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Hingham Institution for Savings saw full-year earnings fall 44 percent in 2022 as its net interest margin continued to decrease.

The Hingham-based bank had net income for the full-year 2022 of $37.52 million, or $17.04 per share diluted, compared to $67.46 million, or $30.65 per share diluted, in 2021. The bank’s fourth quarter net income was $11.96 million, or $5.44 per share diluted, compared to $16.67 million, or $7.56 per share diluted, in the fourth quarter of 2021.

The bank said in its fourth quarter earnings statement that its annualized return on average equity was 12.40 percent in the fourth quarter compared to 19.14 percent in the same quarter last year, while the annualized return on average assets was 1.18 percent compared to 2.05 percent in the fourth quarter of 2021. For the full year, the return on average equity was 10.01 percent and the return on average assets was 0.98 percent compared to 20.62 percent and 2.25 percent, respectively, in 2021.

“Returns on equity and assets were modest in 2022 relative to our recent performance, reflecting the substantial pressure on the net interest margin as the Bank’s balance sheet adjusted to significantly higher short-term interest rates and the Bank’s equity investment holdings fell in value,” Chairman and CEO Robert H. Gaughen Jr. said in the statement. “The Bank has always maintained a relatively liability-sensitive balance sheet and consequently rapid increases in short-term interest rates have a much more significant impact on the Bank’s funding costs than its asset yields.”

The net interest margin for 2022 decreased 67 basis points to 2.81 percent from the end of 2021. The bank said its cost of interest-bearing liabilities increased compared to 2022, driven primarily by the repricing of wholesale borrowings, wholesale deposits, and higher rates on retail and commercial deposits.

Hingham Institution for Savings’ fourth quarter net interest margin decreased year-over-year by 137 basis points to 2.09 percent. In the third quarter of 2022, the net interest margin has been 2.76 percent.

The bank’s efficiency ratio increased to 24.81 percent in 2022, up from 21.31 percent in 2021, while operating expenses as a percentage of average assets fell to 0.70 percent in 2022 compared to 0.74 percent in 2021.

“During periods of significant net interest income volatility, the efficiency ratio in isolation may over or understate the underlying operational efficiency of the Bank,” the statement said. “The Bank remains focused on reducing waste through an ongoing process of continuous improvement and standard work that supports operational leverage.”

The bank’s total assets increased to $4.19 billion at the end of 2022, up 22 percent from the end of 2021. Net loans totaled $3.66 billion on Dec. 31, also up 22 percent from the prior year. The banks said loan growth was concentrated in multifamily assets in its commercial real estate portfolio.

Total deposits, including wholesale deposits, increased to $2.5 billion at the end of the fourth quarter, a year-over-year growth of 5 percent. Total retail and business deposits increased 11 percent from the end of 2021 to $1.89 billion at the end of 2022.

“The Bank’s business model has been built over time to compound shareholder capital through all stages of the economic cycle, with the understanding that there may be periods where the Bank’s short-term performance exceeds or falls short of its long-term performance,” Gaughen said. “During all such periods – whether fair or foul weather – 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.”