HINGHAM INSTITUTION FOR SAVINGS ESTABLISHED 1834 2015 Annual Report 20 21 F I N A N C I A L H I G H L I G H T S F R O M T H E P R E S I D E N T 12.1 13.3 13.4 22.3 19.3 1.25 1.30 1.34 2.10 1.46 38.70 43.65 48.49 57.08 64.83 16.5 1.06 1.10 1.16 .99 1.03 11 12 13 14 15 11 12 13 14 15 11 12 13 14 15 Net Income* ($ in millions) Dividends Declared** ($ per share) Book Value ($ per share) 1,127.3 1,205.9 1,356.4 1,552.2 1,768.5 787.6 869.9 940.9 1,089.2 1,217.0 849.8 949.7 1,078.9 1,238.7 1,405.5 11 12 13 14 15 11 12 13 14 15 11 12 13 14 15 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). 2 To Our Business Partners: 2015 was another outstanding year for Hingham Institution for Savings. Since the present management team became associated with the Bank twenty- three years ago, it has been our objective to build a great bank, characterized by outstanding long-term financial results, a fortress balance sheet that pro- vides unquestionable assurance to our depositors, and an enduring culture of growth and success. In 2015, we continued to expand on this vision – a vision that attracts the best staff, customers, and shareholders to our company. Last year, we produced earnings of $19.3M for the ownership, a 17% increase on an operating basis from 2014. Our return on average equity of 14.81% and return on average assets of 1.18% place us among the most profitable banks in the country. Net loans increased by 13% to $1.406 billion, deposits increased by 12% to $1.217 billion, and total assets increased by 14% to $1.769 billion. This consistent growth over many years is a product of our simplicity, our thrift, and our focus on deliv- ering unique value for our customers. Although the financial results in 2015 were strong, results for any one year do not fully describe the real ac- complishments and progress at Hingham. Throughout 2015, we invested in new and lasting relationships with families, businesses, non-profits, and municipalities that rely on us to finance homes, apartment buildings, and community projects. Customers have entrusted significant sums to our safekeeping – monies earmarked for a child’s education, the expansion of a business, or a city’s schools and emergency services. We never lose sight of our fiduciary duty to our depositors and our promises to them. When customers with significant sums seek security in an uncertain world, Hingham is increasingly the bank of choice. We continued to find outstanding new associates in 2015, offering individuals a wonderful place in which to build a career. Our commitment to independence, our financial performance, and our increasing geographic reach attract great people. As one of the oldest continuously operating banks in the United States, we enjoy deep, long-term relationships with many of our customers - we are quite literally invested in their success. Many are also long-term sharehold- ers 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 182nd year, we have every intention of continuing to earn the trust you have placed in us. Very truly yours, Robert H. Gaughen Jr. President and Chairman of the Board 3 K E N & J O S E P H I N E L Y O N S Owners, Lyons Associates Ken Lyons and his wife Josephine are partners in commercial real estate investment and property management, specializing in luxury residential properties in Boston’s Back Bay and Beacon Hill. The Bank supports all of their financing and banking needs, including handling electronic rent collection and security deposits. They enjoy a close relationship with the Bank and its principals, with direct access to decision-makers to discuss potential transactions. The Bank also supports the banking needs of both Ken and Josephine’s extended families – a hallmark of the deep, long-term relationships Hingham enjoys with its customers and a marker of the trust they have placed in us. 4 4 “We appreciate Hingham’s integrity and ability to execute when time is of the essence.” KEN LYONS 5 T E S S A N D E R S O N Owner, The Hub, Anderson’s “With my busy schedule, I appreciate Hingham’s reliable online banking, and I know I can always count on superb customer service when I visit their branch.” TESS ANDERSON Tess Anderson is the owner of The Hub, an iconic corner store on Main Street in Nantucket. Several years ago, she expanded her business to include Anderson’s, a high-end gift shop which she purchased from her father. The Bank supports Tess’ business and personal banking needs and she appreciates the Bank’s convenience, private banking service, and online offerings. At Hingham, our customers are often friends and neighbors – we are lucky to count Tess and her son Fisher in that group. 6 7 7 T O M C A L U S President, TCR Development Tom Calus is the owner of TCR Development, a boutique real estate development firm that builds, renovates, and manages residential property in Boston. Tom has a record of successful development across the city, in emerging areas like Bay Village, South Boston and Fort Point, as well as the more traditional markets of the South End and Back Bay. Hingham’s speed, flexibility, and market knowledge allow Tom to move quickly to capitalize on opportunities in the marketplace. The Bank also supports all of Tom’s banking needs, including mobile banking, electronic rent collection, and tenant security deposit processing. 8 8 “Hingham’s knowledge of the Boston market is well known within commercial real estate investor circles; we have a business partnership that I respect.” TOM CALUS 9 Owner, SYA+FH Steven Young Architect + Fine Home Builder S T E V E N Y O U N G “Hingham understands the needs of their entrepreneurial customers, and its approach to lending keeps the process simple.” STEVEN YOUNG Steven Young is an architect and owner of SYA+FH, a design/build firm with over twenty years of experience building and renovating luxury residential property in Boston. The Bank has partnered with Steven on multiple projects in Boston’s Back Bay, South End, and Hingham and like all of our commercial borrowers, he enjoys direct access to our senior lenders and our principals. He and his wife Dr. Caroline Young, owner of Hingham Pediatric Dentistry, just finished an extensive renovation of their home in Hingham in partnership with the Bank, and they are now neighbors as well as customers. 10 11 11 L O R I L E O & M I K E T H E R I A U LT Commercial Real Estate Investors Lori Leo and her husband Mike Theriault are experienced commercial real estate investors, as well as the owners of Four Winds Icelandic Horse Farm, an award-winning farm near our branch in Norwell. After working with impersonal national banks, Lori and Mike came to Hingham for its community feel, local decision-making, and personalized service. Hingham has handled their personal and commercial banking needs, including financing investment properties and construction projects. “From Nantucket to Hingham, the Bank has always delivered on our financing needs.” LORI LEO 12 12 13 C A R L A W E D , S R Owner, Park Drive Inc “I found Hingham Savings on the advice of a trusted friend. Hingham understands our family’s business and what we are seeking to accomplish.” CARL AWED, SR. Carl Awed Sr. has owned and operated apartment buildings in the Fenway neighborhood of Boston for over thirty years, most recently with his son Carl Jr. At 90 years of age, Carl directly manages his buildings, whether demolishing walls to expose brick, overseeing the installation of new kitchens and baths, or talking with tenants. Another long-term customer referred Carl to the Bank and we handle all of his commercial banking needs. At Hingham, we often finance generational assets like Carl’s buildings. We look forward to serving Carl and his family for many years to come. 14 15 15 S E L E C T E D F I N A N C I A L D A T A B O A R D O F D I R E C T O R S At December 31, 2011 2012 2013 2014 2015 (Dollars in Thousands) $ $ 1,127,276 116,340 96,689 $ 1,205,884 87,334 102,866 1,356,441 102,847 106,369 $ 408,607 404,343 42,269 1,090 7,516 787,573 247,471 82,265 457,217 438,037 60,390 869 7,999 869,886 234,355 92,799 532,845 498,592 53,520 913 8,509 940,906 302,732 103,217 $ 1,552,205 177,222 70,570 576,665 607,851 60,371 996 9,108 1,089,217 329,602 121,515 1,768,528 261,013 40,603 635,522 681,601 95,433 644 9,905 1,217,027 402,464 138,015 Years Ended December 31, 2011 2012 2013 2014 2015 (Dollars in Thousands, Except Per Share Amounts) $ $ $ $ $ $ 48,444 12,618 35,826 1,100 1,608 15,999 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 2,125,750 $ $ $ $ $ $ 48,831 10,937 37,894 725 1,580 16,348 22,401 9,111 13,290 6.25 6.25 % 1.15 15.05 7.62 3.25 3.38 41.41 1.30 43.65 2,125,750 $ $ $ $ $ $ 49,342 10,502 38,840 380 1,604 17,453 22,611 9,240 13,371 6.28 6.28 % 1.07 13.52 7.89 3.07 3.19 43.15 1.34 48.49 2,128,750 $ $ $ $ $ $ 56,193 9,936 46,257 625 7,863 20,089 33,406 11,142 22,264 10.46 10.44 % 1.52 19.30 7.87 3.13 3.23 37.12 2.10 57.08 2,128,750 $ $ $ $ $ $ 61,859 10,910 50,949 625 1,483 19,031 32,776 13,430 19,346 9.09 9.02 % 1.18 14.81 7.97 3.06 3.17 36.32 1.46 64.83 2,128,750 Balance Sheet Data: Total assets Cash & cash equivalents Securities available for sale Loans: Residential loans Commercial mortgages 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 Shares outstanding, at year end 16 Standing (left to right): Seated (left to right): Edward L. Sparda Scott L. Moser Michael J. Desmond Robert A. Lane, Esq. Brian T. Kenner, Esq. Kara Gaughen Smith Robert H. Gaughen, Jr., Esq. Jacqueline M. Youngworth Robert K. Sheridan, Esq. Patrick R. Gaughen Julio R. Hernando, Esq. Kevin W. Gaughen, Esq. Stacey M. Page Ronald D. Falcione Geoffrey C. Wilkinson, Sr., Howard M. Berger, Esq. 17 17 2 0 Y E A R S O F P E R F O R M A N C E – B O O K V A L U E P E R S H A R E $64.83 $70 $60 $50 $40 $30 $20 $10 $9.17 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $ $ $ 175,409 119,472 9.17 11.11% 0.98 $ 201,586 151,166 9.87 11.06% 1.05 222,584 172,839 10.93 13.00% 1.36 260,076 204,774 12.05 13.18% 1.53 291,183 229,687 12.83 13.07% 1.65 337,881 266,568 14.46 15.17% 2.07 386,181 282,386 16.38 15.95% 2.49 426,430 320,692 18.48 16.58% 2.91 483,954 358,778 19.68 13.53% 2.58 547,051 415,538 21.29 13.56% 2.80 628,251 488,126 23.01 13.20% 2.95 691,652 539,104 24.47 9.18% 2.19 744,602 593,915 25.85 8.40% 2.12 806,193 647,255 28.20 11.08% 2.96 925,560 718,242 30.74 12.78% 3.79 1,017,845 792,910 34.24 14.67% 4.81 1,127,276 849,776 38.70 15.34% 5.68 1,205,884 949,662 43.65 15.05% 6.25 1,356,441 1,078,879 48.49 13.52% 6.28 1,552,205 1,238,656 57.08 19.30% 10.46 1,768,528 1,405,533 64.83 14.81% 9.09 (dollars in thousands, except per share data) Total Assets Total Net Loans Book Value Per Share Return on Equity Earnings Per Share 18 $70 $60 $50 $40 $30 $20 $10 19 S T O C K H O L D E R I N F O R M A T I O N 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, 2015, there were approximately 278 stockholders of record, holding 248,802 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. High Low 2015 First Quarter Second Quarter Third Quarter Fourth Quarter 2014 First Quarter Second Quarter Third Quarter Fourth Quarter $ 103.75 116.84 126.15 135.03 $ 81.00 80.00 88.89 90.77 $ 82.24 98.00 104.25 112.39 $ 74.76 66.12 78.53 80.26 The closing sale price of the Bank’s common stock at December 31, 2015 was $119.80 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 1875 Pennsylvania Ave. NW Washington, DC 20006 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, 2015, 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 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 20 21 Member FDIC/Member DIF | Equal Housing Lender