STAR-BULLETIN FILE
Allan Kitagawa, chairman and CEO of Territorial Savings Bank, said growth could slow in the fourth quarter.
Territorial nears $1 billion
in assets as net jumps 37%
Territorial Savings Bank, closing in on the $1 billion milestone in total assets, posted a 37 percent jump in net income in the third quarter despite a dramatic slowdown in mortgage refinancings.
The privately held bank, which has 18 branches in the state, had net income of $3.7 million compared with $2.7 million in the same period a year ago.
"Considering that interest rates have skyrocketed in the third quarter, I think we did quite well," said Allan Kitagawa, chairman and chief executive officer of Territorial. "We'll see where we go in the fourth quarter. I'm not sure how the fourth quarter will be because interest rates have climbed significantly and loan volume has subsided."
Kitagawa has been saying for several quarters that the bank's phenomenal growth rate eventually will slow, and he said that he's seen evidence of that this month.
"Loan volume has been cut by 50 percent for us as far as new applications for purchases and refis," he said about the just-concluded quarter.
In fact, Kitagawa believes some of Hawaii's real estate market has reached bubble proportions.
"I'm concerned about the prices," he said. "I think the prices are extremely high -- mostly in the middle range of houses. I think it's a very big bubble."
Territorial, a wholly owned subsidiary of Territorial Mutual Holding Co., saw its total assets rise 48.6 percent to $984.6 million as of Sept. 30 from $662.6 million a year ago. Total deposits jumped 44.4 percent to $841.1 million from $582.6 million. And mortgage loans and mortgage-backed securities increased 49.1 percent to $919.2 million from $616.3 million.
Mortgage-backed securities are loans that are 100 percent guaranteed by federally sponsored agencies Freddie Mac, Freddie Mae and Ginnie Mae.
Kitagawa, who expects assets to exceed $1 billion before the end of the year, said the bank's net interest margin slipped to 3.54 percent from 3.75 percent a year ago due to the low interest-rate environment.
"I think it will start to go up again because 30-year fixed rate mortgages are up to almost 6 percent already, and the reason the margin was squeezed down so much was because the fixed rate had gone down to 478, 434 percent," he said. "That's why we got compressed. Still, our spread is still relatively high compared with a lot of other financial institutions. A lot of them are running in the 3 percent range."
The net interest margin is what a bank can make between what it pays depositors and what it brings in from loans. The bank offers a 1.6 percent rate for its regular passbook account.
Meanwhile, Territorial's return on equity, a measure of how well it used reinvested earnings to generate additional earnings, fell to 22.6 percent from 25.7 percent. Its return on assets ratio, which indicates how many dollars of profits it achieves for each dollar of assets it controls, was 1.6 percent from 1.7 percent a year earlier.
The bank's efficiency ratio, though, improved to 43.3 percent from 56.3 percent. The efficiency ratio measures in percentages how much it costs the bank to make a dollar of revenue.
