Territorial Savings Bank, whose residential mortgages comprise 96.9% of its portfolio, said it has granted deferrals on nearly 10% or its total loans as it works with its customers needing financial relief due to the COVID-19 pandemic.
The state’s fifth-largest bank reported today that its net income fell 19.5% to $4.3 million, or 47 cents a share, from $5.4 million, or 57 cents a share, in the year-earlier period. Revenue fell 3.7% to $16 million.
Both earnings per share and revenue beat analysts’ forecasts, which were for 45 cents and $14.76 million, respectively.
“The recession and the decrease in mortgage interest rates that occurred because of COVID-19 have created challenges in the banking industry,” Territorial Bancorp Inc. Chairman and CEO Allan Kitagawa said in a statement. “The Company continued to perform well in the third quarter of 2020 despite these challenges. We are pleased with our asset quality and strong capital position.”
Territorial said as of Oct. 19 that it had granted loan payment deferrals on $142.2 million of loans, which represented 9.6% of total loans receivable as of Sept. 30. The bank said $136.9 million of those deferrals were for one-to-four family residential mortgage loans, or 9.2% of the total loans receivable. The bank also granted loan payment deferrals on $5.3 million of commercial mortgage, commercial and industrial and home equity lines of credit loans, representing 0.4% of total loans receivable at the end of the third quarter.
The bank said to qualify for its payment deferral program that a borrower’s financial difficulties must be related to COVID-19 and the loan must not be more than 30 days past due as of Dec. 31. In the loan payment deferral program, borrowers are allowed to defer loan payments for six months. For residential mortgage loans, the deferred interest will be payable within five years after the six-month deferral period ends. The term of the loan will be extended by six months to allow the loan to fully amortize.
During the deferral period, the borrowers are required to continue to make their escrow payments which include insurance and property tax payments. Territorial said through Oct. 19 that all of its borrowers who received loan payment deferrals had made their escrow payments.
The bank also said it had $122,000 of delinquent mortgage loans 90 days or more past due at Sept. 30 compared to no delinquent mortgage loans 90 days or more past due at Dec. 31. Delinquent loans exclude loans which are receiving loan payment deferrals because of COVID-19
Territorial said its net income decreased from the year-earlier period because it gained $884,000 less in loan sales and it set aside $692,000 for potential loan losses compared with $111,000 in the year-earlier quarter. So far this year, Territorial has put $2.3 million in reserve for potentially troubled loans.
Loans receivable fell 6.9% to $1.48 billion from $1.59 billion in the year-earlier quarter.
Deposits rose 3.6% to $1.66 billion from $1.61 billion.
Net interest margin, which is the difference between what the bank generates from loans and pays out in deposits, remained virtually flat at 2.89% compared with 2.90% in the year-earlier quarter.
Territorial also maintained its quarterly dividend of 23 cents a share. It will be payable on Nov. 25 to stockholders of record as of Nov. 12.
Shares of Territorial rose 19 cents, or 0.9%, to $21.36 before the earnings were announced after the close of trading.