• Hingham Savings Reports First Quarter 2023 Results

    المصدر: Nasdaq GlobeNewswire / 13 أبريل 2023 16:01:00   America/New_York

    HINGHAM, Mass, April 13, 2023 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced results for the quarter ended March 31, 2023.

    Earnings

    Net income for the quarter ended March 31, 2023 was $8,510,000 or $3.96 per share basic and $3.87 per share diluted, as compared to $11,864,000 or $5.54 per share basic and $5.38 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first quarter of 2023 was 8.67%, and the annualized return on average assets was 0.82%, as compared to 13.10% and 1.37% for the same period last year. Net income per share (diluted) for the first quarter of 2023 decreased by 28% compared to the same period in 2022.

    Core net income for the quarter ended March 31, 2023, which represents net income excluding the after-tax gains and losses on equity securities, both realized and unrealized, was $5,744,000 or $2.67 per share basic and $2.61 per share diluted, as compared to $15,105,000 or $7.05 per share basic and $6.85 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first quarter of 2023 was 5.85% and the annualized core return on average assets was 0.56%, as compared to 16.68% and 1.74% for the same period last year. Core net income per share (diluted) for the first quarter of 2023 decreased by 62% over the same period in 2022.

    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.

    Balance Sheet

    Total assets increased to $4.206 billion at March 31, 2023, representing 1% annualized growth year-to-date and 15% growth from March 31, 2022.

    Net loans increased to $3.672 billion at March 31, 2023, representing 2% annualized growth year-to-date and 16% growth from March 31, 2022. Origination activity was concentrated in the Boston and Washington D.C. markets and remained focused on multifamily commercial real estate.

    Retail and business deposits increased to $1.988 billion at March 31, 2023, representing 20% annualized growth year-to-date and 11% growth from March 31, 2022. Non-interest-bearing deposits, included in retail and business deposits, decreased to $375.9 million at March 31, 2023, representing a 12% annualized decline year-to-date and a 7% decline from March 31, 2022. The Bank worked to capitalize on the market disruption generated by the failure or instability of larger regional banks to develop new relationships with commercial, non-profit, and existing customers. These shifts reflect significant new commercial relationships, offset by the flow of funds into higher yielding interest-bearing accounts at the Bank. The stability of the Bank’s balance sheet, as well as full and unlimited deposit insurance through the Bank’s participation in the Massachusetts Depositors Insurance Fund, has historically been appealing to customers in times of uncertainty.

    Wholesale deposits, which include brokered and listing service time deposits, decreased to $531.9 million at March 31, 2023, representing a 53% annualized decline year-to-date and an 11% decline from March 31, 2022, as the Bank continued to manage its wholesale funding mix between wholesale time deposits and Federal Home Loan Bank advances in order mitigate the negative impact of increasing short term rates in the cost of funds.

    Borrowings from the Federal Home Loan Bank totaled $1.265 billion at March 31, 2023, a 1% decline from December 31, 2022, and a 46% increase from March 31, 2022. As of March 31, 2023, the Bank maintained an additional $739.7 million in immediately available borrowing capacity at the Federal Home Loan Bank of Boston and the Federal Reserve Bank.

    Book value per share was $182.89 as of March 31, 2023, representing both a 7% annualized growth year-to-date and growth from March 31, 2022. In addition to the increase in book value per share, the Bank declared $3.09 in dividends per share since March 31, 2022, including a special dividend of $0.63 per share declared during the fourth quarter of 2022.

    On March 29, 2023, the Bank declared a regular cash dividend of $0.63 per share. This dividend will be paid on May 10, 2023 to stockholders of record as of May 1, 2023. This was the Bank’s 117th consecutive quarterly dividend and the Bank has consistently increased regular quarterly cash dividends over the last twenty-eight years. The Bank has also declared special cash dividends in each of the last twenty-eight 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 March 31, 2023 decreased 184 basis points to 1.46%, as compared to 3.30% for the same period last year. The Bank experienced a substantial increase in the cost of interest-bearing liabilities when compared to the prior year. This was driven primarily by the repricing of the Bank’s wholesale borrowings, wholesale deposits and higher rates on the Bank’s retail and commercial deposits. During this period, the increase in the cost of funds was partially offset by a higher yield on interest-earning assets, driven primarily by an increase in the interest on reserves held at the Federal Reserve Bank of Boston, a higher Federal Home Loan Bank of Boston stock dividend and to a lesser extent, an increase in the yield on loans.

    In a linked quarter comparison, the net interest margin for the quarter ended March 31, 2023 decreased 63 basis points to 1.46%, as compared to 2.09% in the quarter ended December 31, 2022. This was primarily the result of the continued and significant increase in the cost of interest-bearing liabilities, driven primarily by an increase in the cost of the Bank’s wholesale funding sources, partially offset by an increase in the interest on reserve balances held at the Federal Reserve Bank of Boston and an increase in the yield on loans from the prior quarter. The increase in the yield on loans was driven by both new loan originations at higher rates and the repricing of existing adjustable rate loans.

    Key credit and operational metrics remained strong in the first quarter. At March 31, 2023, non-performing assets totaled 0.01% of total assets, compared to 0.03% at December 31, 2022 and 0.00% at March 31, 2022. Non-performing loans as a percentage of the total loan portfolio totaled 0.01% at March 31, 2023, compared to 0.03% at December 31, 2022 and 0.00% at March 31, 2022. The Bank did not record any charge-offs in the first three months of 2023 or 2022.

    The Bank did not own any foreclosed property at March 31, 2023, December 31, 2022 and March 31, 2022. In the first quarter of 2023, the Bank foreclosed on a small commercial property in Massachusetts and purchased the property at auction. The Bank subsequently sold the property within the quarter and recovered all principal, interest, and expenses. The Bank also recognized an additional $85,000 gain on sale, reflected as a contra expense in foreclosure and related expense in the Consolidated Statement of Net Income.

    The efficiency ratio, as defined on page 5 below, increased to 45.96% for the first quarter of 2023, as compared to 21.82% for the same period last year. Operating expenses as a percentage of average assets fell to 0.68% for the first quarter of 2023, as compared to 0.72% for the same period last year. As the efficiency ratio can be significantly influenced by the level of net interest income, the Bank utilizes these paired figures together to assess its operational efficiency over time. During periods of significant net interest income volatility, the efficiency ratio in isolation may over or understate the underlying operational efficiency of the Bank. The Bank remains focused on reducing waste through an ongoing process of continuous improvement and standard work that supports operational leverage.

    Chairman Robert H. Gaughen Jr. stated, “Returns on equity and assets in the first quarter were significantly lower than our long-term performance, reflecting the challenge from the increase in short-term interest rates over the last twelve months. The Bank’s business model has been built over time to compound shareholder capital through all stages of the economic cycle. During all such periods, 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.

    During material yield curve inversions, it is important that we prioritize long-term investments, despite the temporary pressure on margins and lower net income. This means capitalizing on current market conditions to attract new deposit and loan customers, as well as talented staff that can help us continue to build our business well into the future.”

    The Bank’s quarterly financial results are summarized in this earnings release, but shareholders are encouraged to read the Bank’s quarterly report on Form 10-Q, which is generally available several weeks after the earnings release. The Bank expects to file Form 10-Q for the quarter ended March 31, 2023 with the Federal Deposit Insurance Corporation (FDIC) on or about May 5, 2023.

    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.

    Annual Meeting

    The Bank will hold its Annual Meeting of Stockholders (the “Meeting”) at 2:00PM EST on Thursday, April 27, 2023 at the Old Derby Academy, located at 34 Main Street, Hingham, Massachusetts. Stockholders may also attend the Meeting by means of remote communication via a video conference. Immediately following the business meeting, the Bank will hold an informal meeting to discuss the results of the prior year and the operations of the Bank, as well as a question and answers session. We strongly encourage all shareholders to vote by proxy. Electronic voting will not be available. Registration for the meeting is available on the Bank’s website (click here). In addition to participating in the meeting itself, we also encourage shareholders to submit questions in writing in advance using the form on the Bank’s website.

    Current Expected Credit Losses (“CECL”)

    On January 1, 2023, the Bank adopted ASU 2016-13 - Measurement of Credit Losses on Financial Instruments, and recorded a one-time transition amount of $545,000, net of taxes, as a decrease to retained earnings. This amount represents additional reserves for loans that existed upon adopting the new guidance. No reserves were recorded for unfunded commitments. The adoption of CECL did not have a material impact on the Bank’s regulatory capital ratios.

    HINGHAM INSTITUTION FOR SAVINGS
    Selected Financial Ratios

     Three Months Ended
    March 31,
     2022 2023
    (Unaudited)     
          
    Key Performance Ratios     
    Return on average assets (1)1.37% 0.82%
    Return on average equity (1)13.10  8.67 
    Core return on average assets (1) (5)1.74  0.56 
    Core return on average equity (1) (5)16.68  5.85 
    Interest rate spread (1) (2)3.24  0.92 
    Net interest margin (1) (3)3.30  1.46 
    Operating expenses to average assets (1)0.72  0.68 
    Efficiency ratio (4)21.82  45.96 
    Average equity to average assets10.45  9.51 
    Average interest-earning assets to average interest bearing liabilities125.86  121.68 
          


     March 31,
    2022
     December 31,
    2022
     March 31,
    2023
    (Unaudited)           
          
    Asset Quality Ratios     
    Allowance for credit losses/total loans 0.68% 0.68% 0.69%
    Allowance for credit losses/non-performing loans 16,606.92
      2,139.39  5,169.01
     
              
    Non-performing loans/total loans   0.03  0.01 
    Non-performing loans/total assets   0.03  0.01 
    Non-performing assets/total assets   0.03  0.01 
              
    Share Related         
    Book value per share$170.49  $179.74 $182.89 
    Market value per share$343.20  $275.96 $233.44 
    Shares outstanding at end of period 2,142,400   2,147,400  2,147,400 

    (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.

    (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.

    HINGHAM INSTITUTION FOR SAVINGS
    Consolidated Balance Sheets

    (In thousands, except share amounts)March 31,
    2022
     December 31,
    2022
     March 31,
    2023
    (Unaudited)        
    ASSETS        
             
    Cash and due from banks$5,371 $7,936 $5,727
    Federal Reserve and other short-term investments 291,497  354,097  346,713
    Cash and cash equivalents 296,868  362,033  352,440
             
    CRA investment 8,874  8,229  8,361
    Other marketable equity securities 83,190  54,967  59,115
    Securities, at fair value 92,064  63,196  67,476
    Securities held to maturity, at amortized cost 3,500  3,500  3,500
    Federal Home Loan Bank stock, at cost 35,508  52,606  52,316
    Loans, net of allowance for credit losses of $21,589 at March 31, 2022, $24,989 at December 31, 2022 and $25,690 at March 31, 2023 3,176,975  3,657,782  3,672,258
    Bank-owned life insurance 13,073  13,312  13,395
    Premises and equipment, net 16,210  17,859  18,056
    Accrued interest receivable 5,887  7,122  7,161
    Deferred income tax asset, net 387  4,061  3,432
    Other assets 6,394  12,328  15,901
    Total assets$3,646,866 $4,193,799 $4,205,935

    LIABILITIES AND STOCKHOLDERS’ EQUITY

             
    Interest-bearing deposits$1,990,848 $2,118,045 $2,144,387
    Non-interest-bearing deposits 404,045  387,244  375,887
    Total deposits 2,394,893  2,505,289  2,520,274
    Federal Home Loan Bank advances 865,000  1,276,000  1,265,000
    Mortgagors’ escrow accounts 9,646  12,323  13,123
    Accrued interest payable 298  4,527  5,713
    Other liabilities 11,768  9,694  9,087
    Total liabilities 3,281,605  3,807,833  3,813,197
             
    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 March 31, 2022, 2,147,400 shares issued and outstanding at December 31, 2022 and March 31, 2023 2,142  2,147  2,147
    Additional paid-in capital 12,735  13,061  13,068
    Undivided profits 350,384  370,758  377,523
    Accumulated other comprehensive income     
    Total stockholders’ equity 365,261  385,966  392,738
    Total liabilities and stockholders’ equity$3,646,866 $4,193,799 $4,205,935
             

    HINGHAM INSTITUTION FOR SAVINGS
    Consolidated Statements of Income

     Three Months Ended
    March 31,
    (In thousands, except per share amounts)2022  2023 
    (Unaudited)     
          
    Interest and dividend income:     
    Loans$29,760  $36,416 
    Debt securities 33   33 
    Equity securities 258   903 
    Federal Reserve and other short-term investments 110   3,374 
    Total interest and dividend income 30,161   40,726 
          
    Interest expense:     
    Deposits 1,504   13,800 
    Federal Home Loan Bank advances 492   12,015 
    Total interest expense 1,996   25,815 
    Net interest income 28,165   14,911 
    Provision for loan losses 1,158   156 
    Net interest income, after provision for loan losses 27,007   14,755 
    Other income (loss):     
    Customer service fees on deposits 175   138 
    Increase in cash surrender value of bank-owned life insurance 93   83 
    Gain (loss) on equity securities, net (4,157)   3,548 
    Miscellaneous 26   63 
    Total other income (loss) (3,863)   3,832 
    Operating expenses:     
    Salaries and employee benefits 3,644   4,306 
    Occupancy and equipment 374   391 
    Data processing 614   653 
    Deposit insurance 283   650 
    Foreclosure and related (21)   (74) 
    Marketing 191   212 
    Other general and administrative 1,124   845 
    Total operating expenses 6,209   6,983 
    Income before income taxes 16,935   11,604 
    Income tax provision 5,071   3,094 
    Net income$11,864  $8,510 
          
    Cash dividends declared per common share$0.57  $0.63 
          
    Weighted average shares outstanding:     
    Basic 2,142   2,147 
    Diluted 2,206   2,200 
          
    Earnings per share:     
    Basic$5.54  $3.96 
    Diluted$5.38  $3.87 
          

    HINGHAM INSTITUTION FOR SAVINGS
    Net Interest Income Analysis

     Three months ended
     March 31, 2022 December 31, 2022 March 31, 2023 
     Average
    Balance
    (9)
     InterestYield/
    Rate (10)
     Average
    Balance
    (9)
      InterestYield/
    Rate (10)
     Average
    Balance
    (9)
     InterestYield/
    Rate (10)
                               
    (Dollars in thousands)                          
    (Unaudited)                          
    Assets                          
    Loans (1) (2)$3,077,644 $29,760 3.87% $3,624,745 $35,714 3.94% $3,682,517 $36,416 3.96%
    Securities (3) (4) 94,899  291 1.23   103,033  749 2.91   99,693  936 3.76 
    Short-term investments (5) 240,755  110 0.18   287,286  2,766 3.85   294,513  3,374 4.58 
    Total interest-earning assets 3,413,298  30,161 3.53   4,015,064  39,229 3.91   4,076,723  40,726 4.00 
    Other assets 52,987        47,959        53,809      
    Total assets$3,466,285       $4,063,023       $4,130,532      
                               
    Liabilities and stockholders’ equity:  `                       
    Interest-bearing deposits (6)$2,028,082  1,504 0.30% $2,221,963  8,793 1.58% $2,250,188  13,800 2.45%
    Borrowed funds 683,920  492 0.29   1,036,944  9,481 3.66   1,100,156  12,015 4.37 
    Total interest-bearing liabilities 2,712,002  1,996 0.29   3,258,907  18,274 2.24   3,350,344  25,815 3.08 
    Non-interest-bearing deposits 383,816        408,951        378,089      
    Other liabilities 8,267        9,282        9,452      
    Total liabilities 3,104,085        3,677,140        3,737,885      
    Stockholders’ equity 362,200        385,883        392,647      
    Total liabilities and stockholders’ equity$3,466,285       $4,063,023       $4,130,532      
    Net interest income   $28,165       $20,955       $14,911   
                               
    Weighted average interest rate spread      3.24%       1.67%       0.92%
                               
    Net interest margin (7)      3.30%       2.09%       1.46%
                               
    Average interest-earning assets to average interest-bearing liabilities (8) 125.86%       123.20%       121.68%     


    (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 cash held at the Federal Reserve Bank.
    (6) Includes mortgagors' escrow accounts.
    (7) Net interest income divided by average total interest-earning assets.
    (8) Total interest-earning assets divided by total interest-bearing liabilities.
    (9) Average balances are calculated on a daily basis.
    (10) 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.

      

     Three Months Ended
    March 31,
    (In thousands, unaudited)2022  2023 
          
    Non-GAAP reconciliation:     
    Net Income$11,864  $8,510 
    (Gain) loss on equity securities, net 4,157   (3,548)
    Income tax expense (benefit) (1) (916)  782 
    Core Net Income$15,105  $5,744 

    (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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