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See Page 10 for a reconciliation between Generally Accepted Accounting Principles (“GAAP”) net income and non-GAAP core net income. GAAP requires that gains and losses on equity securities, net of tax, realized and unrealized, be recognized in the Consolidated Statements of Income. In calculating core net income, the Bank did not make any adjustments other than those relating to after-tax gain on equity securities, realized and unrealized, and the after-tax gain on disposal of fixed assets.

Balance Sheet

Total assets were $4.450 billion at September 30, 2024, representing a 1% annualized decline year-to-date and 2% growth from September 30, 2023.

Net loans were $3.863 billion at September 30, 2024, representing a 2% annualized decline year-to-date and 1% growth from September 30, 2023. Origination activity was concentrated in the Boston and Washington D.C. markets and remained focused on stabilized multifamily commercial real estate and multifamily construction. The Bank continues to evaluate new opportunities in the San Francisco market, where interest in acquisitions and refinancing activity from the Bank’s customers began to pick up in 2024. In the third quarter of 2024, the Bank continued to experience loan prepayments more consistent with historic trends, including continued significant turnover in the Bank’s construction portfolio. As noted below, asset quality remained strong and finding high-quality loan assets remains a core business objective of the Bank.

Retail and business deposits were $1.977 billion at September 30, 2024, representing 8% annualized growth year-to-date and 3% growth from September 30, 2023. Non-interest-bearing deposits, included in retail and business deposits, were $358.0 million at September 30, 2024, representing 7% annualized growth year-to-date and stable from September 30, 2023.

Growth in non-interest bearing and money market balances in the first nine months of 2024 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 over the last nine months continued to contribute to deposit growth in the third quarter of 2024. The Bank continues to recruit actively for talented 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 Internet listing service deposits were $2.015 billion at September 30, 2024, representing a 10% annualized decline year-to-date and 1% growth from September 30, 2023. In the first nine months of 2024, the Bank continued to manage its wholesale funding mix to optimize the cost of funds while taking advantage of the inverted yield curve by adding lower rate longer term liabilities. Wholesale deposits, which include brokered and Internet listing service time deposits, were $482.2 million at September 30, 2024, representing a 1% annualized decline year-to-date and a 2% decline from September 30, 2023. Borrowings from the Federal Home Loan Bank totaled $1.531 billion at September 30, 2024, representing a 13% annualized decline from December 31, 2023, and 1% growth from September 30, 2023. As of September 30, 2024, the Bank maintained an additional $815.5 million in immediately available borrowing capacity at the Federal Home Loan Bank of Boston and the Federal Reserve Bank, in addition to $368.1 million in cash and cash equivalents.

Book value per share was $193.42 as of September 30, 2024, representing 3% annualized growth year-to-date and 4% growth from September 30, 2023. This growth is not consistent with the Bank’s long-term objectives. In addition to the increase in book value per share, the Bank declared $2.52 in dividends per share since September 30, 2023.

On September 25, 2024, the Bank declared a regular cash dividend of $0.63 per share. This dividend will be paid on November 13, 2024 to stockholders of record as of November 4, 2024. This was the Bank’s 123rd consecutive quarterly dividend.

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 September 30, 2024 increased 11 basis points to 1.07%, as compared to 0.96% in the quarter ended June 30, 2024. This was the second consecutive quarter of continued expansion. This improvement was the result of an increase in the yield on earning assets combined with a decline in the cost of interest-bearing liabilities. The six basis points increase in the yield on earning assets was driven primarily by a higher yield on loans, as the Bank continued to originate loans at higher rates and reprice existing loans. The cost of interest-bearing liabilities fell three basis points, as the Bank began to reduce rates later in the third quarter and continued to take advantage of the inverted yield curve by adding lower rate FHLB advances and brokered deposits. The net interest margin in the final month of the third quarter of 2024 was 1.14% annualized.

Key credit and operational metrics remained strong in the third quarter of 2024. At September 30, 2024, non-performing assets totaled 0.04% of total assets, compared to 0.03% at December 31, 2023 and 0.00% at September 30, 2023. Non-performing loans as a percentage of the total loan portfolio totaled 0.04% at both September 30, 2024 and December 31, 2023, as compared to 0.01% at September 30, 2023. The Bank did not record any charge-offs in the first nine months of 2024 or 2023. All non-performing assets and loans cited above were and are residential, owner-occupant loans.

The Bank did not have any delinquent or non-performing commercial real estate loans as of September 30, 2024, December 31, 2023, or September 30, 2023. The Bank did not own any foreclosed property as of September 30, 2024, December 31, 2023 or September 30, 2023.

The efficiency ratio, as defined on page 5 below, fell to 62.19% for the third quarter of 2024, as compared to 68.57% in the prior quarter and 62.55% for the same period last year. Operating expenses as a percentage of average assets rose to 0.68% for the third quarter of 2024, as compared to 0.67% for the prior quarter and the same period last year. 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, positioning the Bank to operate more efficiently in future.

Chairman Robert H. Gaughen Jr. stated, “Returns on equity and assets in the third 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 ultimately 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 some growth in book value per share in this environment. As our assets continue to reprice higher and our liabilities, including both deposits and wholesale funding, reprice lower, conditions have become somewhat more favorable for our model.

While this market environment has been extraordinarily challenging, the Bank’s business model has been built over time to compound shareholder capital through economic cycles. 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 and it will serve us well as our business emerges from this period.”

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 September 30, 2024 with the Federal Deposit Insurance Corporation (FDIC) on or about November 6, 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.

The Bank believes the presentation of the following non-GAAP financial measures provide useful supplemental information that is essential to an investor’s proper understanding of results of operations and financial condition of the Bank. Management uses these measures in its analysis of the Bank’s performance. These non-GAAP measures should not be viewed as substitutes for the financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks.

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 on equity securities and the after-tax gain on disposal of fixed assets.

(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 and gain on disposal of fixed assets.

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