Territorial boosts earnings 5%, increases dividend, adds branch

Territorial Bancorp Inc. boosted its net income 5 percent in the third quarter, increased its dividend and announced the opening of a new branch as it continued to benefit from the state’s rebounding economy.

The parent of Territorial Savings Bank said Thursday that net income rose to $3.8 million, or 39 cents a share, from $3.6 million, or 36 cents a share, a year earlier.

Territorial, the state’s fifth-largest bank in terms of assets, also said it was raising its dividend for the sixth time in just over two years. It boosted its quarterly payout by a penny to 14 cents a share, which represents an annualized yield of 2.6 percent. The dividend will be payable Nov. 17 to stockholders of record as of Nov. 14.

The bank also said it opened its 28th branch in the state on Oct. 2 in Manoa.

Territorial has been repurchasing its stock, which has been stagnant this year, and in September completed its fourth buyback program by repurchasing 532,000 shares at an average price of $22.29 a share. Territorial’s stock closed down 69 cents, or 3.1 percent, at $21.81 on Thursday to bring its decline for the year to 4.6 percent. The earnings were announced after the market closed.

The bank attributed its growth in earnings primarily to an increase in loan service fees and higher gains on the sale of investment securities, as well as needing less money to set aside for potential loan losses.

"The continued stability in Hawaii’s economy has allowed us to expand our customer base by offering mortgage loans and deposit products with attractive interest rates," Territorial Chairman and CEO Allan Kitagawa said in a statement.

Loan receivables rose 10.9 percent to $827.9 million from $746.9 million in the year-earlier quarter due to an increase in residential mortgage loan originations, the bank said.

Territorial’s net interest margin — the spread between lending and deposit rates — dropped to 3.31 percent from 3.33 percent in the third quarter of 2012. Net interest income eased 0.2 percent last quarter to $12.57 million from $12.60 million in the year-earlier period.

Noninterest income, which includes service charges and fees, rose 20.9 percent to $2.3 million from $1.9 million primarily due to a $493,000 increase from the sale of investment securities and a $154,000 gain in service fees from loan and deposit accounts.

Assets were flat at $1.56 billion, while deposits rose 2.6 percent to $1.26 billion from $1.23 billion.

The bank’s credit quality remained strong as its ratio of nonperforming assets — loans 90 or more days past due or not accruing interest — to total assets remained one of the lowest in the country at 0.35 percent. Territorial set aside just $45,000 for potential loan losses last quarter compared with $167,000 in the year-earlier period.