Hawaii’s rebounding housing market and historically low interest rates resulted in record mortgage loans last year at Territorial Savings Bank.
Territorial Bancorp Inc., holding company for the state’s fifth-largest bank, said Monday that a surge of new loans helped boost earnings 11.3 percent in the fourth quarter.
Net income rose to $3.8 million, or 38 cents a share, to easily beat analysts’ consensus estimate of 34 cents. A year ago the bank earned $3.4 million, or 33 cents a share.
Territorial, which generates about 95 percent of its loans from residential mortgages, said loans receivable grew 12.6 percent at the end of last quarter to $774.9 million from $688.1 million in the same period a year ago.
"Our staff was able to close a record number of mortgage loans (this past year)," Territorial Chairman and CEO Allan Kitagawa said. "As a result, our loan portfolio grew despite a significant increase in prepayments of existing loans due to the drop in mortgage rates in 2012."
The average rate nationally on the 30-year fixed loan hit an all-time low of 3.31 percent in November and was below 4 percent for nearly all of last year, according to mortgage buyer Freddie Mac.
Territorial’s noninterest income, which includes service charges and loan fees, jumped 44.1 percent last quarter to $2.3 million from $1.6 million. For the year, the bank’s noninterest income rose 38.3 percent to $7.1 million from $5.1 million.
The bank’s asset quality remained strong even as nonperforming assets — loans delinquent by 90 days or more — rose 32.1 percent to $4.4 million from $3.3 million. The ratio of nonperforming assets to total assets was 0.28 percent as of Dec. 31 to remain one of the lowest in the country. A year ago it was 0.22 percent.
Territorial also boosted its deposits 6.2 percent to $1.24 billion from $1.17 billion, while assets increased 2.4 percent to $1.57 billion from $1.54 billion.
Net income in 2012 rose 16 percent to $14.8 million from $12.8 million in 2011.
Analyst Jacque Chimera said the bank continues to thrive from its loan generation.
"It was a good quarter," said Chimera, of San Francisco-based investment bank Keefe Bruyette & Woods Inc. "Their loan growth has been very impressive throughout the year. … There are margin pressures (due to the narrowing of the spread between lending rates and deposit rates), but that’s been more than offset by origination strength."
Margin pressures, which are affecting all banks, resulted in Territorial’s net interest margin shrinking to 3.24 percent from 3.58 percent a year earlier. Net interest income during the quarter fell 6.4 percent to $12.3 million from $13.1 million.
Territorial, which paid five dividends in 2012 totaling 54 cents a share, maintained its quarterly dividend at 12 cents for the first quarter. It will be payable March 4 to stockholders of record as of Feb. 18. Among its 2012 dividends was a special payout of 10 cents a share in December because of the possibility of a future tax rate increase on dividends stemming from Congress’ fiscal cliff negotiations.
"We felt that this was an opportunity to thank our shareholders who have supported us over the past 3 1⁄2 years," Kitagawa said.
Territorial went public in July 2009 when it converted from a mutual holding company.
The bank’s stock fell 43 cents, or 1.8 percent, to $23.03 Monday on the Nasdaq Stock Market. The earnings were announced two hours after the market opened.
