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 assets	7.98			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