Hingham Institution for Savings :HIFS-US: Earnings Analysis: Q1, 2017 By the Numbers : June 16, 2017

Hingham Institution for Savings reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Hingham Institution for Savings – Western New England Bancorp, Inc., Berkshire Hills Bancorp, Inc., Northwest Bancshares, Inc., Meridian Bancorp Inc, BSB Bancorp, Inc., Wellesley Bancorp, Inc., United Financial Bancorp Inc and Brookline Bancorp, Inc. (WNEB-US, BHLB-US, NWBI-US, EBSB-US, BLMT-US, WEBK-US, UBNK-US and BRKL-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 15.77 million, Net Earnings of USD 6.11 million.
  • Net interest income margins widened from 97.66% to 97.90% compared to the same period last year.
  • Net loan assets changed 12.42% compared to same period last year and 1.78% from previous period, total deposits changed 10.62% compared to same period last year and 2.70% from previous period.
  • Year-on-year change in operating cash flow of 10.86% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 15.77 15.74 15.18 15.03 14.17
Revenue Growth (%YOY) 11.32 14.95 14.89 16.06 11.67
Earnings (mil) 6.11 6.29 5.95 5.87 5.32
Earnings Growth (%YOY) 14.8 20.12 21.97 24.22 17.92
Net Margin (%) 38.76 39.95 39.16 39.02 37.58
EPS 2.8 2.91 2.76 2.73 2.48
Return on Equity (%) 14.91 15.96 15.71 16.09 15.15
Return on Assets (%) 1.21 1.27 1.23 1.25 1.18

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Market Share Versus Profits

Revenues History
Earnings History

HIFS-US‘s change in revenue this period compared to the same period last year of 11.32% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that HIFS-US is holding onto its market share. Also, for comparison purposes, revenues changed by 0.22% and earnings by -2.78% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the following factors: (1) Year-on-year improvements in net interest income margins from 97.66% to 97.90% and (2) improvement in loan loss provisions. As a result, net interest income after provisions margins improved from 95.86% to 96.28% compared to the same period last year. Loan loss provisions as a percentage of net interest income were 1.65% this period and 1.84% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

HIFS-US‘s improvement in net interest income margins came in spite of relative drops in the levels of net loan assets and total deposits. On an absolute basis, net loan assets changed 12.42% compared to the same period last year and 1.78% from the previous period. Total deposits changed 10.62% compared to the same period last year and 2.70% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

HIFS-US‘s change in operating cash flow of 10.86% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 63.82% to 65.93% and (2) one-time items. The company’s pretax margins are now 65.93%, compared to 63.82% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Hingham Institution for Savings provides community banking services. Its primary deposit products include savings, checking and term certificate accounts, and primary lending products are residential and commercial mortgage, real estate, construction, home equity and consumer loans. The company offers online banking services, which include PCBANK24, business online, bill pay service and 24-hour banking. It provides financial services to individuals and small businesses in Boston and Southeastern Massachusetts. Hingham Institution for Savings was founded in 1834 and is headquartered in Hingham, MA.

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