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Hingham Institution for Savings saw deposits increase in the first quarter as it found opportunities to bring on new customers despite the national economic jitters that struck in March.

The Hingham-based bank saw retail and business deposits increase to nearly $1.99 billion at the end of the first quarter, which the bank said in its first quarter earnings statement represented 20 percent annualized growth year-to-date. Those deposits grew year-over-year by 11 percent. Non-interest-bearing deposits for both retail and business customers decreased to $375.9 million as of March 31, a 7 percent decline from the same quarter last year.

The bank said that it worked to capitalize on the market disruption from the failures of Silicon Valley Bank and Signature Bank, as well as the instability of larger regional banks, to develop new relationships with commercial, nonprofit and existing customers.

The deposit shifts reflected significant new commercial relationships, the bank said, which were offset by the flow of funds into higher yielding interest-bearing accounts at the bank.

“The stability of the Bank’s balance sheet, as well as full and unlimited deposit insurance through the Bank’s participation in the Massachusetts Depositors Insurance Fund, has historically been appealing to customers in times of uncertainty,” the bank said.

Hingham Institution for Savings had first quarter net income of $8.51 million, or $3.96 per share basic and $3.87 per share diluted, compared to $11.86 million, or $5.54 per share basic and $5.38 per share diluted, in the first quarter of 2022.

Since banks that had not already done so adopted the current expected credit losses (CECL) accounting methodology in the first quarter, Hingham Institution for Savings saw its first quarter earnings affected by a one-time transition amount of $545,000, net of taxes, for additional reserves on existing loans.

The bank said its annualized return on average equity in the first quarter was 8.67 percent compared to 13.10 percent in the first quarter of 2022, while the annualized return on average assets was 0.82 percent compared to 1.37 percent in the same quarter last year.

“Returns on equity and assets in the first quarter were significantly lower than our long-term performance, reflecting the challenge from the increase in short-term interest rates over the last twelve months,” Chairman Robert H. Gaughen Jr. said in the statement. “The Bank’s business model has been built over time to compound shareholder capital through all stages of the economic cycle. During all such periods, 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.”

The bank’s total assets increased to $4.2 billion at the end of March, up 15 percent year-over-year.

Net loans increased to $3.67 billion in the first quarter, up 16 percent from the same quarter last year. The bank said origination activity was concentrated in the Boston and Washington D.C. markets and remained focused on multifamily commercial real estate.

The bank’s net interest margin decreased year-over-year by 184 basis points to 1.46 percent in the first quarter. The bank said it saw a substantial increase in the cost of interest-bearing liabilities, driven primarily by the repricing of its wholesale borrowings, wholesale deposits and higher rates on retail and commercial deposits.

The bank’s typically low efficiency ratio did increase during the first quarter. The efficiency ratio was 45.96 percent, up from 21.82 percent in the first quarter of 2022. Operating expenses as a percentage of average assets was 0.68 percent for the first quarter compared to 0.72 percent in the same quarter last year. The bank said the efficiency ratio can be significantly influenced by the level of net interest income, adding that it continues to focus on reducing waste.

“During material yield curve inversions, it is important that we prioritize long-term investments, despite the temporary pressure on margins and lower net income,” Gaughen said. “This means capitalizing on current market conditions to attract new deposit and loan customers, as well as talented staff that can help us continue to build our business well into the future.”