Territorial Savings Bank, whose residential mortgages comprise nearly all of its portfolio, emerged from the second quarter relatively unscathed even as it set aside $1.4 million for potential loan losses due to the coronavirus pandemic.
The state’s fifth-largest bank said today that since the beginning of the year and through June 30 it has not seen an increase in loan delinquencies, significant changes in deposits or significant drawdowns on any lines of credit. Territorial does not have any commercial loans with hotels, businesses in the transportation industry, restaurants or retail establishments. Territorial took a loan-loss provision of just $217,000 in the first quarter of this year.
“The company continued to perform well in the second quarter of 2020 despite the economic uncertainties created by COVID-19,” Territorial Chairman, President and CEO Allan Kitagawa said in a statement. “Our net interest margin (the difference between what it generates from loans and pays out in deposits) and net interest income rose in the second quarter and our asset quality continues to be strong. Our strong capital position should allow the company to work through the challenges we face.”
Parent company Territorial Bancorp. Inc. reported that its net income, pulled down by the loan-loss provision, fell 15.2% to $4.3 million, or 47 cents a share, compared with $5.1 million, or 54 cents a share, in the year-earlier quarter. Revenue rose 1.8% to $16.2 million. The numbers came in ahead of analysts’ estimates, which were for earnings per share of 43 cents and revenue of $14.4 million, according to a survey by Thomson Reuters.
Territorial’s net interest margin edged up 1 basis point to 2.94% from 2.93% in the year-ago quarter and rose 7 basis points from 2.87% in the first quarter. Most banks have been seeing their net interest margins decreasing.
Loans fell 3.8% to $1.54 billion from the year-earlier quarter and deposits edged up 0.5% to $1.65 billion.
Unlike other local banks and most banks nationwide, Territorial also executed a stock buyback last quarter by repurchasing 98,769 shares of its stock worth $2.46 million. Nearly all banks nationwide have suspended stock buybacks to preserve capital. Territorial said due to the uncertainty surrounding COVID-19 that it will not announce a new share repurchase program at this time.
Shares of Territorial fell 27 cents to $20.86 before the earnings were announced after the close of trading.
Territorial also declared a quarterly dividend of 23 cents a share. It will be payable on Aug. 27 to stockholders of record as of Aug. 13.
The bank has been working with customers to avoid loan defaults and said as of July 9 it had received forbearance requests totaling $164.2 million, or 10.7% of total loans receivable. In the bank’s loan forbearance program, borrowers are allowed to defer interest payments for six months. Territorial said about $159 million of those loan forbearance inquiries consist of one- to four-family residential mortgage loans.
One- to four-family residential mortgage loans represent 97% of the company’s total loan portfolio balance. Territorial said it believes these loans are currently well secured with the ratio of the current loan balance to the current tax-assessed value of the property securing those mortgage loans averaging 55.7%.
The bank said it had $135,000 of delinquent mortgage loans 90 days or more past due at June 30 compared to no delinquent mortgage loans 90 days or more past due on Dec. 31. Delinquent loans exclude loans which are receiving forbearance because of COVID-19.