• Hingham Savings Reports Second Quarter 2023 Results

    Источник: Nasdaq GlobeNewswire / 14 июл 2023 16:01:01   America/New_York

    HINGHAM, Mass., July 14, 2023 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced results for the quarter ended June 30, 2023.

    Earnings

    Net income for the quarter ended June 30, 2023 was $8,248,000 or $3.84 per share basic and $3.76 per share diluted, as compared to $3,191,000 or $1.49 per share basic and $1.45 per share diluted for the same period last year. The Bank’s annualized return on average equity for the second quarter of 2023 was 8.27%, and the annualized return on average assets was 0.80%, as compared to 3.43% and 0.34% for the same period in 2022. Net income per share (diluted) for the second quarter of 2023 increased by 159% over the same period in 2022.

    Core net income for the quarter ended June 30, 2023, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $4,046,000 or $1.88 per share basic and $1.85 per share diluted, as compared to $15,260,000 or $7.12 per share basic and $6.93 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the second quarter of 2023 was 4.06%, and the annualized core return on average assets was 0.39%, as compared to 16.42% and 1.63% for the same period in 2022. Core net income per share (diluted) for the second quarter of 2023 decreased by 73% over the same period in 2022.

    Net income for the six months ended June 30, 2023 was $16,759,000 or $7.80 per share basic and $7.63 per share diluted, as compared to $15,055,000 or $7.02 per share basic and $6.83 per share diluted for the same period last year. The Bank’s annualized return on average equity for the first six months of 2023 was 8.47%, and the annualized return on average assets was 0.81%, as compared to 8.20% and 0.83% for the same period in 2022.   Net income per share (diluted) for the first six months of 2023 increased by 12% over the same period in 2022.

    Core net income for the six months ended June 30, 2023, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $9,791,000 or $4.56 per share basic and $4.46 per share diluted, as compared to $30,365,000 or $14.17 per share basic and $13.78 per share diluted for the same period last year. The Bank’s annualized core return on average equity for the first six months of 2023 was 4.95%, and the annualized core return on average assets was 0.47%, as compared to 16.55% and 1.68% for the same period in 2022. Core net income per share (diluted) for the first six months of 2023 decreased by 68% over the same period in 2022.

    See Page 10 for a reconciliation between Generally Accepted Accounting Principles (“GAAP”) 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 and Capital Management

    Total assets were $4.311 billion at June 30, 2023, representing 6% annualized growth year-to-date and 8% growth from June 30, 2022.

    Net loans increased to $3.762 billion at June 30, 2023, representing 6% annualized growth year-to-date and 7% growth from June 30, 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 were $1.918 billion at June 30, 2023, representing 3% annualized growth year-to-date and 9% growth from June 30, 2022. Non-interest-bearing deposits, included in retail and business deposits, decreased to $363.8 million at June 30, 2023, representing a 12% annualized decline year-to-date and a 9% decline from June 30, 2022. The Bank continued to work 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. 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, were $495.9 million at June 30, 2023, representing a 38% annualized decline year-to-date and a 30% decline from June 30, 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. This decline in wholesale deposits was primarily driven by the decline in the Bank’s listing service time deposits, as the Bank opted to replace this funding with either brokered certificates of deposit, or borrowings from the Federal Home Loan Bank. Pricing in the listing service market has generally exceeded other wholesale funding sources over the last year.

    Borrowings from the Federal Home Loan Bank totaled $1.470 billion at June 30, 2023, a 30% annualized growth year-to-date, and a 29% increase from June 30, 2022. As of June 30, 2023, the Bank maintained $568.5 million in immediately available borrowing capacity at the Federal Home Loan Bank of Boston and the Federal Reserve Bank, in addition to the $336.0 million cash balance held at the Federal Reserve Bank.

    Book value per share was $185.94 as of June 30, 2023, representing 7% annualized growth year-to-date and 9% growth from June 30, 2022. In addition to the increase in book value per share, the Bank has declared $3.13 in dividends per share since June 30, 2022, including a special dividend of $0.63 per share declared during the fourth quarter of 2022.

    On June 28, 2023, the Bank’s Board of Directors declared a regular cash dividend of $0.63 per share. The dividend will be paid on August 9, 2023 to stockholders of record as of July 31, 2023. This will be the Bank’s 118th consecutive quarterly dividend. 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 June 30, 2023 decreased 193 basis points to 1.28%, as compared to 3.21% 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, an increase in the yield on loans and a higher Federal Home Loan Bank of Boston stock dividend.

    In a linked quarter comparison, the net interest margin for the quarter ended June 30, 2023 decreased 18 basis points to 1.28%, as compared to 1.46% in the quarter ended March 31, 2023. 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 deposits, 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. The Bank also benefited from a modest decline in the cost of borrowed funds, driven by the use of Federal Home Loan Bank option advances.

    The net interest margin for the six months ended June 30, 2023 decreased 188 basis points to 1.37%, as compared to 3.25% 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, an increase in the yield on loans and a higher Federal Home Loan Bank of Boston stock dividend.

    Key credit and operational metrics remained strong in the second quarter. At June 30, 2023, non-performing assets totaled 0.00% of total assets, compared to 0.03% at December 31, 2022 and 0.02% at June 30, 2022. Non-performing loans as a percentage of the total loan portfolio totaled 0.00% at June 30, 2023, compared to 0.03% at both December 31, 2022 and June 30, 2022. The Bank did not record any charge-offs in the first six months of 2023, as compared to $50,000 in net recoveries in the first six months of 2022.

    The Bank did not own any foreclosed property at June 30, 2023, December 31, 2022 and June 30, 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 55.03% for the second quarter of 2023, as compared to 21.30% for the same period last year. Operating expenses as a percentage of average assets increased slightly to 0.71% in the second quarter of 2023, as compared to 0.68% 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.

    These operational metrics reflect the Bank’s disciplined focus on credit quality and expense management.

    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, based upon management’s evaluation of the probability of funding and risk of loss, which indicated the required reserve was not material. The adoption of CECL did not have a material impact on the Bank’s regulatory capital ratios.

    Chairman Robert H. Gaughen Jr. stated, “Returns on equity and assets in the second quarter remained significantly lower than our long-term performance, reflecting the challenge from the increase in short-term interest rates over the last twelve months. Although the current market environment is particularly challenging, the Bank’s business model has been built over time to compound shareholder capital over an 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.

    Although we are in the midst of a historic inversion in the yield curve, it is important that we prioritize long-term investments, despite the temporary but significant pressure on margins and lower net income. This means working to attract new core 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 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, 2023 with the Federal Deposit Insurance Corporation (FDIC) on or about August 4, 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.

     
    HINGHAM INSTITUTION FOR SAVINGS
    Selected Financial Ratios
     
     Three Months Ended
    June 30,
     Six Months Ended
    June 30,
     2022 2023 2022 2023
    (Unaudited)           
                
    Key Performance Ratios           
    Return on average assets (1)0.34% 0.80% 0.83% 0.81%
    Return on average equity (1)3.43  8.27  8.20  8.47 
    Core return on average assets (1) (5)1.63  0.39  1.68  0.47 
    Core return on average equity (1) (5)16.42  4.06  16.55  4.95 
    Interest rate spread (1) (2)3.11  0.66  3.18  0.79 
    Net interest margin (1) (3)3.21  1.28  3.25  1.37 
    Operating expenses to average assets (1)0.68  0.71  0.70  0.69 
    Efficiency ratio (4)21.30  55.03  21.55  50.19 
    Average equity to average assets9.92  9.66  10.17  9.58 
    Average interest-earning assets to average interest-bearing liabilities124.97  121.66  125.39  121.67 
                


     June 30,
    2022
     December 31,
    2022
     June 30,
    2023
    (Unaudited)           
          
    Asset Quality Ratios     
    Allowance for credit losses/total loans 0.68% 0.68% 0.69%
    Allowance for credit losses/non-performing loans 2,428.23  2,139.39  15,376.47 
              
    Non-performing loans/total loans 0.03  0.03   
    Non-performing loans/total assets 0.02  0.03   
    Non-performing assets/total assets 0.02  0.03   
              
    Share Related         
    Book value per share$171.23  $179.74 $ 185.94 
    Market value per share$283.77  $275.96 $ 213.18 
    Shares outstanding at end of period 2,145,400   2,147,400  2,150,400 


    (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)June 30,
    2022
     December 31,
    2022
     June 30,
    2023
    (Unaudited)         
    ASSETS 
             
    Cash and due from banks$7,670 $7,936 $6,764
    Federal Reserve and other short-term investments 303,2233 354,097  347,320
    Cash and cash equivalents 310,893  362,033  354,084
             
    CRA investment 8,626  8,229  8,229
    Other marketable equity securities 68,459  54,967  65,744
    Equity securities, at fair value 77,085  63,196  73,973
    Securities held to maturity, at amortized cost 3,500  3,500  3,500
    Federal Home Loan Bank stock, at cost 47,316  52,606  60,897
    Loans, net of allowance for credit losses of $24,088
       at June 30, 2022, $24,989 at December 31, 2022
       and $26,140 at June 30, 2023
     3,507,936  3,657,782  3,761,572
    Bank-owned life insurance 13,150  13,312  13,478
    Premises and equipment, net 16,617  17,859  18,383
    Accrued interest receivable 6,111  7,122  7,388
    Deferred income tax asset, net 3,793  4,061  2,236
    Other assets 9,202  12,328  15,216
    Total assets$3,995,603 $4,193,799 $4,310,727

    LIABILITIES AND STOCKHOLDERS’ EQUITY

             
    Interest-bearing deposits$2,068,443 $2,118,045 $2,049,918
    Non-interest-bearing deposits 399,478  387,244  363,827
    Total deposits 2,467,921  2,505,289  2,413,745
    Federal Home Loan Bank advances 1,140,000  1,276,000  1,470,000
    Mortgagors’ escrow accounts 11,822  12,323  13,248
    Accrued interest payable 1,003  4,527  6,355
    Other liabilities 7,497  9,694  7,526
    Total liabilities 3,628,243  3,807,833  3,910,874
             
    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; 2,145,400 shares issued and outstanding at June 30, 2022, 2,147,400 at December 31, 2022 and 2,150,400 shares issued and outstanding at June 30, 2023
     

    2,145
      

    2,147
      

    2,150
    Additional paid-in capital 12,908  13,061  13,288
    Undivided profits 352,307  370,758  384,415
    Total stockholders’ equity 367,360  385,966  399,853
    Total liabilities and stockholders’ equity$3,995,603 $4,193,799 $4,310,727


     
    HINGHAM INSTITUTION FOR SAVINGS
    Consolidated Statements of Income
     
          Three Months Ended Six Months Ended
          June 30, June 30,
    (In thousands, except per share amounts)  2022   2023 2022  2023 
    (Unaudited)          
    Interest and dividend income:             
     Loans   $32,406  $37,806 $62,166  $74,222 
     Debt securities    33   33  66   66 
     Equity securities    286   1,044  544   1,947 
     Federal Reserve and other short-term investments 519   3,106  629   6,480 
      Total interest and dividend income  33,244   41,989  63,405   82,715 
    Interest expense:              
     Deposits    2,102   16,808  3,606   30,608 
     Federal Home Loan Bank and Federal Reserve Bank advances    1,431   12,151  1,923   24,166 
      Total interest expense   3,533   28,959  5,529   54,774 
      Net interest income   29,711   13,030  57,876   27,941 
    Provision for credit losses   2,449   450  3,607   606 
    Net interest income, after provision for credit losses 27,262   12,580  54,269   27,335 
    Other income (loss):              
     Customer service fees on deposits  140   141  315   279 
     Increase in cash surrender value of bank-owned life insurance    77   83  170   166 
     Gain (loss) on equity securities, net    (15,482)  5,390  (19,639)  8,938 
     Miscellaneous    20   54  46   117 
      Total other income (loss)   (15,245)  5,668  (19,108)  9,500 
    Operating expenses:              
     Salaries and employee benefits   3,862   4,185  7,506   8,491 
     Occupancy and equipment    315   380  689   771 
     Data processing    648   746  1,262   1,399 
     Deposit insurance    518   590  801   1,240 
     Foreclosure and related    8   26  (13)  (48)
     Marketing    315   277  506   489 
     Other general and administrative    713   1,120  1,837   1,964 
      Total operating expenses   6,379   7,324  12,588   14,306 
    Income before income taxes   5,638   10,924  22,573   22,529 
    Income tax provision    2,447   2,676  7,518   5,770 
      Net income   $3,191  $8,248 $15,055  $16,759 
                     
    Cash dividends declared per share $0.59  $0.63 $1.16  $1.26 
                 
    Weighted average shares outstanding:            
     Basic    2,145   2,149  2,144   2,148 
     Diluted    2,203   2,191  2,204   2,196 
                     
    Earnings per share:             
     Basic   $1.49  $3.84 $7.02  $7.80 
     Diluted   $1.45  $3.76 $6.83  $7.63 


     
    HINGHAM INSTITUTION FOR SAVINGS
    Net Interest Income Analysis
     
     Three Months Ended
     June 30, 2022 March 31, 2023 June 30, 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)$3,350,290 $32,406 3.87 $3,682,517 $36,416 3.96$3,725,717 $37,806 4.06%
    Securities (3) (4) 109,378  319 1.17   99,693  936 3.76  103,153  1,077 4.18 
    Short-term investments (5) 239,797  519 0.87   294,513  3,374 4.58  245,426  3,106 5.06 
    Total interest-earning assets 3,699,465  33,244 3.59   4,076,723  40,726 4.00  4,074,296  41,989 4.12 
    Other assets 47,480        53,809       56,658      
    Total assets$3,746,945       $4,130,532      $4,130,954      
                              
    Liabilities and stockholders’ equity:                         
    Interest-bearing deposits (6)$2,048,311  2,102  0.41 $2,250,188  13,800 2.45$2,196,558  16,808 3.06%
    Borrowed funds 912,034  1,431  0.63   1,100,156  12,015 4.37  1,152,473  12,151 4.22 
    Total interest-bearing liabilities 2,960,345  3,533  0.48   3,350,344  25,815 3.08  3,349,031  28,959 3.46 
    Non-interest-bearing deposits 408,033         378,089       371,262      
    Other liabilities 6,782         9,452       11,636      
    Total liabilities 3,375,160         3,737,885       3,731,929      
    Stockholders’ equity 371,785        392,647       399,025      
    Total liabilities and stockholders’ equity$3,746,945       $4,130,532      $4,130,954      
    Net interest income   $29,711       $14,911      $13,030   
                              
    Weighted average interest rate spread      3.11       0.92      0.66%
                              
    Net interest margin (7)      3.21       1.46      1.28%
                              
    Average interest-earning assets to average interest-bearing liabilities (8)       124.97 %           121.68 %         121.66 %   


    (1)Before allowance for credit 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
    Net Interest Income Analysis
     
      
     Six Months Ended June 30,  
     2022  2023 
     Average Balance (9) Interest Yield/ Rate (10)  Average Balance (9) Interest Yield/ Rate (10) 
    (Dollars in thousands)                 
    (Unaudited)                 
                      
    Loans (1) (2)$3,214,720 $62,166 3.87% $3,704,236 $74,222 4.01%
    Securities (3) (4) 102,179  610 1.19   101,432  2,013 3.97 
    Short-term investments (5) 240,273  629 0.52   269,834  6,480 4.80 
    Total interest-earning assets 3,557,172  63,405 3.56   4,075,502  82,715 4.06 
    Other assets 50,219        55,242      
    Total assets$3,607,391       $4,130,744      
                      
    Interest-bearing deposits (6)$2,038,252  3,606 0.35  $2,223,225  30,608 2.75 
    Borrowed funds 798,607  1,923 0.48   1,126,459  24,166 4.29 
    Total interest-bearing liabilities 2,836,859  5,529 0.39   3,349,684  54,774 3.27 
    Non-interest-bearing deposits 395,991        374,656      
    Other liabilities 7,522        10,551      
    Total liabilities 3,240,372        3,734,891      
    Stockholders’ equity 367,019        395,853      
    Total liabilities and stockholders’ equity$3,607,391       $4,130,744      
    Net interest income   $57,876       $27,941   
                      
    Weighted average interest rate spread      3.17%       0.79%
                      
    Net interest margin (7)      3.25%       1.37%
                      
    Average interest-earning assets to average interest-bearing liabilities (8) 125.39%       121.67%     


    (1)Before allowance for credit 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 Six Months Ended
          June 30, June 30,
    (In thousands, unaudited)  2022   2023  2022  2023 
               
    Non-GAAP reconciliation:             
    Net income  $ 3,191  $8,248  $15,055  $16,759 
    (Gain) loss on equity securities, net    15,482   (5,390)  19,639   (8,938)
    Income tax expense (benefit) (1)    (3,413)  1,188   (4,329)  1,970 
    Core net income  $ 15,260  $4,046  $30,365  $9,791 


    (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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