Hingham Savings Reports Third Quarter 2018 Results

HINGHAM, Mass., Oct. 12, 2018 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced third quarter results for 2018.

Net income for the quarter ended September 30, 2018 was $8,848,000 or $4.15 per share basic and $4.05 per share diluted, as compared to $6,484,000 or $3.04 per share basic and $2.97 per share diluted for the same period last year. The Bank’s annualized return on average equity for the third quarter of 2018 was 17.06%, and the annualized return on average assets was 1.52%, as compared to 14.60% and 1.21% for the same period in 2017. Net income per share (diluted) for the third quarter of 2018 increased 36% over the same period of 2017.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the third quarter of 2018 was $8,424,000 or $3.95 per share basic and $3.85 per share diluted, as compared to $6,484,000 or $3.04 per share basic and $2.97 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the third quarter of 2018 was 16.24%, and the annualized core return on average assets was 1.45%, as compared to 14.60% and 1.21% for the same period in 2017. Core net income per share (diluted) for the third quarter of 2018 increased by 30% over the same period in 2017.

Net income for the nine months ended September 30, 2018 was $25,735,000 or $12.07 per share basic and $11.77 per share diluted, as compared to $19,066,000 or $8.94 per share basic and $8.75 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first nine months of 2018 was 17.17%, and the annualized return on average assets was 1.49%, as compared to 14.81% and 1.22% for the same period last year. Net income per share (diluted) for the first nine months of 2018 increased 35% over the same period in 2017.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the nine months ended September 30, 2018 was $24,729,000 or $11.60 per share basic and $11.31 per share diluted, as compared to $19,017,000 or $8.92 per share basic and $8.72 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first nine months of 2018 was 16.50% and the annualized core return on average assets was 1.43%, as compared to 14.77% and 1.22% for the same period last year. Core net income per share (diluted) for the first nine months of 2018 increased by 30% over the same period in 2017.

Growth in the first nine months of 2018 was generally satisfactory, as deposits increased to $1.715 billion at September 30, 2018, representing 19% annualized growth year-to-date and 18% growth from September 30, 2017. This growth reflected modest growth in retail and business deposits as well as the increasing use of more attractively priced wholesale deposits in lieu of comparable Federal Home Loan Bank advances. Net loans increased to $1.976 billion, representing 10% annualized growth year-to-date and 12% growth from September 30, 2017. Total assets increased to $2.370 billion, representing 5% annualized growth year-to-date and 7% growth from September 30, 2017. During the first nine months of 2018, the Bank used a portion of its cash balances to reduce outstanding Federal Home Loan Bank advances and listing services time deposits, in order to minimize the carrying cost of its on-balance sheet liquidity. Book value per share was $98.35 as of September 30, 2018, representing 17% annualized growth year-to-date and 17% growth from September 30, 2017. In addition to the increase in book value per share, the Bank declared $1.73 in dividends per share since September 30, 2017, including a special dividend of $0.34 per share declared during the fourth quarter of 2017. The Bank announced increases in its regular quarterly dividend in both June and September 2018.

Key credit and operational metrics remained strong in the third quarter of 2018. At September 30, 2018, non-performing assets totaled 0.02% of total assets, compared to 0.07% at December 31, 2017 and 0.05% at September 30, 2017. Non-performing loans as a percentage of the total loan portfolio totaled 0.02% at September 30, 2018, compared to 0.09% at December 31, 2017 and 0.06% at September 30, 2017. The Bank recorded $1,000 in net recoveries for the first nine months of 2018 and 2017. At September 30, 2018, December 31 and September 30, 2017, the Bank did not own any foreclosed property. The efficiency ratio was 29.17% for the third quarter of 2018, as compared to 29.37% for the same period last year. Non-interest expense as a percentage of average assets fell to 0.86% in the third quarter of 2018, as compared to 0.90% for the same period last year.

Chairman Robert H. Gaughen, Jr. stated, “We are pleased to report that returns on equity and assets remained satisfactory in the third quarter of 2018, although balance sheet growth was modest relative to capital generation. We remain focused on careful capital allocation, defensive underwriting and disciplined cost control - we believe these are the keys to generating sustained value for our ownership.”

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 provides commercial mortgage lending and private banking services 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				Nine Months Ended
	September 30,				September 30,
	2017		2018		2017		2018
(Unaudited)

Key Performance Ratios
Return on average assets (1)	1.21	%	1.52	%	1.22	%	1.49	%
Return on average equity (1)	14.60		17.06		14.81		17.17
Core return on average assets (1) (5)	1.21		1.45		1.22		1.43
Core return on average equity (1) (5)	14.60		16.24		14.77		16.50
Interest rate spread (1) (2)	2.89		2.67		2.93		2.72
Net interest margin (1) (3)	3.04		2.93		3.08		2.93
Non-interest expense to average assets (1)	0.90		0.86		0.94		0.88
Efficiency ratio (4)	29.37		29.17		30.58		29.84
Average equity to average assets	8.26		8.91		8.25		8.69
Average interest-earning assets to average interest-bearing liabilities	117.69		119.39		117.32		118.61

	September 30, 2017			December 31, 2017		September 30, 2018
(Unaudited)

Asset Quality Ratios
Allowance for loan losses/total loans	0.68%		0.68%		0.68%
Allowance for loan losses/non-performing loans	1,078.04		735.74		2,807.44

Non-performing loans/total loans	0.06		0.09		0.02
Non-performing loans/total assets	0.05		0.07		0.02
Non-performing assets/total assets	0.05		0.07		0.02

Share Related
Book value per share	$	84.27	$	87.29	$	98.35
Market value per share	$	190.27	$	207.00	$	219.81
Shares outstanding at end of period	2,132,750		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 interest-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 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

(Dollars in thousands, except per share data)	September 30, 2017		December 31, 2017		September 30, 2018
(Unaudited)
ASSETS

Cash and due from banks	$	9,792	$	10,852	$	10,043
Federal Reserve and other short-term investments		341,294		344,377		286,449
Cash and cash equivalents		351,086		355,229		296,492

CRA investment		7,390		7,341		7,605
Debt securities available for sale		19		17		15
Other marketable equity securities		24,892		26,946		32,099
Securities, at fair value		32,301		34,304		39,719
Federal Home Loan Bank stock, at cost		26,863		27,102		21,682
Loans, net of allowance for loan losses of $12,128 at September 30, 2017, $12,537 at December 31, 2017 and $13,588 at September 30, 2018		1,769,830		1,833,987		1,976,422
Foreclosed assets		—		—		—
Bank-owned life insurance		12,158		12,221		12,414
Premises and equipment, net		14,049		14,068		14,458
Accrued interest receivable		4,079		4,398		5,066
Deferred income tax asset, net		1,601		1,301		1,128
Other assets		2,973		1,989		2,981
Total assets	$	2,214,940	$	2,284,599	$	2,370,362

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing deposits	$	1,277,157	$	1,320,487	$	1,494,193
Non-interest-bearing deposits	171,382		185,375		220,943
Total deposits	1,448,539		1,505,862		1,715,136
Federal Home Loan Bank advances	574,395		579,164		431,242
Mortgage payable	826		812		766
Mortgagors’ escrow accounts	6,228		6,424		6,901
Accrued interest payable	457		575		1,687
Other liabilities	4,777		5,604		4,883
Total liabilities	2,035,222		2,098,441		2,160,615

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	2,133		2,133		2,133
Additional paid-in capital	11,706		11,750		11,843
Undivided profits	161,554		165,596		195,771
Accumulated other comprehensive income	4,325		6,679		—
Total stockholders’ equity	179,718		186,158		209,747
Total liabilities and stockholders’ equity	$	2,214,940	$	2,284,599	$	2,370,362

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands, except per share amounts)		2017		2018	2017		2018

(Unaudited)
Interest and dividend income:
Loans	$	19,211	$	22,523	$	55,663	$	64,306
Equity securities		396		503		1,116		1,487
Federal Reserve and other short-term investments		1,079		1,317		2,515		3,814
Total interest and dividend income		20,686		24,343		59,294		69,607
Interest expense:
Deposits		2,854		5,291		8,084		13,202
Federal Home Loan Bank advances		1,742		2,294		3,979		6,653
Mortgage payable		12		12		38		36
Total interest expense		4,608		7,597		12,101		19,891
Net interest income		16,078		16,746		47,193		49,716
Provision for loan losses		558		350		1,098		1,050
Net interest income, after provision for loan losses		15,520		16,396		46,095		48,666
Other income:
Customer service fees on deposits		216		216		662		638
Increase in bank-owned life insurance		67		65		196		193
Gain on equity securities, net		—		544		77		1,290
Miscellaneous		44		42		136		129
Total other income		327		867		1,071		2,250
Operating expenses:
Salaries and employee benefits		3,008		3,146		9,245		9,534
Occupancy and equipment		422		421		1,305		1,313
Data processing		321		353		929		1,042
Deposit insurance		279		258		795		757
Foreclosure		11		(33)		14		(41)
Marketing		85		136		325		428
Other general and administrative		692		698		2,121		2,088
Total operating expenses		4,818		4,979		14,734		15,121
Income before income taxes		11,029		12,284		32,432		35,795
Income tax provision		4,545		3,436		13,366		10,060
Net income	$	6,484	$	8,848	$	19,066	$	25,735

Cash dividends declared per share	$	0.34	$	0.36	$	0.98	$	1.05

Weighted average shares outstanding:
Basic		2,133		2,133		2,133		2,133
Diluted		2,180		2,188		2,180		2,187

Earnings per share:
Basic	$	3.04	$	4.15	$	8.94	$	12.07
Diluted	$	2.97	$	4.05	$	8.75	$	11.77

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

	Three Months Ended September 30,
	2017						2018
	AVERAGE BALANCE		INTEREST		YIELD/ RATE (8)		AVERAGE BALANCE		INTEREST		YIELD/ RATE (8)
(Dollars in thousands)
(Unaudited)

Loans (1) (2)	$	1,733,650	$	19,211	4.43	%	$	1,973,987	$	22,523	4.56	%
Securities (3) (4)	50,696		396		3.12		52,166		503		3.86
Federal Reserve and other short-term investments	332,367		1,079		1.30		262,943		1,317		2.00
Total interest-earning assets	2,116,713		20,686		3.91		2,289,096		24,343		4.25
Other assets	35,471						38,380
Total assets	$	2,152,184					$	2,327,476

Interest-bearing deposits (5)	$	1,265,731	2,854		0.90		$	1,503,771	5,291		1.41
Borrowed funds	532,836		1,754		1.32		413,497		2,306		2.23
Total interest-bearing liabilities	1,798,567		4,608		1.02		1,917,268		7,597		1.58
Demand deposits	171,680						197,838
Other liabilities	4,242						4,927
Total liabilities	1,974,489						2,120,033

Stockholders’ equity	177,695						207,443
Total liabilities and stockholders’ equity	$	2,152,184					$	2,327,476
Net interest income			$	16,078					$	16,746

Weighted average spread					2.89	%					2.67	%

Net interest margin (6)					3.04	%					2.93	%

Average interest-earning assets to average interest-bearing liabilities (7)					117.69	%					119.39	%

(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.
(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,
	2017						2018
	AVERAGE BALANCE		INTEREST		YIELD/ RATE (8)		AVERAGE BALANCE		INTEREST		YIELD/ RATE (8)
(Dollars in thousands)
(Unaudited)

Loans (1) (2)	$	1,675,563	$	55,663	4.43	%	$	1,918,239	$	64,306	4.47	%
Securities (3) (4)	49,202		1,116		3.02		52,870		1,487		3.75
Federal Reserve and other short-term investments	321,335		2,515		1.04		289,018		3,814		1.76
Total interest-earning assets	2,046,100		59,294		3.86		2,260,127		69,607		4.11
Other assets	35,261						38,668
Total assets	$	2,081,361					$	2,298,795

Interest-bearing deposits (5)	$	1,252,938	8,084		0.86		$	1,430,524	13,202		1.23
Borrowed funds	491,114		4,017		1.09		475,050		6,689		1.88
Total interest-bearing liabilities	1,744,052		12,101		0.93		1,905,574		19,891		1.39
Demand deposits	161,037						188,441
Other liabilities	4,613						4,954
Total liabilities	1,909,702						2,098,969
Stockholders’ equity	171,659						199,826
Total liabilities and stockholders’ equity	$	2,081,361					$	2,298,795
Net interest income			$	47,193					$	49,716

Weighted average spread					2.93	%					2.72	%

Net interest margin (6)					3.08	%					2.93	%

Average interest-earning assets to average interest-bearing liabilities (7)					117.32	%					118.61	%