Territorial Savings Bank posts lower net income, but resumes stock buyback

Territorial Savings Bank posted a 5.4% decline in second-quarter net income despite releasing $372,000 from its loan-loss reserve, but resumed purchasing shares amid an improving economic outlook for the state.

“Hawaii’s economy has improved as more visitors arrive in the state,” Territorial Bancorp Inc. Chairman and CEO Allan Kitagawa said today in a statement. “Our balance sheet and asset quality remain strong and we are well-positioned to help our customers with their banking needs. We also continue to return capital to our shareholders by paying dividends and repurchasing shares.”

Territorial’s earnings of $4.1 million, or 44 cents a share, beat analysts’ consensus estimate of 43 cents. In the year-earlier quarter, Territorial had net income of $4.3 million, or 47 cents a share.

The company repurchased 101,273 shares during the April-June period after suspending its buybacks due to the COVID-19 pandemic . Through June 30, Territorial had repurchased 3,806,950 shares in all of its share repurchase programs, representing 31.1% of the total shares issued in its initial public offering in July 2009.

Territorial, which in the second quarter of 2020 put into its reserve $1.4 million for potential loan losses, said it released $372,000 from the reserve in its most recent quarter primarily because of the decrease in the size of its mortgage loan portfolio, a decline in the state’s unemployment rate, and a decrease in the amount of loans in the bank’s payment deferral program.

Territorial’s loans receivable fell 14.5% to $1.31 billion last quarter from the year-earlier period. Deposits rose 2% to $1.68 billion while assets increased 2.1% to $2.13 billion.

The bank said the amount of loans in its payment deferral program decreased as borrowers opted out of the program and repaid any deferred loan payments. As of June 30, the company had $25.62 million of loans, or 1.95% of total loans receivable, in its payment deferral program. At the end of the first quarter, the company had $29.30 million, or 2.18% of total loans receivable, in its payment deferral program.

Territorial had $99,000 of delinquent mortgage loans 90 days or more past due as of June 30, compared with $240,000 as of Dec. 31.

Territorial’s net interest income, which is the difference between what the bank generates from loans and pays out in deposits, fell 11.4% to $13.1 million from $14.8 million in the year-earlier quarter. Its net interest margin worsened by 40 basis points to 2.54% from 2.94% in the year-earlier quarter.

The bank’s noninterest income, which includes charges and fees, rose 18.2% to $1.7 million from $1.5 million. The increase was primarily due to a $492,000 increase in the gain on sale of investment securities. That was partially offset by a $233,000 decrease in the gain on sale of loans during the same period.

Territorial also maintained its quarterly dividend of 23 cents a share. It will be payable Aug. 26 to stockholders of record as of Aug. 12.

Shares of the company jumped 46 cents, or 1.8%, to $25.76 Thursday before earnings were announced.