Hingham Savings Reports First Quarter 2024 Results
- Net income for Hingham Savings in the first quarter of 2024 was $6,868,000, a decrease of 19% from the same period in 2023.
- Core net income for the same period was $2,213,000, representing a 61% decrease from 2023.
- Total assets increased to $4.529 billion, with net loans at $3.938 billion.
- Retail and business deposits grew by 7% annually, while non-interest-bearing deposits declined by 8%.
- The Bank continues to focus on developing deposit relationships and recruiting new talent.
- The net interest margin decreased to 0.85%, with key credit metrics remaining strong.
- Chairman Robert H. Gaughen Jr. acknowledged the challenges posed by short-term interest rate increases and an inverted yield curve, expressing cautious optimism for the future.
- Net income per share (diluted) for the first quarter of 2024 decreased by 19% compared to the same period in 2023.
- Core net income per share (diluted) for the first quarter of 2024 decreased by 61% over the same period in 2023.
- Non-interest-bearing deposits declined by 8% from March 31, 2023.
- The efficiency ratio increased to 77.24% for the first quarter of 2024, compared to 45.96% for the same period last year.
Insights
Examining Hingham Savings' reported earnings, a notable 19% dip in diluted net income per share and a significant 61% fall in core net income per share for Q1 2024 relative to the prior year stands out. These declines highlight potential margin pressures and could signal headwinds in maintaining profitability, which is a concern for investors. The drop in core net income, which excludes variable gains from equity securities, may be indicative of the bank's underlying earning capacity and is a red flag. As interest rates have risen, the Bank's increased cost of wholesale funding sources seems to be a contributing factor to the reduced net interest margin, which is a critical metric in the banking industry. The bank's focus on recruiting and operational efficiency could be viewed as strategic moves to strengthen their market position and manage expenses in a challenging interest rate environment.
The strategic expansion into new markets, such as San Francisco, coupled with increased loan origination activities in the multifamily commercial real estate sector, points to Hingham Savings' growth-oriented trajectory. However, the mix of growth and decline in different deposit categories suggests a shifting customer base or changes in customer preferences. The efforts in hiring new relationship managers and marketing adjustments could be seen as proactive steps to enhance customer relations and deposit growth. The Bank's balance sheet stability and adherence to the Massachusetts Depositors Insurance Fund may offer peace of mind to stakeholders during volatile economic periods and could be a competitive advantage in attracting and retaining customers.
The Bank's modest asset growth and the performance of its loan portfolio, particularly in the housing sector, are noteworthy. Solid asset quality, as reflected by the low percentage of non-performing assets, suggests that Hingham Savings is maintaining strong credit risk management practices. The growth in book value per share is a positive sign, yet the lack of a special dividend in 2023 and the drop in regular dividends may alter shareholder sentiment, potentially affecting the stock's attractiveness. The operational performance metrics such as the efficiency ratio indicate a trend towards increased operational costs in relation to net income; understanding how this will be managed going forward is key for evaluating the bank's long-term operational sustainability.
HINGHAM, Mass., April 12, 2024 (GLOBE NEWSWIRE) -- HINGHAM INSTITUTION FOR SAVINGS (NASDAQ: HIFS), Hingham, Massachusetts announced results for the quarter ended March 31, 2024.
Earnings
Net income for the quarter ended March 31, 2024 was
Core net income for the quarter ended March 31, 2024, which represents net income excluding the after-tax gains on equity securities, both realized and unrealized, was
See Page 9 for a Non-GAAP 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 on equity securities, realized and unrealized. In the first quarter of 2024, both net income and core net income were positively impacted by lower income tax expense driven by excess tax benefit associated with the exercise of stock options and the revision of income tax estimates.
Balance Sheet
Total assets increased to
Net loans increased to
Retail and business deposits were
Growth in non-interest bearing and money market balances reflected the Bank’s focus on developing and deepening deposit relationships with new and existing commercial and non-profit customers. Investments in new relationship managers in late 2023, combined with changes to our marketing approach, began to show some initial results. The Bank also added a new relationship manager in its Specialized Deposit Group in San Francisco during the quarter, as well as a specialist that supports the delivery of cash management services to our commercial customers. The Bank continues to recruit actively for talented retail and commercial bankers in Boston, Washington, and San Francisco, particularly as respected competitors have exited these markets or merged with larger regional banks.
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, continues to be appealing to customers in times of uncertainty.
Wholesale funds, which includes Federal Home Loan Bank borrowings, brokered deposits, and listing service deposits were
Book value per share was
On March 27, 2024, the Bank declared a regular cash dividend of
The Bank has also generally declared special cash dividends in each of the last twenty-nine years, typically in the fourth quarter, but did not declare a special dividend in 2023. 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, particularly the incremental return on capital from new loan originations. 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, 2024 decreased 4 basis points to
The net interest margin for the quarter ended March 31, 2024 decreased 61 basis points to
Key credit and operational metrics remained strong in the first quarter. At March 31, 2024, non-performing assets totaled
The Bank did not have any delinquent or non-performing commercial real estate loans as of March 31, 2024, December 31, 2023, or March 31, 2023. The Bank did not own any foreclosed property at March 31, 2024, December 31, 2023 or March 31, 2023.
The efficiency ratio, as defined on page 5 below, increased to
Chairman Robert H. Gaughen Jr. stated, “Returns on equity and assets in the first quarter of 2024 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 has been particularly challenged during this period and our investment operations have been critical to sustaining growth in book value per share in this environment.
We are cautiously optimistic that this challenge will fade over this year. To the extent we can capitalize on the inverted yield curve and reduce liability sensitivity slightly via our wholesale funding activities, we will do so. 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 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, 2024 with the Federal Deposit Insurance Corporation (FDIC) on or about May 8, 2024.
Incorporated in 1834, Hingham Institution for Savings is one of America’s oldest banks. The Bank maintains offices in Boston, Nantucket, Washington, D.C., and San Francisco.
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 25, 2024 at the Old Derby Academy, located at 34 Main Street, Hingham, Massachusetts. Stockholders may also observe the Meeting by streaming video. 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.
HINGHAM INSTITUTION FOR SAVINGS Selected Financial Ratios | |||||||
Three Months Ended March 31, | |||||||
2023 | 2024 | ||||||
(Unaudited) | |||||||
Key Performance Ratios | |||||||
Return on average assets (1) | 0.82 | % | 0.63 | % | |||
Return on average equity (1) | 8.67 | 6.63 | |||||
Core return on average assets (1) (5) | 0.56 | 0.20 | |||||
Core return on average equity (1) (5) | 5.85 | 2.14 | |||||
Interest rate spread (1) (2) | 0.92 | 0.13 | |||||
Net interest margin (1) (3) | 1.46 | 0.85 | |||||
Operating expenses to average assets (1) | 0.68 | 0.67 | |||||
Efficiency ratio (4) | 45.96 | 77.24 | |||||
Average equity to average assets | 9.51 | 9.54 | |||||
Average interest-earning assets to average interest bearing liabilities | 121.68 | 119.91 | |||||
March 31, 2023 | December 31, 2023 | March 31, 2024 | ||||||||||
(Unaudited) | ||||||||||||
Asset Quality Ratios | ||||||||||||
Allowance for credit losses/total loans | 0.69 | % | 0.68 | % | 0.67 | % | ||||||
Allowance for credit losses/non-performing loans | 5,169.01 | 1,804.47 | 1,530.95 | |||||||||
Non-performing loans/total loans | 0.01 | 0.04 | 0.04 | |||||||||
Non-performing loans/total assets | 0.01 | 0.03 | 0.04 | |||||||||
Non-performing assets/total assets | 0.01 | 0.03 | 0.04 | |||||||||
Share Related | ||||||||||||
Book value per share | $ | 182.89 | $ | 188.50 | $ | 190.07 | ||||||
Market value per share | $ | 233.44 | $ | 194.40 | $ | 174.46 | ||||||
Shares outstanding at end of period | 2,147,400 | 2,162,400 | 2,180,250 | |||||||||
(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 is a non-GAAP measure that represents total operating expenses, divided by the sum of net interest income and total other income, excluding gain on equity securities, net.
(5) Non-GAAP measurements that represent return on average assets and return on average equity, excluding the after-tax gain on equity securities, net.
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
(In thousands, except share amounts) | March 31, 2023 | December 31, 2023 | March 31, 2024 | ||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Cash and due from banks | $ | 5,727 | $ | 5,654 | $ | 6,200 | |||||
Federal Reserve and other short-term investments | 346,713 | 356,823 | 367,046 | ||||||||
Cash and cash equivalents | 352,440 | 362,477 | 373,246 | ||||||||
CRA investment | 8,361 | 8,853 | 8,759 | ||||||||
Other marketable equity securities | 59,115 | 70,949 | 78,497 | ||||||||
Securities, at fair value | 67,476 | 79,802 | 87,256 | ||||||||
Securities held to maturity, at amortized cost | 3,500 | 3,500 | 5,500 | ||||||||
Federal Home Loan Bank stock, at cost | 52,316 | 69,574 | 69,484 | ||||||||
Loans, net of allowance for credit losses of | 3,672,258 | 3,914,244 | 3,938,252 | ||||||||
Bank-owned life insurance | 13,395 | 13,642 | 13,723 | ||||||||
Premises and equipment, net | 18,056 | 17,008 | 16,844 | ||||||||
Accrued interest receivable | 7,161 | 8,554 | 8,783 | ||||||||
Deferred income tax asset, net | 3,432 | 974 | — | ||||||||
Other assets | 15,901 | 14,172 | 16,263 | ||||||||
Total assets | $ | 4,205,935 | $ | 4,483,947 | $ | 4,529,351 |
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits | $ | 2,144,387 | $ | 2,010,918 | $ | 2,045,524 | |||||
Non-interest-bearing deposits | 375,887 | 339,059 | 347,397 | ||||||||
Total deposits | 2,520,274 | 2,349,977 | 2,392,921 | ||||||||
Federal Home Loan Bank advances | 1,265,000 | 1,692,675 | 1,684,675 | ||||||||
Mortgagors’ escrow accounts | 13,123 | 13,942 | 13,570 | ||||||||
Accrued interest payable | 5,713 | 12,261 | 14,040 | ||||||||
Deferred income tax liability, net | — | — | 1,765 | ||||||||
Other liabilities | 9,087 | 7,472 | 7,982 | ||||||||
Total liabilities | 3,813,197 | 4,076,327 | 4,114,953 | ||||||||
Stockholders’ equity: | |||||||||||
Preferred stock, | — | — | — | ||||||||
Common stock, | 2,147 | 2,162 | 2,180 | ||||||||
Additional paid-in capital | 13,068 | 14,150 | 15,416 | ||||||||
Undivided profits | 377,523 | 391,308 | 396,802 | ||||||||
Accumulated other comprehensive income | — | — | — | ||||||||
Total stockholders’ equity | 392,738 | 407,620 | 414,398 | ||||||||
Total liabilities and stockholders’ equity | $ | 4,205,935 | $ | 4,483,947 | $ | 4,529,351 | |||||
HINGHAM INSTITUTION FOR SAVINGS Consolidated Statements of Income | |||||||
Three Months Ended March 31, | |||||||
(In thousands, except per share amounts) | 2023 | 2024 | |||||
(Unaudited) | |||||||
Interest and dividend income: | |||||||
Loans | $ | 36,416 | $ | 43,120 | |||
Debt securities | 33 | 45 | |||||
Equity securities | 903 | 1,450 | |||||
Federal Reserve and other short-term investments | 3,374 | 2,827 | |||||
Total interest and dividend income | 40,726 | 47,442 | |||||
Interest expense: | |||||||
Deposits | 13,800 | 21,146 | |||||
Federal Home Loan Bank advances | 12,015 | 17,212 | |||||
Total interest expense | 25,815 | 38,358 | |||||
Net interest income | 14,911 | 9,084 | |||||
Provision for credit losses | 156 | 108 | |||||
Net interest income, after provision for credit losses | 14,755 | 8,976 | |||||
Other income: | |||||||
Customer service fees on deposits | 138 | 137 | |||||
Increase in cash surrender value of bank-owned life insurance | 83 | 81 | |||||
Gain on equity securities, net | 3,548 | 5,971 | |||||
Miscellaneous | 63 | 55 | |||||
Total other income | 3,832 | 6,244 | |||||
Operating expenses: | |||||||
Salaries and employee benefits | 4,306 | 4,297 | |||||
Occupancy and equipment | 391 | 431 | |||||
Data processing | 653 | 755 | |||||
Deposit insurance | 650 | 810 | |||||
Foreclosure and related | (74 | ) | 32 | ||||
Marketing | 212 | 89 | |||||
Other general and administrative | 845 | 813 | |||||
Total operating expenses | 6,983 | 7,227 | |||||
Income before income taxes | 11,604 | 7,993 | |||||
Income tax provision | 3,094 | 1,125 | |||||
Net income | $ | 8,510 | $ | 6,868 | |||
Cash dividends declared per common share | $ | 0.63 | $ | 0.63 | |||
Weighted average shares outstanding: | |||||||
Basic | 2,147 | 2,169 | |||||
Diluted | 2,200 | 2,192 | |||||
Earnings per share: | |||||||
Basic | $ | 3.96 | $ | 3.17 | |||
Diluted | $ | 3.87 | $ | 3.13 | |||
HINGHAM INSTITUTION FOR SAVINGS
Net Interest Income Analysis
Three Months Ended | |||||||||||||||||||||||||||||||
March 31, 2023 | December 31, 2023 | March 31, 2024 | |||||||||||||||||||||||||||||
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) | $ | 3,682,517 | $ | 36,416 | 3.96 | % | $ | 3,896,425 | $ | 42,214 | 4.33 | % | $ | 3,956,135 | $ | 43,120 | 4.36 | % | |||||||||||||
Securities (3) (4) | 99,693 | 936 | 3.76 | 111,913 | 1,335 | 4.77 | 116,203 | 1,495 | 5.15 | ||||||||||||||||||||||
Short-term investments (5) | 294,513 | 3,374 | 4.58 | 215,323 | 2,960 | 5.50 | 208,245 | 2,827 | 5.43 | ||||||||||||||||||||||
Total interest-earning assets | 4,076,723 | 40,726 | 4.00 | 4,223,661 | 46,509 | 4.40 | 4,280,583 | 47,442 | 4.43 | ||||||||||||||||||||||
Other assets | 53,809 | 58,768 | 64,034 | ||||||||||||||||||||||||||||
Total assets | $ | 4,130,532 | $ | 4,282,429 | $ | 4,344,617 | |||||||||||||||||||||||||
Liabilities and stockholders’ equity: | ` | ||||||||||||||||||||||||||||||
Interest-bearing deposits (6) | $ | 2,250,188 | 13,800 | 2.45 | % | $ | 2,119,506 | 20,811 | 3.93 | % | $ | 2,098,851 | 21,146 | 4.03 | % | ||||||||||||||||
Borrowed funds | 1,100,156 | 12,015 | 4.37 | 1,395,744 | 16.323 | 4.68 | 1,471,027 | 17,212 | 4.68 | ||||||||||||||||||||||
Total interest-bearing liabilities | 3,350,344 | 25,815 | 3.08 | 3,515,250 | 37,134 | 4.23 | 3,569,878 | 38,358 | 4.30 | ||||||||||||||||||||||
Non-interest-bearing deposits | 378,089 | 345,743 | 346,136 | ||||||||||||||||||||||||||||
Other liabilities | 9,452 | 14,843 | 14,261 | ||||||||||||||||||||||||||||
Total liabilities | 3,737,885 | 3,875,836 | 3,930,275 | ||||||||||||||||||||||||||||
Stockholders’ equity | 392,647 | 406,593 | 414,342 | ||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 4,130,532 | $ | 4,282,429 | $ | 4,344,617 | |||||||||||||||||||||||||
Net interest income | $ | 14,911 | $ | 9,375 | $ | 9,084 | |||||||||||||||||||||||||
Weighted average interest rate spread | 0.92 | % | 0.17 | % | 0.13 | % | |||||||||||||||||||||||||
Net interest margin (7) | 1.46 | % | 0.89 | % | 0.85 | % | |||||||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities (8) |
(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 March 31, | |||||||
(In thousands, unaudited) | 2023 | 2024 | |||||
Non-GAAP reconciliation: | |||||||
Net Income | $ | 8,510 | $ | 6,868 | |||
Gain on equity securities, net | (3,548 | ) | (5,971 | ) | |||
Income tax expense (1) | 782 | 1,316 | |||||
Core Net Income | $ | 5,744 | $ | 2,213 |
(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.
The table below presents the calculation of the efficiency ratio, a non-U.S. GAAP performance measure that management uses to assess operational efficiency which represents total operating expenses, divided by the sum of net interest income and total other income, excluding gain on equity securities, net.
Three Months Ended | |||||||
March 31, | |||||||
(In thousands, unaudited) | 2023 | 2024 | |||||
Non-U.S. GAAP efficiency ratio calculation: | |||||||
Operating expenses | $ | 6,983 | $ | 7,227 | |||
Net interest income | $ | 14,911 | $ | 9,084 | |||
Other income | 3,832 | 6,244 | |||||
Gain on equity securities, net | (3,548 | ) | (5,971 | ) | |||
Total revenue | $ | 15,195 | $ | 9,357 | |||
Efficiency ratio | 45.96 | % | 77.24 | % | |||
CONTACT: | Patrick R. Gaughen, President and Chief Operating Officer (781) 783-1761 | |
FAQ
What was Hingham Savings' net income for the first quarter of 2024?
How did core net income for HIFS in the first quarter of 2024 compare to the same period in 2023?
What was the total assets of Hingham Savings as of March 31, 2024?
Did retail and business deposits increase or decrease from March 31, 2023?
Who acknowledged the challenges posed by short-term interest rate increases and an inverted yield curve?