Hingham Savings Reports Second - NASDAQ OMX GlobeNewswire

HINGHAM, Mass., July 13, 2018 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS ), Hingham, Massachusetts announced second quarter results for 2018.

Net income for the quarter ended June 30, 2018 was $7,975,000 or $3.74 per share basic and $3.64 per share diluted, as compared to $6,470,000 or $3.03 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 second quarter of 2018 was 15.97%, and the annualized return on average assets was 1.40%, as compared to 15.08% and 1.25% for the same period in 2017. Net income per share (diluted) for the second quarter of 2018 increased 23% over the same period of 2017.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the second quarter of 2018 was $8,147,000 or $3.82 per share basic and $3.73 per share diluted, as compared to $6,421,000 or $3.01 per share basic and $2.95 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the second quarter of 2018 was 16.31%, and the annualized core return on average assets was 1.43%, as compared to 14.97% and 1.24% for the same period in 2017. Core net income per share (diluted) for the second quarter of 2018 increased by 26% over the same period in 2017.

Net income for the six months ended June 30, 2018 was $16,887,000 or $7.92 per share basic and $7.72 per share diluted, as compared to $12,582,000 or $5.90 per share basic and $5.77 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first six months of 2018 was 17.24%, and the annualized return on average assets was 1.48%, as compared to 14.93% and 1.23% for the same period last year. Net income per share (diluted) for the first six months of 2018 increased 34% over the same period in 2017.

Excluding the after-tax gains on securities, both realized and unrealized, core net income for the six months ended June 30, 2018 was $16,305,000 or $7.65 per share basic and $7.46 per share diluted, as compared to $12,533,000 or $5.88 per share basic and $5.75 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first six months of 2018 was 16.64% and the annualized core return on average assets was 1.43%, as compared to 14.87% and 1.23% for the same period last year. Core net income per share (diluted) for the first six months of 2018 increased by 30% over the same period in 2017.

Growth in the first half of 2018 was strong, as deposits increased to $1.646 billion at June 30, 2018, representing 19% annualized growth year-to-date and 16% growth from June 30, 2017. This growth reflected strong growth in retail and business deposits as well as the use of more attractively priced wholesale deposits in lieu of comparable Federal Home Loan Bank advances. Net loans increased to $1.934 billion, representing 11% annualized growth year-to-date and 16% growth from June 30, 2017. Total assets increased to $2.308 billion, representing 2% annualized growth year-to-date and 9% growth from June 30, 2017. During the first half 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 $94.55 as of June 30, 2018, representing 17% annualized growth year-to-date and 17% growth from June 30, 2017. In addition to the increase in book value per share, the Bank declared $1.71 in dividends per share since June 30, 2017, including a special dividend of $0.34 per share declared during the fourth quarter of 2017.

Key credit and operational metrics remained strong in the second quarter. At June 30, 2018, non-performing assets totaled 0.05% of total assets, compared to 0.07% at December 31, 2017 and 0.18% at June 30, 2017. Non-performing loans as a percentage of the total loan portfolio totaled 0.06% at June 30, 2018, compared to 0.09% at December 31, 2017 and 0.22% at June 30, 2017. The Bank recorded zero net charge-offs for the first six months of 2018, as compared to $1,000 net recoveries for the same period last year. At June 30, 2018, December 31 and June 30, 2017, the Bank did not own any foreclosed property. The efficiency ratio was 29.95% for the second quarter of 2018, as compared to 29.97% for the same period last year. Non-interest expense as a percentage of average assets fell to 0.88% in the second quarter of 2018, as compared to 0.93% for the same period last year.

Chairman Robert H. Gaughen, Jr. stated, “During the second quarter, we announced our intention to close our North Scituate branch in September 2018 and consolidate our client service for this market in our branch in historic Cohasset Village. We also completed the acquisition of 85A Main Street in Hingham Square - a parcel of land that will facilitate growth in our Main Office well into the future. We continue to balance our emphasis on thrift with a willingness to invest aggressively if long-term returns on capital are likely to be satisfactory. The most important test of performance in banking is whether a firm can generate sustained high returns on equity capital through all stages of the credit cycle. This is the standard against which we measure all of our capital allocation, lending, and operational decisions. 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 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 June 30,				Six Months Ended June 30,
	2017		2018		2017		2018
(Unaudited)

Key Performance Ratios
Return on average assets (1)	1.25	%	1.40	%	1.23	%	1.48	%
Return on average equity (1)	15.08		15.97		14.93		17.24
Core return on average assets (1) (5)	1.24		1.43		1.23		1.43
Core return on average equity (1) (5)	14.97		16.31		14.87		16.64
Interest rate spread (1) (2)	2.94		2.72		2.97		2.74
Net interest margin (1) (3)	3.08		2.94		3.10		2.94
Non-interest expense to average assets (1)	0.93		0.88		0.97		0.89
Efficiency ratio (4)	29.97		29.95		31.20		30.18
Average equity to average assets	8.27		8.74		8.24		8.58
Average interest-earning assets to average interest-
bearing liabilities	117.45		118.57		117.12		118.20

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

Asset Quality Ratios
Allowance for loan losses/total loans		0.69	%		0.68	%		0.68	%
Allowance for loan losses/non-performing loans		310.63			735.74			1,064.92

Non-performing loans/total loans		0.22			0.09			0.06
Non-performing loans/total assets		0.18			0.07			0.05
Non-performing assets/total assets		0.18			0.07			0.05

Share Related
Book value per share	$	81.05		$	87.29		$	94.55
Market value per share	$	181.93		$	207.00		$	219.70
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 (loss) on equity securities.

(5	)	Non-GAAP measurements that represent return on average assets and return on average equity, excluding the after-tax gain (loss) on equity securities.

H INGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets


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

Cash and due from banks	$	8,312	$	10,852	$	9,342
Federal Reserve and other short-term investments		346,999		344,377		265,695
Cash and cash equivalents		355,311		355,229		275,037

CRA investment		7,383		7,341		7,665
Debt securities available for sale		23		17		16
Other marketable equity securities		21,951		26,946		30,328
Securities, at fair value		29,357		34,304		38,009
Federal Home Loan Bank stock, at cost		25,297		27,102		24,530
Loans, net of allowance for loan losses of $11,571
at June 30, 2017, $12,537 at December 31, 2017
and $13,237 at June 30, 2018		1,666,172		1,833,987		1,933,915
Foreclosed assets		—		—		—
Bank-owned life insurance		12,091		12,221		12,349
Premises and equipment, net		14,169		14,068		14,479
Accrued interest receivable		3,645		4,398		4,630
Deferred income tax asset, net		2,190		1,301		1,165
Other assets		2,784		1,989		3,505
Total assets	$	2,111,016	$	2,284,599	$	2,307,619


LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing deposits	$	1,263,923	$	1,320,487	$	1,453,401
Non-interest-bearing deposits		159,702		185,375		192,918
Total deposits		1,423,625		1,505,862		1,646,319
Federal Home Loan Bank advances		503,242		579,164		446,283
Mortgage payable		840		812		782
Mortgagors’ escrow accounts		5,735		6,424		6,659
Accrued interest payable		531		575		1,233
Other liabilities		4,182		5,604		4,697
Total liabilities		1,938,155		2,098,441		2,105,973

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		11,662		11,750		11,822
Undivided profits		155,796		165,596		187,691
Accumulated other comprehensive income		3,270		6,679		—
Total stockholders’ equity		172,861		186,158		201,646
Total liabilities and stockholders’ equity	$	2,111,016	$	2,284,599	$	2,307,619

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income

				Three Months Ended						Six Months Ended
				June 30,						June 30,
(In thousands, except per share amounts)				2017			2018			2017		2018
(Unaudited)
Interest and dividend income:
		Loans		$	18,484		$	21,366		$	36,452	$	41,783
		Equity securities			367			505			720		984
		Federal Reserve and other short-term investments			827			1,256			1,436		2,497
			Total interest and dividend income		19,678			23,127			38,608		45,264
Interest expense:
		Deposits			2,712			4,344			5,230		7,911
		Federal Home Loan Bank advances			1,277			2,266			2,237		4,359
		Mortgage payable			13			12			26		24
			Total interest expense		4,002			6,622			7,493		12,294
			Net interest income		15,676			16,505			31,115		32,970
Provision for loan losses					285			415			540		700
Net interest income, after provision for loan losses					15,391			16,090			30,575		32,270
Other income:
	Customer service fees on deposits				227			216			446		422
	Increase in bank-owned life insurance				62			60			129		128
	Gain (loss) on equity securities				77			(220	)		77		746
	Miscellaneous				47			43			92		87
			Total other income		413			99			744		1,383
Operating expenses:
		Salaries and employee benefits			3,091			3,176			6,237		6,388
		Occupancy and equipment			419			426			883		892
		Data processing			311			348			608		689
		Deposit insurance			258			226			516		499
		Foreclosure			(40	)		(13	)		3		(8	)
		Marketing			116			154			240		292
		Other general and administrative			643			722			1,429		1,390
			Total operating expenses		4,798			5,039			9,916		10,142
Income before income taxes					11,006			11,150			21,403		23,511
Income tax provision					4,536			3,175			8,821		6,624
			Net income	$	6,470		$	7,975		$	12,582	$	16,887

Cash dividends declared per share				$	0.32		$	0.35		$	0.64	$	0.69

Weighted average shares outstanding:
		Basic			2,133			2,133			2,133		2,133
		Diluted			2,179			2,187			2,180		2,186

Earnings per share:
		Basic		$	3.03		$	3.74		$	5.90	$	7.92
		Diluted		$	2.97		$	3.64		$	5.77	$	7.72

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis


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

Loans (1) (2)	$	1,666,327	$	18,484	4.44	%	$	1,913,404	$	21,366	4.47	%
Securities (3) (4)		49,233		367	2.98			52,941		505	3.82
Federal Reserve and other short-term investments		322,239		827	1.03			278,434		1,256	1.80
Total interest-earning assets		2,037,799		19,678	3.86			2,244,779		23,127	4.12
Other assets		35,894						39,619
Total assets	$	2,073,693					$	2,284,398

Interest-bearing deposits (5)	$	1,263,209		2,712	0.86		$	1,423,682		4,344	1.22
Borrowed funds		471,805		1,290	1.09			469,476		2,278	1.94
Total interest-bearing liabilities		1,735,014		4,002	0.92			1,893,158		6,622	1.40
Demand deposits		162,339						186,919
Other liabilities		4,755						4,555
Total liabilities		1,902,108						2,084,632
Stockholders’ equity		171,585						199,766
Total liabilities and stockholders’ equity	$	2,073,693					$	2,284,398
Net interest income			$	15,676					$	16,505

Weighted average spread					2.94	%					2.72	%

Net interest margin (6)					3.08	%					2.94	%

Average interest-earning assets to average
interest-bearing liabilities (7)					117.45	%					118.57	%

(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

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

Loans (1) (2)	$	1,646,040	$	36,452	4.43	%	$	1,889,901	$	41,783	4.42	%
Securities (3) (4)		48,442		720	2.97			53,228		984	3.70
Federal Reserve and other short-term investments		315,727		1,436	0.91			302,272		2,497	1.65
Total interest-earning assets		2,010,209		38,608	3.84			2,245,401		45,264	4.03
Other assets		35,153						38,815
Total assets	$	2,045,362					$	2,284,216

Interest-bearing deposits (5)	$	1,246,436		5,230	0.84		$	1,393,294		7,911	1.14
Borrowed funds		469,907		2,263	0.96			506,337		4,383	1.73
Total interest-bearing liabilities		1,716,343		7,493	0.87			1,899,631		12,294	1.29
Demand deposits		155,627						183,665
Other liabilities		4,802						4,965
Total liabilities		1,876,772						2,088,261
Stockholders’ equity		168,590						195,955
Total liabilities and stockholders’ equity	$	2,045,362					$	2,284,216
Net interest income			$	31,115					$	32,970

Weighted average spread					2.97	%					2.74	%

Net interest margin (6)					3.10	%					2.94	%
Average interest-earning assets to average
interest-bearing liabilities (7)					117.12	%					118.20	%

(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.