Territorial Savings Bank pares loan reserve, boosts profit 12.1%

Territorial Savings Bank’s net income rose 12.1% in the first quarter after the company released $913,000 from its loan-loss reserve amid an improving outlook for the state economy.

“2020 was a very difficult year for many residents in the state because of COVID-19,” Territorial Chairman and CEO Allan Kitagawa said in a statement. “In the first few months of 2021, Hawaii’s economy has started to improve as more visitors arrive in the state, businesses reopen and residents return to work. Our asset quality and capital remain strong despite the downturn and we continue to support our customers and community, as needed.”

Holding company Territorial Bancorp Inc. reported today that the state’s fifth-largest bank earned $5 million, or 55 cents a share, during the quarter to beat analysts’ estimate of 44 cents a share. A year earlier, Territorial reported earnings of $4.5 million, or 48 cents a share.

Territorial, which like all banks has been assisting customers struggling to make mortgage loan payments, said that as of March 31 it had outstanding loan payment deferrals on $29.3 million of loans, which represented 2.18% of total loans receivable. That was down from $34 million, or 2.4% of loans, at the end of December.

The bank said the amount of loans in the payment deferral program decreased as borrowers opted out of the program and repaid any deferred loan payments. Territorial had $99,000 of delinquent mortgage loans 90 days or more past due as of March 31 compared with $240,000 as of Dec. 31

Territorial, which in the first quarter of 2020 put into its reserve $217,000 for potential loan losses, said it released $913,000 from the reserve in its most recent quarter primarily because of the decrease in the size of its mortgage loan portfolio and a decline in the state’s unemployment rate, as well as an increase in the amount of loans with higher loan-to-value ratios that have made six consecutive payments.

Territorial’s $1.34 billion in loans receivable in the first quarter fell 14.2% from the year-earlier period and 4.8% from the December quarter as loan repayments and sales exceeded new loan originations.

Deposits rose 1.8% to $1.66 billion last quarter from a year ago while assets increased 1.4% to $2.14 billion.

Territorial’s net interest income, which is the difference between what the bank generates from loans and pays out in deposits, fell 9% to $13.2 million from $14.5 million. Its net interest margin worsened by 26 basis points to 2.61% from 2.87% in the year-earlier quarter.

The bank’s noninterest income, which includes charges and fees, rose 72.1% to $2.2 million from $1.3 million. The increase was primarily due to a $542,000 increase in service fees on loans and deposit accounts and a $348,000 increase in the gain on sale of investment securities.

Territorial also maintained its quarterly dividend of 23 cents a share. It will be payable May 27 to stockholders of record as of May 13.

Shares of the company closed down 21 cents, or 0.8%, to $25.17 before earnings were announced.