We came across a bullish thesis on Hingham Institution for Savings (HIFS) on Substack by @Govro12 WinterGems Stocks. In this article, we will summarize the bulls’ thesis on HIFS. Hingham Institution for Savings (HIFS)’s share was trading at $257.31 as of Jan 24th. HIFS’s trailing P/E was 24.39 according to Yahoo Finance.
A view of a busy banking hall, customers engaging with banking staff to conduct their financial transactions.
Hingham Institution for Savings (HIFS) posted solid Q4 results, largely in line with projections, showing a significant improvement in net interest margin (NIM), which rose 17 basis points to 1.24%, a 16% increase from the previous quarter. This improvement was driven by the two Federal Reserve rate cuts in Q4, one in October and one in December. HIFS benefited fully from the October cut and partially from the December cut, with management revealing a NIM of 1.36% for December, setting expectations for a NIM north of 1.36% in Q1 2025. The potential for further growth in NIM is high, as the bank will likely benefit from any additional rate cuts by the Fed.
In terms of loans, HIFS experienced a small decline in its loan book, ending Q4 with an average balance of $3.88 billion. The bank is focused on renewing loans at higher yields rather than aggressively chasing new loan growth. Jumbo loans, for example, are now priced at 6.94%, well above the current average loan yield of 4.58%. Although loan yield improvements were modest in Q4, this reflects a broader trend of higher loan pricing moving forward, which should continue to bolster the bank’s margins.
HIFS also saw a slight upward trend in interest-bearing deposits, which averaged $2.136 billion in Q4. While the deposit yield dropped slightly to 3.80%, the bank is focusing on attracting deposits through a mix of short- and long-term certificates. The next quarter could be trickier to predict, given the mix of deposit types, but the overall strategy of increasing deposits remains intact.
Looking ahead, HIFS is expected to continue benefiting from the strong momentum in net interest income, with projections showing a rise to $15.6 million in Q1 2025. Core operating income per share is projected to increase 35% sequentially, reaching $2.95. With a book value of $198 per share, HIFS provides strong downside protection, making it a relatively safe bet for investors.
The bank’s path to a 2% NIM is within reach, and achieving this target could lead to core earnings of $5 per share per quarter, potentially translating to $25 per share annually. With a clear strategy focused on higher-yield loans and disciplined deposit management, HIFS is well-positioned for continued growth and offers an attractive investment opportunity with significant upside potential.
Hingham Institution for Savings (HIFS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 10 hedge fund portfolios held HIFS at the end of the third quarter which was 11 in the previous quarter. While we acknowledge the risk and potential of HIFS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HIFS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.