#47: Hingham Institution For Savings 2024 Full-Year Update

"The most dangerous response to short-term challenges is to make changes that have long-term consequences."

Disclosure: Long HIFS.

See other posts about Hingham here, especially the 2024 Deep Dive, for a more in-depth discussion of the industry and Hingham’s history.

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The phrase in the subtitle above appeared in the last three Hingham annual letters to shareholders. Perhaps as much for insiders as shareholders, the mantra reminded readers that the bank’s basic model — transforming short-term deposits and borrowings into longer-term loans with little-to-no credit losses while operating lean — works very well over time.

From the vantage point of late March 2025, it appears management has successfully navigated the longest and deepest yield curve inversion on record and positioned the bank for future success.

Valuation remains attractive.

Some recent highlights:

• Added a San Francisco-based lender and SDG personnel

• Increased non-interest-bearing deposits by 17%

• Added some rate-shock protection with FHLB option advances and changes to loan rate resets

• Added a DC-based director

• Invested additional capital into equities (now 24% of shareholders’ equity)

• Made another meaningful investment in a DC-based bank (more below)

Interest Rates

The yield curve is back to a normal shape compared to a year ago. Though the 3/10 spread is marginally back in negative territory as of mid-late March, it appears we’re out of the deep valley of the last 18 months. The short-rate-down scenario has taken some pressure off Hingham’s cost of funds and allowed spreads to widen, albeit marginally.

Hingham’s spread bottomed in Q4 2023 at just 17bps. NIM bottomed the following quarter at 0.85%. Spread and NIM were 53bps and 1.24%, respectively, at the end of Q4 2024. In the Q4 press release, management noted that NIM was 1.36% in December (annualized).

Any other bank would be printing losses from a sub-1 % NIM. Not Hingham. Embracing the principles of Kaizen, its management team operates the bank at high 60s basis points (emphasis on basis points) of overhead.

Even in the depths of late 2023 / early 2024, the bank produced core net income, excluding securities gains. Subpar as it might have been, that it was positive at all is proof of the model’s ability to take extreme stress.

From a P&L perspective, this translated into low but still positive core profitability. Look at the near bookend-like quarterly results in 2023 and 2024.