OREANDA-NEWS. HINGHAM INSTITUTION FOR SAVINGS (NASDAQ:HIFS), announced second quarter earnings for 2016. Net income for the quarter ended June 30, 2016 was $5,867,000 or $2.75 per share basic and $2.73 per share diluted as compared to $4,723,000 or $2.22 per share basic and $2.20 per share diluted for the second quarter of 2015.  Net income per share (basic) for the second quarter of 2016 increased 24% over the same period in 2015.  The Bank’s annualized return on average equity for the second quarter of 2016 was 15.96%, and the annualized return on average assets was 1.21% as compared to 14.70% and 1.19% for the same period in 2015. Net income for the 2016 period included an after-tax realized gain on investments of approximately $221,000, which was unrelated to the Bank’s core business operations.

Net income for the six months ended June 30, 2016 was $11,191,000 or $5.25 per share basic and $5.21 per share diluted as compared to $9,238,000 or $4.34 per share basic and $4.31 per share diluted for the same period last year. Net income per share (basic) for the first six months of 2016 increased 21% over the same period in 2015.  The Bank’s annualized return on average equity for the first six months of 2016 was 15.51% and the annualized return on average assets was 1.20%. The Bank’s annualized return on average equity for the first six months of 2015 was 14.61%, and the annualized return on average assets was 1.17%.

Strong balance sheet growth trends of recent years continued, as deposits were $1.320 billion at June 30, 2016, representing 17% annualized growth year-to-date and 17% growth from June 30, 2015.  Net loans were $1.525 billion at June 30, 2016, representing 17% annualized growth year-to-date and 18% growth from June 30, 2015.  Total assets were $1.919 billion at June 30, 2016, representing 17% annualized growth year-to-date and 17% growth from June 30, 2015.  Book value per share increased to $69.69 per share at June 30, 2016, representing a 15% annualized growth rate year-to-date and a 14% increase from June 30, 2015.  In addition to the increase in book value per share, the Bank has declared $1.50 in dividends per share since June 30, 2015.

Key credit and operational metrics remained steady in the second quarter of 2016.  At June 30, 2016, non-performing assets totaled 0.18% of total assets, compared with 0.10% at December 31, 2015 and 0.11% at June 30, 2015.  Non-performing loans as a percentage of the total loan portfolio totaled 0.22% at June 30, 2016, as compared to 0.13% at December 31, 2015 and 0.13% at June 30, 2015.  At June 30, 2016, the Bank did not own any foreclosed property.  The efficiency ratio improved to 32.96% for the second quarter of 2016, as compared to 36.36% for the same period last year.  Non-interest expense (annualized) as a percentage of average assets fell to 1.00% for the second quarter of 2016, as compared to 1.18% for the same period last year.  These metrics reflect the Bank’s disciplined focus on credit and expense management.

President Robert H. Gaughen, Jr. stated, “We are pleased to report that our current quarterly earnings per share represent a 24% increase over the second quarter of 2015.  At Hingham, we take our role as stewards of the shareholders’ capital seriously.  Our emphasis on careful capital allocation, defensive and conservative underwriting, and disciplined cost control continues to serve our owners well.  More important than performance in any one period, however, is a company’s record of compounding shareholder capital over time and through credit cycles.  On this measure, our team strives to set a high bar.”

Hingham Institution for Savings is a Massachusetts-chartered savings bank located in Hingham, Massachusetts. Incorporated in 1834, it is the oldest financial institution headquartered in Hingham and one of the oldest continuously operating banks in the United States.  The Bank’s Main Office is located on Main Street in Hingham.  The Bank also maintains branch offices in South Hingham and the neighboring towns of Cohasset, Hull, Norwell, Scituate and Weymouth, as well as branches in the South End of Boston, on Beacon Hill and on the island of Nantucket.  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,
  2015   2016   2015   2016
(Unaudited)                      
                       
Key Performance Ratios                      
Return on average assets (1) 1.19 %   1.21 %   1.17 %   1.20 %
Return on average equity (1) 14.70     15.96     14.61     15.51  
Interest rate spread (1) (2) 3.11     2.90     3.10     2.96  
Net interest margin (1) (3) 3.21     3.01     3.20     3.07  
Non-interest expense to average assets (1) 1.18     1.00     1.21     1.04  
Efficiency ratio (4) 36.36     32.96     37.33     33.66  
Average equity to average assets 8.09     7.59     8.00     7.73  
                       
Average interest-earning assets to average interest-
    bearing liabilities		  115.67     115.55     115.77     115.83  
                       
  June 30,
   December 31,   June 30,
  2015   2015   2016
(Unaudited)                        
                         
Asset Quality Ratios                        
Allowance for loan losses/total loans   0.73 %   0.70 %     0.68 %
Allowance for loan losses/non-performing loans   569.13     540.37       302.09  
                     
Non-performing loans/total loans   0.13     0.13       0.22  
Non-performing loans/total assets   0.10     0.10       0.18  
Non-performing assets/total assets   0.11     0.10       0.18  
                     
Share Related                    
Book value per share $ 60.96     $ 64.83     $    69.69  
Market value per share $ 115.11     $ 119.80     $ 122.92  
Shares outstanding at end of period   2,128,750       2,128,750       2,130,750  
                       

(1) Annualized. 

(2) Interest rate spread represents the difference between the yield on interest-earning assets and cost of interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average earning assets.

(4) The efficiency ratio represents non-interest expense, divided by the sum of net interest income and non-interest income, excluding gain on sale of securities. 

 
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Balance Sheets
                 
  June 30,   December 31,    June 30,
(Dollars in thousands, except per share data) 2015   2015   2016
(Unaudited)                
ASSETS                
                 
Cash and due from banks  $ 10,115   $ 6,944   $ 10,788
Short-term investments    207,143     254,069     287,009
Cash and cash equivalents    217,258     261,013     297,797
                 
Certificates of deposit    9,281     6,206     2,630
Securities available for sale, at fair value    59,831     40,603     32,949
Federal Home Loan Bank stock, at cost   18,454     19,796     24,203
Loans, net of allowance for loan losses of $9,459                
  at June 30, 2015, $9,905 at December 31,  2015                 
  and $10,413 at June 30, 2016    1,294,141     1,405,533     1,525,407
Foreclosed assets    175     —     —
Bank-owned life insurance    11,557     11,697     11,838
Premises and equipment, net    15,085     15,094     14,774
Accrued interest receivable    3,075     3,270     3,498
Deferred income tax asset, net    2,589     3,281     3,146
Other assets    2,550     2,035     2,423
Total assets $ 1,633,996   $ 1,768,528   $ 1,918,665
                 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
Interest-bearing deposits $ 1,011,365   $ 1,088,742   $ 1,183,353
Non-interest-bearing deposits   116,813     128,285     136,272
Deposits    1,128,178     1,217,027     1,319,625
Federal Home Loan Bank advances    366,534     402,464     440,392
Mortgage payable    948     922     896
Mortgagors’ escrow accounts    4,223     4,850     4,970
Accrued interest payable    302     303     388
Other liabilities   4,044     4,947     3,897
Total liabilities   1,504,229     1,630,513     1,770,168
                 
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; 2,128,750 shares issued and outstanding at
  June 30, 2015 and December 31, 2015 and 2,130,750
  shares issued and outstanding at June 30, 2016 		   2,129     2,129     2,131
Additional paid-in capital    11,006     11,052     11,319
Undivided profits    116,289     124,481     134,394
Accumulated other comprehensive income   343     353     653
Total stockholders’ equity   129,767     138,015     148,497
Total liabilities and stockholders’ equity $ 1,633,996   $ 1,768,528   $ 1,918,665
                 
HINGHAM INSTITUTION FOR SAVINGS
Consolidated Statements of Income
 
            Three Months Ended   Six Months Ended
            June 30,   June 30,
(In thousands, except per share amounts)   2015     2016   2015   2016
(Unaudited)                                
Interest and dividend income:                              
  Loans       $ 14,732     $ 16,983   $ 29,270   $ 33,413
  Debt securities     57       18     119     46
  Equity securities         159       285     314     529
  Short-term investments and certificates of deposit   134       418     270     744
    Total interest and dividend income     15,082       17,704     29,973     34,732
Interest expense:                            
  Deposits         1,874       2,400     3,701     4,690
  Federal Home Loan Bank advances         713       959     1,434     1,849
  Mortgage payable       15       13     29     27
    Total interest expense       2,602       3,372     5,164     6,566
    Net interest income       12,480       14,332     24,809     28,166
Provision for loan losses       175       255     350     510
  Net interest income, after provision for loan losses   12,305       14,077     24,459     27,656
Other income:                                
  Customer service fees on deposits     253       236     481     452
  Increase in bank-owned life insurance         71       74     141     141
  Gain on sale of securities         —       344     —     344
  Miscellaneous         37       48     96     97
    Total other income       361       702     718     1,034
Operating expenses:                            
  Salaries and employee benefits       2,922       2,991     5,826     6,061
  Occupancy and equipment         519       484     1,073     955
  Data processing         304       303     600     608
  Deposit insurance         221       264     438     506
  Foreclosure         (45 )     26     32     82
  Marketing         137       109     258     225
  Other general and administrative         611       665     1,302     1,275
    Total operating expenses       4,669       4,842     9,529     9,712
Income before income taxes       7,997       9,937     15,648     18,978
Income tax provision         3,274       4,070     6,410     7,787
    Net income       $ 4,723     $ 5,867   $ 9,238   $ 11,191
                                 
Cash dividends declared per share   $ 0.28     $ 0.30   $ 0.56   $ 0.60
                         
Weighted average shares outstanding:                        
  Basic         2,129       2,131     2,129     2,130
  Diluted         2,145       2,149     2,142     2,148
                                 
Earnings per share:                          
  Basic       $ 2.22     $ 2.75   $ 4.34   $ 5.25
  Diluted       $ 2.20     $ 2.73   $ 4.31   $ 5.21
   
HINGHAM INSTITUTION FOR SAVINGS  
Net Interest Income Analysis  
   
  Three Months Ended June 30,  
  2015     2016  
  AVERAGE       YIELD/     AVERAGE       YIELD/  
  BALANCE   INTEREST   RATE (8)     BALANCE   INTEREST   RATE (8)  
(Dollars in thousands)                                  
(Unaudited)                                  
                                   
Loans (1) (2) $ 1,277,323   $ 14,732   4.61 %   $ 1,507,171   $ 16,983   4.51 %
Securities (3) (4)   82,026     216   1.05       61,766     303   1.96  
Short-term investments and certificates of deposit   196,092     134   0.27       335,064     418   0.50  
  Total interest-earning assets   1,555,441     15,082   3.88       1,904,001     17,704   3.72  
Other assets   32,792                 33,532            
  Total assets $ 1,588,233               $ 1,937,533            
                                   
Interest-bearing deposits (5) $ 1,013,585     1,874   0.74     $ 1,177,674     2,400   0.82  
Borrowed funds   331,158     728   0.88       470,110     972   0.83  
  Total interest-bearing liabilities   1,344,743     2,602   0.77       1,647,784     3,372   0.82  
Demand deposits   110,770                 137,837            
Other liabilities   4,194                 4,889            
  Total liabilities   1,459,707                 1,790,510            
Stockholders’ equity   128,526                 147,023            
  Total liabilities and stockholders’ equity $ 1,588,233               $ 1,937,533            
Net interest income       $ 12,480               $ 14,332      
                                   
Weighted average spread             3.11 %               2.90 %
                                   
Net interest margin (6)             3.21 %               3.01 %
                                   
Average interest-earning assets to average
  interest-bearing liabilities (7)		             115.67 %               115.55 %
  (1) Before allowance for loan losses.
  (2) Includes non-accrual loans.
  (3) Excludes the impact of the average net unrealized gain or loss on securities available for sale.
  (4) Includes Federal Home Loan Bank stock.
  (5) Includes mortgagors' escrow accounts.
  (6) Net interest income divided by average total interest-earning assets.
  (7) Total interest-earning assets divided by total interest-bearing liabilities.
  (8) Annualized
   
HINGHAM INSTITUTION FOR SAVINGS  
Net Interest Income Analysis  
   
  Six Months Ended June 30,  
  2015       2016  
  AVERAGE
             YIELD/       AVERAGE       YIELD/  
  BALANCE
   INTEREST      RATE (8)       BALANCE
   INTEREST
   RATE (8)  
(Dollars in thousands)                                    
(Unaudited)                                    
                                     
Loans (1) (2) $ 1,263,897   $ 29,270   4.63 %     $ 1,473,583   $ 33,413   4.53 %
Securities (3) (4)   84,530     433   1.02         61,404     575   1.87  
Short-term investments and certificates of deposit   200,316     270   0.27         297,866     744   0.50  
  Total interest-earning assets   1,548,743     29,973   3.87         1,832,853     34,732   3.79  
Other assets   32,742                   33,344            
  Total assets $ 1,581,485                 $ 1,866,197            
                                     
Interest-bearing deposits (5) $ 1,009,726     3,701   0.73       $ 1,149,165     4,690   0.82  
Borrowed funds   328,085     1,463   0.89         433,244     1,876   0.87  
  Total interest-bearing liabilities   1,337,811     5,164   0.77         1,582,409     6,566   0.83  
Demand deposits   112,751                   134,524            
Other liabilities   4,483                   4,918            
  Total liabilities   1,455,045                   1,721,851            
Stockholders’ equity   126,440                   144,346            
  Total liabilities and stockholders’ equity $ 1,581,485                 $ 1,866,197            
Net interest income       $ 24,809                 $ 28,166      
                                     
Weighted average spread             3.10 %                 2.96 %
                                     
Net interest margin (6)             3.20 %                 3.07 %
                                     
Average interest-earning assets to average
  interest-bearing liabilities (7)		             115.77 %                 115.83 %
  (1) Before allowance for loan losses.
  (2) Includes non-accrual loans.
  (3) Excludes the impact of the average net unrealized gain or loss on securities available for sale.
  (4) Includes Federal Home Loan Bank stock.
  (5) Includes mortgagors' escrow accounts.
  (6) Net interest income divided by average total interest-earning assets.
  (7) Total interest-earning assets divided by total interest-bearing liabilities.
  (8) Annualized