Territorial Savings Bank reported today that its margins expanded in the third quarter due to rising mortgage rates but that net income declined 6.5% partly because of a decrease in loan activity.
The state’s fifth-largest bank posted net income of $3.9 million, or 44 cents a share, to beat analysts’ consensus estimate of 42 cents. In the year-earlier quarter, Territorial earned $4.2 million, or 46 cents a share.
“In the third quarter of 2022, we were able to increase our total interest income by 5.73% and net interest income by 3.45%.” Territorial Bancorp Inc. Chairman and CEO Allan Kitagawa said in a statement. “Rising interest rates have increased interest expense but our strong capital and asset quality will allow us to continue to serve our community well. The company intends to continue to enhance shareholder value through dividends and share repurchases.”
The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, increased 3.4% to $14.3 million from the year-earlier quarter. Its net interest margin rose 3 basis points to 2.75% from 2.72% a year earlier.
However, the bank’s loans receivable dipped 0.7% to $1.3 billion from the year-earlier quarter as loan repayments and sales of loans exceeded the origination of new loans. The bank released $109,000 from its loan-loss reserve compared during the quarter compared with releasing $167,000 in the year-earlier quarter. The release of reserves was due to decreases in the size of the bank’s mortgage loan portfolio.
Deposits rose 2.8% to $1.71 billion.
Noninterest income, which includes service charges and fees, fell 49.7% to $615,000. The decrease from the year-earlier quarter was primarily due to a $403,000 decline in the sales gain of investment securities because no securities were sold last quarter. The bank also saw a $138,000 decrease in the gain on sale of loans from the previous quarter.
Territorial announced it would keep its quarterly dividend at 23 cents a share. The next payout will be paid Nov. 23 to stockholders of record as of Nov. 10. On July 12 the company also said it repurchased 220,029 of common shares to complete its 11th share repurchase program.
Shares of the company rose 10 cents to $19.88 before the earnings were announced.
