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 SAVINGSSelected Financial Ratios

  Three Months EndedJune 30,   Six Months EndedJune 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.
     

HINGHAM 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 SAVINGSNet 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.
     

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

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