• Hingham Savings Reports Second Quarter 2022 Results

    Source: Nasdaq GlobeNewswire / 15 Jul 2022 16:01:00   America/New_York

    HINGHAM, Mass., July 15, 2022 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced results for the quarter ended June 30, 2022.

    Earnings

    Net income for the quarter ended June 30, 2022 was $3,191,000 or $1.49 per share basic and $1.45 per share diluted, as compared to $20,422,000 or $9.54 per share basic and $9.28 per share diluted for the same period last year. The Bank’s annualized return on average equity for the second quarter of 2022 was 3.43%, and the annualized return on average assets was 0.34%, as compared to 25.51% and 2.83% for the same period in 2021. Net income per share (diluted) for the second quarter of 2022 decreased by 84% over the same period in 2021.

    Core net income for the quarter ended June 30, 2022, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, and the after-tax gains on the disposal of fixed assets, was $15,260,000 or $7.12 per share basic and $6.93 per share diluted, as compared to $13,795,000 or $6.44 per share basic and $6.27 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the second quarter of 2022 was 16.42%, and the annualized core return on average assets was 1.63%, as compared to 17.24% and 1.91% for the same period in 2021. Core net income per share (diluted) for the second quarter of 2022 increased by 11% over the same period in 2021.

    Net income for the six months ended June 30, 2022 was $15,055,000 or $7.02 per share basic and $6.83 per share diluted, as compared to $36,772,000 or $17.18 per share basic and $16.73 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first six months of 2022 was 8.20%, and the annualized return on average assets was 0.83%, as compared to 23.67% and 2.58% for the same period in 2021. Net income per share (diluted) for the first six months of 2022 decreased by 59% over the same period in 2021.

    Core net income for the six months ended June 30, 2022, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, and the after-tax gains on the disposal of fixed assets, was $30,365,000 or $14.17 per share basic and $13.78 per share diluted, as compared to $27,520,000 or $12.86 per share basic and $12.52 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first six months of 2022 was 16.55%, and the annualized core return on average assets was 1.68%, as compared to 17.72% and 1.93% for the same period in 2021. Core net income per share (diluted) for the first six months of 2022 increased by 10% over the same period in 2021.

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

    Balance Sheet and Capital Management

    Total assets were $3.996 billion at June 30, 2022, representing 33% annualized growth year-to-date and 34% growth from June 30, 2021.

    Net loans increased to $3.508 billion at June 30, 2022, representing 34% annualized growth year-to-date and 33% growth from June 30, 2021. Growth was concentrated in the Bank’s commercial real estate portfolio.

    Total deposits, including wholesale deposits, were $2.468 billion at June 30, 2022, representing 6% annualized growth year-to-date and 5% growth from June 30, 2021. Total retail and business deposits increased to $1.763 billion at June 30, 2022, representing 6% annualized growth year-to-date and 7% growth from June 30, 2021. Non-interest-bearing deposits, included in retail and business deposits, increased to $399.5 million at June 30, 2022, representing 5% annualized growth year-to-date and 12% growth from June 30, 2021. During the first half of 2022, the Bank used wholesale funds to help fund the strong loan growth experienced during the period.

    Book value per share was $171.23 as of June 30, 2022, representing 7% annualized growth year-to-date and 12% growth from June 30, 2021. In addition to the increase in book value per share, the Bank has declared $2.99 in dividends per share since June 30, 2021, including a special dividend of $0.75 per share declared during the fourth quarter of 2021. The Bank increased its regular quarterly dividend in each of the last four quarters.

    On June 29, 2022, the Bank’s Board of Directors declared a regular cash dividend of $0.59 per share. This represents an increase of 4% over the previous regular quarterly dividend of $0.57 per share. The dividend will be paid on August 10, 2022 to stockholders of record as of August 1, 2022. This will be the Bank’s 114th consecutive quarterly dividend and the Bank has consistently increased regular quarterly cash dividends over the last twenty-seven years. The Bank has also declared special cash dividends in each of the last twenty-seven years, typically in the fourth quarter.

    The Bank sets the level of the special dividend based on the Bank’s capital requirements and the prospective return on other capital allocation options. This may result in special dividends, if any, significantly above or below the regular quarterly dividend. Future regular and special dividends will be considered by the Board of Directors on a quarterly basis.

    Operational Performance Metrics

    The net interest margin for the quarter ended June 30, 2022 decreased 25 basis points to 3.21%, as compared to 3.46% for the same period last year. This decline was driven by a declining yield on interest-earning assets, resulting primarily from a lower yield on loans, combined with a higher cost of interest-bearing liabilities. The net interest margin for the six months ended June 30, 2022 decreased 25 basis points to 3.25%, as compared to 3.50% for the same period last year. This decline was driven by a declining yield on interest-earning assets, resulting primarily from a lower yield on loans.

    Key credit and operational metrics remained strong in the second quarter. At June 30, 2022, non-performing assets totaled 0.02% of total assets, compared to 0.01% at both December 31, 2021 and June 30, 2021. Non-performing loans as a percentage of the total loan portfolio totaled 0.03% at June 30, 2022, compared to 0.01% at both December 31, 2021 and June 30, 2021.

    The Bank recorded $50,000 in net recoveries in the first six months of 2022, as compared to $1,000 in net charge-offs for the same period last year.

    The Bank did not own any foreclosed property at June 30, 2022, December 31, 2021 and June 30, 2021.

    The efficiency ratio, as defined on page 4 below, fell slightly to 21.30% for the second quarter of 2022, as compared to 21.37% for the same period last year. Operating expenses as a percentage of average assets fell to 0.68% in the second quarter of 2022, as compared to 0.74% for the same period last year. The Bank remains focused on reducing waste through an ongoing process of continuous improvement and standard work that supports operational leverage.

    These operational metrics reflect the Bank’s disciplined focus on credit quality and expense management.

    Chairman Robert H. Gaughen Jr. stated, “Returns on equity and assets in our core operations were adequate in the second quarter of 2022, although we face a range of headwinds, including significant near-term pressure on our net interest margin. In our business operations, we had significant growth across all three markets in our commercial real estate group with both new and existing relationship customers. We are carefully managing this growth moving forward, particularly as growth in our commercial deposits in the same period was modest by comparison. In our investment operations, we remain generally satisfied with the performance of our portfolio companies and we continue to increase our ownership of these companies as market conditions have presented opportunities to do so. As always, 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 quarterly financial results are summarized in the earnings release, but shareholders are encouraged to read the Bank’s quarterly reports on Form 10-Q, which are generally available several weeks after the earnings release. The Bank expects to file Form 10-Q for the quarter ended June 30, 2022 with the FDIC on or about August 5, 2022.

    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., and provides commercial mortgage and banking services in the San Francisco Bay 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 Ended
    June 30,
     Six Months Ended
    June 30,
     2021 2022 2021 2022
    (Unaudited)           
                
    Key Performance Ratios           
    Return on average assets (1)2.83% 0.34% 2.58% 0.83%
    Return on average equity (1)25.51  3.43  23.67  8.20 
    Core return on average assets (1) (5)1.91  1.63  1.93  1.68 
    Core return on average equity (1) (5)17.24  16.42  17.72  16.55 
    Interest rate spread (1) (2)3.39  3.11  3.42  3.18 
    Net interest margin (1) (3)3.46  3.21  3.50  3.25 
    Operating expenses to average assets (1)0.74  0.68  0.75  0.70 
    Efficiency ratio (4)21.37  21.30  21.70  21.55 
    Average equity to average assets11.08  9.92  10.89  10.17 
    Average interest-earning assets to average interest-bearing liabilities127.44  124.97  126.78  125.39 


     June 30,
    2021
     December 31,
    2021
     June 30,
    2022
    (Unaudited)           
          
    Asset Quality Ratios     
    Allowance for loan losses/total loans 0.69% 0.68%  0.68%
    Allowance for loan losses/non-performing loans 6,159.12  4,784.78   2,428.23 
               
    Non-performing loans/total loans 0.01  0.01   0.03 
    Non-performing loans/total assets 0.01  0.01   0.02 
    Non-performing assets/total assets 0.01  0.01   0.02 
               
    Share Related          
    Book value per share$153.02  $165.52  $ 171.23 
    Market value per share$290.50  $419.88  $ 283.77 
    Shares outstanding at end of period 2,142,400   2,142,400   2,145,400 


    (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 (loss), excluding gain (loss) on equity securities, net and gain on disposal of fixed assets.
      
    (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, and the after-tax gain on disposal of fixed assets.


    H
    INGHAM INSTITUTION FOR SAVINGS
    Consolidated Balance Sheets

    (In thousands, except share amounts)June 30,
    2021
     December 31,
    2021

     June 30,
    2022
    (Unaudited)           
    ASSETS 
                
    Cash and due from banks$7,734  $5,428  $7,670 
    Federal Reserve and other short-term investments 198,590   265,733   303,223 
    Cash and cash equivalents 206,324   271,161   310,893 
                
    CRA investment 9,439   9,306   8,626 
    Other marketable equity securities 69,311   79,167   68,459 
    Equity securities, at fair value 78,750   88,473   77,085 
    Securities available for sale, at fair value 5       
    Securities held to maturity, at amortized cost 3,500   3,500   3,500 
    Federal Home Loan Bank stock, at cost 14,732   29,908   47,316 
    Loans, net of allowance for loan losses of $18,231 at June 30, 2021, $20,431 at December 31, 2021 and $24,088 at June 30, 2022 2,630,332   2,999,096   3,507,936 
    Bank-owned life insurance 12,822   12,980   13,150 
    Premises and equipment, net 15,103   15,825   16,617 
    Accrued interest receivable 5,158   5,467   6,111 
    Deferred income tax asset, net       3,793 
    Other assets 7,039   4,755   9,202 
    Total assets$2,973,765  $3,431,165  $3,995,603 
                
    LIABILITIES AND STOCKHOLDERS’ EQUITY           
                
    Interest-bearing deposits$1,985,442  $2,003,717  $2,068,443 
    Non-interest-bearing deposits 358,195   389,148   399,478 
    Total deposits 2,343,637   2,392,865   2,467,921 
    Federal Home Loan Bank advances 285,600   665,000   1,140,000 
    Mortgagors’ escrow accounts 8,321   9,183   11,822 
    Accrued interest payable 158   198   1,003 
    Deferred income tax liability, net 1,201   536    
    Other liabilities 7,014   8,771   7,497 
    Total liabilities 2,645,931   3,076,553   3,628,243 
                
    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; 2,142,400 shares issued and outstanding at June 30, 2021 and December 31, 2021 and 2,145,400 shares issued and outstanding at June 30, 2022 2,142   2,142   2,145 
    Additional paid-in capital 12,715   12,728   12,908 
    Undivided profits 312,977   339,742   352,307 
    Accumulated other comprehensive income        
    Total stockholders’ equity 327,834   354,612   367,360 
    Total liabilities and stockholders’ equity$2,973,765  $3,431,165  $3,995,603 


    HINGHAM INSTITUTION FOR SAVINGS

    Consolidated Statements of Income

     Three Months Ended Six Months Ended
     June 30, June 30,
    (In thousands, except per share amounts)2021
     2022 2021 2022
    (Unaudited)          
    Interest and dividend income:            
    Loans$26,215  $32,406  $52,964  $62,166 
    Debt securities 18   33   18   66 
    Equity securities 173   286   391   544 
    Federal Reserve and other short-term investments 54   519   106   629 
    Total interest and dividend income 26,460   33,244   53,479   63,405 
    Interest expense:            
    Deposits 1,692   2,102   3,799   3,606 
    Federal Home Loan Bank and Federal Reserve Bank advances 212   1,431   656   1,923 
    Mortgage payable           
    Total interest expense 1,904   3,533   4,455   5,529 
    Net interest income 24,556   29,711   49,024   57,876 
    Provision for loan losses 550   2,449   828   3,607 
    Net interest income, after provision for loan losses 24,006   27,262   48,196   54,269 
    Other income (loss):            
    Customer service fees on deposits 192   140   373   315 
    Increase in cash surrender value of bank-owned life insurance 84   77   165   170 
    Gain (loss) on equity securities, net 6,346   (15,482)  9,713   (19,639)
    Gain on disposal of fixed assets 2,337      2,337    
    Miscellaneous 21   20   36   46 
    Total other income (loss) 8,980   (15,245)  12,624   (19,108)
    Operating expenses:            
    Salaries and employee benefits 3,459   3,862   6,985   7,506 
    Occupancy and equipment 325   315   731   689 
    Data processing 482   648   943   1,262 
    Deposit insurance 227   518   450   801 
    Foreclosure and related 7   8   (75)  (13)
    Marketing 104   315   228   506 
    Other general and administrative 708   713   1,500   1,837 
    Total operating expenses 5,312   6,379   10,762   12,588 
    Income before income taxes 27,674   5,638   50,058   22,573 
    Income tax provision 7,252   2,447   13,286   7,518 
    Net income$20,422  $3,191  $36,772  $15,055 
                 
    Cash dividends declared per share$0.51  $0.59  $1.00  $1.16 
                 
    Weighted average shares outstanding:            
    Basic 2,142   2,145   2,140   2,144 
    Diluted 2,200   2,203   2,198   2,204 
                 
    Earnings per share:            
    Basic$9.54  $1.49  $17.18  $7.02 
    Diluted$9.28  $1.45  $16.73  $6.83 


    HINGHAM INSTITUTION FOR SAVINGS
    Net Interest Income Analysis

     Three Months Ended June 30,  
     2021 2022 
     AVERAGE BALANCE INTEREST YIELD/ RATE (8) AVERAGE BALANCE INTEREST YIELD/ RATE (8) 
    (Dollars in thousands)                
    (Unaudited)                
                     
    Loans (1) (2)$2,567,437 $26,215 4.08%$3,350,290 $32,406 3.87%
    Securities (3) (4) 65,463  191 1.17  109,378  319 1.17 
    Federal Reserve and other short-term investments 205,636  54 0.11  239,797  519 0.87 
    Total interest-earning assets 2,838,536  26,460 3.73  3,699,465  33,244 3.59 
    Other assets 51,008       47,480      
    Total assets$2,889,544      $3,746,945      
                     
    Interest-bearing deposits (5)$1,970,226  1,692 0.34 $2,048,311  2,102 0.41 
    Borrowed funds 257,117  212 0.33  912,034  1,431 0.63 
    Total interest-bearing liabilities 2,227,343  1,904 0.34  2,960,345  3,533 0.48 
    Non-interest-bearing deposits 335,541       408,033      
    Other liabilities 6,503       6,782      
    Total liabilities 2,569,387       3,375,160      
    Stockholders’ equity 320,157       371,785      
    Total liabilities and stockholders’ equity$2,889,544      $3,746,945      
    Net interest income   $24,556      $29,711   
                     
    Weighted average spread      3.39%      3.11%
                     
    Net interest margin (6)      3.46%      3.21%
                     
    Average interest-earning assets to average interest-bearing liabilities (7) 127.44%      124.97%     


    (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,  
     2021 2022 
     AVERAGE BALANCE INTEREST YIELD/ RATE (8) AVERAGE BALANCE INTEREST YIELD/ RATE (8) 
    (Dollars in thousands)                
    (Unaudited)                
                     
    Loans (1) (2)$2,532,473 $52,964 4.18%$3,214,720 $62,166 3.87%
    Securities (3) (4) 64,699  409 1.26  102,179  610 1.19 
    Federal Reserve and other short-term investments 205,263  106 0.10  240,273  629 0.52 
    Total interest-earning assets 2,802,435  53,479 3.82  3,557,172  63,405 3.56 
    Other assets 49,366       50,219      
    Total assets$2,851,801      $3,607,391      
                     
    Interest-bearing deposits (5)$1,926,769  3,799 0.39 $2,038,252  3,606 0.35 
    Borrowed funds 283,752  656 0.46  798,607  1,923 0.48 
    Total interest-bearing liabilities 2,210,521  4,455 0.40  2,836,859  5,529 0.39 
    Non-interest-bearing deposits 323,736       395,991      
    Other liabilities 6,873       7,522      
    Total liabilities 2,541,130       3,240,372      
    Stockholders’ equity 310,671       367,019      
    Total liabilities and stockholders’ equity$2,851,801      $3,607,391      
    Net interest income   $49,024      $57,876   
                     
    Weighted average spread      3.42%      3.17%
                     
    Net interest margin (6)      3.50%      3.25%
                     
    Average interest-earning assets to average interest-bearing liabilities (7) 126.78%      125.39%     


    (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
    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 (loss) on equity securities, net, and after-tax gain on disposal of fixed assets.

     Three Months Ended Six Months Ended
     June 30, June 30,
    (In thousands, unaudited) 2021 2022  2021 2022
              
    Non-GAAP reconciliation:           
    Net income$20,422  $3,191  $36,772  $15,055 
    (Gain) loss on equity securities, net (6,346)  15,482   (9,713)  19,639 
    Income tax expense (benefit) (1) 1,399   (3,413)  2,141   (4,329)
    Gain on disposal of fixed assets (2,337)     (2,337)   
    Income tax expense 657      657    
    Core net income$13,795  $15,260  $27,520  $30,365 


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


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


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