GlobeNewswire Inc | Jul 13, 2021 04:03PM EDT

July 13, 2021

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 Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks quarterly financial results are summarized in the earnings release, but shareholders are encouraged to read the Banks 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 Americas 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 Banks 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 Ended Six Months Ended June 30, June 30, 2020 2021 2020 2021(Unaudited) Key Performance Ratios Return on average assets (1) 2.41 % 2.83 % 1.39 % 2.58 %Return on average equity (1) 25.28 25.51 14.50 23.67 Core return on average assets 1.61 1.91 1.45 1.93 (1) (5)Core return on average equity 16.92 17.24 15.08 17.72 (1) (5)Interest rate spread (1) (2) 2.97 3.39 2.74 3.42 Net interest margin (1) (3) 3.15 3.46 2.99 3.50 Operating expenses to average 0.79 0.74 0.83 0.75 assets (1)Efficiency ratio (4) 25.28 21.37 27.76 21.70 Average equity to average 9.52 11.08 9.59 10.89 assetsAverage interest-earningassets to average interest- 122.79 127.44 122.09 126.78 bearing liabilities

June 30, December 31, June 30, 2020 2020 2021(Unaudited) Asset Quality Ratios Allowance for loan losses 0.69 % 0.69 % 0.69 %/total loansAllowance for loan losses 615.21 438.28 6,159.12 /non-performing loans Non-performing loans/ 0.11 0.16 0.01 total loansNon-performing loans/ 0.10 0.14 0.01 total assetsNon-performing assets/ 0.24 0.27 0.01 total assets Share Related Book value per share $ 123.57 $ 137.02 $ 153.02 Market value per share $ 167.78 $ 216.00 $ 290.50 Shares outstanding at end 2,136,900 2,137,900 2,142,400 of period

(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 Banks 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.

HINGHAM INSTITUTION FOR SAVINGSConsolidated Balance Sheets

June 30, December June 30,(In thousands, except share amounts) 2020 31, 2021 2020(Unaudited) ASSETS Cash and due from banks $ 7,365 $ 6,798 $ 7,734Federal Reserve and other short-term 214,489 227,188 198,590investmentsCash and cash equivalents 221,854 233,986 206,324 CRA investment 8,604 9,580 9,439Other marketable equity securities 46,191 56,282 69,311Equity securities, at fair value 54,795 65,862 78,750Securities available for sale, at fair 9 6 5valueSecurities held to maturity, at ? ? 3,500amortized costFederal Home Loan Bank stock, at cost 20,390 19,345 14,732Loans, net of allowance for loan lossesof $16,458 at June 30, 2020, $17,404 at 2,381,780 2,495,331 2,630,332December 31, 2020 and $18,231 at June30, 2021Foreclosed assets 3,811 3,826 ?Bank-owned life insurance 12,844 12,657 12,822Premises and equipment, net 15,358 15,248 15,103Accrued interest receivable 5,054 5,267 5,158Deferred income tax asset, net 1,729 763 ?Other assets 6,215 4,802 7,039Total assets $ 2,723,839 $ 2,857,093 $ 2,973,765

LIABILITIES AND STOCKHOLDERS EQUITY

Interest-bearing deposits $ 1,764,714 $ 1,825,700 $ 1,985,442Non-interest-bearing deposits 289,574 313,497 358,195Total deposits 2,054,288 2,139,197 2,343,637Federal Home Loan Bank and Federal 385,431 408,031 285,600Reserve Bank advancesMortgagors? escrow accounts 8,185 8,770 8,321Accrued interest payable 282 252 158Deferred income tax liability, net ? ? 1,201Other liabilities 11,605 7,900 7,014Total liabilities 2,459,791 2,564,150 2,645,931 Stockholders? equity: Preferred stock, $1.00 par value,2,500,000 shares authorized, none ? ? ?issuedCommon stock, $1.00 par value,5,000,000 sharesauthorized; 2,136,900shares issued and outstanding at June30, 2020, 2,137,900 shares issued and 2,137 2,138 2,142outstanding at December 31, 2020 and2,142,400 shares issued and outstandingat June 30, 2021Additional paid-in capital 12,352 12,460 12,715Undivided profits 249,559 278,345 312,977Accumulated other comprehensive income ? ? ?Total stockholders? equity 264,048 292,943 327,834Total liabilities and stockholders? $ 2,723,839 $ 2,857,093 $ 2,973,765equity

HINGHAM INSTITUTION FOR SAVINGSConsolidated Statements of Income

Three Months Ended Six Months Ended June 30, June 30,(In thousands, except per share 2020 2021 2020 2021 amounts)(Unaudited) Interest and dividend income: Loans $ 25,856 $ 26,215 $ 51,566 $ 52,964 Debt securities ? 18 ? 18 Equity securities 463 173 961 391 Federal Reserve and other 56 54 797 106 short-term investmentsTotal interest and dividend 26,375 26,460 53,324 53,479 incomeInterest expense: Deposits 4,392 1,692 10,333 3,799 Federal Home Loan Bank and 942 212 3,889 656 Federal Reserve Bank advancesMortgage payable ? ? 3 ? Total interest expense 5,334 1,904 14,225 4,455 Net interest income 21,041 24,556 39,099 49,024 Provision for loan losses 625 550 1,763 828 Net interest income, after 20,416 24,006 37,336 48,196 provision for loan lossesOther income (loss): Customer service fees on deposits 148 192 320 373 Increase in cash surrender value 59 84 117 165 of bank-owned life insuranceGain (loss) on equity securities, 6,930 6,346 (1,144 ) 9,713 netGain on disposal of fixed assets ? 2,337 218 2,337 Miscellaneous 28 21 81 36 Total other income (loss) 7,165 8,980 (408 ) 12,624 Operating expenses: Salaries and employee benefits 3,287 3,459 6,667 6,985 Occupancy and equipment 474 325 929 731 Data processing 475 482 964 943 Deposit insurance 254 227 437 450 Foreclosure and related 28 7 154 (75 )Marketing 104 104 284 228 Other general and administrative 756 708 1,563 1,500 Total operating expenses 5,378 5,312 10,998 10,762 Income before income taxes 22,203 27,674 25,930 50,058 Income tax provision 5,865 7,252 7,407 13,286 Net income $ 16,338 $ 20,422 $ 18,523 $ 36,772 Cash dividends declared per share $ 0.43 $ 0.51 $ 0.85 $ 1.00 Weighted average shares outstanding:Basic 2,137 2,142 2,137 2,140 Diluted 2,176 2,200 2,180 2,198 Earnings per share: Basic $ 7.65 $ 9.54 $ 8.67 $ 17.18 Diluted $ 7.50 $ 9.28 $ 8.50 $ 16.73

HINGHAM INSTITUTION FOR SAVINGSNet Interest Income Analysis

Three Months Ended June 30, 2020 2021 YIELD YIELD AVERAGE / AVERAGE / BALANCE INTEREST RATE BALANCE INTEREST RATE (8) (8)(Dollars in thousands)(Unaudited) Loans (1) (2) $ 2,379,132 $ 25,856 4.35 % $ 2,567,437 $ 26,215 4.08 %Securities (3) (4) 69,901 463 2.65 65,463 191 1.17 Federal Reserve andother short-term 222,960 56 0.10 205,636 54 0.11 investmentsTotalinterest-earning 2,671,993 26,375 3.95 2,838,536 26,460 3.73 assetsOther assets 44,066 51,008 Total assets $ 2,716,059 $ 2,889,544 Interest-bearing $ 1,592,458 4,392 1.10 $ 1,970,226 1,692 0.34 deposits (5)Borrowed funds 583,532 942 0.65 257,117 212 0.33 Totalinterest-bearing 2,175,990 5,334 0.98 2,227,343 1,904 0.34 liabilitiesNon-interest-bearing 272,418 335,541 depositsOther liabilities 9,107 6,503 Total liabilities 2,457,515 2,569,387 Stockholders? equity 258,544 320,157 Total liabilitiesand stockholders? $ 2,716,059 $ 2,889,544 equityNet interest income $ 21,041 $ 24,556 Weighted average 2.97 % 3.39 %spread Net interest margin 3.15 % 3.46 %(6) Averageinterest-earningassets to average 122.79 % 127.44 % interest-bearingliabilities (7)

(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 SAVINGSNet Interest Income Analysis

Six Months Ended June 30, 2020 2021 YIELD YIELD AVERAGE / AVERAGE / BALANCE INTEREST RATE BALANCE INTEREST RATE (8) (8)(Dollars in thousands)(Unaudited) Loans (1) (2) $ 2,325,075 $ 51,566 4.44 % $ 2,532,473 $ 52,964 4.18 %Securities (3) (4) 67,601 961 2.84 64,699 409 1.26 Federal Reserve andother short-term 225,565 797 0.71 205,263 106 0.10 investmentsTotalinterest-earning 2,618,241 53,324 4.07 2,802,435 53,479 3.82 assetsOther assets 45,302 49,366 Total assets $ 2,663,543 $ 2,851,801 Interest-bearing $ 1,552,901 10,333 1.33 $ 1,926,769 3,799 0.39 deposits (5)Borrowed funds 591,596 3,892 1.32 283,752 656 0.46 Totalinterest-bearing 2,144,497 14,225 1.33 2,210,521 4,455 0.40 liabilitiesNon-interest-bearing 255,212 323,736 depositsOther liabilities 8,347 6,873 Total liabilities 2,408,056 2,541,130 Stockholders? equity 255,487 310,671 Total liabilitiesand stockholders? $ 2,663,543 $ 2,851,801 equityNet interest income $ 39,099 $ 49,024 Weighted average 2.74 % 3.42 %spread Net interest margin 2.99 % 3.50 %(6) Averageinterest-earningassets to average 122.09 % 126.78 % interest-bearingliabilities (7)

(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) 2020 2021 2020 2021 Non-GAAP reconciliation: Net income $ 16,338 $ 20,422 $ 18,523 $ 36,772 (Gain) loss on equity (6,930 ) (6,346 ) 1,144 (9,713 )securities, netIncome tax expense (benefit) 1,528 1,399 (252 ) 2,141 (1)Gain on disposal of fixed ? (2,337 ) (218 ) (2,337 )assetsIncome tax expense ? 657 61 657 Core net income $ 10,936 $ 13,795 $ 19,258 $ 27,520

(1) The equity securities are held in a tax-advantaged subsidiary corporation. The income tax effect of the (gain) loss onequity 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