HIFS - Hingham Savings Reports Second Quarter 2021 Results

HINGHAM, Mass., July 13, 2021 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced second quarter results for 2021.

Earnings

Net income for the quarter ended June 30, 2021 was $20,422,000 or $9.54 per share basic and $9.28 per share diluted, as compared to $16,338,000 or $7.65 per share basic and $7.50 per share diluted for the same period last year. The Bank’s annualized return on average equity for the second quarter of 2021 was 25.51%, and the annualized return on average assets was 2.83%, as compared to 25.28% and 2.41% for the same period in 2020. Net income per share (diluted) for the second quarter of 2021 increased by 24% over the same period in 2020.

Core net income for the quarter ended June 30, 2021, 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 $13,795,000 or $6.44 per share basic and $6.27 per share diluted, as compared to $10,936,000 or $5.12 per share basic and $5.03 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the second quarter of 2021 was 17.24%, and the annualized core return on average assets was 1.91%, as compared to 16.92% and 1.61% for the same period in 2020. Core net income per share (diluted) for the second quarter of 2021 increased by 25% over the same period in 2020.

Net income for the six months ended June 30, 2021 was $36,772,000 or $17.18 per share basic and $16.73 per share diluted, as compared to $18,523,000 or $8.67 per share basic and $8.50 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first six months of 2021 was 23.67%, and the annualized return on average assets was 2.58%, as compared to 14.50% and 1.39% for the same period in 2020.   Net income per share (diluted) for the first six months of 2021 increased by 97% over the same period in 2020.

Core net income for the six months ended June 30, 2021, 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 $27,520,000 or $12.86 per share basic and $12.52 per share diluted, as compared to $19,258,000 or $9.01 per share basic and $8.83 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first six months of 2021 was 17.72%, and the annualized core return on average assets was 1.93%, as compared to 15.08% and 1.45% for the same period in 2020. Core net income per share (diluted) for the first six months of 2021 increased by 42% over the same period in 2020.

In calculating core net income, the Bank has not traditionally made any adjustments other than those relating to after-tax gains and losses on securities, both realized and unrealized. However, net income for the three and six months ended June 30, 2021 included a $2.3 million pre-tax gain on the sale of the Bank’s former branch properties located in Weymouth and South Hingham, included in gain on disposal of fixed assets. This compares to a $218,000 pre-tax gain recorded in the first six months of 2020, related to the sale of the Bank’s former branch property in Scituate. Given the significant gains on disposal of fixed assets, the Bank has excluded these gains from the calculation of core net income. The prior year core net income, core net income per share basic and diluted, core return on average assets and core return on average equity figures have been adjusted accordingly to exclude such gains. See Page 10 for a Non-GAAP reconciliation between net income and core net income.

The Bank continues to optimize its branch footprint and has recently announced its intention to close its Norwell branch in September 2021, subject to regulatory approvals.

Balance Sheet

Balance sheet growth was satisfactory, as total assets increased to $2.974 billion at June 30, 2021, representing 8% annualized growth year-to-date and 9% growth from June 30, 2020. Asset growth, as a percentage, was below loan growth in both periods as the Bank continued to manage the balance sheet to minimize the carrying cost of its on-balance sheet liquidity.

Net loans increased to $2.630 billion at June 30, 2021, representing 11% annualized growth year-to-date and 10% growth from June 30, 2020. Growth was concentrated in the Bank’s commercial real estate portfolio.

Total deposits, including wholesale deposits, increased to $2.344 billion at June 30, 2021, representing 19% annualized growth year-to-date and 14% growth from June 30, 2020. Total retail and business deposits increased to $1.640 billion at June 30, 2021, representing 6% annualized growth year-to-date and 4% growth from June 30, 2020. Retail and business deposit growth was partially offset by a continuous decline in retail time deposits, as the Bank allowed higher rate maturing time deposits to roll off. Non-interest-bearing deposits, included in retail and business deposits, increased to $358.2 million at June 30, 2021, representing 29% annualized growth year-to-date and 24% growth from June 30, 2020. During the first half of 2021, the Bank continued to manage 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 $153.02 as of June 30, 2021, representing 23% annualized growth year-to-date and 24% growth from June 30, 2020. In addition to the increase in book value per share, the Bank has declared $2.62 in dividends per share since June 30, 2020, including a special dividend of $0.70 per share declared during the fourth quarter of 2020. The Bank increased its regular quarterly dividend in each of the last four quarters.

On June 23, 2021, the Bank’s Board of Directors declared a regular cash dividend of $0.51 per share. This represents an increase of 4% over the previous regular quarterly dividend of $0.49 per share. The dividend will be paid on August 11, 2021 to stockholders of record as of August 2, 2021. This will be the Bank’s 110th consecutive quarterly dividend and the Bank has consistently increased regular quarterly cash dividends over the last twenty-six years. The Bank has also declared special cash dividends in each of the last twenty-six 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, 2021 increased 31 basis points to 3.46%, as compared to 3.15% for the same period last year. The net interest margin for the six months ended June 30, 2021 increased 51 basis points to 3.50%, as compared to 2.99% 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 period.

Key credit and operational metrics remained strong in the second quarter. At June 30, 2021, non-performing assets totaled 0.01% of total assets, compared to 0.27% at December 31, 2020 and 0.24% at June 30, 2020. Non-performing loans as a percentage of the total loan portfolio totaled 0.01% at June 30, 2021, compared to 0.16% at December 31, 2020 and 0.11% at June 30, 2020.

The Bank recorded $1,000 in net charge-offs in the first six months of 2021, as compared to $681,000 in net charge-offs for the same period last year. The prior year charge-off related exclusively to the foreclosed property discussed below.

At June 30, 2021, the Bank did not own any foreclosed property, as compared to $3.8 million at both June 30, 2020 and December 31, 2020. The property was sold during the first quarter of 2021.

The efficiency ratio fell to 21.37% for the second quarter of 2021, as compared to 25.28% for the same period last year. Operating expenses as a percentage of average assets fell to 0.74% in the second quarter of 2021, as compared to 0.79% for the same period last year. The Bank remains focused on reducing waste through an ongoing process of continuous improvement.

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 were strong in the second quarter of 2021, although such performance should always be viewed cautiously, especially when tailwinds are blowing strongly in our favor. 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, 2021 with the FDIC on or about August 4, 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., 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

(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. Prior to the first quarter of 2021, the Bank’s calculation of the efficiency ratio included gains on disposal of fixed assets. This had the impact of slightly improving the efficiency ratio in periods in which the Bank recognized gains on the sale of former branch locations. The Bank believes it is more conservative to exclude such transactions. The efficiency ratio for the six months ended June 30, 2020 stated above has been recalculated using this method.

(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. Core return on average assets and core return on average equity for the six months ended June 30, 2020 have been recalculated accordingly.

H INGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets

LIABILITIES AND STOCKHOLDERS’ EQUITY

HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis

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.

(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