Hingham Institution for Savings (HIFS)

07/25/2024


Hingham Institution for Savings passed a turn point in second quarter of 2024. Its interest margin expanded in the 2Q 2024 which produced higher net interest income. Loan and revenue continue to grow. Also, the bank managed to lower interest expense at very low level quarter to quarter (see Financial Data). In addition, the repriced loans have generated more interest income with higher rate.


The result is that declining trend of net interest income has stopped and the net interest income of 2Q 2024 has turned to growth quarter to quarter. We believe from this point on that interest margin will continue to expand and restore the bank's profitability to the level of early 2022. Due to the fact, Federal Reserve will begin to cut interest rate in the second half of 2024 which will lead to dramatic decline of borrowing cost for HIFS, especially the cost of FHLB Advance (the biggest cost of interest expense). This should be the first solid leg up for Hingham Institution for Savings. Plus, it is the first time we see a major news outlet report on the bank, AP.




Again, concentration investing involves higher risk of significant loss without the protection of diversity.


Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.





02/13/2024





From time to time, we would like to increase the position of Hingham Institution for Savings for Portfolio III whenever an opportunity is presented. 


HIFS is priced below its tangible book value now, and it represents a 2021-earning (prior the beginning of increase of Federal fund rate) to common stock price ratio of approximate 18%. It means that HIFS will earn investors 18% of return annually if investors wholly own the HIFS and the earning remains constantly.



Again, concentration investing involves higher risk of significant loss without the protection of diversity.



Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.



01/12/2024





Hingham Institution for Savings is one of oldest banks in the Unites States, but it is still a very small business. Slow and steady growth has been benefiting shareholders since the Gaughen family took over the company.


Company primarily focus on commercial real estate loans. This type of loans involves higher risk than residential owner occupies loans. HIFS implements several safeguards to reduce the risk of those loans. It requires that loan-to-value does not exceed 75%, loans must be approved by a selected loan committee, a member of the committee will visit on-site twice annually.


On the deposit side, the company relies heavily on Federal Home Loan Banks for capital to its lending business. It cost the company  higher interest expenses than usual customer deposits, but the source of capital from FHLB is much stable than customer deposit.

Also, the company utilizes Network Deposit and DIF to ensure customers' deposit which exceed the FDIC limit.


At this cycle of monetary tightening, HIFS's bottom line has been hurting mainly due to the much higher interest expense paid to FHLB. There is more than 2% of interest margin vanished. However, due to the company's low cost operation, company continue to grow its loan portfolio despite of this cycle of raising interest rate. We believe HIFS will return its profitability and earning growth once Federal Reverse begins to reduce interest rate, and eventually the return of valuation.




Again, concentration investing involves higher risk of significant loss without the protection of diversity.



Each individual investor should always consider their own investment goal, risk tolerance, investing span and objectives for their investment positions. Investing in securities involved the risk of total losses. Investors should always consult with financial professionals.