HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), Hingham, Massachusetts announced third quarter earnings for 2017.

Net income for the quarter ended September 30, 2017 was $6,484,000 or $3.04 per share basic and $2.97 per share diluted as compared to $5,945,000 or $2.79 per share basic and $2.76 per share diluted for the third quarter of 2016.  Net income per share (diluted) for the third quarter of 2017 increased 8% over the same period of 2016.  The Bank’s annualized return on average equity for the third quarter of 2017 was 14.60%, and the annualized return on average assets was 1.21%, as compared to 15.59% and 1.23% for the same period in 2016.

Net income for the nine months ended September 30, 2017 was $19,066,000 or $8.94 per share basic and $8.75 per share diluted as compared to $17,136,000 or $8.04 per share basic and $7.97 per share diluted for the same period last year.  Net income per share (diluted) for the first nine months of 2017 increased 10% over the same period in 2016.  The Bank’s annualized return on average equity for the first nine months of 2017 was 14.81% and the annualized return on average assets was 1.22%, as compared to 15.53% and 1.21% for the same period in 2016.

Net income for the nine month periods ended September 30, 2017 and 2016 included after-tax realized gains on securities of approximately $49,000 and $221,000 respectively, which were unrelated to the Bank’s core business operations.  Unrealized gains on securities, net of deferred tax liabilities, are recorded in stockholders’ equity through accumulated other comprehensive income.

Strong balance sheet growth trends of recent years continued, as deposits were $1.449 billion at September 30, 2017, representing 8% annualized growth year-to-date and 8% growth from September 30, 2016.  Net loans were $1.770 billion at September 30, 2017, representing 14% annualized growth year-to-date and 13% growth from September 30, 2016.  Total assets were $2.215 billion at September 30, 2017, representing 13% annualized growth year-to-date and 13% growth from September 30, 2016.  Book value per share increased from $72.35 at September 30, 2016, to $84.27 per share at September 30, 2017, representing a 15% annualized growth rate year-to-date and a 16% increase from September 30, 2016.  In addition to the increase in book value per share, the Bank has declared $1.62 in dividends per share since September 30, 2016.

Key credit and operational metrics improved in the third quarter of 2017.  At September 30, 2017, non-performing assets totaled 0.05% of total assets, as compared to 0.09% at December 31, 2016 and 0.16% at September 30, 2016.  Non-performing loans as a percentage of the total loan portfolio totaled 0.06% at September 30, 2017, as compared to 0.11% at December 31, 2016 and 0.20% at September 30, 2016.  The Bank recorded $1,000 of net recoveries for the first nine months of 2017, as compared to $3,000 of net charge-offs for the same period last year.  At September 30, 2017 and 2016, the Bank did not own any foreclosed property.  The efficiency ratio improved to 29.37% for the third quarter of 2017, as compared to 31.57% for the same period last year.  Non-interest expense (annualized) as a percentage of average assets fell to 0.90% for the third quarter of 2017, as compared to 0.99% for the same period last year.  These metrics reflect the Bank’s disciplined focus on credit quality and expense management.

President Robert H. Gaughen, Jr. stated, “We are pleased to report that returns on equity and assets remain satisfactory.  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 EndedSeptember 30,   Nine Months EndedSeptember 30,
  2016   2017   2016   2017
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 1.23 %   1.21 %   1.21 %   1.22 %
Return on average equity (1) 15.59     14.60     15.53     14.81  
Interest rate spread (1) (2) 3.00     2.89     2.97     2.93  
Net interest margin (1) (3) 3.12     3.04     3.09     3.08  
Non-interest expense to average assets (1) 0.99     0.90     1.02     0.94  
Efficiency ratio (4) 31.57     29.37     32.94     30.58  
Average equity to average assets 7.88     8.26     7.78     8.25  
Average interest-earning assets to average interest-   bearing liabilities 116.41     117.69     116.03     117.32  
                       
  September 30, 2016   December 31, 2016   September 30, 2017
(Unaudited)                      
                       
Asset Quality Ratios                      
Allowance for loan losses/total loans   0.68 %   0.68 %     0.68 %
Allowance for loan losses/non-performing loans   334.89     614.43       1,078.04  
                     
Non-performing loans/total loans   0.20     0.11       0.06  
Non-performing loans/total assets   0.16     0.09       0.05  
Non-performing assets/total assets   0.16     0.09       0.05  
                     
Share Related                    
Book value per share $ 72.35     $ 75.50     $   84.27   
Market value per share $ 138.50     $ 196.78     $   190.27  
Shares outstanding at end of period   2,130,750       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 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. 

 
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
           
  September 30,   December 31,   September 30,
(Dollars in thousands, except per share data) 2016  2016   2017
(Unaudited)                
ASSETS                
                 
Cash and due from banks $ 7,849   $ 7,816   $ 9,792
Federal Reserve and other short-term investments   305,990     315,116     341,294
Cash and cash equivalents   313,839     322,932     351,086
                 
Certificates of deposit   1,142     —     —
                 
CRA investment   7,059     6,839     7,390
Other securities available for sale   15,823     20,329     24,911
Securities available for sale, at fair value   22,882     27,168     32,301
Federal Home Loan Bank stock, at cost   24,203     24,472     26,863
Loans, net of allowance for loan losses of $10,713                
at September 30, 2016, $11,030 at December 31, 2016          
and $12,128 at September 30, 2017 1,562,934   1,605,647   1,769,830
Foreclosed assets   —     —     —
Bank-owned life insurance   11,900     11,962     12,158
Premises and equipment, net   14,605     14,462     14,049
Accrued interest receivable   3,394     3,529     4,079
Deferred income tax asset, net   2,957     2,489     1,601
Other assets   2,453     1,938     2,973
Total assets $ 1,960,309   $ 2,014,599   $ 2,214,940
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
Interest-bearing deposits $ 1,183,905   $ 1,218,360   $ 1,277,157
Non-interest-bearing deposits   151,284     147,749     171,382
Total deposits   1,335,189     1,366,109     1,448,539
Federal Home Loan Bank advances   460,356     475,318     574,395
Mortgage payable   882     868     826
Mortgagors’ escrow accounts   5,389     5,585     6,228
Accrued interest payable   360     400     457
Other liabilities   3,979     5,295     4,777
Total liabilities   1,806,155     1,853,575     2,035,222
                 
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; 2,130,750 shares issued and outstanding at            
September 30, 2016 and 2,132,750 shares issued and            
outstanding at December 31, 2016 and September 30, 2017 2,131   2,133     2,133
Additional paid-in capital   11,351     11,575     11,706
Undivided profits   139,656     144,580     161,554
Accumulated other comprehensive income   1,016     2,736     4,325
Total stockholders’ equity   154,154     161,024     179,718
Total liabilities and stockholders’ equity $ 1,960,309   $ 2,014,599   $ 2,214,940
                 
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
           
      Three Months Ended   Nine Months Ended
      September 30,   September 30,
(In thousands, except per share amounts)   2016     2017   2016   2017
(Unaudited)                      
Interest and dividend income:                      
  Loans $ 17,477   $ 19,211   $ 50,890   $ 55,663
  Debt securities   6     —     52     —
  Equity securities   352     396     881     1,116
  Federal Reserve and other short-term investments   382     1,079     1,126     2,515
    Total interest and dividend income   18,217     20,686     52,949     59,294
Interest expense:                      
  Deposits   2,435     2,854     7,125     8,084
  Federal Home Loan Bank advances   933     1,742     2,782     3,979
  Mortgage payable   13     12     40     38
    Total interest expense   3,381     4,608     9,947     12,101
    Net interest income   14,836     16,078     43,002     47,193
Provision for loan losses   300     558     810     1,098
  Net interest income, after provision for loan losses   14,536     15,520     42,192     46,095
Other income:                      
  Customer service fees on deposits   239     216     691     662
  Increase in bank-owned life insurance   63     67     203     196
  Gain on sale of securities, net   —     —     344     77
  Miscellaneous   45     44     143     136
    Total other income   347     327     1,381     1,071
Operating expenses:                      
  Salaries and employee benefits   2,927     3,008     8,988     9,245
  Occupancy and equipment   446     422     1,401     1,305
  Data processing   318     321     926     929
  Deposit insurance   265     279     771     795
  Foreclosure   25     11     107     14
  Marketing   104     85     329     325
  Other general and administrative   708     692     1,983     2,121
    Total operating expenses   4,793     4,818     14,505     14,734
Income before income taxes   10,090     11,029     29,068     32,432
Income tax provision   4,145     4,545     11,932     13,366
    Net income $ 5,945   $ 6,484   $ 17,136   $ 19,066
                           
Cash dividends declared per share $ 0.32   $ 0.34   $ 0.92   $ 0.98
                       
Weighted average shares outstanding:                      
  Basic   2,131     2,133     2,130     2,133
  Diluted   2,152     2,180     2,150     2,180
                           
Earnings per share:                      
  Basic $ 2.79   $ 3.04   $ 8.04   $ 8.94
  Diluted $ 2.76   $ 2.97   $ 7.97   $ 8.75
                         

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
     
  Three Months Ended September 30,  
  2016     2017  
  AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)     AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,552,866   $ 17,477   4.50 %   $ 1,733,650   $ 19,211   4.43 %
Securities (3) (4)   49,354     358   2.90       50,696     396   3.12  
Federal Reserve and other short-term investments   300,435     382   0.51       332,367     1,079   1.30  
Total interest-earning assets   1,902,655     18,217   3.83       2,116,713     20,686   3.91  
Other assets   33,109                 35,471            
Total assets $ 1,935,764               $ 2,152,184            
                                   
Interest-bearing deposits (5) $ 1,194,292     2,435   0.82     $ 1,265,731     2,854   0.90  
Borrowed funds   440,104     946   0.86       532,836     1,754   1.32  
Total interest-bearing liabilities   1,634,396     3,381   0.83       1,798,567     4,608   1.02  
Demand deposits   144,497                 171,680            
Other liabilities   4,334                 4,242            
Total liabilities   1,783,227                 1,974,489            
Stockholders’ equity   152,537                 177,695            
Total liabilities and stockholders’ equity $ 1,935,764               $ 2,152,184            
Net interest income       $ 14,836               $ 16,078      
                                   
Weighted average spread             3.00 %               2.89 %
                                   
Net interest margin (6)             3.12 %               3.04 %
                                   
Average interest-earning assets to average  interest-bearing liabilities (7)             116.41 %               117.69 %
                                   
(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
     
  Nine Months Ended September 30,  
  2016     2017  
  AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)     AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,500,203   $ 50,890   4.52 %   $ 1,675,563   $ 55,663   4.43 %
Securities (3) (4)   57,358     933   2.17       49,202     1,116   3.02  
Federal Reserve and other short-term investments   298,729     1,126   0.50       321,335     2,515   1.04  
Total interest-earning assets   1,856,290     52,949   3.80       2,046,100     59,294   3.86  
Other assets   33,265                 35,261            
Total assets $ 1,889,555               $ 2,081,361            
                                   
Interest-bearing deposits (5) $ 1,164,317     7,125   0.82     $ 1,252,938     8,084   0.86  
Borrowed funds   435,548     2,822   0.86       491,114     4,017   1.09  
Total interest-bearing liabilities   1,599,865     9,947   0.83       1,744,052     12,101   0.93  
Demand deposits   137,873                 161,037            
Other liabilities   4,741                 4,613            
Total liabilities   1,742,479                 1,909,702            
Stockholders’ equity   147,076                 171,659            
Total liabilities and stockholders’ equity $ 1,889,555               $ 2,081,361            
Net interest income       $ 43,002               $ 47,193      
                                   
Weighted average spread             2.97 %               2.93 %
                                   
Net interest margin (6)             3.09 %               3.08 %
                                   
Average interest-earning assets to average  interest-bearing liabilities (7)             116.03 %               117.32 %
                                   
(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.
       

CONTACT:Patrick R. Gaughen, Executive Vice President (781) 783-1761 

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