HIFS - Hingham Institution for Savings

[Guest Cameron]

This bank is one of the oldest banks in America, the current management ended up taking over around 1993, Robert Gaughen Jr. and his father as well as other shareholders kicked out management after they made some bad loans as well as the president of the bank ended up getting kickbacks, they were able to stop a takeover from Worcester Bank during this time and turned the bank around, Mr. Gaughen has been CEO for the last 23 years. His son is the president of the bank and in total insiders own around 40% of shares outstanding. They have never had a year where they did not increase book value, the only year that deposits for the bank didn't increase was 1994. Earnings took a small hit in 2006 and 2007 with net earnings at $4.6 million in 2006 and $4.4 million in 2007, they then earned $6.2 million in 2008 and $8 million in 2009, all the while increasing their deposits and loan portfolio. They trade at around 2.34x book and 16x P/E, so a rather rich valuation in terms of book value, but I think valuing this company based on book would underestimate how great the bank compounds capital. I will leave a couple of links to interviews that Mr. Gaughen did, one of them is with one of Hingham's local newpapers, he has done about 3 of these interviews that I have been able to find. He also did an interview with Dan Rather during 2009, he had a couple of interesting comments on the housing crisis, specifically he talks about how some investment bankers from New York that specialized in community banks they tried to talk him into buying securities that he couldn't understand but would juice up the banks returns, he ended up walking away. What you'll find in the Dan Rather interview is that the advantage that HIFS has over other banks is that customers feel secure, non preforming loans at HIFS are almost non existent. I also think that they have an advantage in a world where none of the big banks really specialize in a certain area rather they are a melting pot of all your financial needs, meanwhile HIFS is able to focus and specialize on one area, lending, specifically lending in the South Shore of Boston and surrounding area's. Simplicity when it comes to the bank that you trust to hold your money, as well as the fact that many of the people that live in Hingham and the surrounding area's feel a sense pride about the bank, from my research, opening a bank account for your child at HIFS is a ritual for those who live in Hingham. I'll leave the financial data I have in a spread sheet that I made for the forum as well as their website, they have an archive of annual reports that go back to 1989.

 

I currently do not have a position in the company because I bought it sometime before the election when the shares where 131.05 and after Trump got elected they traded at $200 which was a P/E of 20 and I had idea's that were far cheaper. I figured this might be a good company to follow, as this is my first post on the forum, for those of you who like compounders and thought I should share since the company gets a total of zero coverage.

 

Link to Local Newspaper Article - http://www.wickedlocal.com/article/20151120/NEWS/151129112

Link to Website - https://www.hinghamsavings.com/

 

The Dan Rather and spreadsheet of the last 23 years will be attachments.

 

Happy Investing,

Cameron.

Dan_Rather_Reports_409.pdf

[jtvalue]

Thanks for posting! I've had this one on my watch list for awhile as the numbers are fantastic.

[vox]

I like HIFS a lot. They have a high quality management team and been the beneficiaries of consolidation by BofA, Santander, and TD Bank in their market. They are looking to expand their commercial real estate loan portfolio in the greater Boston area and focusing on in 1-4 family owner occupied lending in Nantucket and Martha's Vineyard.

[EricSchleien]

Has anyone looked at this recently?

[Philbert77]

Just bought some today. Great business, great efficiency rating and just released great results.

[Guest Schwab711]

This is probably one of the few banks that benefits from lower rates for longer. Also, HIFS has one of the larger equity portfolios of any bank in the US. I tried to quantify the benefit in my blog but I think the ability for the bank to invest in equities is underappreciated.

[Philbert77]

What is your blog url?

[Philbert77]

For those who care the annual meeting video is interesting: https://www.youtube.com/watch?v=flmR-LNtwbs&feature=youtu.be