FINAL cover HIFS 2013 annual report_Layout 1 3/1/14 1:04 PM Page 1
OFFICES
BOSTON
BEACON HILL
SOUTH END
COHASSET
HINGHAM
HINGHAM SQUARE
SOUTH HINGHAM
LINDEN PONDS
HULL
NANTUCKET
NORWELL/HANOVER
SCITUATE
SOUTH WEYMOUTH
www.hinghamsavings.com
Member FDIC/Member DIF
Equal Housing Lender
2013 ANNUAL REPORT
HINGHAM
INSTITUTION FOR
SAVINGS
ESTABLISHED 1834
Financial Highlights
8.0
10.2
12.1
13.3
13.4
1.09
1.19
1.25
1.30
1.34
09
10
11
12
13
09
10
11
12
13
Net Income
($ in millions)
Dividends Declared
($ per share)
925.6
1,017.8 1,127.3 1,205.9 1,356.4
631.1
730.0
787.6
869.9
940.9
718.2
792.9
849.8
949.7
1,078.9
09
10
11
12
13
09
10
11
12
13
09
10
11
12
13
Assets
($ in millions)
Deposits
($ in millions)
Loans, net
($ in millions)
From the President
Dear Shareholders,
2013 was another outstanding year for Hingham Savings. We produced record earnings for you, our ownership, with a
return on average equity of 13.52% and a return on average assets of 1.07%. These earnings were driven by strong balance
sheet growth in both real estate loans and deposits. They are among the strongest in our industry. Our conservative and
risk-averse management of our investment portfolio, weighted heavily in favor of cash, allowed us to avoid the significant
bond market losses of many of our competitors. We continued our strategy of measured, organic growth, opening a new
branch on Main Street in Nantucket. We have been warmly received on the Island and our performance there has already
exceeded our expectations.
In 2013, deposits increased by $71.0 million, or 8%, net loans increased by $129.2 million, or 14%, and total assets
increased by 12%. Our rigorous cost control produced an efficiency ratio of 43%; non-interest expenses as a percentage
of average total assets reached a record low of 1.40%. Book value per share increased to $48.49 per share from $43.65
per share, reflecting the strong return on average equity and the continuation of our dividend strategy, in which we return a
significant portion of our earnings to the ownership. In 2013, we declared $1.34 in total cash dividends per share. This was
the 19th consecutive year in which the Bank increased total cash dividends per share.
Despite the apparent tailwinds in the real estate markets, we are committed to the conservative strategies that have
delivered superior long-term returns to our owners without undue risk. We continue to insist on a substantial margin of
safety in our commercial real estate operations where we now commit the majority of our capital. We aggressively manage
our troubled assets, of which we have few, and in 2013 we actually produced net recoveries to our loan loss reserve. Our
residential lending and retail franchises continue to be market leaders, with strong brand recognition, outstanding service,
and loyal customers. We continue to be opportunistic about expansion, recognizing, however, that growth must enhance
earnings available to the shareholders. There are no empire-builders at Hingham.
In his 2006 letter to the shareholders of Berkshire Hathaway, Warren Buffett observed that “every day, in countless ways,
the competitive position of our businesses grow either weaker or stronger. If we are delighting customers, eliminating
unnecessary costs and improving our products and services, we gain strength. If we treat customers with indifference
or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively,
though, their consequences are enormous.”
At Hingham, we look to grow stronger every day in 2014 and beyond. We appreciate your continued support and we look
forward to working on your behalf.
Very truly yours,
Robert H. Gaughen Jr.
President & Chief Executive Officer
Cohasset Golf Club
Established in 1894, the Cohasset Golf Club is a premier golf course designed by legendary
architect Donald Ross. Attention to detail is crucial for smooth operations at CGC, and
that’s just one reason why Treasurer Don Grilli recommended Hingham Savings in 2009
to finance the club’s capital projects. This year, CGC moved their operating accounts to
Hingham Savings, and has been impressed with the client-friendly service, knowledgeable
staff and straightforward processes. By all accounts, the seamless transition has been a
hole-in-one.
Alex Boyd, Vice President, Commercial Loan Officer, Hingham Savings
Jim Simmons, General Manager, Cohasset Golf Club
Donald Grilli, Treasurer, Cohasset Golf Club
“Hingham Savings has exceeded our expectations
in every way – in commercial loan services as
well as business banking – the personal service
and attention to detail has been superb.”
DonalD Grilli
Ken Oringer
Chef Ken Oringer owns seven successful restaurants, has received the Best Chef Northeast
2001 award from the James Beard Foundation, won Food Network’s Iron Chef America,
and has been selected for Star Chefs Rising Stars Mentor Award. A world traveler, he
brings a strong culinary philosophy of authenticity and innovation to his inspired dishes.
When it came time to settle down in Boston with his young family, he chose Hingham
Savings as his Bank for financing his new home because he knows we share his high
standards for attention to detail and professional excellence.
Ken Oringer, Chef and Restaurateur, Clio, Uni, Toro, and La Verdad (Boston),
Earth (Kennebunkport), Toro (NYC)
“Hingham Savings has shown me that they stand
behind their reputation, with great service and a
helpful attitude – they are the real deal, and it is
great to have authenticity in your Bank.”
Ken orinGer
“We can count on Hingham Savings to
understand our needs and respond quickly
to make things happen.”
FranKlin W. Simon
The Simon Companies
Founded in 1966, The Simon Companies is a leading real estate investment firm that has
developed and managed a substantial portfolio of commercial properties and more than
4000 multifamily units throughout New England. They demonstrate an extraordinary
commitment to excellence in their projects, and the choice of Hingham Savings for their
commercial financing is consistent with their own stellar credentials. Like The Simon
Companies, the senior management team at Hingham Savings brings more than a century
of industry know-how to their work. The Simons recognize the Bank’s strength, speed,
and ability to deliver solid commercial lending solutions.
John G. Snyder, Senior Vice President and General Counsel
Hinda Simon Snyder, Executive Vice President
Franklin W. Simon, Founder and President
Artists Association of Nantucket
The AAN was launched in the fall of 1945, charged with fostering the visual arts on
Nantucket. Today, more than 240 artists are part of this vibrant arts community, and they
have moved forward to create Nantucket’s first Visual Arts Center, to open in Fall 2014.
Executive Director Cecil Barron Jensen views the Center as an exciting opportunity, and
the organization is pleased with how Hingham Savings moved quickly and thoughtfully
to deliver a financing solution that allows the AAN’s dollars to work harder. Hingham
Savings is proud to be a part of our client’s vision, with creative solutions and an ability
to keep the process simple.
Cecil Barron Jensen, Executive Director
Sara Congdon, Nantucket Branch Manager, Hingham Savings
“Hingham Savings has helped us to fulfill
our mission, with services that are both
creative and responsive.”
CeCil Barron JenSen
“Hingham Savings’ thorough knowledge of
the market, innovative thinking, and ability
to move quickly has made them a trusted
partner on our projects.”
neW BoSton VentureS
New Boston Ventures
For more than 25 years, the award-winning team of David Goldman and Dennis Kanin has
achieved impressive success in the creation of landmark developments throughout Greater
Boston, with new construction as well as the preservation and adaptive re-use of historic
structures. They have worked with Hingham Savings since 2007 on their project financing
and business banking. The relationship has grown to include their personal banking as
well, and they recognize that the Bank’s strong reputation and outside-the-box thinking is
a good match with their own values. Hingham Savings has served as a trusted partner on
several projects, including two recent developments in Boston’s South End.
David Goldman,
Co-founder, Principal
Robert H. Gaughen, Jr.
President and CEO,
Hingham Savings
Dennis Kanin,
Co-founder, Principal
The Salvation Army Building,
407-409 Shawmut Ave, Boston
Zero Worcester Square,
Washington Street, Boston
David Shukis and Susan Blair
David T. Shukis, CFA: Head of Global Investment,
Cambridge Associates
Susan Blair, Homemaker
Longtime residents of Hingham,
David Shukis and Susan Blair enjoy
their beautifully restored historic
home and active community life,
as well as their vacation home on
Nantucket. When it came time to
refinance, they were very pleased
to
learn
that Hingham Savings
also lends on Nantucket. They
were delighted with how easy
the Bank made the refinancing
process for them, and discovered
that Hingham Savings can provide
exceptional, personal service, both
on and off-island. David and Susan
look forward to visiting the Bank’s
newest branch on Nantucket.
“Working with our loan officer was a pleasure
throughout the mortgage process. We were guided
through every step along the way. Hingham
Savings knows how to treat people well.”
DaViD t. ShuKiS anD SuSan Blair
Board of Directors
Howard M. Berger, Esq.
Michael J. Desmond
Marion J. Fahey
Ronald D. Falcione
Kevin W. Gaughen, Esq.
Patrick R. Gaughen
Robert H. Gaughen, Jr., Esq.
Julio R. Hernando, Esq.
Brian T. Kenner, Esq.
Robert A. Lane, Esq.
Scott L. Moser
Stacey M. Page
Robert K. Sheridan
Edward L. Sparda
Geoffrey C. Wilkinson, Sr.
Jacqueline M. Youngworth
Selected Financial Data
Selected Financial Data.
The following information does not purport to be complete and is qualified in its entirety by the more detailed information
contained elsewhere herein.
Balance Sheet Data:
Total assets … … … … … … … … …
Securities available for sale… … … …
Loans:
Residential loans … … … … … … …
Commercial mortgage … … … … …
Construction … … … … … … … …
Other … … … … … … … … … … …
Allowance for loan losses … … … …
Deposits … … … … … … … … … …
Federal Home Loan Bank advances…
Stockholders’ equity … … … … … …
2013
2012
2011
2010
2009
At December 31,
$ 1,356,441
106,369
$ 1,205,884
102,866
$ 1,127,276
96,689
$ 1,017,845
95,071
$ 925,560
96,374
532,845
498,592
53,520
913
8,509
940,906
302,732
103,217
457,217
438,037
60,390
869
7,999
869,886
234,355
92,799
408,607
404,343
42,269
1,090
7,516
787,573
247,471
82,265
385,525
383,361
29,065
958
6,905
729,960
207,580
72,736
2013
Years Ended December 31,
2010
2012
(Dollars in Thousands, Except Per Share Amounts)
2011
350,433
348,700
23,228
833
5,737
631,087
222,636
65,293
2009
Income Statement Data:
Total interest and dividend income ……………
Total interest expense……………………………
Net interest income ……………………
Provision for loan losses ……………………
Other income ……………………………………
Operating expenses ..…………………………
Income before income taxes …………….
Income tax provision .…………………………
Net income ………………………………
Earnings per common share:
Basic………………………………………………
Diluted……………………………………………
Financial Ratios:
Return on average assets………………………
Return on average equity………………………
Average equity to average assets………………
Interest rate spread……………………………….
Net interest margin………………………………
Efficiency ratio……………………………………
…
Cash dividends declared per common share ……
Book value per common share …………………
$
49,342 $
10,502
38,840
48,831 $
10,937
37,894
380
1,678
17,257
22,611
9,240
13,371
725
1,666
16,434
22,401
9,111
$ 13,290
$
48,444 $
12,618
35,826
1,100
1,700
16,091
20,335
8,273
12,062
$
46,825 $
15,098
31,727
1,300
1,627
14,978
17,076
6,848
10,228
$
44,798
17,599
27,199
1,700
2,008
14,371
13,136
5,091
8,045
$
$
$
$
6.28 $
6.25 $
5.68 $
4.81 $
6.28 $
6.25 $
5.67 $
4.81 $
1.07 %
13.52
7.89
3.07
3.19
43.26
1.34
48.49
$
$
1.15 %
15.05
7.62
3.25
3.38
41.54
1.30
43.65
$
$
1.14 %
15.34
7.44
3.36
3.50
42.88
1.25
38.70
$
$
1.05 %
14.67
7.14
3.20
3.37
44.91
1.19
34.24
$
$
3.79
3.79
0.93 %
12.78
7.26
3.11
3.30
49.20
1.09
30.74
Comparative Stock Performance Graph
Comparative Stock Performance Graph
The chart which appears below sets forth the percentage change, on an annual basis, in the cumulative total return on the
Bank’s Common Stock since December 31, 2008 through December 31, 2013. For comparative purposes, changes in the
cumulative total return on the three indices of publicly traded stocks (the “Indices”) are also set forth on the chart.
The NASDAQ Composite Index reflects the total return of a group of stocks in a cross section of industries. Many of these
stocks have substantially larger market capitalizations than the Bank. The SNL Bank and Thrift Index tracks a national group
of publicly traded bank and thrift institutions.
The final Index, SNL New England Thrift Index, tracks a peer group of all publicly traded thrift institutions located in New
England. SNL Securities is a research and publishing firm specializing in the collection and dissemination of data on the
banking, thrift, and financial services industries.
The chart begins with an equal base value of $100 for the Bank’s stock and for each of the Indices on December 31, 2007 and
reflects year-end closing prices and dividends paid thereafter by the Bank and by the companies which comprise the Indices.
The chart assumes full reinvestment of such dividends.
Information about the Indices has been obtained from sources believed to be reliable, but neither the accuracy nor the
completeness of such information is guaranteed by the Bank.
Total Return Performance
400
350
300
250
Hingham Institution for Savings
NASDAQ Composite
SNL New England Thrift
SNL Bank and Thrift
e
u
l
a
V
x
e
d
n
I
200
150
100
50
0
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
Index
Hingham Institution for Savings
NASDAQ Composite
SNL New England Thrift
SNL Bank and Thrift
Period Ending
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
100.00
100.00
100.00
100.00
127.07
145.36
95.15
98.66
190.47
171.74
97.53
110.14
209.91
170.38
96.57
85.64
281.25
200.63
102.53
115.00
359.61
281.22
129.39
157.46
Consolidated Balance Sheets
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
2013
2012
Cash and due from banks ...................................................................................
Short-term investments ......................................................................................
Cash and cash equivalents ............................................................................
$
(In Thousands)
$
11,922
90,925
102,847
Certificates of deposit ........................................................................................
Securities available for sale, at fair value .............................................................
Federal Home Loan Bank stock, at cost ...............................................................
Loans, net of allowance for loan losses
of $8,509,000 in 2013 and $7,999,000 in 2012 ................................................
Foreclosed assets ..............................................................................................
Bank-owned life insurance .................................................................................
Premises and equipment, net ..............................................................................
Accrued interest receivable ................................................................................
Deferred income tax asset, net ...........................................................................
Other assets......................................................................................................
Total assets ................................................................................................
13,011
106,369
15,978
1,078,879
271
15,375
15,854
2,792
2,934
2,131
$ 1,356,441
7,961
79,373
87,334
13,737
102,866
14,105
949,662
471
14,945
14,180
2,667
2,556
3,361
$ 1,205,884
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits ..........................................................................................................
Federal Home Loan Bank advances.....................................................................
Mortgage payable.............................................................................................
Mortgagors’ escrow accounts.............................................................................
Accrued interest payable....................................................................................
Other liabilities.................................................................................................
Total liabilities ...........................................................................................
$
940,906
302,732
1,020
3,709
490
4,367
1,253,224
$
869,886
234,355
1,065
3,231
478
4,070
1,113,085
Stockholders’ equity:
Preferred stock, $1.00 par value,
2,500,000 shares authorized, none issued ...................................................
Common stock, $1.00 par value, 5,000,000 shares
authorized; 2,128,750 shares issued and
outstanding at December 31, 2013 and
2,125,750 issued and outstanding at
December 31, 2012 .................................................................................
Additional paid-in capital..............................................................................
Undivided profits.........................................................................................
Accumulated other comprehensive income (loss).............................................
Total stockholders’ equity.......................................................................
Total liabilities and stockholders’ equity..........................................................
—
—
2,129
10,659
90,449
(20)
103,217
$ 1,356,441
2,126
10,519
79,930
224
92,799
$ 1,205,884
Consolidated Statements of Net Income
CONSOLIDATED STATEMENTS OF NET INCOME
Years Ended December 31,
2012
(In Thousands, Except Per Share Amounts)
2013
2011
Interest and dividend income:
Loans ………………………………………………………………………
Debt securities ……………………………………………………………
Equity securities……………………………………………………………
Short-term investments and certificates of deposit ………………………
Total interest and dividend income ……………………………………
Interest expense:
Deposits……………………………………………………………………
Federal Home Loan Bank advances ………………………………………
Mortgage payable …………………………………………………………
Total interest expense …………………………………………………
Net interest income ……………………………………………………………
Provision for loan losses ………………………………………………………
Net interest income, after provision for loan losses …………………………
Other income:
Customer service fees on deposits…………………………………………
Increase in Bank-owned life insurance……………………………………
Miscellaneous ……………………………………………………………
Total other income ……………………………………………………
Operating expenses:
Salaries and employee benefits ……………………………………………
Data processing ……………………………………………………………
Occupancy and equipment ………………………………………………
Deposit insurance …………………………………………………………
Foreclosure…………………………………………………………………
Marketing …………………………………………………………………
Other general and administrative …………………………………………
Total operating expenses………………………………………………
Income before income taxes …………………………………………………
Income tax provision …………………………………………………………
Net income ………………………………………………………………
Earnings per common share:
Basic ………………………………………………………………………
Diluted ……………………………………………………………………
$
$
$
$
48,455
407
181
299
49,342
5,660
4,779
63
10,502
38,840
380
38,460
1,019
430
229
1,678
10,602
1,015
1,868
684
186
557
2,615
17,527
22,611
9,240
13,371
6.28
6.28
$
$
$
$
47,753
526
198
354
48,831
5,858
5,014
65
10,937
37,894
725
37,169
1,008
421
237
1,666
9,643
884
1,709
611
336
654
2,597
16,434
22,401
9,111
13,290
6.25
6.25
$
$
$
$
47,191
749
153
351
48,444
6,751
5,799
68
12,618
35,826
1,100
34,726
987
450
263
1,700
8,894
883
1,528
701
1,038
650
2,397
16,091
20,335
8,273
12,062
5.68
5.67
Stockholder Information
Hingham Institution for Savings
55 Main Street
Hingham, MA 02043
(781) 749-2200
President and Chief
Executive Officer
Robert H. Gaughen, Jr.
Investor Inquiries
William M. Donovan, Jr.
Vice President –Administration
TransferAgent and Registrar
Computershare
P.O. Box 30170
College Station, TX 77842-3170
(800) 288-9541
Online Registered Shareholder Access
www.computershare.com/investor
Independent Registered Public Accounting Firm
Wolf & Company, P.C.
99 High Street
Boston, MA 02110
Special Counsel
WilmerHale
60 State Street
Boston, MA 02109
Form 10-K and Proxy Statement
A copy of the Bank’s Annual Report on Form 10-K and Proxy
Statement for the fiscal year ended December 31, 2013,
as filed with the Federal Deposit Insurance Corporation,
may be obtained without charge by any stockholder of
the Bank upon written request addressed to the Investor
Relations Department. Additionally, the Bank’s Annual
Report on Form 10-K and the Proxy Statement are available
electronically at www.hinghamsavings.com
Stock Data
Hingham Institution for Savings’ common shares are listed
and traded on The NASDAQ Stock Market under the
symbol HIFS.
As of December 31, 2013, there were approximately 334
stockholders of record, holding 611,345 outstanding shares
of common stock. These shares do not include the number
of persons who hold their shares in nominee or street name
through various brokerage firms.
The following table presents the quarterly high and low bid
prices for the Bank’s common stock reported by NASDAQ.
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 72.94
70.46
77.00
79.56
$ 56.94
61.40
66.99
82.34
Low
$ 62.63
57.69
66.01
66.01
$ 47.90
53.79
57.74
59.55
The closing sale price of the Bank’s common stock at
December 31, 2013 was $78.49 per share.
FINAL cover HIFS 2013 annual report_Layout 1 3/1/14 1:04 PM Page 1
OFFICES
BOSTON
BEACON HILL
SOUTH END
COHASSET
HINGHAM
HINGHAM SQUARE
SOUTH HINGHAM
LINDEN PONDS
HULL
NANTUCKET
NORWELL/HANOVER
SCITUATE
SOUTH WEYMOUTH
www.hinghamsavings.com
Member FDIC/Member DIF
Equal Housing Lender
2013 ANNUAL REPORT