HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced earnings for the first quarter ended March 31, 2019.

Net income for the quarter ended March 31, 2019 was $9,824,000 or $4.61 per share basic and $4.50 per share diluted, as compared to $8,912,000 or $4.18 per share basic and $4.08 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the first quarter of 2019 was 17.98%, and the annualized return on average assets was 1.64%, as compared to 18.56% and 1.56% for the same period last year.  Net income per share (diluted) for the first quarter of 2019 increased by 10% compared to the same period in 2018.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the quarter ended March 31, 2019 was $7,587,000 or $3.56 per share basic and $3.48 per share diluted, as compared to $8,159,000 or $3.83 per share basic and $3.73 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the first quarter of 2019 was 13.89% and the annualized core return on average assets was 1.26%, as compared to 16.99% and 1.43% for the same period last year.  Core net income per share (diluted) for the first quarter of 2019 decreased by 7% over the same period in 2018.

Growth in the first quarter of 2019 was mixed, with a decline in total deposits combined with strong loan growth.  Deposits decreased to $1.555 billion at March 31, 2019, representing a 5% annualized decline year-to-date and 2% growth from March 31, 2018.  This reflected a decline in wholesale deposits and retail interest-bearing deposits, partially offset by growth in non-interest-bearing business deposits.  Net loans increased to $2.092 billion, representing 17% annualized growth year-to-date and 12% growth from March 31, 2018.  Total assets increased to $2.497 billion, representing 15% annualized growth year-to-date and 11% growth from March 31, 2018.  Book value per share was $103.89 as of March 31, 2019, representing 17% annualized growth year-to-date and 14% growth from March 31, 2018.  In addition to the increase in book value per share, the Bank declared $1.96 in dividends per share since March 31, 2018, including a special dividend of $0.50 per share declared during the fourth quarter of 2018.  The Bank announced increases in its regular quarterly dividend in each of the last four quarters.

Key credit and operational metrics remained strong in the first quarter.  At March 31, 2019, non-performing assets totaled 0.02% of total assets, compared to 0.02% at December 31, 2018 and 0.08% at March 31, 2018.  Non-performing loans as a percentage of the total loan portfolio totaled 0.03% at March 31, 2019, compared to 0.02% at December 31, 2018 and 0.10% at March 31, 2018.  The Bank recorded $1,000 of net charge-offs for the first three months of 2019, as compared to $1,000 of net recoveries for the same period last year.  At March 31, 2019, December 31, 2018, and March 31, 2018 the Bank did not own any foreclosed property.  The efficiency ratio increased to 31.86% for the first quarter of 2019, as compared to 30.41% for the same period last year.  Operating expenses as a percentage of average assets fell to 0.86% in the first quarter of 2019, as compared to 0.89% for the same period last year.  These metrics reflect the Bank’s disciplined focus on credit quality and expense management.

Chairman Robert H. Gaughen Jr. stated, “Although returns on equity and assets were adequate in the first quarter of 2019, we continue to face significant headwinds from a flattening yield curve and an extraordinarily competitive market for both high-quality lending and deposit relationships.  There is a natural temptation in our industry to compromise on credit quality to obtain higher yields and achieve growth.  We must continue to resist this temptation.  As always, we remain focused on careful capital allocation, defensive underwriting, and disciplined cost control - the keys to compounding shareholder capital through all stages of the credit cycle.

We also are devoting increased focus to our commercial deposit business through our Specialized Deposit Group, which provides our commercial, institutional, and nonprofit customers with dedicated single point-of-contact relationship managers to handle all of their deposit needs.  This relationship business offsets our traditional reliance on Federal Home Loan Bank and wholesale funding.”

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 EndedMarch 31,
  2018   2019
(Unaudited)          
           
Key Performance Ratios          
Return on average assets (1) 1.56 %   1.64 %
Return on average equity (1) 18.56     17.98  
Core return on average assets (1) (5) 1.43     1.26  
Core return on average equity (1) (5) 16.99     13.89  
Interest rate spread (1) (2) 2.75     2.36  
Net interest margin (1) (3) 2.93     2.68  
Operating expenses to average assets (1) 0.89     0.86  
Efficiency ratio (4) 30.41     31.86  
Average equity to average assets 8.41     9.10  
Average interest-earning assets to average interest bearing liabilities 117.83     120.54  
           
  March 31, 2018   December 31,2018   March 31,2019
(Unaudited)                      
           
Asset Quality Ratios          
Allowance for loan losses/total loans   0.68 %   0.68 %   0.68 %
Allowance for loan losses/non-performing loans   691.27     2,852.89     2,280.77  
                   
Non-performing loans/total loans   0.10     0.02     0.03  
Non-performing loans/total assets   0.08     0.02     0.02  
Non-performing assets/total assets   0.08     0.02     0.02  
                   
Share Related                  
Book value per share $   91.14     $ 99.67   $   103.89  
Market value per share $ 206.00     $ 197.74   $   172.01  
Shares outstanding at end of period   2,132,750       2,132,750     2,133,750  
  1. Annualized. 
  2. Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities. 
  3. Net interest margin represents net interest income divided by average interest-earning assets. 
  4. The efficiency ratio represents total operating expenses, divided by the sum of net interest income and total other 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
 
 (In thousands, except share amounts) March 31,2018   December 31,2018   March 31,2019
(Unaudited)                  
ASSETS  
                 
Cash and due from banks  $ 8,901   $ 8,004   $ 7,433
Federal Reserve and other short-term investments   262,367     287,971     286,333
  Cash and cash equivalents    271,268     295,975     293,766
                 
CRA investment   7,724     7,680     7,776
Debt securities available for sale   17     14     13
Other marketable equity securities   30,089     30,766     34,935
  Securities, at fair value   37,830     38,460     42,724
Federal Home Loan Bank stock, at cost   24,530     28,696     30,617
Loans, net of allowance for loan losses of $12,823 at March 31, 2018, $13,808 at December 31, 2018 and $14,232 at March 31, 2019   1,872,114     2,009,288     2,092,313
Foreclosed assets   —     —     —
Bank-owned life insurance    12,289     12,476     12,542
Premises and equipment, net    13,947     14,553     14,388
Accrued interest receivable   4,240     4,581     5,180
Deferred income tax asset, net   1,103     2,258     1,626
Other assets   2,816     2,300     4,233
  Total assets $ 2,240,137   $ 2,408,587   $ 2,497,389

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 
Interest-bearing deposits $ 1,345,639   $ 1,359,581   $ 1,327,451
Non-interest-bearing deposits   186,169     213,573     227,872
  Total deposits   1,531,808     1,573,154     1,555,323
Federal Home Loan Bank advances   499,124     606,600     702,100
Mortgage payable   797     751     735
Mortgagors’ escrow accounts   6,551     7,402     7,201
Accrued interest payable   774     2,187     2,086
Other liabilities   6,695     5,917     8,263
  Total liabilities   2,045,749     2,196,011     2,275,708
                 
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 March 31 and December 31, 2018 and 2,133,750 shares issued and outstanding at March 31, 2019    2,133      2,133     2,134
  Additional paid-in capital   11,794     11,863     11,954
  Undivided profits   180,461     198,580     207,593
  Accumulated other comprehensive income   —     —     —
  Total stockholders’ equity   194,388     212,576     221,681
  Total liabilities and stockholders’ equity $ 2,240,137   $ 2,408,587   $ 2,497,389

 
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
 
  Three Months EndedMarch 31,
(In thousands, except per share amounts) 2018   2019
(Unaudited)          
           
Interest and dividend income:          
   Loans $ 20,417   $ 23,080
  Equity securities   479     489
  Federal Reserve and other short-term investments   1,241     1,560
  Total interest and dividend income   22,137     25,129
           
Interest expense:          
  Deposits   3,567     6,146
  Federal Home Loan Bank advances   2,093     3,128
  Mortgage payable   12     11
  Total interest expense   5,672     9,285
  Net interest income   16,465     15,844
Provision for loan losses   285     425
  Net interest income, after provision for loan losses   16,180     15,419
Other income:          
  Customer service fees on deposits   206     186
  Increase in cash surrender value of bank-owned life insurance   68     67
  Gain on equity securities, net   966     2,869
  Miscellaneous   44     40
  Total other income   1,284     3,162
Operating expenses:          
  Salaries and employee benefits   3,212     3,147
  Occupancy and equipment   466     454
  Data processing   341     434
  Deposit insurance   273     243
  Foreclosure   5     23
  Marketing   167     132
  Other general and administrative   639     709
  Total operating expenses   5,103     5,142
Income before income taxes   12,361     13,439
Income tax provision   3,449     3,615
  Net income $ 8,912   $ 9,824
           
Cash dividends declared per common share $ 0.34   $ 0.38
           
Weighted average shares outstanding:          
  Basic   2,133     2,133
  Diluted   2,186     2,182
           
Earnings per share:          
  Basic $ 4.18   $ 4.61
  Diluted $ 4.08   $ 4.50
           
   
HINGHAM INSTITUTION FOR SAVINGS  
Net Interest Income Analysis  
   
  Three Months Ended March 31,  
  2018     2019  
  AVERAGEBALANCE    INTEREST   YIELD/RATE (8)     AVERAGEBALANCE    INTEREST   YIELD/RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,866,138   $ 20,417   4.38 %   $ 2,048,387   $ 23,080   4.51 %
Securities (3) (4)   53,517     479   3.58       54,873     489   3.56  
Federal Reserve and other short-term investments   326,375     1,241   1.52       260,176     1,560   2.40  
  Total interest-earning assets   2,246,030     22,137   3.94       2,363,436     25,129   4.25  
Other assets   38,003                 39,122            
  Total assets $ 2,284,033               $ 2,402,558            
                                   
Interest-bearing deposits (5) $ 1,362,569     3,567   1.05     $ 1,485,540     6,146   1.65  
Borrowed funds   543,607     2,105   1.55       475,213     3,139   2.64  
  Total interest-bearing liabilities   1,906,176     5,672   1.19       1,960,753     9,285   1.89  
Demand deposits   180,375                 215,115            
Other liabilities   5,381                 8,128            
  Total liabilities   2,091,932                 2,183,996            
Stockholders’ equity   192,101                 218,562            
  Total liabilities and stockholders’ equity $ 2,284,033               $ 2,402,558            
Net interest income       $ 16,465               $ 15,844      
                                   
Weighted average spread             2.75 %               2.36 %
                                   
Net interest margin (6)             2.93 %               2.68 %
                                   
Average interest-earning assets to average interest-bearing liabilities (7)   117.83 %               120.54 %          
(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.
     

CONTACT: Patrick R. Gaughen, President and Chief Operating Officer (781) 783-1761

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