Skip to main content

Market Overview

Hingham Savings Reports 2020 Results

Share:

HINGHAM, Mass., Jan. 19, 2021 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2020.

Earnings

Net income for the year ended December 31, 2020 was $50,771,000 or $23.76 per share basic and $23.25 per share diluted, as compared to $38,927,000 or $18.24 per share basic and $17.83 per share diluted for the same period last year.  The Bank's return on average equity for the year ended December 31, 2020 was 18.96%, and the return on average assets was 1.88%, as compared to 16.82% and 1.55% for the same period in 2019.  Net income per share (diluted) for 2020 increased by 30% over the same period in 2019.

Core net income for the year ended December 31, 2020, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $44,600,000 or $20.87 per share basic and $20.43 per share diluted, as compared to $32,996,000 or $15.46 per share basic and $15.12 per share diluted for the same period last year.  The Bank's core return on average equity for the year ended December 31, 2020 was 16.66%, and the core return on average assets was 1.65%, as compared to 14.26% and 1.32% for the same period in 2019.  Core net income per share (diluted) for 2020 increased by 35% over the same period in 2019.

Net income for the quarter ended December 31, 2020 was $17,042,000 or $7.97 per share basic and $7.78 per share diluted, as compared to $11,364,000 or $5.32 per share basic and $5.20 per share diluted for the same period last year.  The Bank's annualized return on average equity for the fourth quarter of 2020 was 23.83%, and the annualized return on average assets was 2.46%, as compared to 18.64% and 1.81% for the same period in 2019.  Net income per share (diluted) for the fourth quarter of 2020 increased by 50% over the same period in 2019. 

Core net income for the quarter ended December 31, 2020, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $12,791,000 or $5.99 per share basic and $5.84 per share diluted, as compared to $8,814,000 or $4.13 per share basic and $4.04 per share diluted for the same period last year.  The Bank's annualized core return on average equity for the fourth quarter of 2020 was 17.89%, and the annualized core return on average assets was 1.85%, as compared to 14.46% and 1.40% for the same period in 2019.  Core net income per share (diluted) for the fourth quarter of 2020 increased by 45% over the same period in 2019.

See page 9 for a Non-GAAP reconciliation between net income and core net income.  In calculating core net income, the Bank does not make any adjustments other than those relating to after-tax gains and losses on securities, realized and unrealized.

Balance Sheet

Total assets increased to $2.857 billion at December 31, 2020, representing 10% growth from December 31, 2019.

Net loans totaled $2.495 billion at December 31, 2020, representing 12% growth from December 31, 2019.  Growth was concentrated in the Bank's commercial real estate portfolio. 

Total deposits, including wholesale deposits, increased to $2.139 billion at December 31, 2020, representing 17% growth from December 31, 2019.  Total retail and business deposits increased to $1.592 billion at December 31, 2020, representing 11% growth from December 31, 2019.  Non-interest bearing deposits, included in retail and business deposits, increased to $313.5 million at December 31, 2020, representing 32% growth from December 31, 2019.  During 2020, the Bank continued to reduce the balance of excess reserves held at the Federal Reserve Bank and managed its wholesale funding mix between wholesale time deposits and Federal Home Loan Bank advances in order to reduce the cost of funds.

Book value per share was $137.02 as of December 31, 2020, representing 18.4% growth from December 31, 2019.  In addition to the increase in book value per share, the Bank has declared $2.47 in dividends per share since December 31, 2019, including a special dividend of $0.70 per share declared during the fourth quarter of 2020.  The Bank increased its regular dividend per share in each of the last four quarters.  The trailing five year compound annual growth rate in book value per share, an important measure of long-term value creation, was 16.1%.

Operational Performance Metrics

The net interest margin for the year ended December 31, 2020 increased 50 basis points to 3.22%, as compared to 2.72% in the prior year.  The net interest margin for the quarter ended December 31, 2020 increased 64 basis points to 3.43%, as compared to 2.79% for the same period last year.  The Bank has benefited from a sharp decline in the cost of interest-bearing liabilities, including retail and commercial deposits and wholesale funding. The Bank has also benefited from continued growth in non-interest bearing deposit balances. These benefits were partially offset by a decline in the yield on interest-earning assets, driven primarily by the decline in the interest on excess reserves held at the Federal Reserve Bank of Boston and a lower yield on loans during the same periods.

Key credit and operational metrics remained strong in the fourth quarter. At December 31, 2020, non-performing assets totaled 0.27% of total assets, as compared to 0.22% at December 31, 2019.  Non-performing loans as a percentage of the total loan portfolio totaled 0.16% at December 31, 2020, as compared to 0.25% at December 31, 2019.  At December 31, 2020, the Bank did not have any material exposure to loans modified as a result of the COVID-19 pandemic.  As indicated in prior quarters, the Bank did not defer the collection of interest due on any commercial loans in response to COVID-19.  See "COVID-19 Modifications Table" in Page 9 for a summary of modified loans still outstanding at December 31, 2020. Although the Bank's litigation activities were slowed by pandemic-related operational challenges in both state and federal courts early in 2020, we continue to pursue delinquencies vigorously. 

At December 31, 2020, the Bank owned $3.8 million in foreclosed property, consisting exclusively of a residential property on Nantucket that was purchased at auction in January 2020.  This balance includes the capitalization of repairs and improvements completed by the Bank following acquisition, net of a valuation allowance of $100,000 recorded in the fourth quarter of 2020 to reflect the property's fair value. This property had originally secured a non-performing loan which comprised the substantial majority of non-performing assets at December 31, 2019.  This property is currently under contract pending closing in the first quarter of 2021.  At December 31, 2019, the Bank did not own any foreclosed property. 

The Bank recorded $260,000 of net charge-offs in 2020, as compared to $1,000 in net recoveries in 2019. This was the product of $712,000 in gross charge-offs, primarily associated with two residential mortgage loans subject to foreclosure, partially offset by $452,000 in recoveries from ongoing litigation and insurance claims related to the same residential loans.  The Bank continues to pursue remaining deficiencies via litigation.

The efficiency ratio, as defined on page 4 below, fell to 25.41% in 2020, as compared to 30.26% in 2019.  Operating expenses as a percentage of average assets were 0.82% in both 2020 and 2019.  The Bank remains focused on reducing waste through an ongoing process of continuous improvement.

Chairman and Chief Executive Officer Robert H. Gaughen Jr. stated, "Returns on equity and assets were satisfactory in 2020, although performance in any one period should always be viewed cautiously, especially when tailwinds are blowing strongly in our favor.  These tailwinds will not blow forever and we must be prepared for environments in which headwinds prevail.  In doing so, we remain focused on careful capital allocation, defensive underwriting and disciplined cost control - the building blocks for compounding shareholder capital through all stages of the economic cycle.  These remain constant, regardless of the macroeconomic environment in which we operate."

The Bank's annual financial results are summarized in the 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, 2020 with the Federal Deposit Insurance Corporation (FDIC) on or about March 3, 2021.

Incorporated in 1834, Hingham Institution for Savings is one of America's oldest banks.  The Bank maintains offices in Boston, Nantucket, and 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 SAVINGS
Selected Financial Ratios

  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
  2019   2020   2019   2020
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 1.81 %   2.46 %   1.55 %   1.88 %
Return on average equity (1) 18.64     23.83     16.82     18.96  
Core return on average assets (1) (5) 1.40     1.85     1.32     1.65  
Core return on average equity (1) (5) 14.46     17.89     14.26     16.66  
Interest rate spread (1) (2) 2.45     3.31     2.38     3.03  
Net interest margin (1) (3) 2.79     3.43     2.72     3.22  
Operating expenses to average assets (1) 0.81     0.80     0.82     0.82  
Efficiency ratio (4) 29.00     23.57     30.26     25.41  
Average equity to average assets 9.70     10.34     9.24     9.93  
Average interest-earning assets to average interest-                       
bearing liabilities 122.02     125.62     120.74     123.64  
                       


  December 31, 2019   December 31, 2020
(Unaudited)              
           
Asset Quality Ratios          
Allowance for loan losses/total loans   0.69 %   0.69 %
Allowance for loan losses/non-performing loans   274.57     438.28  
             
Non-performing loans/total loans   0.25     0.16  
Non-performing loans/total assets   0.22     0.14  
Non-performing assets/total assets   0.22     0.27  
             
Share Related            
Book value per share $ 115.75     $ 137.02  
Market value per share $ 210.20     $ 216.00  
Shares outstanding at end of period   2,135,750       2,137,900  


(1) Annualized for the three months ended December 31, 2019 and 2020.

(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)
  December 31, 2019
  December 31, 2020
(Unaudited)  
ASSETS  
             
Cash and due from banks   $ 9,057   $ 6,798
Federal Reserve and other short-term investments     243,090     227,188
Cash and cash equivalents     252,147     233,986
             
CRA investment     7,910     9,580
Debt securities available for sale     11     6
Other marketable equity securities     39,265     56,282
Securities, at fair value     47,186     65,868
Federal Home Loan Bank stock, at cost     24,890     19,345
Loans, net of allowance for loan losses of $15,376 at December 31,            
2019 and $17,404 at December 31, 2020     2,227,062     2,495,331
Foreclosed assets         3,826
Bank-owned life insurance     12,727     12,657
Premises and equipment, net     14,548     15,248
Accrued interest receivable     4,926     5,267
Deferred income tax asset, net     1,213     763
Other assets     5,647     4,802
Total assets   $ 2,590,346   $ 2,857,093

LIABILITIES AND STOCKHOLDERS' EQUITY

             
Interest-bearing deposits   $ 1,583,280   $ 1,825,700
Non-interest-bearing deposits     237,554     313,497
Total deposits     1,820,834     2,139,197
Federal Home Loan Bank advances     505,200     408,031
Mortgage payable     687    
Mortgagors' escrow accounts     7,815     8,770
Accrued interest payable     960     252
Other liabilities     7,627     7,900
Total liabilities     2,343,123     2,564,150
             
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;            
2,135,750 shares issued and outstanding at December 31,            
2019 and 2,137,900 shares issued and outstanding at            
December 31, 2020     2,136     2,138
Additional paid-in capital     12,234     12,460
Undivided profits     232,853     278,345
Accumulated other comprehensive income        
Total stockholders' equity     247,223     292,943
Total liabilities and stockholders' equity   $ 2,590,346   $ 2,857,093


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income

    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
(In thousands, except per share amounts)     2019     2020   2019   2020
(Unaudited)                    
Interest and dividend income:                        
Loans   $ 25,330   $ 26,038   $ 99,379   $ 103,797
Debt securities     1         1    
Equity securities     493     264     1,996     1,666
Federal Reserve and other short-term investments   860     55     5,576     899
Total interest and dividend income     26,684     26,357     106,952     106,362
Interest expense:                        
Deposits     6,014     2,568     26,819     16,186
Federal Home Loan Bank and Federal Reserve Bank advances     3,422     513     13,188     4,969
Mortgage payable     10         43     3
Total interest expense     9,446     3,081     40,050     21,158
Net interest income     17,238     23,276     66,902     85,204
Provision for loan losses     285     175     1,567     2,288
Net interest income, after provision for loan losses   16,953     23,101     65,335     82,916
Other income:                        
Customer service fees on deposits     205     177     803     678
Increase in cash surrender value of bank-owned life insurance     66     51     251     219
Gain on equity securities, net     3,271     5,453     7,608     7,916
Gain on disposal of fixed assets                 218
Miscellaneous     41     47     166     161
Total other income     3,583     5,728     8,828     9,192
Operating expenses:                        
Salaries and employee benefits     3,212     3,278     12,826     13,155
Occupancy and equipment     459     422     1,813     1,854
Data processing     432     443     1,586     1,909
Deposit insurance     4     211     534     860
Foreclosure and related     16     207     117     528
Marketing     198     145     695     545
Other general and administrative     768     846     3,044     3,127
Total operating expenses     5,089     5,552     20,615     21,978
Income before income taxes     15,447     23,277     53,548     70,130
Income tax provision     4,083     6,235     14,621     19,359
Net income   $ 11,364   $ 17,042   $ 38,927   $ 50,771
                         
Cash dividends declared per share   $ 1.01   $ 1.17   $ 2.18   $ 2.47
                         
Weighted average shares outstanding:                        
Basic     2,134     2,137     2,134     2,137
Diluted     2,183     2,189     2,183     2,183
                         
Earnings per share:                        
Basic   $ 5.32   $ 7.97   $ 18.24   $ 23.76
Diluted   $ 5.20   $ 7.78   $ 17.83   $ 23.25


HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

  Three Months Ended December 31,  
  2019     2020  
  AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)     AVERAGE BALANCE   INTEREST   YIELD/ RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 2,198,689   $ 25,330   4.61 %   $ 2,440,571   $ 26,038   4.27 %
Securities (3) (4)   62,938     494   3.14       62,966     264   1.68  
Federal Reserve and other short-term investments   208,197     860   1.65       214,403     55   0.10  
Total interest-earning assets   2,469,824     26,684   4.32       2,717,940     26,357   3.88  
Other assets   42,766                 48,848            
Total assets $ 2,512,590               $ 2,766,788            
                                   
Interest-bearing deposits (5) $ 1,425,114     6,014   1.69     $ 1,843,689     2,568   0.56  
Borrowed funds   599,025     3,432   2.29       319,931     513   0.64  
Total interest-bearing liabilities   2,024,139     9,446   1.87       2,163,620     3,081   0.57  
Non-interest-bearing deposits   237,039                 309,975            
Other liabilities   7,594                 7,153            
Total liabilities   2,268,772                 2,480,748            
Stockholders' equity   243,818                 286,040            
Total liabilities and stockholders' equity $ 2,512,590               $ 2,766,788            
Net interest income       $ 17,238               $ 23,276      
                                   
Weighted average spread             2.45 %               3.31 %
                                   
Net interest margin (6)             2.79 %               3.43 %
                                   
Average interest-earning assets to average                                  
interest-bearing liabilities (7)   122.02 %               125.62 %          


(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

  Twelve Months Ended December 31,  
  2019     2020  
  AVERAGE BALANCE  
INTEREST
  YIELD/ RATE     AVERAGE BALANCE   INTEREST   YIELD/ RATE  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 2,150,445   $ 99,379   4.62 %   $ 2,370,869   $ 103,797   4.38 %
Securities (3) (4)   58,585     1,997   3.41       65,318     1,666   2.55  
Federal Reserve and other short-term investments   255,082     5,576   2.19       212,490     899   0.42  
Total interest-earning assets   2,464,112     106,952   4.34       2,648,677     106,362   4.02  
Other assets   41,806                 46,986            
Total assets $ 2,505,918               $ 2,695,663            
                                   
Interest-bearing deposits (5) $ 1,517,625     26,819   1.77     $ 1,677,107     16,186   0.97  
Borrowed funds   523,235     13,231   2.53       465,161     4,972   1.07  
Total interest-bearing liabilities   2,040,860     40,050   1.96       2,142,268     21,158   0.99  
Non-interest-bearing deposits   225,999                 277,924            
Other liabilities   7,619                 7,748            
Total liabilities   2,274,478                 2,427,940            
Stockholders' equity   231,440                 267,723            
Total liabilities and stockholders' equity $ 2,505,918               $ 2,695,663            
Net interest income       $ 66,902               $ 85,204      
                                   
Weighted average spread             2.38 %               3.03 %
                                   
Net interest margin (6)             2.72 %               3.22 %
                                   
Average interest-earning assets to average                                  
interest-bearing liabilities (7)   120.74 %               123.64 %          

 

(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.

 

HINGHAM INSTITUTION FOR SAVINGS
Non-GAAP Reconciliation

The table below presents the reconciliation between net income and core net income, a non-GAAP measurement that represents net income excluding the after-tax gain on equity securities, net.

    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
(In thousands, unaudited)     2019       2020     2019     2020  
                     
Non-GAAP reconciliation:                          
Net income   $ 11,364     $ 17,042     $ 38,927     $ 50,771  
Gain on equity securities, net     (3,271 )     (5,453 )     (7,608 )     (7,916 )
Income tax expense (1)     721       1,202       1,677       1,745  
Core net income   $ 8,814     $ 12,791     $ 32,996     $ 44,600  

 

(1) The equity securities are held in a tax-advantaged subsidiary corporation. The income tax effect of the gain on equity securities, net, was calculated using the effective tax rate applicable to the subsidiary.


COVID-19 Modifications Table

The table below presents the number and outstanding balances of loans that the Bank has modified as a result of COVID-19 compared as a percentage of the total number and outstanding balances of the Bank's loan portfolio as of December 31, 2020, by loan category. This table reflects all modifications in effect as of December 31, 2020 and as loans return to the original contractual terms, they are no longer reflected on this table.

    Outstanding   Modified   % Modified  
  # of
Loans
  Balance (2)   # of
Loans
  Balance   # of
Loans
  Balance
(Balances in thousands, unaudited)                          
                                 
Residential Real Estate (1) 2,392   $ 656,220     5   $ 1,394   0.21 %   0.21 %
Commercial Real Estate 1,380     1,693,215     7     21,236   0.51     1.25  
Construction 65     153,020                
Commercial and Consumer 529     7,438                
Total Loans   4,366   $ 2,509,893     12   $ 22,630   0.27 %   0.90 %

 

(1) Includes Home Equity lines of credit.
(2) Gross loans, before net deferred loan origination costs and the allowance for loan losses.


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


Primary Logo

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com