Hingham Savings Announces 8% Increase in Annual Diluted Earnings per Share, 14.73% Return on Equity

HINGHAM, Mass., Jan. 18, 2018 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2017.

Net income for the year ended December 31, 2017 was $25,757,000 or $12.08 per share basic and $11.81 per share diluted as compared to $23,423,000 or $10.99 per share basic and $10.89 per share diluted for the year ended December 31, 2016. Net income per share (diluted) for 2017 increased 8% over the same period in 2016. The Bank’s return on average equity for the year ended December 31, 2017 was 14.73% and the return on average assets was 1.21%, as compared to 15.59% and 1.22% for the same period in 2016. As a result of the Tax Cut and Jobs Act enacted on December 22, 2017, the Bank was required to remeasure its deferred tax assets and liabilities. The remeasurement resulted in an additional $218,000 in income tax expense provision for the year ended December 31, 2017. Excluding the effect of this remeasurement, net income for the year ended December 31, 2017 was $25,975,000 or $12.18 per share basic and $11.91 per share diluted, representing a return on average equity of 14.85% and a return on average assets of 1.22%.

Net income for the quarter ended December 31, 2017 was $6,691,000 or $3.14 per share basic and $3.06 per share diluted as compared to $6,287,000 or $2.95 per share basic and $2.92 per share diluted for the fourth quarter of 2016. Net income per share (diluted) for the fourth quarter of 2017 increased 5% over the same period of 2016. The Bank’s annualized return on average equity for the fourth quarter of 2017 was 14.51%, and the annualized return on average assets was 1.18%, as compared to 15.85% and 1.27% for the same period in 2016. Excluding the effect of the net deferred tax asset remeasurement discussed above, net income for the quarter ended December 31, 2017 was $6,909,000 or $3.24 per share basic and $3.16 per share diluted, representing an annualized return on average equity of 14.98% and an annualized return on average assets of 1.22%.

The Bank continued to produce strong growth in deposits, loans, and book value per share in 2017. Total deposits increased by 10% to $1.506 billion, with 25% growth in non-interest bearing deposits. Net loans increased by 14% to $1.834 billion. Total assets increased by 13% to $2.285 billion. Book value per share increased by 16% from $75.50 to $87.29. In addition to the increase in book value per share, the Bank declared $1.66 in dividends per share since December 31, 2016, including a special dividend of $0.34 per share declared during the fourth quarter of 2017. The trailing five year compound annual growth rate in book value per share, an important measure of value creation, rose to 14.9%.

Key credit and operational metrics improved in 2017. At December 31, 2017, non-performing assets totaled 0.07% of total assets, as compared to 0.09% at December 31, 2016. Non-performing loans as a percentage of the total loan portfolio totaled 0.09% at December 31, 2017, as compared to 0.11% at December 31, 2016. The Bank recorded $2,000 of net recoveries in 2017, as compared to $10,000 of net charge-offs in 2016. At December 31, 2017 and 2016, the Bank did not own any foreclosed property. The efficiency ratio improved to 30.06% in 2017, as compared to 32.15% in 2016. Non-interest expense as a percentage of average assets improved to 0.92% in 2017, as compared to 1.00% in 2016. Both the efficiency ratio and operating expenses as a percentage of average assets reached new record lows in 2017. These metrics reflect the Bank’s disciplined focus on credit quality and expense management.

Net income for the years ended December 31, 2017 and 2016 included after-tax realized gains on securities of approximately $49,000 and $221,000 respectively. For the year ended December 31, 2017, unrealized gains on securities, net of deferred tax liabilities, were recorded in stockholders’ equity through accumulated other comprehensive income. Effective January 1, 2018, changes in unrealized gains on equity securities, net of deferred tax liabilities, will be recognized through the income statement.

President Robert H. Gaughen, Jr. stated, “We are pleased to report that returns on equity and assets remain satisfactory, despite heightened competition and a flattening yield curve. 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
December 31,
Twelve Months Ended
December 31,
2016 2017 2016 2017
(Unaudited)
Key Performance Ratios
Return on average assets (1)1.27% 1.18% 1.22% 1.21%
Return on average equity (1)15.85 14.51 15.59 14.73
Interest rate spread (1) (2)3.03 2.83 2.99 2.91
Net interest margin (1) (3)3.15 2.99 3.10 3.05
Non-interest expense to average assets (1)0.95 0.86 1.00 0.92
Efficiency ratio (4)29.93 28.58 32.15 30.06
Average equity to average assets7.98 8.16 7.85 8.22
Average interest-earning assets to average interest-
bearing liabilities
116.65 117.59 116.19 117.39


December 31,
2016
December 31,
2017
(Unaudited)
Asset Quality Ratios
Allowance for loan losses/total loans 0.68% 0.68%
Allowance for loan losses/non-performing loans 614.43 735.74
Non-performing loans/total loans 0.11 0.09
Non-performing loans/total assets 0.09 0.07
Non-performing assets/total assets 0.09 0.07
Share Related
Book value per share$75.50 $87.29
Market value per share$196.78 $207.00
Shares outstanding at end of period 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, net.

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
December 31, December 31,
(Dollars in thousands, except per share data)2016 2017
(Unaudited)
ASSETS
Cash and due from banks$7,816 $ 10,852
Federal Reserve and other short-term investments 315,116 344,377
Cash and cash equivalents 322,932 355,229
CRA investment 6,839 7,341
Other securities available for sale 20,329 26,963
Securities available for sale, at fair value 27,168 34,304
Federal Home Loan Bank stock, at cost 24,472 27,102
Loans, net of allowance for loan losses of $11,030 at December 31, 2016 and $12,537 at December 31, 2017 1,605,647 1,833,987
Foreclosed assets
Bank-owned life insurance 11,962 12,221
Premises and equipment, net 14,462 14,068
Accrued interest receivable 3,529 4,398
Deferred income tax asset, net 2,489 1,301
Other assets 1,938 1,989
Total assets$2,014,599 $ 2,284,599
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits$1,218,360 $1,320,487
Non-interest-bearing deposits 147,749 185,375
Total deposits 1,366,109 1,505,862
Federal Home Loan Bank advances 475,318 579,164
Mortgage payable 868 812
Mortgagors’ escrow accounts 5,585 6,424
Accrued interest payable 400 575
Other liabilities 5,295 5,604
Total liabilities 1,853,575 2,098,441
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 December 31, 2016 and 2017, respectively 2,133 2,133
Additional paid-in capital 11,575 11,750
Undivided profits 144,580 166,796
Accumulated other comprehensive income 2,736 5,479
Total stockholders’ equity 161,024 186,158
Total liabilities and stockholders’ equity$2,014,599 $2,284,599

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands, except per share amounts) 2016 2017 2016 2017
(Unaudited)
Interest and dividend income:
Loans $18,027 $20,180 $68,917 $75,843
Debt securities 1 52 1
Equity securities 367 414 1,248 1,530
Federal Reserve and other short-term investments 426 1,170 1,552 3,685
Total interest and dividend income 18,820 21,765 71,769 81,059
Interest expense:
Deposits 2,474 3,282 9,599 11,366
Federal Home Loan Bank advances 950 1,866 3,732 5,845
Mortgage payable 14 12 54 50
Total interest expense 3,438 5,160 13,385 17,261
Net interest income 15,382 16,605 58,384 63,798
Provision for loan losses 325 407 1,135 1,505
Net interest income, after provision for loan losses 15,057 16,198 57,249 62,293
Other income:
Customer service fees on deposits 237 227 928 889
Increase in bank-owned life insurance 62 63 265 259
Gain on sale of securities, net 344 77
Miscellaneous 55 49 198 185
Total other income 354 339 1,735 1,410
Operating expenses:
Salaries and employee benefits 3,036 3,055 12,024 12,300
Occupancy and equipment 455 460 1,856 1,765
Data processing 304 341 1,230 1,270
Deposit insurance 252 285 1,023 1,080
Foreclosure (73) (27) 34 (13)
Marketing 74 73 403 398
Other general and administrative 662 655 2,645 2,776
Total operating expenses 4,710 4,842 19,215 19,576
Income before income taxes 10,701 11,695 39,769 44,127
Income tax provision 4,414 5,004 16,346 18,370
Net income $6,287 $6,691 $23,423 $25,757
Cash dividends declared per share $0.64 $0.68 $1.56 $1.66
Weighted average shares outstanding:
Basic 2,131 2,133 2,131 2,133
Diluted 2,158 2,184 2,152 2,181
Earnings per share:
Basic $2.95 $3.14 $10.99 $12.08
Diluted $2.92 $3.06 $10.89 $11.81


HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
Three Months Ended December 31,
2016 2017
AVERAGE
BALANCE
INTEREST YIELD/
RATE (8)
AVERAGE
BALANCE
INTEREST YIELD/
RATE (8)
(Dollars in thousands)
(Unaudited)
Loans (1) (2)$1,598,286 $18,027 4.51% $1,816,754 $20,180 4.44%
Securities (3) (4) 45,965 367 3.19 52,513 415 3.16
Federal Reserve and other short-term investments 309,043 426 0.55 353,393 1,170 1.32
Total interest-earning assets 1,953,294 18,820 3.85 2,222,660 21,765 3.92
Other assets 33,715 36,854
Total assets$1,987,009 $2,259,514
Interest-bearing deposits (5)$1,212,674 2,474 0.82 $1,334,198 3,282 0.98
Borrowed funds 461,749 964 0.84 555,953 1,878 1.35
Total interest-bearing liabilities 1,674,423 3,438 0.82 1,890,151 5,160 1.09
Demand deposits 149,352 180,088
Other liabilities 4,579 4,819
Total liabilities 1,828,354 2,075,058
Stockholders’ equity 158,655 184,456
Total liabilities and stockholders’ equity$1,987,009 $2,259,514
Net interest income $15,382 $16,605
Weighted average spread 3.03% 2.83%
Net interest margin (6) 3.15% 2.99%
Average interest-earning assets to average
interest-bearing liabilities (7)
116.65% 117.59%


(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,
2016 2017
AVERAGE
BALANCE
INTEREST YIELD/
RATE
AVERAGE
BALANCE
INTEREST YIELD/
RATE
(Dollars in thousands)
(Unaudited)
Loans (1) (2)$1,524,858 $68,917 4.52% $1,711,152 $75,843 4.43%
Securities (3) (4) 54,494 1,300 2.39 50,036 1,531 3.06
Federal Reserve and other short-term investments 301,322 1,552 0.52 329,415 3,685 1.12
Total interest-earning assets 1,880,674 71,769 3.82 2,090,603 81,059 3.88
Other assets 33,378 35,662
Total assets$1,914,052 $2,126,265
Interest-bearing deposits (5)$1,176,472 9,599 0.82 $1,273,420 11,366 0.89
Borrowed funds 442,134 3,786 0.86 507,457 5,895 1.16
Total interest-bearing liabilities 1,618,606 13,385 0.83 1,780,877 17,261 0.97
Demand deposits 140,758 165,839
Other liabilities 4,456 4,665
Total liabilities 1,763,820 1,951,381
Stockholders’ equity 150,232 174,884
Total liabilities and stockholders’ equity$1,914,052 $2,126,265
Net interest income $58,384 $63,798
Weighted average spread 2.99% 2.91%
Net interest margin (6) 3.10% 3.05%
Average interest-earning assets to average
interest-bearing liabilities (7)
116.19% 117.39%


(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