5,234,000 or $2.46 per share basic and $2.44 per share diluted for the fourth quarter of 2015. Net income per share (basic and diluted) for the fourth quarter of 2016 increased 20% over the same period in 2015. The Bank’s annualized return on average equity for the fourth quarter of 2016 was 15.85%, and the annualized return on average assets was 1.27% as compared to 15.30% and 1.21% for the same period in 2015.

The Bank continued to produce strong growth in deposits, loans, and book value per share in 2016. Deposits increased by 12% to $1.366 billion. Net loans increased by 14% to $1.606 billion. Total assets increased by 14% to $2.015 billion. Book value per share increased by 16% to $75.50. This increase in book value per share excludes capital returned to the ownership through regular and special dividends; the Bank declared $1.56 in regular and special dividends in 2016.

Key credit and operational metrics remained strong in 2016. At December 31, 2016, non-performing assets totaled 0.09% of total assets as compared with 0.10% at December 31, 2015. Non-performing loans as a percentage of the total loan portfolio totaled 0.11% at December 31, 2016, as compared to 0.13% at December 31, 2015. At December 31, 2016 and 2015, the Bank did not own any foreclosed property. The efficiency ratio improved to 32.15% in 2016 as compared to 36.32% in 2015. Non-interest expense as a percentage of average assets improved to 1.00% in 2016, as compared to 1.16% in 2015. Both the efficiency ratio and operating expenses as a percentage of average assets reached new record lows in 2016 and reflect the Bank’s particular focus on disciplined expense management.

President Robert H. Gaughen, Jr. stated, “We are pleased to report a strong return on capital in 2016. 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 the oldest financial institution headquartered in Hingham and one of the oldest continuously operating banks in the United States. The Bank’s main offices are located on Main Street in Hingham, MA. The Bank also maintains branch offices in South Hingham and the neighboring towns of Cohasset, Hull, Scituate, Norwell and Weymouth as well as branches in the South End of Boston, 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 Ended
December 31,
Twelve Months Ended
December 31,
2015 2016 2015 2016
(Unaudited)
Key Performance Ratios
Return on average assets (1)1.21% 1.27% 1.18% 1.22%
Return on average equity (1)15.30 15.85 14.81 15.59
Interest rate spread (1) (2)3.02 3.03 3.06 2.99
Net interest margin (1) (3)3.14 3.15 3.17 3.10
Non-interest expense to average assets (1)1.09 0.95 1.16 1.00
Efficiency ratio (4)34.55 29.93 36.32 32.15
Average equity to average assets7.90 7.98 7.97 7.85
Average interest-earning assets to average interest-bearing liabilities115.90 116.65 115.85 116.19


December 31,
2015
December 31,
2016
(Unaudited)
Asset Quality Ratios
Allowance for loan losses/total loans0.70% 0.68%
Allowance for loan losses/non-performing loans540.37 614.43
Non-performing loans/total loans0.13 0.11
Non-performing loans/total assets0.10 0.09
Non-performing assets/total assets0.10 0.09
Share Related
Book value per share$64.83 $ 75.50
Market value per share$119.80 $ 196.78
Shares outstanding at end of period 2,128,750 2,132,750

(1) Annualized for the three months periods.

(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
(Dollars in thousands, except per share data) December 31, 2015 December 31,
2016
(Unaudited)
ASSETS
Cash and due from banks $6,944 $7,816
Federal Reserve and other short-term investments 254,069 315,116
Cash and cash equivalents 261,013 322,932
Certificates of deposit 6,206
CRA investment 4,971 6,839
Other securities available for sale 35,632 20,329
Securities available for sale, at fair value 40,603 27,168
Federal Home Loan Bank stock, at cost 19,796 24,472
Loans, net of allowance for loan losses of $9,905 at December 31, 2015 and $11,030 at December 31, 2016 1,405,533 1,605,647
Foreclosed assets
Bank-owned life insurance 11,697 11,962
Premises and equipment, net 15,094 14,462
Accrued interest receivable 3,270 3,529
Deferred income tax asset, net 3,281 2,489
Other assets 2,035 1,938
Total assets $1,768,528 $2,014,599
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits $1,088,742 $1,218,360
Non-interest-bearing deposits 128,285 147,749
Total deposits 1,217,027 1,366,109
Federal Home Loan Bank advances 402,464 475,318
Mortgage payable 922 868
Mortgagors’ escrow accounts 4,850 5,585
Accrued interest payable 303 400
Other liabilities 4,947 5,295
Total liabilities 1,630,513 1,853,575
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 and 2,132,750 shares issued and outstanding at December 31, 2015 and 2016, respectively 2,129 2,133
Additional paid-in capital 11,052 11,575
Undivided profits 124,481 144,580
Accumulated other comprehensive income 353 2,736
Total stockholders’ equity 138,015 161,024
Total liabilities and stockholders’ equity $1,768,528 $2,014,599


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands, except per share amounts) 2015 2016 2015 2016
(Unaudited)
Interest and dividend income:
Loans $15,810 $18,027 $60,260 $68,917
Debt securities 33 195 52
Equity securities 250 367 795 1,248
Federal Reserve and other short-term investments 185 426 609 1,552
Total interest and dividend income 16,278 18,820 61,859 71,769
Interest expense:
Deposits 2,197 2,474 7,945 9,599
Federal Home Loan Bank advances 746 950 2,908 3,732
Mortgage payable 14 14 57 54
Total interest expense 2,957 3,438 10,910 13,385
Net interest income 13,321 15,382 50,949 58,384
Provision for loan losses 100 325 625 1,135
Net interest income, after provision for loan losses 13,221 15,057 50,324 57,249
Other income:
Customer service fees on deposits 247 237 978 928
Increase in bank-owned life insurance 69 62 281 265
Gain on sale of securities 29 344
Miscellaneous 53 55 195 198
Total other income 369 354 1,483 1,735
Operating expenses:
Salaries and employee benefits 2,931 3,036 11,632 12,024
Occupancy and equipment 471 455 2,057 1,856
Data processing 291 304 1,182 1,230
Deposit insurance 240 252 902 1,023
Foreclosure 10 (73) 72 34
Marketing 105 74 489 403
Other general and administrative 682 662 2,697 2,645
Total operating expenses 4,730 4,710 19,031 19,215
Income before income taxes 8,860 10,701 32,776 39,769
Income tax provision 3,626 4,414 13,430 16,346
Net income $5,234 $6,287 $19,346 $23,423
Cash dividends declared per share $0.60 $0.64 $1.46 $1.56
Weighted average shares outstanding:
Basic 2,129 2,131 2,129 2,131
Diluted 2,149 2,158 2,145 2,152
Earnings per share:
Basic $2.46 $2.95 $9.09 $10.99
Diluted $2.44 $2.92 $9.02 $10.89



HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
Three Months Ended December 31,
2015 2016
AVERAGE BALANCE INTEREST YIELD/ RATE (8) AVERAGE BALANCE

INTEREST
YIELD/ RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)$1,381,732 $15,810 4.58% $1,598,286 $18,027 4.51%
Securities (3) (4) 64,082 283 1.77 45,965 367 3.19
Federal Reserve and other short-term investments 253,716 185 0.29 309,043 426 0.55
Total interest-earning assets 1,699,530 16,278 3.83 1,953,294 18,820 3.85
Other assets 33,138 33,715
Total assets$1,732,668 $1,987,009
Interest-bearing deposits (5)$1,087,721 2,197 0.81 $1,212,674 2,474 0.82
Borrowed funds 378,621 760 0.80 461,749 964 0.84
Total interest-bearing liabilities 1,466,342 2,957 0.81 1,674,423 3,438 0.82
Demand deposits 124,994 149,352
Other liabilities 4,499 4,579
Total liabilities 1,595,835 1,828,354
Stockholders’ equity 136,833 158,655
Total liabilities and stockholders’ equity$1,732,668 $1,987,009
Net interest income $13,321 $15,382
Weighted average spread 3.02% 3.03%
Net interest margin (6) 3.14% 3.15%
Average interest-earning assets to average interest-bearing liabilities (7) 115.90% 116.65%


(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
Twelve Months Ended December 31,
2015 2016
AVERAGE BALANCE

INTEREST
YIELD/ RATE AVERAGE BALANCE

INTEREST
YIELD/ RATE
(Dollars in thousands)
(Unaudited)
Loans (1) (2)$1,307,871 $60,260 4.61% $1,524,858 $68,917 4.52%
Securities (3) (4) 76,193 990 1.30 54,494 1,300 2.39
Federal Reserve and other short-term investments 221,807 609 0.27 301,322 1,552 0.52
Total interest-earning assets 1,605,871 61,859 3.85 1,880,674 71,769 3.82
Other assets 33,014 33,378
Total assets$1,638,885 $1,914,052
Interest-bearing deposits (5)$1,038,016 7,945 0.77 $1,176,472 9,599 0.82
Borrowed funds 348,094 2,965 0.85 442,134 3,786 0.86
Total interest-bearing liabilities 1,386,110 10,910 0.79 1,618,606 13,385 0.83
Demand deposits 117,741 140,758
Other liabilities 4,387 4,456
Total liabilities 1,508,238 1,763,820
Stockholders’ equity 130,647 150,232
Total liabilities and stockholders’ equity$1,638,885 $1,914,052
Net interest income $50,949 $58,384
Weighted average spread 3.06% 2.99%
Net interest margin (6) 3.17% 3.10%
Average interest-earning assets to average interest-bearing liabilities (7) 115.85% 116.19%


(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.


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

Source:Hingham Institution for Savings