HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2019.

Net income for the year ended December 31, 2019 was $38,927,000 or $18.24 per share basic and $17.83 per share diluted, as compared to $30,399,000 or $14.25 per share basic and $13.90 per share diluted for the same period last year.  The Bank’s return on average equity for the year ended December 31, 2019 was 16.82%, and the return on average assets was 1.55%, as compared to 14.97% and 1.32% for the same period in 2018.  Net income per share (diluted) for 2019 increased 28% over the same period in 2018.

Excluding the after-tax gains and losses on securities, both realized and unrealized, core net income for the year ended December 31, 2019 was $32,996,000 or $15.46 per share basic and $15.12 per share diluted, as compared to $32,776,000 or $15.37 per share basic and $14.99 per share diluted for the same period last year.  The Bank’s core return on average equity for the year ended December 31, 2019 was 14.26%, and the core return on average assets was 1.32%, as compared to 16.14% and 1.42% for the same period in 2018.  Core net income per share (diluted) for 2019 increased by 1% over the same period in 2018.

Net income for the quarter ended December 31, 2019 was $11,364,000 or $5.32 per share basic and $5.20 per share diluted, as compared to $4,664,000 or $2.18 per share basic and $2.13 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the fourth quarter of 2019 was 18.64%, and the annualized return on average assets was 1.81%, as compared to 8.78% and 0.80% for the same period last year.  Net income per share (diluted) for the fourth quarter of 2019 increased by 144% 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 December 31, 2019 was $8,814,000 or $4.13 per share basic and $4.04 per share diluted, as compared to $8,046,000 or $3.77 per share basic and $3.68 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the fourth quarter of 2019 was 14.46% and the annualized core return on average assets was 1.40%, as compared to 15.14% and 1.38% for the same period last year.  Core net income per share (diluted) for the fourth quarter of 2019 increased by 10% over the same period in 2018.

Balance sheet growth in 2019 was strong, as deposits increased to $1.821 billion at December 31, 2019, representing 16% growth from 2018.  This reflected strong growth in retail and business deposits of $173.3 million, as well $74.4 million growth in wholesale deposits.  Net loans increased to $2.227 billion, representing 11% growth from 2018.  Total assets increased to $2.590 billion, representing 8% growth from 2018.  During 2019, the Bank used a portion of its cash balances to reduce outstanding Federal Home Loan Bank advances, in order to minimize the carrying cost of its on-balance sheet liquidity.  Book value per share was $115.75 as of December 31, 2019, representing 16% growth from December 31, 2018.  In addition to the increase in book value per share, the Bank declared $2.18 in dividends per share in 2019, including a special dividend of $0.60 per share declared during the fourth quarter of 2019.  The Bank announced increases in its regular quarterly dividend in March, June, September and November of 2019.  The trailing five year compound annual growth rate in book value per share, an important measure of long-term value creation, was 15.2%.

Key credit and operational metrics remained strong in 2019.  At December 31, 2019, non-performing assets totaled 0.22% of total assets, compared to 0.02% at December 31, 2018.  Non-performing loans as a percentage of the total loan portfolio totaled 0.25% at December 31, 2019, compared to 0.02% at December 31, 2018.  A single non-performing residential loan on Nantucket comprised the substantial majority of non-performing assets at year-end and the Bank is actively exercising its full range of remedies, including foreclosure proceedings against the collateral as well as direct litigation against each of the borrowers individually.  The Bank recorded $1,000 in net recoveries in both 2019 and 2018.  At December 31, 2019 and 2018, the Bank did not own any foreclosed property.  The efficiency ratio increased slightly to 30.26% in 2019, as compared to 29.89% in 2018.  Operating expenses as a percentage of average assets improved to 0.82% in 2019, as compared to 0.87% in 2018.  These metrics reflect the Bank’s disciplined focus on credit quality and expense management.

Chairman Robert H. Gaughen, Jr. stated, “Returns on equity and assets were adequate in 2019, although competitive pressures remain acute.  Performance in any one period, especially a period in which tailwinds are blowing strongly in our favor, should be viewed cautiously.  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.”

The Bank’s annual and quarterly financial results are summarized in this earnings release, but shareholders are encouraged to read the Bank’s annual report on Form 10-K, which is generally available several weeks after the earnings release.  The Bank expects to file Form 10-K for the year ended December 31, 2019 with the FDIC on or about March 4, 2020.

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 maintains a commercial banking office in Washington, D.C.

The Bank’s shares of common stock are listed and traded on The NASDAQ Stock Market under the symbol HIFS.

HINGHAM INSTITUTION FOR SAVINGSSelected Financial Ratios

  Three Months EndedDecember 31,   Twelve Months EndedDecember 31,
  2018   2019   2018   2019
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 0.80 %   1.81 %   1.32 %   1.55 %
Return on average equity (1) 8.78     18.64     14.97     16.82  
Core return on average assets (1) (5) 1.38     1.40     1.42     1.32  
Core return on average equity (1) (5) 15.14     14.46     16.14     14.26  
Interest rate spread (1) (2) 2.48     2.45     2.66     2.38  
Net interest margin (1) (3) 2.79     2.79     2.90     2.72  
Operating expenses to average assets (1) 0.84     0.81     0.87     0.82  
Efficiency ratio (4) 30.07     29.00     29.89     30.26  
Average equity to average assets 9.09     9.70     8.80     9.24  
Average interest-earning assets to average interest-   bearing liabilities   121.08       122.02       119.23       120.74  
                       
  December 31, 2018   December 31, 2019  
(Unaudited)          
           
Asset Quality Ratios          
Allowance for loan losses/total loans   0.68 %   0.69 %
Allowance for loan losses/non-performing loans   2,852.89     274.57  
             
Non-performing loans/total loans   0.02     0.25  
Non-performing loans/total assets   0.02     0.22  
Non-performing assets/total assets   0.02     0.22  
             
Share Related            
Book value per share $ 99.67     $ 115.75  
Market value per share $ 197.74     $ 210.20  
Shares outstanding at end of period   2,132,750       2,135,750  
  1. Annualized for the three months ended December 31, 2018 and 2019. 
  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 (loss), excluding gain (loss) on equity securities, net.  
  5. Non-GAAP measurements that represent return on average assets and return on average equity, excluding the after-tax gain (loss) on equity securities, net.

HINGHAM INSTITUTION FOR SAVINGSConsolidated Balance Sheets

 (Dollars in thousands, except share amounts)   December 31, 2018   December 31, 2019
(Unaudited)  
ASSETS  
             
Cash and due from banks    $ 8,004   $ 9,057
Federal Reserve and other short-term investments     287,971     243,090
  Cash and cash equivalents      295,975     252,147
             
CRA investment     7,680     7,910
Debt securities available for sale     14     11
Other marketable equity securities     30,766     39,265
  Securities, at fair value     38,460     47,186
Federal Home Loan Bank stock, at cost     28,696     24,890
Loans, net of allowance for loan losses of $13,808 at December 31,    2018 and $15,376 at December 31, 2019       2,009,288       2,227,062
Foreclosed assets        
Bank-owned life insurance      12,476     12,727
Premises and equipment, net      14,553     14,548
Accrued interest receivable     4,581     4,926
Deferred income tax asset, net     2,258     1,213
Other assets     2,300     5,647
  Total assets   $ 2,408,587   $ 2,590,346

LIABILITIES AND STOCKHOLDERS’ EQUITY

             
Interest-bearing deposits   $ 1,359,581   $ 1,583,280
Non-interest-bearing deposits     213,573     237,554
  Total deposits     1,573,154     1,820,834
Federal Home Loan Bank advances     606,600     505,200
Mortgage payable     751     687
Mortgagors’ escrow accounts     7,402     7,815
Accrued interest payable     2,187     960
Other liabilities     5,917     7,627
  Total liabilities     2,196,011     2,343,123
             
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, 2018 and 2,135,750 shares issued and outstanding at December 31, 2019       2,133       2,136
  Additional paid-in capital     11,863     12,234
  Undivided profits     198,580     232,853
  Accumulated other comprehensive income        
  Total stockholders’ equity     212,576     247,223
  Total liabilities and stockholders’ equity   $ 2,408,587   $ 2,590,346

HINGHAM INSTITUTION FOR SAVINGSConsolidated Statements of Income

            Three Months Ended   Twelve Months Ended
            December 31,   December 31,
(In thousands, except per share amounts)     2018       2019   2018     2019
(Unaudited)                    
Interest and dividend income:                          
  Loans       $ 22,716     $ 25,330   $ 87,022     $ 99,379
  Debt securities         1       1     1       1
  Equity securities         498       493     1,985       1,996
  Federal Reserve and other short-term investments   1,347       860     5,161       5,576
    Total interest and dividend income     24,562       26,684     94,169       106,952
Interest expense:                            
  Deposits         5,777       6,014     18,979       26,819
  Federal Home Loan Bank advances         2,705       3,422     9,358       13,188
  Mortgage payable       11       10     47       43
    Total interest expense       8,493       9,446     28,384       40,050
    Net interest income       16,069       17,238     65,785       66,902
Provision for loan losses       220       285     1,270       1,567
  Net interest income, after provision for loan losses   15,849       16,953     64,515       65,335
Other income (loss):                            
  Customer service fees on deposits     222       205     860       803
  Increase in bank-owned life insurance         62       66     255       251
  Gain (loss) on equity securities, net         (4,313 )     3,271     (3,023 )     7,608
  Miscellaneous         44       41     173       166
    Total other income (loss)       (3,985 )     3,583     (1,735 )     8,828
Operating expenses:                            
  Salaries and employee benefits       3,124       3,212     12,658       12,826
  Occupancy and equipment         461       459     1,774       1,813
  Data processing         360       432     1,402       1,586
  Deposit insurance         220       4     977       534
  Foreclosure         9       16     (32 )     117
  Marketing         137       198     625       695
  Other general and administrative         619       768     2,647       3,044
    Total operating expenses       4,930       5,089     20,051       20,615
Income before income taxes       6,934       15,447     42,729       53,548
Income tax provision         2,270       4,083     12,330       14,621
    Net income       $ 4,664     $ 11,364   $ 30,399     $ 38,927
                                 
Cash dividends declared per share   $ 0.87     $ 1.01   $ 1.92     $ 2.18
                         
Weighted average shares outstanding:                        
  Basic         2,133       2,134     2,133       2,134
  Diluted         2,186       2,183     2,187       2,183
                                 
Earnings per share:                          
  Basic       $ 2.18     $ 5.32   $ 14.25     $ 18.24
  Diluted       $ 2.13     $ 5.20   $ 13.90     $ 17.83

HINGHAM INSTITUTION FOR SAVINGSNet Interest Income Analysis

  Three Months Ended December 31,  
  2018     2019  
  AVERAGE BALANCE    INTEREST   YIELD/ RATE (8)     AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 2,009,174   $ 22,716   4.52 %   $ 2,198,689   $ 25,330   4.61 %
Securities (3) (4)   53,603     499   3.72       62,938     494   3.14  
Federal Reserve and other short-term investments   237,371     1,347   2.27       208,197     860   1.65  
  Total interest-earning assets   2,300,148     24,562   4.27       2,469,824     26,684   4.32  
Other assets   37,433                 42,766            
  Total assets $ 2,337,581               $ 2,512,590            
                                   
Interest-bearing deposits (5) $ 1,469,637     5,777   1.57     $ 1,425,114     6,014   1.69  
Borrowed funds   430,121     2,716   2.53       599,025     3,432   2.29  
  Total interest-bearing liabilities   1,899,758     8,493   1.79       2,024,139     9,446   1.87  
Non-interest-bearing deposits   218,621                 237,039            
Other liabilities   6,606                 7,594            
  Total liabilities   2,124,985                 2,268,772            
Stockholders’ equity   212,596                 243,818            
  Total liabilities and stockholders’ equity $ 2,337,581               $ 2,512,590            
Net interest income       $ 16,069               $ 17,238      
                                   
Weighted average spread             2.48 %               2.45 %
                                   
Net interest margin (6)             2.79 %               2.79 %
                                   
Average interest-earning assets to average  interest-bearing liabilities (7)     121.08   %                 122.02   %          
(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 SAVINGSNet Interest Income Analysis

  Twelve Months Ended December 31,  
  2018     2019  
  AVERAGE BALANCE    INTEREST   YIELD/ RATE     AVERAGE BALANCE   INTEREST   YIELD/ RATE  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,941,159   $ 87,022   4.48 %   $ 2,150,445   $ 99,379   4.62 %
Securities (3) (4)   53,055     1,986   3.74       58,585     1,997   3.41  
Federal Reserve and other short-term investments   276,000     5,161   1.87       255,082     5,576   2.19  
  Total interest-earning assets   2,270,214     94,169   4.15       2,464,112     106,952   4.34  
Other assets   38,357                 41,806            
  Total assets $ 2,308,571               $ 2,505,918            
                                   
Interest-bearing deposits (5) $ 1,440,383     18,979   1.32     $ 1,517,625     26,819   1.77  
Borrowed funds   463,726     9,405   2.03       523,235     13,231   2.53  
  Total interest-bearing liabilities   1,904,109     28,384   1.49       2,040,860     40,050   1.96  
Non-interest-bearing deposits   196,048                 225,999            
Other liabilities   5,369                 7,619            
  Total liabilities   2,105,526                 2,274,478            
Stockholders’ equity   203,045                 231,440            
  Total liabilities and stockholders’ equity $ 2,308,571               $ 2,505,918            
Net interest income       $ 65,785               $ 66,902      
                                   
Weighted average spread             2.66 %               2.38 %
                                   
Net interest margin (6)             2.90 %               2.72 %
                                   
Average interest-earning assets to average  interest-bearing liabilities (7)     119.23   %                 120.74   %          
(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.

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

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