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Hingham Savings Reports 2023 Results

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Hingham Institution for Savings (HIFS) announced its earnings for the fourth quarter and the year ended December 31, 2023. Net income for the year decreased by 29% compared to the same period in 2022, with core net income decreasing by 73%. Total assets and net loans increased by 7%, while retail and business deposits declined by 2%. The Bank's net interest margin decreased significantly, and the efficiency ratio increased to 57.18% in 2023.
Positive
  • Net income for the year ended December 31, 2023 was $26,371,000 or $12.26 per share basic and $12.02 per share diluted, a decrease of 29% compared to the same period in 2022.
  • Core net income for the year ended December 31, 2023 was $14,539,000 or $6.76 per share basic and $6.63 per share diluted, a decrease of 73% compared to the same period in 2022.
  • Total assets increased by 7% to $4.484 billion at December 31, 2023, and net loans increased by 7% to $3.914 billion at the same date.
  • Retail and business deposits declined by 2% to $1.861 billion at December 31, 2023.
  • The net interest margin for the year ended December 31, 2023 decreased 164 basis points to 1.17%, and the efficiency ratio increased to 57.18% in 2023.
Negative
  • The Bank's net income for the year and the fourth quarter of 2023 decreased significantly compared to the same periods in 2022.
  • Core net income for the year and the fourth quarter of 2023 also decreased significantly compared to the same periods in 2022.
  • Retail and business deposits experienced a decline of 2% at December 31, 2023.
  • The net interest margin for the year and the fourth quarter of 2023 decreased significantly compared to the same periods in 2022.
  • The efficiency ratio increased to 57.18% in 2023, indicating a decrease in operational efficiency.

Insights

The reported earnings by Hingham Institution for Savings indicate a significant year-over-year decline in both net income and core net income for the year and fourth quarter of 2023. This decrease, particularly the 73% drop in core net income per share for the year, is a stark contrast to the previous year's performance and could raise concerns among investors regarding the bank's profitability and future earnings potential. A key factor in this decline appears to be the increasing cost of interest-bearing liabilities, which has outpaced the growth in yield on interest-earning assets. This dynamic has led to a compression in net interest margin, a critical measure of a bank's profitability.

Additionally, the balance sheet growth of 7% in net loans signals a steady expansion in lending activities, particularly in the multifamily commercial real estate sector in the Boston and Washington D.C. markets. However, the decline in retail and business deposits, especially the 12% decrease in non-interest-bearing deposits, implies a challenging environment for deposit growth and could affect the bank's liquidity and cost of capital. The strategic steps taken by the bank, such as hiring new commercial relationship managers and obtaining branch powers for the Washington D.C. office, indicate a proactive approach to address these challenges.

In the context of the broader banking industry, the bank's operational performance metrics, such as the efficiency ratio, have worsened, which may concern stakeholders about the bank's cost management and operational efficiency. However, the bank's strong credit metrics, with non-performing assets and loans remaining low, suggest a disciplined approach to credit risk management, which is a positive sign for long-term stability.

The banking sector has been under pressure due to the inverted yield curve and rising short-term interest rates, which typically squeeze the margins that banks earn on their lending activities. Hingham Institution for Savings' experience is reflective of this broader industry trend. The bank's proactive management of its wholesale funding mix to mitigate the impact of short-term rate increases demonstrates an adaptive response to these macroeconomic headwinds.

Market conditions in the San Francisco Bay Area, as mentioned in the report, have been less active, which may be indicative of a cooling real estate market that could affect regional banks with exposure to this area. This is an important consideration for stakeholders looking at geographic diversification and market-specific risks.

The bank's focus on continuous improvement and operational leverage is a strategy aimed at maintaining competitiveness in the industry. The bank's historical performance and the management's cautious optimism for 2024 suggest a belief in the resilience of their business model. However, investors may weigh this against the current performance downturn to assess the bank's ability to navigate economic cycles and deliver on long-term value creation.

The banking industry is sensitive to changes in interest rates and the Federal Reserve's monetary policy over the past two years has been a key driver of the economic environment Hingham Institution for Savings operates within. The bank's lower returns on equity and assets in 2023 can be attributed to the challenging interest rate environment and the inversion of the yield curve, which typically signals investor skepticism about the near-term economic outlook.

The adoption of the Current Expected Credit Loss (CECL) accounting standard, which requires banks to estimate credit losses over the life of loans, has not had a material impact on the bank's regulatory capital ratios. This suggests a strong capital position and could be reassuring to investors concerned about the bank's ability to absorb potential credit losses.

Looking forward, the normalization of the yield curve anticipated by bank management could alleviate some of the pressure on net interest margins. However, the timing and extent of this normalization remain uncertain and stakeholders should consider the potential lag in recovery of profitability metrics as new and adjusting loans catch up to the interest rate environment.

HINGHAM, Mass., Jan. 19, 2024 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced earnings for the fourth quarter and the year ended December 31, 2023.

Earnings

Net income for the year ended December 31, 2023 was $26,371,000 or $12.26 per share basic and $12.02 per share diluted, as compared to $37,519,000 or $17.49 per share basic and $17.04 per share diluted for the same period last year.  The Bank’s return on average equity for the year ended December 31, 2023 was 6.57%, and the return on average assets was 0.63%, as compared to 10.01% and 0.98% for the same period in 2022.  Net income per share (diluted) for 2023 decreased by 29% over the same period in 2022.

Core net income for the year ended December 31, 2023, 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 $14,539,000 or $6.76 per share basic and $6.63 per share diluted, as compared to $54,569,000 or $25.44 per share basic and $24.78 per share diluted for the same period last year.  The Bank’s core return on average equity for the year ended December 31, 2023 was 3.62%, and the core return on average assets was 0.35%, as compared to 14.56% and 1.43% for the same period in 2022.  Core net income per share (diluted) for 2023 decreased by 73% over the same period in 2022.

Net income for the quarter ended December 31, 2023 was $6,315,000 or $2.93 per share basic and $2.89 per share diluted, as compared to $11,965,000 or $5.58 per share basic and $5.44 per share diluted for the same period last year.  The Bank’s annualized return on average equity for the fourth quarter of 2023 was 6.21%, and the annualized return on average assets was 0.59%, as compared to 12.40% and 1.18% for the same period in 2022.  Net income per share (diluted) for the fourth quarter of 2023 decreased by 47% over the same period in 2022.

Core net income for the quarter ended December 31, 2023, which represents net income excluding the after-tax gains and losses on securities, both realized and unrealized, was $1,854,000 or $0.86 per share basic and $0.85 per share diluted, as compared to $9,713,000 or $4.53 per share basic and $4.42 per share diluted for the same period last year.  The Bank’s annualized core return on average equity for the fourth quarter of 2023 was 1.82%, and the annualized core return on average assets was 0.17%, as compared to 10.07% and 0.96% for the same period in 2022.  Core net income per share (diluted) for the fourth quarter of 2023 decreased by 81% over the same period in 2022.

See Page 11 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 and after-tax gains on the disposal of fixed assets, as applicable.

Balance Sheet

Total assets increased to $4.484 billion at December 31, 2023, representing 7% growth from December 31, 2022.

Net loans increased to $3.914 billion at December 31, 2023, representing 7% growth from December 31, 2022.  Lending was concentrated in the Boston and Washington D.C. markets and remained focused on multifamily commercial real estate.  Lending in the San Francisco Bay Area market was relatively limited in 2023; the Bank continues to evaluate new opportunities, but the Bank’s customers have been less active given market conditions.  As noted below, asset quality remained strong.

Retail and business deposits were $1.861 billion at December 31, 2023, representing a 2% decline from December 31, 2022.  Non-interest-bearing deposits, included in retail and business deposits, decreased to $339.1 million at December 31, 2023, representing a 12% decline from December 31, 2022.  A portion of the non-interest bearing deposits shifted towards higher-rate alternatives at the Bank.  In 2023, the Bank continued to focus on developing 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 and helped the Bank mitigate the challenging deposit environment experienced in 2023.

Although the environment for deposit growth was a challenging one in a number of respects, it also presented significant opportunities that the Bank did not adequately capitalize on.  The Bank’s performance with respect to retail and commercial deposit growth in 2023 was not consistent with the Bank’s historical performance.  The Bank has taken a number of steps to address this matter, including hiring several new commercial relationship managers in our Specialized Deposit Group, obtaining branch powers for our Washington D.C. office, and hiring a dedicated relationship manager in San Francisco who will start in 2024.

Wholesale deposits, which include brokered and listing service time deposits, were $488.7 million at December 31, 2023, representing a 20% decline from December 31, 2022, as the Bank continued to manage its wholesale funding mix between wholesale time deposits and Federal Home Loan Bank advances in order to 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 brokered certificates of deposit and borrowings from the Federal Home Loan Bank.  Pricing in the listing service market generally exceeded other wholesale funding sources during 2023.

Borrowings from the Federal Home Loan Bank totaled $1.693 billion at December 31, 2023, representing a 33% growth from December 31, 2022.  As of December 31, 2023, the Bank maintained $598.9 million in immediately available borrowing capacity at the Federal Home Loan Bank of Boston and the Federal Reserve Bank, in addition to the $345.0 million cash balance held at the Federal Reserve Bank.  Borrowings from the Federal Home Loan Bank have always comprised a significant portion of the Bank’s balance sheet.

Book value per share was $188.50 as of December 31, 2023, representing 5% growth from December 31, 2022.  In addition to the increase in book value per share, the Bank has declared $2.52 in regular dividends per share since December 31, 2022.  The trailing five year compound annual growth rate in book value per share, an important measure of long-term value creation, was 13.6%.

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.

Operational Performance Metrics

The net interest margin for the year ended December 31, 2023 decreased 164 basis points to 1.17%, as compared to 2.81% in the prior year.  In the year ended December 31, 2023, 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 yield on loans, an increase in the interest on reserves held at the Federal Reserve Bank of Boston and a higher Federal Home Loan Bank of Boston stock dividend.

The net interest margin for the quarter ended December 31, 2023 decreased 120 basis points to 0.89%, as compared to 2.09% in the same quarter in 2022.  During this period, the Bank experienced a significant increase in the cost of interest-bearing liabilities when compared to the same period in the prior year, driven by the same factors described above.  The higher cost of funds was partially offset by an increase in the yield on interest-earning assets, driven by the same factors described above.

In a linked quarter comparison, the net interest margin for the quarter ended December 31, 2023 decreased 16 basis points to 0.89%, as compared to 1.05% in the quarter ended September 30, 2023.  This was primarily the result of the continued increase in the cost of interest-bearing liabilities.  This was partially offset by an increase in the yield on loans and an increase in the interest rate on reserve balances held at the Federal Reserve Bank of Boston 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.  As noted in the prior quarter, the Bank has experienced declining pressure on negotiated money market deposit rates, although the market for retail CDs remains highly competitive.  During the quarter, the Bank began extending some short-term borrowings slightly to capture the benefit of inversion at the front-end of the yield curve.

Key credit and operational metrics remained strong in the fourth quarter.  At both December 31, 2023 and 2022, non-performing assets totaled 0.03% of total assets.  Non-performing loans as a percentage of the total loan portfolio totaled 0.04% at December 31, 2023, as compared to 0.03% at December 31, 2022.  The Bank had no non-performing commercial real estate loans at December 31, 2023.  The Bank did not record any charge-offs during the year ended December 31, 2023, as compared to $50,000 of net recoveries during the year ended December 31, 2022.

The Bank did not own any foreclosed property on December 31, 2023 and 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 11 below, increased to 57.18% in 2023, as compared to 24.81% in 2022.  Operating expenses as a percentage of average assets fell to 0.67% in 2023, as compared to 0.70% in 2022.  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.

Chairman Robert H. Gaughen Jr. stated, “Returns on equity and assets in 2023 were significantly lower than our long-term performance, reflecting the challenge from the increase in short-term interest rates over the last twenty-four months and a historically long and deep inversion of the yield curve.  These conditions have posed a significant - albeit temporary - challenge to our business model.  Our core business was particularly challenged in 2023 and our investment operations were critical to sustaining growth in book value per share this year.

We are cautiously optimistic that this challenge will fade over the coming year and may do so materially.  To the extent we can capitalize on this via our wholesale funding activities, we will do so and we are seeing materially lower wholesale funding costs already in 2024.  This normalization of the yield curve will eventually allow us to achieve more satisfactory returns as we obtain higher rates on new and adjusting loans and incremental funding pressure abates.

While the current market environment has been extraordinarily 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.  I believe that over the past twenty-four months we have retained this focus.”

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, 2023 with the Federal Deposit Insurance Corporation (FDIC) on or about March 6, 2024.

The Bank expects to hold its Annual Meeting of Shareholders in Hingham, Massachusetts on Thursday, April 25, 2024 in the afternoon.  Additional information will follow in the Bank’s Proxy Statement later in the first quarter of 2024.

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
December 31,
 Twelve Months Ended
December 31,
 2022 2023 2022 2023
(Unaudited)           
            
Key Performance Ratios           
Return on average assets (1)1.18% 0.59% 0.98% 0.63%
Return on average equity (1)12.40  6.21  10.01  6.57 
Core return on average assets (1) (5)0.96  0.17  1.43  0.35 
Core return on average equity (1) (5)10.07  1.82  14.56  3.62 
Interest rate spread (1) (2)1.67  0.17  2.60  0.53 
Net interest margin (1) (3)2.09  0.89  2.81  1.17 
Operating expenses to average assets (1)0.70  0.65  0.70  0.67 
Efficiency ratio (4)33.54  71.58  24.81  57.18 
Average equity to average assets9.50  9.49  9.81  9.56 
Average interest-earning assets to average interest-
       bearing liabilities
123.20  120.15  124.30  120.99 
            


 December 31,
2022
 December 31,
2023
  
(Unaudited)           
      
Asset Quality Ratios     
Allowance for credit losses/total loans 0.68% 0.68%   
Allowance for credit losses/non-performing loans 2,139.39  1,804.47    
          
Non-performing loans/total loans 0.03  0.04    
Non-performing loans/total assets 0.03  0.03    
Non-performing assets/total assets 0.03  0.03    
          
Share Related         
Book value per share$179.74  $188.50   
Market value per share$275.96  $194.40   
Shares outstanding at end of period 2,147,400   2,162,400   


(1) Annualized for the three months ended December 31, 2022 and 2023.
   
(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 and and the after-tax gain on disposal of fixed assets.
   
(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, and the after-tax gain on disposal of fixed assets.



 
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
 
(In thousands, except share amounts) December 31,
2022
 December 31,
2023
(Unaudited)        
ASSETS        
         
Cash and due from banks $7,936  $5,654 
Federal Reserve and other short-term investments  354,097   356,823 
Cash and cash equivalents  362,033   362,477 
         
CRA investment  8,229   8,853 
Other marketable equity securities  54,967   70,949 
Securities, at fair value  63,196   79,802 
Securities held to maturity, at amortized cost  3,500   3,500 
Federal Home Loan Bank stock, at cost  52,606   69,574 
Loans, net of allowance for credit losses of $24,989 at December 31, 
    2022 and $26,652 at December 31, 2023
  3,657,782   3,914,244 
Bank-owned life insurance  13,312   13,642 
Premises and equipment, net  17,859   17,008 
Accrued interest receivable  7,122   8,554 
Deferred income tax asset, net  4,061   974 
Other assets  12,328   14,172 
Total assets $4,193,799  $4,483,947 


LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Interest-bearing deposits $2,118,045  $2,010,918 
Non-interest-bearing deposits  387,244   339,059 
Total deposits  2,505,289   2,349,977 
Federal Home Loan Bank advances  1,276,000   1,692,675 
Mortgagors’ escrow accounts  12,323   13,942 
Accrued interest payable  4,527   12,261 
Other liabilities  9,694   7,472 
Total liabilities  3,807,833   4,076,327 
         
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;        
2,147,400 shares issued and outstanding at December 31, 2022 and 2,162,400 shares issued and outstanding at December 31, 2023  2,147   2,162 
Additional paid-in capital  13,061   14,150 
Undivided profits  370,758   391,308 
Total stockholders’ equity  385,966   407,620 
Total liabilities and stockholders’ equity $4,193,799  $4,483,947 



 
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Net Income
 
    Three Months Ended Twelve Months Ended
    December 31, December 31,
(In thousands, except per share amounts)  2022   2023  2022  2023
(Unaudited)            
Interest and dividend income:                
 Loans $35,714  $42,214  $132,089  $156,681 
 Debt securities  33   33   132   131 
 Equity securities  716   1,302   1,752   4,412 
 Federal Reserve and other short-term investments 2,766   2,960   5,055   13,038 
  Total interest and dividend income  39,229   46,509   139,028   174,262 
Interest expense:               
 Deposits  8,793   20,811   16,882   71,429 
 Federal Home Loan Bank and Federal Reserve Bank advances  9,481   16,323   16,012   54,531 
  Total interest expense  18,274   37,134   32,894   125,960 
  Net interest income  20,955   9,375   106,134   48,302 
Provision for credit losses  600   271   4,508   1,118 
Net interest income, after provision for credit losses 20,355   9,104   101,626   47,184 
Other income (loss):               
 Customer service fees on deposits  146   140   602   550 
 Increase in cash surrender value of bank-owned life insurance  80   80   332   330 
 Gain (loss) on equity securities, net  2,979   5,723   (21,777)  15,147 
 Gain on disposal of fixed assets           44 
 Miscellaneous  57   56   124   232 
  Total other income (loss)  3,262   5,999   (20,719)  16,303 
Operating expenses:               
 Salaries and employee benefits  4,153   3,853   15,831   16,413 
 Occupancy and equipment  350   422   1,378   1,628 
 Data processing  804   732   2,757   2,874 
 Deposit insurance  515   795   1,862   2,701 
 Foreclosure and related  19   19   24    
 Marketing  279   128   1,031   769 
 Other general and administrative  1,003   959   3,709   3,872 
  Total operating expenses  7,123   6,908   26,592   28,257 
Income before income taxes  16,494   8,195   54,315   35,230 
Income tax provision  4,529   1,880   16,796   8,859 
  Net income $11,965  $6,315  $37,519  $26,371 
                  
Cash dividends declared per share $1.26  $0.63  $3.03  $2.52 
                
Weighted average shares outstanding:               
 Basic  2,146   2,157   2,145   2,151 
 Diluted  2,198   2,188   2,202   2,193 
                  
Earnings per share:               
 Basic $5.58  $2.93  $17.49  $12.26 
 Diluted $5.44  $2.89  $17.04  $12.02 



 
HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
 
  Three Months Ended
  December 31, 2022 September 30, 2023 December 31, 2023
  Average
Balance
(9)
  Interest
 Yield/
Rate
(10)
 Average
Balance
(9)
 Interest
 Yield/
Rate
(10)
 Average
Balance
(9)
 Interest
 Yield/
Rate
(10)
                            
(Dollars in thousands)                           
(Unaudited)                           
Assets                           
Loans (1) (2) $3,624,745 $35,714 3.94% $3,802,045 $40,245 4.23% $3,896,425 $42,214 4.33%
Securities (3) (4)  103,033  749 2.91   107,432  1,195 4.45   111,913  1,335 4.77 
Short-term investments (5)  287,286  2,766 3.85   264,160  3,598 5.45   215,323  2,960 5.50 
Total interest-earning assets  4,015,064  39,229 3.91   4,173,637  45,038 4.32   4,223,661  46,509 4.40 
Other assets  47,959        61,529        58,768      
Total assets $4,063,023       $4,235,166       $4,282,429      
                            
Liabilities and stockholders’ equity:   `                       
Interest-bearing deposits (6) $2,221,963  8,793 1.58% $2,200,952  20,010 3.64% $2,119,506  20,811 3.93%
Borrowed funds  1,036,944  9,481 3.66   1,261,652  14,042 4.45   1,395,744  16,323 4.68 
Total interest-bearing liabilities  3,258,907  18,274 2.24   3,462,604  34,052 3.93   3,515,250  37,134 4.23 
Non-interest-bearing deposits  408,951        353,543        345,743      
Other liabilities  9,282        12,958        14,843      
Total liabilities  3,677,140        3,829,105        3,875,836      
Stockholders’ equity  385,883        406,061        406,593      
Total liabilities and
stockholders’ equity
 $4,063,023       $4,235,166       $ 4,282,429      
Net interest income    $20,955       $10,986       $9,375   
                            
Weighted average interest rate spread       1.67%       0.39%       0.17%
                            
Net interest margin (7)       2.09%       1.05%       0.89%


Average interest earning assets          
to average interest-bearing liabilities (8) 123.20% 120.53% 120.15% 


(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
 
 Twelve Months Ended December 31,  
 2022  2023 
 Average
Balance (9)
 Interest Yield/
Rate (10)
  Average
Balance (9)
 Interest Yield/
Rate (10)
 
(Dollars in thousands)                 
(Unaudited)                 
                  
Loans (1) (2)$3,404,674 $132,089 3.88% $3,777,332 $156,681 4.15%
Securities (3) (4) 105,612  1,884 1.78   105,586  4,543 4.30 
Short-term investments (5) 263,606  5,055 1.92   254,664  13,038 5.12 
Total interest-earning assets 3,773,892  139,028 3.68   4,137,582  174,262 4.21 
Other assets 47,772        57,715      
Total assets$3,821,664       $4,195,297      
                  
Interest-bearing deposits (6)$2,118,798  16,882 0.80% $2,191,468  71,429 3.26%
Borrowed funds 917,252  16,012 1.75   1,228,410  54,531 4.44 
Total interest-bearing liabilities 3,036,050  32,894 1.08   3,419,878  125,960 3.68 
Non-interest-bearing deposits 402,890        362,047      
Other liabilities 7,857        12,239      
Total liabilities 3,446,797        3,794,164      
Stockholders’ equity 374,867        401,133      
Total liabilities and stockholders’ equity$3,821,664       $4,195,297      
Net interest income   $106,134       $48,302   
                  
Weighted average interest rate spread      2.60%       0.53%
                  
Net interest margin (7)      2.81%       1.17%
                  
Average interest-earning assets                 
to average interest-bearing liabilities (8) 124.30%       120.99%
     


(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, net, and after-tax gain on disposal of fixed assets.
          

  Three Months Ended   Twelve Months Ended 
  December 31,   December 31, 
(In thousands, unaudited) 2022   2023   2022   2023 
                
Non-GAAP reconciliation:               
Net income$11,965  $6,315  $37,519  $26,371 
(Gain) loss on equity securities, net (2,979)  (5,723)  21,777   (15,147)
Income tax expense (benefit) (1) 727   1,262   (4,727)  3,347 
Gain on disposal of fixed assets          (44)
Income tax expense          12 
Core net income$9,713  $1,854  $54,569  $14,539 


(1) The equity securities are mostly held in a tax-advantaged subsidiary corporation. The income tax effect of the gain (loss) on equity securities, net, was calculated using the applicable effective tax rates. 


The table below presents the calculation of the efficiency ratio, a non-U.S. GAAP performance measure the management uses to assess operational efficiency which represents total operating expenses, divided by the sum of net interest income and total other income (loss), excluding gain (loss) on equity securities, net, and the after-tax gain on disposal of fixed assets.

  Three Months Ended           Twelve Months Ended       
   December 31,         December 31,        
(In thousands, unaudited) 2022    2023    2022     2023   
                    
Non-U.S. GAAP efficiency ratio calculation:                   
Operating expenses$7,123   $6,908   $26,592   $28,257  
                    
Net interest income$20,955   $9,375   $106,134   $48,302  
Other income (loss) 3,262    5,999    (20,719)   16,303  
(Gain) loss on equity securities, net (2,979)   (5,723)   21,777    (15,147) 
Gain on disposal of fixed assets             (44) 
Total revenue$21,238   $9,651   $107,192   $49,414  
                    
Efficiency ratio 33.54 %  71.58 %  24.81 %  57.18 %


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


FAQ

What was Hingham Institution for Savings' (HIFS) net income for the year ended December 31, 2023?

The net income for the year ended December 31, 2023 was $26,371,000 or $12.26 per share basic and $12.02 per share diluted.

How did HIFS's core net income for the year ended December 31, 2023 compare to the same period in 2022?

Core net income for the year ended December 31, 2023 was $14,539,000 or $6.76 per share basic and $6.63 per share diluted, a decrease of 73% compared to the same period in 2022.

What was the percentage change in total assets at HIFS from December 31, 2022 to December 31, 2023?

Total assets increased by 7% to $4.484 billion at December 31, 2023.

How did the net interest margin for the year ended December 31, 2023 compare to the prior year?

The net interest margin for the year ended December 31, 2023 decreased 164 basis points to 1.17%, as compared to 2.81% in the prior year.

What was the efficiency ratio for HIFS in 2023?

The efficiency ratio increased to 57.18% in 2023, as compared to 24.81% in 2022.

Hingham Institution for Saving

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Hingham