HINGHAM INSTITUTION FOR SAVINGS ESTABLISHED 1834 Financial Highlights 10.2 12.1 13.3 13.4 22.3 1.19 1.25 1.30 1.34 2.10 34.24 38.70 43.65 48.49 57.08 16.5 1.03 1.06 1.10 .99 .94 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 Net Income* ($ in millions) Dividends Declared** ($ per share) Book Value ($ per share) 1,017.8 1,127.3 1,205.9 1,356.4 1,552.2 730.0 787.6 869.9 940.9 1,089.2 792.9 849.8 949.7 1,078.9 1,238.7 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 Assets ($ in millions) Deposits ($ in millions) Loans, net ($ in millions) *Net Income: 2014 includes a one-time net gain of $5.7 million related to a non-taxable life insurance death benefit (light shading reflects this one-time gain). **Dividends Declared: Dividends declared table includes the total regular dividends declared (dark shading) and the total dividends declared including any special dividends (light shading). From the President To Our Business Partners: 2014 was another outstanding year for Hingham Institution for Savings. We produced record earnings of $22.3 million, with a return on average equity of 19.30% and a return on average assets of 1.52%. Excluding the impact of a substantial one-time insurance transaction, the Bank generated an operating return on average equity of 14.32% and an operating return on average assets of 1.13%. Book value per share grew by 18% and the five year compound annual growth in book value was 13%. We returned $4.5 million to the ownership in dividends in light of these results. They are among the strongest in our industry. Our strategy of measured, organic growth continues to bear fruit. Our performance in 2014 was the product of disciplined execution across the Bank. In 2014, net loans increased by $159.8 million, or 15%, deposits increased by $148.3 million, or 16%, and total assets increased to $1.552 billion, or 14%. We have achieved this growth while maintaining a conservative underwriting culture that focuses on “common- sense” lending. We continue to insist on a substantial margin of safety in our commercial real estate operations where the majority of our capital is now committed. Our speed, flexibility, and focus on serving specialty commercial and residential real estate markets allows us to make loans that deliver unique value for our customers. Balance sheet growth at Hingham must be safe and must be profitable, in that order. Prudence and thrift remain the cornerstones of our operational culture. Non-interest expenses as a percentage of average total assets reached a record low of 1.37% this year and our efficiency ratio similarly reached a record low of 37.19%. We continue to identify new and creative ways to take costs out of the business. Our employees act and think like owners, because nearly all of them are. As noted in these pages, we enjoy deep, long-term relationships with many of our customers - we are quite literally invested in their success. Many of our customers are also long-term shareholders in the Bank and we know them from our active participation in the civic life of the communities in which we operate. You are our neighbors and friends, as well as our partners and customers. In our 181st year, we have every intention of continuing to earn the trust that you have placed in us. Very truly yours, Robert H. Gaughen Jr. President and Chairman of the Board Jonathan Block President, Block Properties Jonathan Block is an experienced real estate investor with offices in Boston’s Back Bay. His specialty is the renovation and management of multifamily rental properties. Jonathan had only done business with large banks before coming to Hingham and he was surprised by how quickly Hingham was able to act on his requests for financing, especially when he was bidding on new acquisitions under tight timelines. He appreciated Vice President Shawn Sullivan’s solid understanding of the commercial market, as well as the Bank’s flexibility in structuring terms that met his needs. Jonathan has been thoroughly impressed by Hingham, and this is a partnership with a bright future. “Hingham Savings is a bank that gets it. Their knowledge of the commercial market is solid, they have an ability to move quickly, and they keep the process simple.” Jonathan Block “From the start, it was clear that Hingham Savings understood our business financing needs, as well as the seasonal economy of the Island. We are delighted to work with a Bank that treats its small business customers so respectfully.” Wendy & Chef Peter Jannelle 6 Fifty-Six Union Chef Peter Jannelle, Owner / Wendy Jannelle, Owner Fifteen years ago, Chef Peter Jannelle and his wife Wendy opened Fifty-Six Union on Nantucket. A graduate of the Culinary Institute of America, Peter creates dishes ranging from simple to sophisticated. Combined with an extensive wine list and welcoming atmosphere, Fifty-Six Union is a chic neighborhood bistro with a loyal following. The Jannelles have found Hingham Savings a strong partner. Our solid understanding of the Island market, flexible lending products, and high service standards are a proven recipe for success. 7 Dr. Mohamad Shurbaji, DMD Owner, Advanced Dental Centers / Independent Real Estate Investor Dr. Mohamad Shurbaji is the owner of Advanced Dental Centers, with offices in Norwood and Weymouth. He is also a commercial real estate investor, with several multifamily properties in the Boston area. Like many of our customers, Mohamad was referred to Hingham Savings by another customer. He partners with us on his growing portfolio of properties, in addition to his personal and business banking. As a resident of Hingham with a young family, community is important to Dr. Shurbaji. He shares our values and our commitment to outstanding personal service; that’s why Hingham Savings is his bank of choice. “Hingham Savings consistently brings the highest standards of excellence to a relationship that continues to grow, whether we are doing business in person, by phone, or online. They have earned my trust.” Dr. Mohamad Shurbaji, DMD “As business owners, everyone wears a lot of hats, and we are impressed with Hingham Savings’ hands-on approach to our business needs. The Bank truly sees us as more than just a set of numbers on a page, and we are very pleased with their upbeat, can-do attitude.” Larry & Michelle Maury Emporium of Nantucket Michelle and Larry Maury, Owners Larry and Michelle Maury own the Emporium of Nantucket, a popular island home goods store, established in 1947. With over 5000 square feet of home furnishings, lighting, and nautical décor, the Emporium is a celebration of Nantucket style. For Islanders, the shop is a perennial favorite and a trusted resource; it’s well known that the variety of items available at the Emporium will furnish an entire home beautifully. The Maury family has a long history in the Nantucket community, and they have seen many changes over the years. They grew disappointed with the big banks on the Island that didn’t seem to understand small businesses. The Maurys moved their deposit accounts to Hingham Savings soon after our Nantucket branch opened. Our relationship has grown to include their personal and commercial real estate financing. They appreciate the access to decision-makers that understand the Nantucket market and support their business needs. They are pleased to see a return to true community banking on Nantucket. “As entrepreneurs, we appreciate Hingham Savings’ speed and flexibility - they are a business partner that can deliver solutions we can rely on.” Samantha Shih 9Tailors Samantha Shih, President, Co-Owner / Austin Wei, Co-Owner Patrick R. Gaughen, Executive Vice President, HIFS Samantha Shih and Austin Wei own 9Tailors, a luxury custom clothing business located in Boston. 9Tailors’ handmade custom suits and dress shirts – produced by master tailors in Hong Kong – are a blend of old-world tradition and modern elegance. Samantha chose “9” – an auspicious number in Chinese – because it conveys longevity and success. The company has experienced both, growing rapidly since its founding in 2008 and developing a loyal following in Boston and New York. In 2014, Samantha and Austin found a loft space in Boston’s Leather District that would accommodate their growth and success – they relied on Hingham Savings for the financing. The family has done business with Hingham Savings for many years; like many of the Bank’s customers, they enjoy a long relationship with our principals and benefit from our common sense approach to lending. Hingham Historical Society Michael Studley, President / Suzanne Buchanan, Executive Director Robert H. Gaughen, Jr., President & CEO, HIFS Founded in 1914, the Hingham Historical Society’s mission is the preservation and sharing of Hingham’s 379-year history. Executive Director Suzanne Buchanan oversees a collection of more than 10,000 artifacts and documents, a bustling Visitor Center, and a growing membership. She is excited about the expansion for this treasured landmark, which will soon be known as the Hingham Heritage Museum. This $2.8 million project, supported in part by Hingham Savings, will preserve and expand Old Derby, creating a museum-quality exhibition space and a beautifully restored venue for cultural and educational programs. As the oldest operating business in Hingham, we are deeply committed to the preservation of our town’s history and the vitality of our Town Square. “The Society appreciates Hingham Savings’ longtime support. Our forward thinking partnership will help ensure the success of the Hingham Heritage Museum Project, and a vibrant future for one of Hingham’s most treasured historic icons.” Suzanne Buchanan Board of Directors Standing: Seated: Stacey M. Page, Scott L. Moser, Michael J. Desmond, Brian T. Kenner, Esq., Marion J. Fahey, Robert A. Lane, Esq., Robert K. Sheridan, Esq., Robert H. Gaughen, Jr., Esq., Jacqueline M. Youngworth, Julio R. Hernando, Esq., Kevin W. Gaughen, Esq., Patrick R. Gaughen Ronald D. Falcione, Geoffrey C. Wilkinson, Sr., Howard M. Berger, Esq., Edward L. Sparda Selected Financial Data Balance Sheet Data: Total assets Short-term investments Securities available for sale Loans: Residential loans Commercial mortgage Construction Other Allowance for loan losses Deposits Federal Home Loan Bank advances Stockholders’ equity 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, at year end At December 31, 2014 2013 2012 2011 2010 (Dollars in Thousands) $ 1,552,205 170,305 70,570 $ 1,356,441 90,925 106,369 $ 1,205,884 79,373 102,866 $ 1,127,276 107,422 96,689 $ 1,017,845 61,566 95,071 576,665 607,851 60,371 996 9,108 1,089,217 329,602 121,515 532,845 498,592 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 Years Ended December 31, 2014 2013 2012 2011 2010 (Dollars in Thousands, Except Per Share Amounts) $ $ $ $ $ $ 56,193 9,936 46,257 625 7,920 20,146 33,406 11,142 22,264 % 10.46 10.44 1.52 19.30 7.86 3.13 3.23 37.19 2.10 57.08 $ $ $ $ $ $ 49,342 10,502 38,840 380 1,663 17,512 22,611 9,240 13,371 % 6.28 6.28 1.07 13.52 7.89 3.07 3.19 43.26 1.34 48.49 $ $ $ $ $ $ 48,831 10,937 37,894 725 1,638 16,406 22,401 9,111 13,290 % 6.25 6.25 1.15 15.05 7.62 3.25 3.38 41.54 1.30 43.65 $ $ $ $ $ $ 48,444 12,618 35,826 1,100 1,670 16,061 20,335 8,273 12,062 5.68 5.67 % 1.14 15.34 7.44 3.36 3.50 42.88 1.25 38.70 $ $ $ $ $ $ 46,825 15,098 31,727 1,300 1,598 14,949 17,076 6,848 10,228 % 4.81 4.81 1.05 14.67 7.14 3.20 3.37 44.91 1.19 34.24 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, 2009 through December 31, 2014. 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. thereafter by the Bank and by the companies which comprise the Indices. The chart assumes full reinvestment of such dividends. 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, 2009 and reflects year-end closing prices and dividends paid Information about the Indices has been obtained from sources believed to be reliable, but neither the accuracy nor the completeness of such is guaranteed by the Bank. information ■ Hingham Institution for Savings ■ NASDAQ Composite ■ SNL New England Thrift ■ SNL Bank and Thrift Total Return Performance 350 300 250 200 150 100 50 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 Index 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 Hingham Institution for Savings NASDAQ Composite SNL New England Thrift SNL Bank and Thrift 100.00 100.00 100.00 100.00 149.90 118.15 102.50 111.64 165.19 117.22 101.49 86.81 221.34 138.02 107.76 116.57 283.01 193.47 135.98 159.61 319.33 222.16 143.86 178.18 Year Ending Consolidated Balance Sheets ASSEtS Cash and due from banks Short-term investments Cash and cash equivalents 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 $9,108,000 in 2014 and $8,509,000 in 2013 Foreclosed assets Bank-owned life insurance Premises and equipment, net Accrued interest receivable Deferred income tax asset, net Other assets Total assets LIABILItIES AND StOCKHOLDERS’ EQUItY Deposits Federal Home Loan Bank advances Mortgage payable Mortgagors’ escrow accounts Accrued interest payable Other liabilities Total liabilities 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, 2014 and 2013 Additional paid-in capital Undivided profits Accumulated other comprehensive income (loss) Total stockholders’ equity Total liabilities and stockholders’ equity At December 31, 2014 2013 (In Thousands) $ $ $ 6,917 170,305 177,222 12,926 70,570 17,855 1,238,656 786 11,416 15,211 2,959 2,642 1,962 1,552,205 1,089,217 329,602 973 4,476 350 6,072 1,430,690 11,922 90,925 102,847 13,011 106,369 15,978 1,078,879 271 15,375 15,854 2,792 2,934 2,131 1,356,441 940,906 302,732 1,020 3,709 490 4,367 1,253,224 — — 2,129 10,942 108,243 201 121,515 1,552,205 $ 2,129 10,659 90,449 (20) 103,217 1,356,441 $ $ $ $ Consolidated Statements of Net Income 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 Gain on life insurance distribution 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 Years Ended December 31, 2014 2013 2012 (Dollars in Thousands, Except Per Share Amounts) 54,990 336 491 376 56,193 6,314 3,562 60 9,936 46,257 625 45,632 1,014 308 6,302 296 7,920 12,424 1,197 1,968 803 263 557 2,934 20,146 33,406 11,142 22,264 10.46 10.44 $ $ $ $ 48,455 407 181 299 49,342 5,660 4,779 63 10,502 38,840 380 38,460 1,019 430 — 214 1,663 10,602 1,015 1,853 684 186 557 2,615 17,512 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 — 209 1,638 9,643 884 1,681 611 336 654 2,597 16,406 22,401 9,111 13,290 6.25 6.25 $ $ $ $ Stockholder Information 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, 2014, there were approximately 303 stockholders of record, holding 336,208 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. 2014 First Quarter Second Quarter Third Quarter Fourth Quarter 2013 First Quarter Second Quarter Third Quarter Fourth Quarter High $ 81.00 80.00 88.89 90.77 $ 72.94 70.46 77.00 79.56 Low $ 74.76 66.12 78.53 80.26 $ 62.63 57.59 66.01 66.01 The closing sale price of the Bank’s common stock at December 31, 2014 was $87.01 per share. Hingham Institution for Savings 55 Main Street Hingham, MA 02043 (781) 749-2200 President and Chief Executive Officer Robert H. Gaughen, Jr. Investor Inquiries Robert A. Bogart Vice President – Treasurer 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, 2014, as filed with the Federal Deposit Insurance Corporation, may be obtained without charge by any stockholder of the Bank upon written request addressed 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 to Boston Beacon Hill south End CoHassEt HingHam Hingham square south Hingham Linden Ponds HuLL nantuCkEt norwELL/HanovEr sCituatE wEymoutH HINGHAM INSTITUTION FOR SAVINGS ESTABLISHED 1834 www.hinghamsavings.com Member FDIC/Member DIF | Equal Housing Lender