Hingham Savings Reports 2020 Results

HINGHAM, Mass., Jan. 19, 2021 (GLOBE NEWSWIRE) — HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2020.
EarningsNet income for the year ended December 31, 2020 was $50,771,000 or $23.76 per share basic and $23.25 per share diluted, as compared to $38,927,000 or $18.24 per share basic and $17.83 per share diluted for the same period last year.  The Bank’s return on average equity for the year ended December 31, 2020 was 18.96%, and the return on average assets was 1.88%, as compared to 16.82% and 1.55% for the same period in 2019.  Net income per share (diluted) for 2020 increased by 30% over the same period in 2019.Core net income for the year ended December 31, 2020, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $44,600,000 or $20.87 per share basic and $20.43 per share diluted, as compared to $32,996,000 or $15.46 per share basic and $15.12 per share diluted for the same period last year.  The Bank’s core return on average equity for the year ended December 31, 2020 was 16.66%, and the core return on average assets was 1.65%, as compared to 14.26% and 1.32% for the same period in 2019.  Core net income per share (diluted) for 2020 increased by 35% over the same period in 2019.Net income for the quarter ended December 31, 2020 was $17,042,000 or $7.97 per share basic and $7.78 per share diluted, as compared to $11,364,000 or $5.32 per share basic and $5.20 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the fourth quarter of 2020 was 23.83%, and the annualized return on average assets was 2.46%, as compared to 18.64% and 1.81% for the same period in 2019.  Net income per share (diluted) for the fourth quarter of 2020 increased by 50% over the same period in 2019. Core net income for the quarter ended December 31, 2020, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $12,791,000 or $5.99 per share basic and $5.84 per share diluted, as compared to $8,814,000 or $4.13 per share basic and $4.04 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the fourth quarter of 2020 was 17.89%, and the annualized core return on average assets was 1.85%, as compared to 14.46% and 1.40% for the same period in 2019.  Core net income per share (diluted) for the fourth quarter of 2020 increased by 45% over the same period in 2019.See page 9 for a Non-GAAP reconciliation between net income and core net income.  In calculating core net income, the Bank does not make any adjustments other than those relating to after-tax gains and losses on securities, realized and unrealized.Balance SheetTotal assets increased to $2.857 billion at December 31, 2020, representing 10% growth from December 31, 2019.Net loans totaled $2.495 billion at December 31, 2020, representing 12% growth from December 31, 2019.  Growth was concentrated in the Bank’s commercial real estate portfolio. Total deposits, including wholesale deposits, increased to $2.139 billion at December 31, 2020, representing 17% growth from December 31, 2019.  Total retail and business deposits increased to $1.592 billion at December 31, 2020, representing 11% growth from December 31, 2019.  Non-interest bearing deposits, included in retail and business deposits, increased to $313.5 million at December 31, 2020, representing 32% growth from December 31, 2019.  During 2020, the Bank continued to reduce the balance of excess reserves held at the Federal Reserve Bank 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 $137.02 as of December 31, 2020, representing 18.4% growth from December 31, 2019.  In addition to the increase in book value per share, the Bank has declared $2.47 in dividends per share since December 31, 2019, 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.  The trailing five year compound annual growth rate in book value per share, an important measure of long-term value creation, was 16.1%.Operational Performance MetricsThe net interest margin for the year ended December 31, 2020 increased 50 basis points to 3.22%, as compared to 2.72% in the prior year.  The net interest margin for the quarter ended December 31, 2020 increased 64 basis points to 3.43%, as compared to 2.79% for the same period last year.  The Bank has benefited from a sharp decline in the cost of interest-bearing liabilities, including retail and commercial deposits and wholesale funding. The Bank has also benefited from continued growth in non-interest bearing deposit balances. These benefits were partially offset by a decline in the yield on interest-earning assets, driven primarily by the decline in the interest on excess reserves held at the Federal Reserve Bank of Boston and a lower yield on loans during the same periods.Key credit and operational metrics remained strong in the fourth quarter. At December 31, 2020, non-performing assets totaled 0.27% of total assets, as compared to 0.22% at December 31, 2019.  Non-performing loans as a percentage of the total loan portfolio totaled 0.16% at December 31, 2020, as compared to 0.25% at December 31, 2019.  At December 31, 2020, the Bank did not have any material exposure to loans modified as a result of the COVID-19 pandemic.  As indicated in prior quarters, the Bank did not defer the collection of interest due on any commercial loans in response to COVID-19.  See “COVID-19 Modifications Table” in Page 9 for a summary of modified loans still outstanding at December 31, 2020. Although the Bank’s litigation activities were slowed by pandemic-related operational challenges in both state and federal courts early in 2020, we continue to pursue delinquencies vigorously. At December 31, 2020, the Bank owned $3.8 million in foreclosed property, consisting exclusively of a residential property on Nantucket that was purchased at auction in January 2020.  This balance includes the capitalization of repairs and improvements completed by the Bank following acquisition, net of a valuation allowance of $100,000 recorded in the fourth quarter of 2020 to reflect the property’s fair value. This property had originally secured a non-performing loan which comprised the substantial majority of non-performing assets at December 31, 2019.  This property is currently under contract pending closing in the first quarter of 2021.  At December 31, 2019, the Bank did not own any foreclosed property. The Bank recorded $260,000 of net charge-offs in 2020, as compared to $1,000 in net recoveries in 2019. This was the product of $712,000 in gross charge-offs, primarily associated with two residential mortgage loans subject to foreclosure, partially offset by $452,000 in recoveries from ongoing litigation and insurance claims related to the same residential loans.  The Bank continues to pursue remaining deficiencies via litigation.The efficiency ratio, as defined on page 4 below, fell to 25.41% in 2020, as compared to 30.26% in 2019.  Operating expenses as a percentage of average assets were 0.82% in both 2020 and 2019.  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 satisfactory in 2020, although performance in any one period should always be viewed cautiously, especially when tailwinds are blowing strongly in our favor.  These tailwinds will not blow forever and we must be prepared for environments in which headwinds prevail.  In doing so, 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, 2020 with the Federal Deposit Insurance Corporation (FDIC) on or about March 3, 2021.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. 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


HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets