Strong loan growth helps lift Territorial’s net 7.3%

Territorial Bancorp Inc.’s earnings rose 7.3 percent in the first quarter as loans surged amid continued strength in the state’s real estate market.

The parent of the state’s fifth-largest bank reported Thursday that net income increased to $3.8 million, or 41 cents a share, to beat analysts’ estimates by a penny. In the year-earlier quarter, Territorial had earnings of $3.5 million, or 38 cents a share.

Territorial Savings Bank, which generates more than 95 percent of its loans from residential mortgages, produced a 16.9 percent increase in loans to $1.21 billion from $1.04 billion in the year-earlier quarter.

“The growth in our loan portfolio has resulted in a 7.1 percent increase in total interest and dividend income for the three months ended March 31 (compared with the year-earlier period),” said Allan Kitagawa, CEO of Territorial. “The increase in interest and and dividend income occurred because our loan portfolio grew.”

The company also said it has received approval from the Federal Reserve Bank of San Francisco to open its 29th branch, which will be across the street from the Walmart parking garage on Keeaumoku Street. The new branch at 735 Keeaumoku St. will be in the location formerly occupied by Morning Glory, close to Like Like Drive Inn. Territorial said it is still waiting approval from the state to open the branch.

Territorial had another solid quarter in deposits as they rose 6.8 percent to $1.47 billion from $1.38 billion in the first quarter of 2015. Assets increased 7.9 percent to $1.85 billion from $1.72 billion as the bank pulled within striking range of reaching the $2 billion threshold for the first time.

The bank’s net interest income, the difference between the interest Territorial pays on deposits and the interest it receives on loans, rose 5.3 percent to $14.5 million from $13.8 million. Its net interest margin, though, worsened to 3.28 percent from 3.36 percent.

The bank also set aside $28,000 for potential losses last quarter compared with $194,000 in the year-earlier period.

Noninterest income, which includes service charges and fees, declined 28.9 percent to $886,000 from $1.2 million primarily because it had no gains on the sale of investment securities last quarter compared with a $236,000 gain in the first quarter of 2015.

Nonperforming assets, or delinquent loans not accruing interest and foreclosed real estate, increased 19.5 percent to $5.2 million from $4.3 million.

Territorial said it was keeping its quarterly dividend at 18 cents a share and that it will be payable May 26 to stockholders of record as of May 12. It will be the company’s 26th consecutive quarterly dividend since going public in July 2009. Territorial began paying dividends in the first quarter of 2010 when it declared a 5-cent dividend.

The company’s stock rose 2 cents Thursday to $26.12. Territorial released its financial results after the stock market closed.