Territorial Bancorp Inc. boosted its earnings 4.6 percent in the second quarter as the credit quality of its loan portfolio remained strong despite the slumping economy.
The holding company for Territorial Savings Bank, the state’s fifth-largest bank, said Thursday that it only had five delinquent loans — 90 days or more past due — totaling $1 million at the end of last quarter. It also needed to set aside just $14,000 for potential loan write-offs.
New York-based Sterne Agee analyst Mike Shafir said he was amazed.
“That’s practically unheard of,” he said about the bank’s loan-loss provision. “That’s like the cost of a Hyundai. That’s not what credit costs should be at a bank. It’s very unique. I don’t have a lot of that in my universe.” Shafir and his associates follow 19 banks.
Territorial posted net income of $3.4 million, or 30 cents a share, last quarter compared with $3.2 million, or 29 cents a share, a year earlier. Analysts were forecasting earnings of 28 cents a share.
The bank, which primarily focuses on the residential loan market, had a ratio of nonperforming assets to total assets last quarter of just 0.08 percent, up slightly from 0.06 percent at the end of last year. Shafir said it’s one of the lowest ratios among the banks that his firm follows.
“We continue to make quality mortgage loans and maintain a favorable net interest margin in a tough economic environment,” Territorial Chairman and CEO Allan Kitagawa said.
Territorial’s board also maintained its dividend at 9 cents a share. It will be payable Sept. 1 to stockholders of record as of Aug. 18.
Net interest income, the difference between what the bank pays depositors and what it brings in from loans, rose 14.5 percent to $12.9 million last quarter from $11.3 million in the year-ago period. The bank said the gain was due to its net interest expense declining $1.2 million. The bank’s net interest margin improved to 3.56 percent from 3.26 percent in the year-earlier quarter.
“Our core earnings for the second quarter remain solid,” Kitagawa said.
Noninterest income, which includes charges and fees, fell 17.3 percent to $1.2 million from $1.5 million in the year-ago quarter when the bank had a gain of $282,000 from the sale of investment securities. The bank had no such sales last quarter.
Total assets grew to $1.49 billion as of June 30 from $1.44 billion as of Dec. 31 and $1.45 billion as of June 30, 2010.
Deposits increased to $1.107 billion last quarter from $1.076 billion as of Dec. 31 and $1.084 at the end of the second quarter in 2010.
Loans receivable, benefiting from an increase in residential mortgage loan production, grew to $661.4 million at the end of the second quarter from $641.8 million at the end of last year and $627 million as of June 30, 2010.
Territorial’s stock fell 36 cents to $20.60 on Thursday. The earnings were announced after the market closed.
The company, which has 26 branches statewide, began trading at $10 in July 2009 after converting from mutual to full stock ownership.
