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

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| Source: Hingham Institution for Savings

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.
  

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