Hingham Institution for Savings
Annual Report 2016

Plain-text annual report

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 HINGHAM INSTITUTION FOR SAVINGS ESTABLISHED 1834 2016 Annual Report 1 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 13.3 13.4 22.3 19.3 23.4 1.30 1.34 2.10 1.46 1.56 43.65 48.49 57.08 64.83 75.50 16.5 1.24 1.16 1.10 1.03 1.06 12 13 14 15 16 Net Income* ($ in millions) 12 13 14 15 16 Dividends Declared** ($ per share) 12 13 14 15 16 Book Value ($ per share) 1,205.9 1,356.4 1,552.2 1,768.5 2,014.6 869.9 940.9 1,089.2 1,217.0 1,366.1 949.7 1,078.9 1,238.7 1,405.5 1,605.6 To Our Business Partners: 2016 was another outstanding year for Hingham Institution for Savings. Since the present management group became associated with the Bank twenty four years ago, it has been our objective to build a great bank, characterized by superior long-term financial results, a fortress balance sheet that provides unquestionable assurance to our depositors, and an enduring culture of growth and success. In 2016, we continued to expand on this vision - a vision that attracts the best associates, customers, and shareholders to our company. Last year, we produced earnings of $23.4 million dollars for our owners, a 21.1% increase from 2015. Our return on average equity of 15.59% and re- turn on average assets of 1.22% place us among the most profitable banks in the country. Net loans increased by 14.2% to $1.606 billion, deposits in- creased by 12.2% to $1.366 billion, and total assets increased by 13.9% to $2.015 billion. Book value per share rose 16.5% in 2016 to $75.50 per share. This excludes capital returned to the shareholders through regular and special dividends - we declared $1.56 in dividends per share in 2016. The trailing five year compound annual growth rate in book value per share, an important mea- sure of long-term value creation, rose to 14.3%. The efficiency ratio fell to a record low of 32.15%, a reflec- tion of our disciplined cost control. Although our financial results in 2016 were strong, the Bank’s long-term success is a reflection of the fact that banking is a long-term business. Our relationships with customers, their businesses, and their families span generations. Investments we made a decade ago continue to bear fruit today and invest- ments we make today will dictate our returns and our competitive position many years from now. As a publicly-traded, closely-held business, we are corporate in form but a partnership in spirit. Our partner- ship will always lend and invest with long-term performance in mind. This means that we must balance improving near-term efficiency with ensuring that we have the peo- ple, products, and technology necessary to serve our customers and manage risk as we grow. We are committed to investing in a high-performance team and we continue to attract some of the best bank- ing and commercial real estate talent in our industry. We significantly expanded our benefits program in 2016 with extended fully paid parental leave for new mothers and fathers and began sponsoring key staff for advanced degrees. Our culture of performance, innovation, and deliberate development, coupled with our commitment to independence and our increasing geographic reach, make Hingham a great place to build a career. As one of the oldest continuously operating banks in the United States, we enjoy deep relationships with many of our customers - we are quite literally invested in their success. Many are also long-term share- holders of 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 183rd year, we have every intention of continuing to earn the trust you have placed in us. Very truly yours, 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 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 2 including any special dividends (light shading). Robert H. Gaughen Jr. President and Chairman of the Board Nino, Marcello and Giancarlo Micozzi Owners, The Micozzi Companies The Micozzi Companies are leaders in commercial property management, with current holdings of more than 2,000 apartments and a half million square feet of retail properties across New England. Nino Micozzi is one of the original founders of Dellaria Salons, and established The Micozzi Companies in 1979. Nino and his sons Marcello and Giancarlo have worked with Hingham on several real estate investment projects. They came to Hingham because of our strong reputation among real estate investors for speed, streamlined processing, and flexible terms. “Hingham is a bank that stands out and takes great care of their clients. They are there whenever we need them.” NINO MICOZZI 4 5 C h r i s P e r r y & T i m V i e t h Owners, White Hart Development Tim Vieth and Chris Perry are partners in White Hart Development, a full-service design/build firm that specializes in luxury construction and renovation projects on Nantucket. As the leading construction lender on Nantucket, Hingham has financed several successful White Hart projects. The Bank also supports the personal banking needs of Tim, Chris, and their 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. “Hingham is a relationship-based bank, with new technology and efficiency in mind.” TIM VIETH 6 7 R u b y S t e e l e - M o r r i s Commercial Real Estate Investor “I take pride in my relationship with Hingham and the Gaughens, and I see them as family. Hingham’s focus on client service is extraordinary.” RUBY STEELE-MORRIS A seasoned commercial real estate investor, Ruby Steele-Morris purchased her first house when she was 21. Ruby’s objective is to provide high quality affordable housing in Boston and her daughter Brittany helps her mother manage the family business. Hingham has provided a full range of banking services and real estate financing for Ruby and her family. 8 9 M a r c e l S a f a r Founder, Chevron Partners “Hingham shares our commitment to excellence and that is at the heart of our strong relationship.” MARCEL SAFAR Marcel Safar is the founder of Chevron Partners, a privately-held and integrated real estate development firm. He was previously the General Manager of Daniel Rene Boston, a family-owned real estate company. Marcel and his family have a longstanding banking relationship with Hingham. Marcel chose Hingham for the financing of the Sears Crescent building, a historic landmark in the heart of Boston, because of Hingham’s experienced lenders, certainty of execution, and a commitment to service. 10 11 S t e v e E l b a z & A n d r e w T e r r a t Principals, Mitchell Gold + Bob Williams, Boston Steve Elbaz and Andrew Terrat are principals at Mitchell Gold + Bob Williams, an American home furnishings company respected for its stylish, high-end furniture as well as its commitment to social justice. They came to Hingham on the recommendation of Dennis Kanin and David Goldman of New Boston Ventures, long-time business and personal clients of the Bank. The Bank moved quickly to provide Steve and Andrew financing on a complicated transaction, and they were impressed with their banker’s guidance throughout the process. We now handle Steve’s personal banking needs at our South End office. “We knew we had come to the right place when we came to Hingham. Our banker was fast and transparent and ensured the entire process went very smoothly.” STEVE ELBAZ 12 13 T o w n o f P l y m o u t h Pamela L. Borgatti, Treasurer “Hingham understands the unique banking needs of cities and towns. They have gone above and beyond to make sure we get what we need.” PAMELA L. BORGATTI, Town Treasurer Established in 1620 by the Pilgrims, Plymouth is one of America’s oldest towns. It relies on Hingham, one of America’s oldest banks, to provide a full suite of cash management and banking services. Like many cities and towns across Massachusetts, Plymouth has entrusted significant sums to our safekeeping, monies earmarked for schools, emergency services, and payroll. Town Treasurer Pamela L. Borgatti and Assistant Treasurer Patricia Meachen, long-time residents of Plymouth and dedicated civil servants, appreciate the speed and customer focus of our Specialized Deposit Group that serves our municipal and institutional clients. 14 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 Balance Sheet Data: Total assets Cash & cash equivalents Securities available for sale Loans: Residential loans Commercial mortgage Construction Other Allowance for loan losses Deposits Federal Home Loan Bank advances Stockholders’ equity At December 31, 2012 2013 2014 2015 2016 (In Thousands) $ 1,205,884 87,334 102,866 $ 1,356,441 102,847 106,369 $ 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 $ 2,014,599 322,932 27,168 635,522 681,601 95,433 644 9,905 1,217,027 402,464 138,015 685,674 796,063 131,778 678 11,030 1,366,109 475,318 161,024 At or For the Years Ended December 31, 2012 2013 2014 2015 2016 (Dollars in Thousands, Except Per Share Amounts) $ $ $ $ $ $ 48,831 10,937 37,894 725 1,580 16,348 22,401 9,111 13,290 6.25 6.25 $ $ $ $ 49,342 10,502 38,840 380 1,604 17,453 22,611 9,240 13,371 6.28 6.28 1.15 % 15.05 7.62 3.25 3.38 41.41 1.30 43.65 2,125,750 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 $ $ $ $ 61,859 10,910 50,949 625 1,483 19,031 32,776 13,430 19,346 9.09 9.02 1.52 % 19.30 7.87 3.13 3.23 37.12 2.10 57.08 2,128,750 1.18 % 14.81 7.97 3.06 3.17 36.32 1.46 64.83 2,128,750 $ $ $ $ $ $ $ $ 71,769 13,385 58,384 1,135 1,735 19,215 39,769 16,346 23,423 10.99 10.89 1.22 % 15.59 7.85 2.99 3.10 32.15 1.56 75.50 2,132,750 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 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 2 4 Ye a r s o f P e r f o r m a n c e – B o o k Va l u e P e r S h a r e $75.50 $80 $70 $60 $50 $40 $30 $20 $10 $7.35 (dollars in thousands, except per share data) Total Assets Total Net Loans Book Value Per Share Return on Equity Earnings Per Share (Basic) 1993* 1994* 1995* 1996* 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $ $ $ 147,889 76,936 7.35 1.34% 0.10 $ $ $ $ 153,192 100,398 8.24 17.09% 1.33 $ $ $ $ 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 $ $ $ $ 2,014,599 1,605,647 75.50 15.59% 10.99 $ * per share data for 1993, 1994, 1995 and 1996 adjusted for the 3 for 2 stock split 18 $80 $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, 2016, there were approximately 260 stockholders of record, holding 232,825 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 2016 First Quarter Second Quarter Third Quarter Fourth Quarter 2015 First Quarter Second Quarter Third Quarter Fourth Quarter $ 127.71 137.45 139.90 203.01 $ 103.75 116.84 126.15 135.03 $ 115.80 118.00 120.25 132.00 $ 82.24 98.00 104.25 112.39 The closing sale price of the Bank’s common stock at December 31, 2016 was $196.78 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 Patrick R. Gaughen Executive Vice President 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, 2016, 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. 20 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 HINGHAM INSTITUTION FOR SAVINGS ESTABLISHED 1834 2016 Annual Report 

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