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Hingham Institution for Savings continued to see its net interest margin increase in the first quarter as earnings went up more than 600 percent compared to the first quarter of 2020, when banks were responding to the start of the pandemic.
The Hingham-based bank had first quarter net income of $16.35 million, or $7.65 per share basic and $7.45 per share diluted, compared to $2.19 million, or $1.02 per share basic and $1.00 per share diluted, for the same quarter in 2020. The bank had fourth quarter 2020 net income of $17.04 million, or $7.97 per share basic and $7.78 per share diluted.
Hingham Institution for Savings saw its net interest margin increase in the first quarter by 72 basis points to 3.54 percent compared to 2.82 percent for the same quarter last year. The bank said in a statement that it has benefited from a sharp decline in the cost of interest-bearing liabilities, including retail and commercial deposits and wholesale funding. The continued growth in non-interest bearing deposit balances has also helped net interest margin, the bank said, but added that these benefits were partially offset by a decline in the yield on its interest-earning assets, including excess reserves held at the Federal Reserve Bank of Boston, and a lower yield on loans.
Net loans increased to about $2.51 billion in the first quarter, which the bank said represented a 2 percent annualized growth year-to-date and 8 percent growth from the first quarter of 2020. Growth was concentrated in the bank’s commercial real estate portfolio.
Hingham Institution for Savings’ total assets were $2.84 billion on March 31 compared to $2.86 billion at the end of December. Asset growth was below loan growth, the bank said, “because it continued to manage the balance sheet to minimize the carrying cost of its on-balance sheet liquidity.”
Total deposits, including wholesale deposits, increased to $2.27 billion in the first quarter, representing a 25 percent annualized growth year-to-date and 33 percent growth from the first quarter of 2020. The bank said it continued to manage its wholesale funding mix between wholesale time deposits and Federal Home Loan Bank advances in to reduce the cost of funds.
The bank’s already low efficiency ratio improved even further in the first quarter. The efficiency ratio fell to 22.02 percent compared to 30.64 percent for the same period last year. Operating expenses as a percentage of average assets fell to 0.77 percent for the first quarter of 2021 compared to 0.86 percent for the same period last year. The bank said it remains focused on reducing waste through an ongoing process of continuous improvement.
“Returns on equity and assets were satisfactory in the first quarter of 2021, although performance in any one period should always be viewed cautiously, especially when tailwinds are blowing strongly in our favor,” Chairman Robert H. Gaughen Jr. said in a statement. “These tailwinds will not blow forever and we must be prepared for environments in which headwinds prevail. In doing so, we remain focused on careful capital allocation, defensive underwriting and disciplined cost control – the building blocks for compounding shareholder capital through all stages of the economic cycle. These remain constant, regardless of the macroeconomic environment in which we operate.”
