HINGHAM, Mass., Jan. 20, 2022 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2021.
Earnings
Net income for the year ended December 31, 2021 was $67,458,000 or $31.50 per share basic and $30.65 per share diluted, as compared to $50,771,000 or $23.76 per share basic and $23.25 per share diluted for the same period last year. The Bank’s return on average equity for the year ended December 31, 2021 was 20.62%, and the return on average assets was 2.25%, as compared to 18.96% and 1.88% for the same period in 2020. Net income per share (diluted) for 2021 increased by 32% over the same period in 2020.
Core net income for the year ended December 31, 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 $56,563,000 or $26.42 per share basic and $25.70 per share diluted, as compared to $44,443,000 or $20.80 per share basic and $20.36 per share diluted for the same period last year. The Bank’s core return on average equity for the year ended December 31, 2021 was 17.29%, and the core return on average assets was 1.89%, as compared to 16.60% and 1.65% for the same period in 2020. Core net income per share (diluted) for 2021 increased by 26% over the same period in 2020.
Net income for the quarter ended December 31, 2021 was $16,674,000 or $7.78 per share basic and $7.56 per share diluted, as compared to $17,042,000 or $7.97 per share basic and $7.78 per share diluted for the same period last year. The Bank’s annualized return on average equity for the fourth quarter of 2021 was 19.14%, and the annualized return on average assets was 2.05%, as compared to 23.83% and 2.46% for the same period in 2020. Net income per share (diluted) for the fourth quarter of 2021 decreased by 3% over the same period in 2020.
Core net income for the quarter ended December 31, 2021, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $15,033,000 or $7.02 per share basic and $6.81 per share diluted, as compared to $12,791,000 or $5.99 per share basic and $5.84 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the fourth quarter of 2021 was 17.26%, and the annualized core return on average assets was 1.85%, as compared to 17.89% and 1.85% for the same period in 2020. Core net income per share (diluted) for the fourth quarter of 2021 increased by 17% 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 year ended December 31, 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 year ended December 31, 2020, related to the sale of the Bank’s former branch property in Scituate. Given the significant gains on disposal of fixed assets recorded in the current year, the Bank has also 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 9 for a Non-GAAP reconciliation between net income and core net income.
Balance Sheet
Total assets increased to $3.431 billion at December 31, 2021, representing 20% growth from December 31, 2020.
Net loans totaled $2.999 billion at December 31, 2021, representing 20% growth from December 31, 2020. Growth was concentrated in the Bank’s commercial real estate portfolio.
Total deposits, including wholesale deposits, increased to $2.393 billion at December 31, 2021, representing 12% growth from December 31, 2020. Total retail and business deposits increased to $1.709 billion at December 31, 2021, representing 7% growth from December 31, 2020. Non-interest bearing deposits, included in retail and business deposits, increased to $389.1 million at December 31, 2021, representing 24% growth from December 31, 2020. This growth was offset by a significant decline in retail time deposits, as the Bank allowed higher rate maturing time deposits to roll off. In 2021, the Bank continued to reduce the balance of excess reserves held at the Federal Reserve Bank as a percentage of assets 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 $165.52 as of December 31, 2021, representing 21% growth from December 31, 2020. In addition to the increase in book value per share, the Bank has declared $2.83 in dividends per share since December 31, 2020, including a special dividend of $0.75 per share declared during the fourth quarter of 2021. 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 17%.
Operational Performance Metrics
The net interest margin for the year ended December 31, 2021 increased 26 basis points to 3.48%, as compared to 3.22% in the prior year. The net interest margin for the quarter ended December 31, 2021 increased 3 basis points to 3.46%, as compared to 3.43% for the same period last year. In the year ended December 31, 2021, and to a lesser extent, in the quarter ended December 31, 2021, the Bank benefited from a 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 consistent 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 a lower yield on loans and a decrease in Federal Home Loan Bank stock dividends declared during the same periods.
Key credit and operational metrics remained satisfactory in the fourth quarter. At December 31, 2021, non-performing assets totaled 0.01% of total assets, as compared to 0.27% at December 31, 2020. Non-performing loans as a percentage of the total loan portfolio totaled 0.01% at December 31, 2021, as compared to 0.16% at December 31, 2020.
At December 31, 2021, the Bank did not own any foreclosed property, as compared to $3.8 million at December 31, 2020. This balance consisted of a single residential property which was sold during the first quarter of 2021.
The Bank recorded $1,000 of net charge-offs in 2021, as compared to $260,000 in 2020. The prior year net charge-off related primarily to the foreclosed property discussed above.
The efficiency ratio, as defined on page 4 below, fell to 21.31% in 2021, as compared to 25.48% in 2020. Operating expenses as a percentage of average assets fell to 0.74% in 2021, as compared to 0.82% in 2020. 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 strong in 2021, although such performance must be viewed cautiously, especially when tailwinds have blown strongly in our favor. We must be prepared for considerably more adverse conditions in the future. 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, 2021 with the Federal Deposit Insurance Corporation (FDIC) on or about March 9, 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 SAVINGSSelected Financial Ratios
| Three Months EndedDecember 31, | Twelve Months EndedDecember 31, | ||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||
| (Unaudited) | |||||||||||
| Key Performance Ratios | |||||||||||
| Return on average assets (1) | 2.46 | % | 2.05 | % | 1.88 | % | 2.25 | % | |||
| Return on average equity (1) | 23.83 | 19.14 | 18.96 | 20.62 | |||||||
| Core return on average assets (1) (5) | 1.85 | 1.85 | 1.65 | 1.89 | |||||||
| Core return on average equity (1) (5) | 17.89 | 17.26 | 16.60 | 17.29 | |||||||
| Interest rate spread (1) (2) | 3.31 | 3.39 | 3.03 | 3.40 | |||||||
| Net interest margin (1) (3) | 3.43 | 3.46 | 3.22 | 3.48 | |||||||
| Operating expenses to average assets (1) | 0.80 | 0.71 | 0.82 | 0.74 | |||||||
| Efficiency ratio (4) | 23.57 | 20.62 | 25.48 | 21.31 | |||||||
| Average equity to average assets | 10.34 | 10.73 | 9.93 | 10.93 | |||||||
| Average interest-earning assets to average interest-bearing liabilities | 125.62 | 127.01 | 123.64 | 127.22 | |||||||
| December 31, 2020 | December 31, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| Asset Quality Ratios | |||||||||||
| Allowance for loan losses/total loans | 0.69 | % | 0.68 | % | |||||||
| Allowance for loan losses/non-performing loans | 438.28 | 4,784.78 | |||||||||
| Non-performing loans/total loans | 0.16 | 0.01 | |||||||||
| Non-performing loans/total assets | 0.14 | 0.01 | |||||||||
| Non-performing assets/total assets | 0.27 | 0.01 | |||||||||
| Share Related | |||||||||||
| Book value per share | $ | 137.02 | $ | 165.52 | |||||||
| Market value per share | $ | 216.00 | $ | 419.88 | |||||||
| Shares outstanding at end of period | 2,137,900 | 2,142,400 | |||||||||
(1) Annualized for the three months ended December 31, 2020 and 2021.
(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 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 twelve months ended December 31, 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 twelve months ended December 31, 2020 have been recalculated accordingly.
HINGHAM INSTITUTION FOR SAVINGSConsolidated Balance Sheets
| (In thousands, except share amounts) | December 31, 2020 | December 31, 2021 | ||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Cash and due from banks | $ | 6,798 | $ | 5,428 | ||
| Federal Reserve and other short-term investments | 227,188 | 265,733 | ||||
| Cash and cash equivalents | 233,986 | 271,161 | ||||
| CRA investment | 9,580 | 9,306 | ||||
| Other marketable equity securities | 56,282 | 79,167 | ||||
| Securities, at fair value | 65,862 | 88,473 | ||||
| Securities available for sale, at fair value | 6 | — | ||||
| Securities held to maturity, at amortized cost | — | 3,500 | ||||
| Federal Home Loan Bank stock, at cost | 19,345 | 29,908 | ||||
| Loans, net of allowance for loan losses of $17,404 at December 31, 2020 and $20,431 at December 31, 2021 | 2,495,331 | 2,999,096 | ||||
| Foreclosed assets | 3,826 | — | ||||
| Bank-owned life insurance | 12,657 | 12,980 | ||||
| Premises and equipment, net | 15,248 | 15,825 | ||||
| Accrued interest receivable | 5,267 | 5,467 | ||||
| Deferred income tax asset, net | 763 | — | ||||
| Other assets | 4,802 | 4,755 | ||||
| Total assets | $ | 2,857,093 | $ | 3,431,165 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY
| Interest-bearing deposits | $ | 1,825,700 | $ | 2,003,717 | ||
| Non-interest-bearing deposits | 313,497 | 389,148 | ||||
| Total deposits | 2,139,197 | 2,392,865 | ||||
| Federal Home Loan Bank advances | 408,031 | 665,000 | ||||
| Mortgagors’ escrow accounts | 8,770 | 9,183 | ||||
| Accrued interest payable | 252 | 198 | ||||
| Deferred income tax liability, net | — | 536 | ||||
| Other liabilities | 7,900 | 8,771 | ||||
| Total liabilities | 2,564,150 | 3,076,553 | ||||
| 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; 2,137,900 shares issued and outstanding at December 31, 2020 and 2,142,400 shares issued and outstanding at December 31, 2021 | 2,138 | 2,142 | ||||
| Additional paid-in capital | 12,460 | 12,728 | ||||
| Undivided profits | 278,345 | 339,742 | ||||
| Total stockholders’ equity | 292,943 | 354,612 | ||||
| Total liabilities and stockholders’ equity | $ | 2,857,093 | $ | 3,431,165 |
HINGHAM INSTITUTION FOR SAVINGSConsolidated Statements of Net Income
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| (In thousands, except per share amounts) | 2020 | 2021 | 2020 | 2021 | ||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Interest and dividend income: | ||||||||||||||||||||
| Loans | $ | 26,038 | $ | 29,182 | $ | 103,797 | $ | 109,449 | ||||||||||||
| Debt securities | — | 33 | — | 84 | ||||||||||||||||
| Equity securities | 264 | 134 | 1,666 | 696 | ||||||||||||||||
| Federal Reserve and other short-term investments | 55 | 78 | 899 | 262 | ||||||||||||||||
| Total interest and dividend income | 26,357 | 29,427 | 106,362 | 110,491 | ||||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Deposits | 2,568 | 1,518 | 16,186 | 6,868 | ||||||||||||||||
| Federal Home Loan Bank and Federal Reserve Bank advances | 513 | 300 | 4,969 | 1,158 | ||||||||||||||||
| Mortgage payable | — | — | 3 | — | ||||||||||||||||
| Total interest expense | 3,081 | 1,818 | 21,158 | 8,026 | ||||||||||||||||
| Net interest income | 23,276 | 27,609 | 85,204 | 102,465 | ||||||||||||||||
| Provision for loan losses | 175 | 1,200 | 2,288 | 3,028 | ||||||||||||||||
| Net interest income, after provision for loan losses | 23,101 | 26,409 | 82,916 | 99,437 | ||||||||||||||||
| Other income: | ||||||||||||||||||||
| Customer service fees on deposits | 177 | 192 | 678 | 746 | ||||||||||||||||
| Increase in cash surrender value of bank-owned life insurance | 51 | 79 | 219 | 323 | ||||||||||||||||
| Gain on equity securities, net | 5,453 | 2,105 | 7,916 | 11,820 | ||||||||||||||||
| Gain on disposal of fixed assets | — | — | 218 | 2,337 | ||||||||||||||||
| Miscellaneous | 47 | 22 | 161 | 82 | ||||||||||||||||
| Total other income | 5,728 | 2,398 | 9,192 | 15,308 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Salaries and employee benefits | 3,278 | 3,566 | 13,155 | 13,988 | ||||||||||||||||
| Occupancy and equipment | 422 | 368 | 1,854 | 1,450 | ||||||||||||||||
| Data processing | 443 | 571 | 1,909 | 2,003 | ||||||||||||||||
| Deposit insurance | 211 | 252 | 860 | 933 | ||||||||||||||||
| Foreclosure and related | 207 | 2 | 528 | (49 | ) | |||||||||||||||
| Marketing | 145 | 140 | 545 | 563 | ||||||||||||||||
| Other general and administrative | 846 | 855 | 3,127 | 3,188 | ||||||||||||||||
| Total operating expenses | 5,552 | 5,754 | 21,978 | 22,076 | ||||||||||||||||
| Income before income taxes | 23,277 | 23,053 | 70,130 | 92,669 | ||||||||||||||||
| Income tax provision | 6,235 | 6,379 | 19,359 | 25,211 | ||||||||||||||||
| Net income | $ | 17,042 | $ | 16,674 | $ | 50,771 | $ | 67,458 | ||||||||||||
| Cash dividends declared per share | $ | 1.17 | $ | 1.30 | $ | 2.47 | $ | 2.83 | ||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 2,137 | 2,142 | 2,137 | 2,141 | ||||||||||||||||
| Diluted | 2,189 | 2,206 | 2,183 | 2,201 | ||||||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | $ | 7.97 | $ | 7.78 | $ | 23.76 | $ | 31.50 | ||||||||||||
| Diluted | $ | 7.78 | $ | 7.56 | $ | 23.25 | $ | 30.65 | ||||||||||||
HINGHAM INSTITUTION FOR SAVINGSNet Interest Income Analysis
| Three Months Ended December 31, | |||||||||||||||||
| 2020 | 2021 | ||||||||||||||||
| AVERAGE BALANCE | INTEREST | YIELD/ RATE (8) | AVERAGE BALANCE | INTEREST | YIELD/ RATE (8) | ||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Loans (1) (2) | $ | 2,440,571 | $ | 26,038 | 4.27 | % | $ | 2,908,433 | $ | 29,182 | 4.01 | % | |||||
| Securities (3) (4) | 62,966 | 264 | 1.68 | 82,113 | 167 | 0.81 | |||||||||||
| Federal Reserve and other short-term investments | 214,403 | 55 | 0.10 | 204,815 | 78 | 0.15 | |||||||||||
| Total interest-earning assets | 2,717,940 | 26,357 | 3.88 | 3,195,361 | 29,427 | 3.68 | |||||||||||
| Other assets | 48,848 | 52,128 | |||||||||||||||
| Total assets | $ | 2,766,788 | $ | 3,247,489 | |||||||||||||
| Interest-bearing deposits (5) | $ | 1,843,689 | 2,568 | 0.56 | $ | 2,087,523 | 1,518 | 0.29 | |||||||||
| Borrowed funds | 319,931 | 513 | 0.64 | 428,315 | 300 | 0.28 | |||||||||||
| Total interest-bearing liabilities | 2,163,620 | 3,081 | 0.57 | 2,515,838 | 1,818 | 0.29 | |||||||||||
| Non-interest-bearing deposits | 309,975 | 375,139 | |||||||||||||||
| Other liabilities | 7,153 | 8,022 | |||||||||||||||
| Total liabilities | 2,480,748 | 2,898,999 | |||||||||||||||
| Stockholders’ equity | 286,040 | 348,490 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,766,788 | $ | 3,247,489 | |||||||||||||
| Net interest income | $ | 23,276 | $ | 27,609 | |||||||||||||
| Weighted average spread | 3.31 | % | 3.39 | % | |||||||||||||
| Net interest margin (6) | 3.43 | % | 3.46 | % | |||||||||||||
| Average interest-earning assets to average interest-bearing liabilities (7) | 125.62 | % | 127.01 | % | |||||||||||||
| (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
| Twelve Months Ended December 31, | |||||||||||||||||
| 2020 | 2021 | ||||||||||||||||
| AVERAGE BALANCE | INTEREST | YIELD/ RATE | AVERAGE BALANCE | INTEREST | YIELD/ RATE | ||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Loans (1) (2) | $ | 2,370,869 | $ | 103,797 | 4.38 | % | $ | 2,667,812 | $ | 109,449 | 4.10 | % | |||||
| Securities (3) (4) | 65,318 | 1,666 | 2.55 | 70,419 | 780 | 1.11 | |||||||||||
| Federal Reserve and other short-term investments | 212,490 | 899 | 0.42 | 204,500 | 262 | 0.13 | |||||||||||
| Total interest-earning assets | 2,648,677 | 106,362 | 4.02 | 2,942,731 | 110,491 | 3.75 | |||||||||||
| Other assets | 46,986 | 51,635 | |||||||||||||||
| Total assets | $ | 2,695,663 | $ | 2,994,366 | |||||||||||||
| Interest-bearing deposits (5) | $ | 1,677,107 | 16,186 | 0.97 | $ | 1,993,863 | 6,868 | 0.34 | |||||||||
| Borrowed funds | 465,161 | 4,972 | 1.07 | 319,193 | 1,158 | 0.36 | |||||||||||
| Total interest-bearing liabilities | 2,142,268 | 21,158 | 0.99 | 2,313,056 | 8,026 | 0.35 | |||||||||||
| Non-interest-bearing deposits | 277,924 | 346,992 | |||||||||||||||
| Other liabilities | 7,748 | 7,147 | |||||||||||||||
| Total liabilities | 2,427,940 | 2,667,195 | |||||||||||||||
| Stockholders’ equity | 267,723 | 327,171 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,695,663 | $ | 2,994,366 | |||||||||||||
| Net interest income | $ | 85,204 | $ | 102,465 | |||||||||||||
| Weighted average spread | 3.03 | % | 3.40 | % | |||||||||||||
| Net interest margin (6) | 3.22 | % | 3.48 | % | |||||||||||||
| Average interest-earning assets to average interest-bearing liabilities (7) | 123.64 | % | 127.22 | % | |||||||||||||
| (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, and after-tax gain on disposal of fixed assets.
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||
| (In thousands, unaudited) | 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||
| Non-GAAP reconciliation: | ||||||||||||||||||||||
| Net income | $ | 17,042 | $ | 16,674 | $ | 50,771 | $ | 67,458 | ||||||||||||||
| Gain on equity securities, net | (5,453 | ) | (2,105 | ) | (7,916 | ) | (11,820 | ) | ||||||||||||||
| Income tax expense (1) | 1,202 | 464 | 1,745 | 2,605 | ||||||||||||||||||
| Gain on disposal of fixed assets | — | — | (218 | ) | (2,337 | ) | ||||||||||||||||
| Income tax expense | — | — | 61 | 657 | ||||||||||||||||||
| Core net income | $ | 12,791 | $ | 15,033 | $ | 44,443 | $ | 56,563 | ||||||||||||||
(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
