GlobeNewswire Inc | Oct 13, 2021 04:01PM EDT

October 13, 2021

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

Earnings

Net income for the quarter ended September 30, 2021 was $14,012,000 or $6.54 per share basic and $6.36 per share diluted, as compared to $15,206,000 or $7.12 per share basic and $6.96 per share diluted for the same period last year. The Banks annualized return on average equity for the third quarter of 2021 was 16.57%, and the annualized return on average assets was 1.85%, as compared to 22.23% and 2.26% for the same period in 2020. Net income per share (diluted) for the third quarter of 2021 decreased by 9% over the same period in 2020.

Core net income for the quarter ended September 30, 2021, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $14,010,000 or $6.54 per share basic and $6.36 per share diluted, as compared to $12,394,000 or $5.80 per share basic and $5.68 per share diluted for the same period last year. The Banks annualized core return on average equity for the third quarter of 2021 was 16.56%, and the annualized core return on average assets was 1.85%, as compared to 18.12% and 1.84% for the same period in 2020. Core net income per share (diluted) for the third quarter of 2021 increased by 12% over the same period in 2020.

Net income for the nine months ended September 30, 2021 was $50,784,000 or $23.72 per share basic and $23.09 per share diluted, as compared to $33,729,000 or $15.79 per share basic and $15.46 per share diluted for the same period last year. The Banks annualized return on average equity for the first nine months of 2021 was 21.16%, and the annualized return on average assets was 2.33%, as compared to 17.19% and 1.68% for the same period in 2020. Net income per share (diluted) for the first nine months of 2021 increased by 49% over the same period in 2020.

Core net income for the nine months ended September 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 $41,530,000 or $19.40 per share basic and $18.88 per share diluted, as compared to $31,652,000 or $14.81 per share basic and $14.51 per share diluted for the same period last year. The Banks annualized core return on average equity for the first nine months of 2021 was 17.31%, and the annualized core return on average assets was 1.90%, as compared to 16.13% and 1.58% for the same period in 2020. Core net income per share (diluted) for the first nine months of 2021 increased by 30% 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 nine months ended September 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 nine months of 2020, related to the sale of the Banks former branch property in Scituate. Given the significant gains on disposal of fixed assets recorded in the current year, 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.

Balance Sheet

Total assets increased to $3.165 billion at September 30, 2021, representing 14% annualized growth year-to-date and 16% growth from September 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 $2.800 billion at September 30, 2021, representing 16% annualized growth year-to-date and 19% growth from September 30, 2020. Growth was concentrated in the Banks commercial real estate portfolio.

Total deposits, including wholesale deposits, increased to $2.416 billion at September 30, 2021, representing 17% annualized growth year-to-date and 19% growth from September 30, 2020. Total retail and business deposits increased to $1.691 billion at September 30, 2021, representing 8% annualized growth year-date and 10% growth from September 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 $366.4 million at September 30, 2021, representing 22% annualized growth year-to-date and 21% growth from September 30, 2020. During the first nine months 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 $159.03 as of September 30, 2021, representing 21% annualized growth year-to-date and 22% growth from September 30, 2020. In addition to the increase in book value per share, the Bank has declared $2.70 in dividends per share since September 30, 2020, 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.

On September 29, 2021, the Banks Board of Directors declared a regular cash dividend of $0.53 per share. This represents an increase of 4% over the previous regular quarterly dividend of $0.51 per share. The dividend will be paid on November 10, 2021 to stockholders of record as of November 1, 2021. This will be the Banks 111th 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 September 30, 2021 increased 2 basis points to 3.48%, as compared to 3.46% for the same period last year. The net interest margin for the nine months ended September 30, 2021 increased 34 basis points to 3.49%, as compared to 3.15% for the same period last year. In the nine months ended September 30, 2021, and to a lesser extent, in the quarter ended September 30, 2021, the Bank benefited from a sharp decline in the cost of interest-bearing liabilities, including retail and commercial deposits and wholesale funding, when compared to the same periods in the prior year. The Bank 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 satisfactory in the third quarter. At September 30, 2021, non-performing assets totaled 0.01% of total assets, compared to 0.27% at December 31, 2020 and 0.23% at September 30, 2020. Non-performing loans as a percentage of the total loan portfolio totaled 0.01% at September 30, 2021, compared to 0.16% at December 31, 2020 and 0.10% at September 30, 2020.

The Bank recorded $1,000 of net charge-offs for the nine months ended September 30, 2021, as compared to $709,000 of net charge-offs for the same period last year. The prior year charge-off related primarily to the foreclosed property discussed below.

At September 30, 2021, the Bank did not own any foreclosed property, as compared to $3.9 million and $3.8 million at September 30, 2020 and December 31, 2020, respectively. This balance consisted of a single residential property which was sold during the first quarter of 2021.

The efficiency ratio fell to 21.29% for the third quarter of 2021, as compared to 23.50% for the same period last year. Operating expenses as a percentage of average assets fell to 0.74% in the third quarter of 2021, as compared to 0.81% for the same period last year. The Bank remains focused on reducing waste through an ongoing process of continuous improvement.

The Bank completed the previously announced closure of its Norwell branch in September 2021. The Bank will explore options to maximize the long-term value of the property whether through sale or lease.

Chairman Robert H. Gaughen Jr. stated, Returns on equity and assets were strong in the third 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 September 30, 2021 with the FDIC on or about November 3, 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 Nine Months Ended September 30, September 30, 2020 2021 2020 2021(Unaudited) Key Performance Ratios Return on average assets 2.26 % 1.85 % 1.68 % 2.33 %(1)Return on average equity 22.23 16.57 17.19 21.16 (1)Core return on average 1.84 1.85 1.58 1.90 assets (1) (5)Core return on average 18.12 16.56 16.13 17.31 equity (1) (5)Interest rate spread (1) 3.31 3.42 2.93 3.41 (2)Net interest margin (1) (3) 3.46 3.48 3.15 3.49 Operating expenses to 0.81 0.74 0.82 0.75 average assets (1)Efficiency ratio (4) 23.50 21.29 26.19 21.56 Average equity to average 10.18 11.20 9.79 11.00 assetsAverage interest-earning assets to average interest-bearing liabilities 124.72 128.29 122.96 127.30

September 30, December 31, September 30, 2020 2020 2021(Unaudited) Asset Quality Ratios Allowance for loan losses 0.71 % 0.69 % 0.68 %/total loansAllowance for loan losses 699.75 438.28 5,297.80 /non-performing loans Non-performing loans/ 0.10 0.16 0.01 total loansNon-performing loans/ 0.09 0.14 0.01 total assetsNon-performing assets/ 0.23 0.27 0.01 total assets Share Related Book value per share $ 130.24 $ 137.02 $ 159.03 Market value per share $ 184.00 $ 216.00 $ 336.70 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, excluding gain 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 nine months ended September 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 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 nine months ended September 30, 2020 have been recalculated accordingly.



HINGHAM INSTITUTION FOR SAVINGSConsolidated Balance Sheets

September December September(In thousands, except share amounts) 30, 31, 30, 2020 2020 2021(Unaudited) ASSETS Cash and due from banks $ 9,816 $ 6,798 $ 5,711Federal Reserve and other short-term 229,555 227,188 213,442investmentsCash and cash equivalents 239,371 233,986 219,153 CRA investment 8,604 9,580 9,395Other marketable equity securities 48,744 56,282 72,702Equity securities, at fair value 57,348 65,862 82,097Securities available for sale, at fair 6 6 5valueSecurities held to maturity, at ? ? 3,500amortized costFederal Home Loan Bank stock, at cost 18,985 19,345 18,908Loans, net of allowance for loan losses of $16,780at September 30, 2020, $17,404 atDecember 31, 2020 2,358,983 2,495,331 2,800,477and $19,231 at September 30, 2021Foreclosed assets 3,926 3,826 ?Bank-owned life insurance 12,895 12,657 12,901Premises and equipment, net 15,294 15,248 15,476Accrued interest receivable 5,116 5,267 5,270Deferred income tax asset, net 1,176 763 ?Other assets 6,045 4,802 7,042Total assets $ 2,719,145 $ 2,857,093 $ 3,164,829

LIABILITIES AND STOCKHOLDERS EQUITY

Interest-bearing deposits $ 1,722,970 $ 1,825,700 $ 2,049,930Non-interest-bearing deposits 303,774 313,497 366,398Total deposits 2,026,744 2,139,197 2,416,328Federal Home Loan Bank advances 399,031 408,031 390,000Mortgagors? escrow accounts 8,105 8,770 8,683Accrued interest payable 274 252 179Deferred income tax liability, net ? ? 1,206Other liabilities 6,679 7,900 7,717Total liabilities 2,440,833 2,564,150 2,824,113 Stockholders? equity: Preferred stock, $1.00 par value, 2,500,000 shares authorized, none issued ? ? ?Common stock, $1.00 par value, 5,000,000 sharesauthorized; 2,136,900 shares issued andoutstanding atSeptember 30, 2020, 2,137,900 sharesissued and 2,137 2,138 2,142outstanding and December 31, 2020 and2,142,400 sharesissued and outstanding at September 30,2021Additional paid-in capital 12,371 12,460 12,722Undivided profits 263,804 278,345 325,852Accumulated other comprehensive income ? ? ?Total stockholders? equity 278,312 292,943 340,716Total liabilities and stockholders? $ 2,719,145 $ 2,857,093 $ 3,164,829equity

HINGHAM INSTITUTION FOR SAVINGSConsolidated Statements of Income Three Months Ended Nine Months Ended September 30, September 30,(In thousands, except per share 2020 2021 2020 2021 amounts)(Unaudited) Interest and dividend income: Loans $ 26,193 $ 27,303 $ 77,759 $ 80,267 Debt securities ? 33 ? 51 Equity securities 441 171 1,402 562 Federal Reserve and other 47 78 844 184 short-term investments Total interest and dividend 26,681 27,585 80,005 81,064 incomeInterest expense: Deposits 3,285 1,551 13,618 5,350 Federal Home Loan Bank and 567 202 4,456 858 Federal Reserve Bank advances Mortgage payable ? ? 3 ? Total interest expense 3,852 1,753 18,077 6,208 Net interest income 22,829 25,832 61,928 74,856 Provision for loan losses 350 1,000 2,113 1,828 Net interest income, after 22,479 24,832 59,815 73,028 provision for loan lossesOther income: Customer service fees on 181 181 501 554 deposits Increase in cash surrender value 51 79 168 244 of bank-owned life insurance Gain on equity securities, net 3,607 2 2,463 9,715 Gain on disposal of fixed assets ? ? 218 2,337 Miscellaneous 33 24 114 60 Total other income 3,872 286 3,464 12,910 Operating expenses: Salaries and employee benefits 3,210 3,437 9,877 10,422 Occupancy and equipment 503 351 1,432 1,082 Data processing 502 489 1,466 1,432 Deposit insurance 212 231 649 681 Foreclosure and related 167 24 321 (51 ) Marketing 116 195 400 423 Other general and 718 833 2,281 2,333 administrative Total operating expenses 5,428 5,560 16,426 16,322 Income before income taxes 20,923 19,558 46,853 69,616 Income tax provision 5,717 5,546 13,124 18,832 Net income $ 15,206 $ 14,012 $ 33,729 $ 50,784 Cash dividends declared per share $ 0.45 $ 0.53 $ 1.30 $ 1.53 Weighted average shares outstanding: Basic 2,137 2,142 2,137 2,141 Diluted 2,183 2,202 2,181 2,199 Earnings per share: Basic $ 7.12 $ 6.54 $ 15.79 $ 23.72 Diluted $ 6.96 $ 6.36 $ 15.46 $ 23.09

HINGHAM INSTITUTION FOR SAVINGSNet Interest Income Analysis

Three Months Ended September 30, 2020 2021 YIELD YIELD AVERAGE INTEREST / AVERAGE INTEREST / BALANCE RATE BALANCE RATE (8) (8)(Dollars in thousands)(Unaudited) Loans (1) (2) $ 2,391,761 $ 26,193 4.38 % $ 2,693,457 $ 27,303 4.05 %Securities (3) (4) 63,151 441 2.79 69,978 204 1.17 Federal Reserve andother short-term 184,710 47 0.10 202,685 78 0.15 investmentsTotalinterest-earning 2,639,622 26,681 4.04 2,966,120 27,585 3.72 assetsOther assets 48,456 55,606 Total assets $ 2,688,078 $ 3,021,726 Interest-bearing $ 1,756,238 3,285 0.75 $ 2,032,203 1,551 0.31 deposits (5)Borrowed funds 360,271 567 0.63 279,796 202 0.29 Totalinterest-bearing 2,116,509 3,852 0.73 2,311,999 1,753 0.30 liabilitiesNon-interest-bearing 290,803 364,599 depositsOther liabilities 7,156 6,812 Total liabilities 2,414,468 2,683,410 Stockholders? equity 273,610 338,316 Total liabilitiesand stockholders? $ 2,688,078 $ 3,021,726 equityNet interest income $ 22,829 $ 25,832 Weighted average 3.31 % 3.42 %spread Net interest margin 3.46 % 3.48 %(6) Averageinterest-earning assets to averageinterest-bearing 124.72 % 128.29 % liabilities (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

Nine Months Ended September 30, 2020 2021 YIELD YIELD AVERAGE INTEREST / AVERAGE INTEREST / BALANCE RATE BALANCE RATE (8) (8)(Dollars in thousands)(Unaudited) Loans (1) (2) $ 2,347,466 $ 77,759 4.42 % $ 2,586,723 $ 80,267 4.14 %Securities (3) (4) 66,107 1,402 2.83 66,478 613 1.23 Federal Reserve andother short-term 211,847 844 0.53 204,395 184 0.12 investmentsTotalinterest-earning 2,625,420 80,005 4.06 2,857,596 81,064 3.78 assetsOther assets 46,361 51,469 Total assets $ 2,671,781 $ 2,909,065 Interest-bearing $ 1,621,175 13,618 1.12 $ 1,962,300 5,350 0.36 deposits (5)Borrowed funds 513,925 4,459 1.16 282,419 858 0.41 Totalinterest-bearing 2,135,100 18,077 1.13 2,244,719 6,208 0.37 liabilitiesNon-interest-bearing 267,162 337,507 depositsOther liabilities 7,947 6,852 Total liabilities 2,410,209 2,589,078 Stockholders? equity 261,572 319,987 Total liabilitiesand stockholders? $ 2,671,781 $ 2,909,065 equityNet interest income $ 61,928 $ 74,856 Weighted average 2.93 % 3.41 %spread Net interest margin 3.15 % 3.49 %(6) Averageinterest-earning assets to averageinterest-bearing 122.96 % 127.30 % liabilities (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 SAVINGSNon-GAAP Reconciliation

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

Three Months Ended Nine Months Ended September 30, September 30,(In thousands, unaudited) 2020 2021 2020 2021 Non-GAAP reconciliation: Net income $ 15,206 $ 14,012 $ 33,729 $ 50,784 Gain on equity securities, (3,607 ) (2 ) (2,463 ) (9,715 )net Income tax expense (1) 795 ? 543 2,141 Gain on disposal of fixed ? ? (218 ) (2,337 )assets Income tax expense ? ? 61 657 Core net income $ 12,394 $ 14,010 $ 31,652 $ 41,530

(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.

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