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Hingham Savings Announces 8% Increase in Quarterly Diluted Earnings Per Share, 14.60% Return on Equity

HINGHAM, Mass., Oct. 12, 2017 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), Hingham, Massachusetts announced third quarter earnings for 2017.

Net income for the quarter ended September 30, 2017 was $6,484,000 or $3.04 per share basic and $2.97 per share diluted as compared to $5,945,000 or $2.79 per share basic and $2.76 per share diluted for the third quarter of 2016. Net income per share (diluted) for the third quarter of 2017 increased 8% over the same period of 2016. The Bank’s annualized return on average equity for the third quarter of 2017 was 14.60%, and the annualized return on average assets was 1.21%, as compared to 15.59% and 1.23% for the same period in 2016.

Net income for the nine months ended September 30, 2017 was $19,066,000 or $8.94 per share basic and $8.75 per share diluted as compared to $17,136,000 or $8.04 per share basic and $7.97 per share diluted for the same period last year. Net income per share (diluted) for the first nine months of 2017 increased 10% over the same period in 2016. The Bank’s annualized return on average equity for the first nine months of 2017 was 14.81% and the annualized return on average assets was 1.22%, as compared to 15.53% and 1.21% for the same period in 2016.

Net income for the nine month periods ended September 30, 2017 and 2016 included after-tax realized gains on securities of approximately $49,000 and $221,000 respectively, which were unrelated to the Bank’s core business operations. Unrealized gains on securities, net of deferred tax liabilities, are recorded in stockholders’ equity through accumulated other comprehensive income.

Strong balance sheet growth trends of recent years continued, as deposits were $1.449 billion at September 30, 2017, representing 8% annualized growth year-to-date and 8% growth from September 30, 2016. Net loans were $1.770 billion at September 30, 2017, representing 14% annualized growth year-to-date and 13% growth from September 30, 2016. Total assets were $2.215 billion at September 30, 2017, representing 13% annualized growth year-to-date and 13% growth from September 30, 2016. Book value per share increased from $72.35 at September 30, 2016, to $84.27 per share at September 30, 2017, representing a 15% annualized growth rate year-to-date and a 16% increase from September 30, 2016. In addition to the increase in book value per share, the Bank has declared $1.62 in dividends per share since September 30, 2016.

Key credit and operational metrics improved in the third quarter of 2017. At September 30, 2017, non-performing assets totaled 0.05% of total assets, as compared to 0.09% at December 31, 2016 and 0.16% at September 30, 2016. Non-performing loans as a percentage of the total loan portfolio totaled 0.06% at September 30, 2017, as compared to 0.11% at December 31, 2016 and 0.20% at September 30, 2016. The Bank recorded $1,000 of net recoveries for the first nine months of 2017, as compared to $3,000 of net charge-offs for the same period last year. At September 30, 2017 and 2016, the Bank did not own any foreclosed property. The efficiency ratio improved to 29.37% for the third quarter of 2017, as compared to 31.57% for the same period last year. Non-interest expense (annualized) as a percentage of average assets fell to 0.90% for the third quarter of 2017, as compared to 0.99% for the same period last year. These metrics reflect the Bank’s disciplined focus on credit quality and expense management.

President Robert H. Gaughen, Jr. stated, “We are pleased to report that returns on equity and assets remain satisfactory. At Hingham, we take seriously our role as stewards of the 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, especially periods when tailwinds may be with us, should be viewed cautiously. Such periods are historically fraught with peril in our industry. The real test of performance in banking is a company’s record of compounding shareholder capital over time and through all stages of the credit cycle. 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 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 Ended
September 30,
Nine Months Ended
September 30,
2016 2017 2016 2017
(Unaudited)
Key Performance Ratios
Return on average assets (1)1.23% 1.21% 1.21% 1.22%
Return on average equity (1)15.59 14.60 15.53 14.81
Interest rate spread (1) (2)3.00 2.89 2.97 2.93
Net interest margin (1) (3)3.12 3.04 3.09 3.08
Non-interest expense to average assets (1)0.99 0.90 1.02 0.94
Efficiency ratio (4)31.57 29.37 32.94 30.58
Average equity to average assets7.88 8.26 7.78 8.25
Average interest-earning assets to average interest-
bearing liabilities
116.41 117.69 116.03 117.32


September 30,
2016
December 31,
2016

September 30,
2017
(Unaudited)
Asset Quality Ratios
Allowance for loan losses/total loans 0.68% 0.68% 0.68%
Allowance for loan losses/non-performing loans 334.89 614.43 1,078.04
Non-performing loans/total loans 0.20 0.11 0.06
Non-performing loans/total assets 0.16 0.09 0.05
Non-performing assets/total assets 0.16 0.09 0.05
Share Related
Book value per share$72.35 $75.50 $ 84.27
Market value per share$138.50 $196.78 $ 190.27
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
September 30, December 31, September 30,
(Dollars in thousands, except per share data)2016 2016 2017
(Unaudited)
ASSETS
Cash and due from banks$7,849 $7,816 $9,792
Federal Reserve and other short-term investments 305,990 315,116 341,294
Cash and cash equivalents 313,839 322,932 351,086
Certificates of deposit 1,142
CRA investment 7,059 6,839 7,390
Other securities available for sale 15,823 20,329 24,911
Securities available for sale, at fair value 22,882 27,168 32,301
Federal Home Loan Bank stock, at cost 24,203 24,472 26,863
Loans, net of allowance for loan losses of $10,713
at September 30, 2016, $11,030 at December 31, 2016
and $12,128 at September 30, 20171,562,934 1,605,647 1,769,830
Foreclosed assets
Bank-owned life insurance 11,900 11,962 12,158
Premises and equipment, net 14,605 14,462 14,049
Accrued interest receivable 3,394 3,529 4,079
Deferred income tax asset, net 2,957 2,489 1,601
Other assets 2,453 1,938 2,973
Total assets$1,960,309 $2,014,599 $2,214,940
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits$1,183,905 $1,218,360 $1,277,157
Non-interest-bearing deposits 151,284 147,749 171,382
Total deposits 1,335,189 1,366,109 1,448,539
Federal Home Loan Bank advances 460,356 475,318 574,395
Mortgage payable 882 868 826
Mortgagors’ escrow accounts 5,389 5,585 6,228
Accrued interest payable 360 400 457
Other liabilities 3,979 5,295 4,777
Total liabilities 1,806,155 1,853,575 2,035,222
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
September 30, 2016 and 2,132,750 shares issued and
outstanding at December 31, 2016 and September 30, 20172,131 2,133 2,133
Additional paid-in capital 11,351 11,575 11,706
Undivided profits 139,656 144,580 161,554
Accumulated other comprehensive income 1,016 2,736 4,325
Total stockholders’ equity 154,154 161,024 179,718
Total liabilities and stockholders’ equity$1,960,309 $2,014,599 $2,214,940


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per share amounts) 2016 2017 2016 2017
(Unaudited)
Interest and dividend income:
Loans$17,477 $19,211 $50,890 $55,663
Debt securities 6 52
Equity securities 352 396 881 1,116
Federal Reserve and other short-term investments 382 1,079 1,126 2,515
Total interest and dividend income 18,217 20,686 52,949 59,294
Interest expense:
Deposits 2,435 2,854 7,125 8,084
Federal Home Loan Bank advances 933 1,742 2,782 3,979
Mortgage payable 13 12 40 38
Total interest expense 3,381 4,608 9,947 12,101
Net interest income 14,836 16,078 43,002 47,193
Provision for loan losses 300 558 810 1,098
Net interest income, after provision for loan losses 14,536 15,520 42,192 46,095
Other income:
Customer service fees on deposits 239 216 691 662
Increase in bank-owned life insurance 63 67 203 196
Gain on sale of securities, net 344 77
Miscellaneous 45 44 143 136
Total other income 347 327 1,381 1,071
Operating expenses:
Salaries and employee benefits 2,927 3,008 8,988 9,245
Occupancy and equipment 446 422 1,401 1,305
Data processing 318 321 926 929
Deposit insurance 265 279 771 795
Foreclosure 25 11 107 14
Marketing 104 85 329 325
Other general and administrative 708 692 1,983 2,121
Total operating expenses 4,793 4,818 14,505 14,734
Income before income taxes 10,090 11,029 29,068 32,432
Income tax provision 4,145 4,545 11,932 13,366
Net income$5,945 $6,484 $17,136 $19,066
Cash dividends declared per share$0.32 $0.34 $0.92 $0.98
Weighted average shares outstanding:
Basic 2,131 2,133 2,130 2,133
Diluted 2,152 2,180 2,150 2,180
Earnings per share:
Basic$2.79 $3.04 $8.04 $8.94
Diluted$2.76 $2.97 $7.97 $8.75


HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
Three Months Ended September 30,
2016 2017
AVERAGE
BALANCE
INTEREST YIELD/
RATE (8)
AVERAGE
BALANCE
INTEREST YIELD/
RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)$1,552,866 $17,477 4.50% $1,733,650 $19,211 4.43%
Securities (3) (4) 49,354 358 2.90 50,696 396 3.12
Federal Reserve and other short-term investments 300,435 382 0.51 332,367 1,079 1.30
Total interest-earning assets 1,902,655 18,217 3.83 2,116,713 20,686 3.91
Other assets 33,109 35,471
Total assets$1,935,764 $2,152,184
Interest-bearing deposits (5)$1,194,292 2,435 0.82 $1,265,731 2,854 0.90
Borrowed funds 440,104 946 0.86 532,836 1,754 1.32
Total interest-bearing liabilities 1,634,396 3,381 0.83 1,798,567 4,608 1.02
Demand deposits 144,497 171,680
Other liabilities 4,334 4,242
Total liabilities 1,783,227 1,974,489
Stockholders’ equity 152,537 177,695
Total liabilities and stockholders’ equity$1,935,764 $2,152,184
Net interest income $14,836 $16,078
Weighted average spread 3.00% 2.89%
Net interest margin (6) 3.12% 3.04%
Average interest-earning assets to average
interest-bearing liabilities (7)
116.41% 117.69%


(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
Nine Months Ended September 30,
2016 2017
AVERAGE
BALANCE
INTEREST YIELD/
RATE (8)
AVERAGE
BALANCE

INTEREST
YIELD/
RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)$1,500,203 $50,890 4.52% $1,675,563 $55,663 4.43%
Securities (3) (4) 57,358 933 2.17 49,202 1,116 3.02
Federal Reserve and other short-term investments 298,729 1,126 0.50 321,335 2,515 1.04
Total interest-earning assets 1,856,290 52,949 3.80 2,046,100 59,294 3.86
Other assets 33,265 35,261
Total assets$1,889,555 $2,081,361
Interest-bearing deposits (5)$1,164,317 7,125 0.82 $1,252,938 8,084 0.86
Borrowed funds 435,548 2,822 0.86 491,114 4,017 1.09
Total interest-bearing liabilities 1,599,865 9,947 0.83 1,744,052 12,101 0.93
Demand deposits 137,873 161,037
Other liabilities 4,741 4,613
Total liabilities 1,742,479 1,909,702
Stockholders’ equity 147,076 171,659
Total liabilities and stockholders’ equity$1,889,555 $2,081,361
Net interest income $43,002 $47,193
Weighted average spread 2.97% 2.93%
Net interest margin (6) 3.09% 3.08%
Average interest-earning assets to average
interest-bearing liabilities (7)
116.03% 117.32%


(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

Source:Hingham Institution for Savings