Territorial surpasses
$1 billion in assetsThe bank posts a 23.8% rise
in net income and expands its
marketing to TV, radio and sports
Territorial Savings Bank, which this month launched its first large-scale television advertising campaign in more than a decade, hit the $1 billion milestone in assets last quarter as net income jumped 23.8 percent from a year ago.
The privately held bank said yesterday it posted earnings of $3.7 million compared with $3 million in the fourth quarter of 2002. For the year, Territorial's net income increased 65.3 percent to $14.5 million from $8.8 million in 2002.
"To me, the billion-dollar mark is a magic level in terms of size," said Allan Kitagawa, chairman and chief executive officer of Territorial.
"It's a psychological level because the bigger companies are in the billions in assets, and just hitting the billion-dollar mark is a big difference."
Territorial, which plans to add its 19th branch statewide in Pearl City Shopping Center in the next few months, ended 2003 with total assets of just more than $1 billion, a 36.8 percent gain from $741.6 million a year ago.
Total deposits rose 39.7 percent to $864.6 million from $618.8 million. And mortgage loans and mortgage-backed securities increased 26.6 percent to $883.2 million from $697.4 million.
Mortgage-backed securities are loans that are 100 percent guaranteed by federally sponsored agencies Freddie Mac, Freddie Mae and Ginnie Mae.
Kitagawa, whose bank specializes in residential mortgage loans, said demand has been cut in half from its peak.
"It's down 50 percent," Kitagawa said. "My feeling is that a 50 percent reduction is probably where it's going to stay because there's not many homes to refinance unless the interest rate goes below 5 percent. And there's not many homes because inventory is very low as far as being available for purchase."
Kitagawa said he expects the drop-off in loans to have some effect on the company's future earnings.
"There will be an impact, but I don't think it will be that great of an impact," he said.
The bank, a wholly owned subsidiary of Territorial Mutual Holding Co., is trying to capitalize on its growth with television spots that feature employees and other individuals running through the streets of downtown Honolulu holding butterfly nets.
"Everyone's chasing a butterfly, which is basically chasing a dream," said Stanley Tanaka, vice president of research and development. "And you're using Territorial to help accomplish your dream, whether it be in the form of savings or mortgages or whatever."
Tanaka said that Territorial, the sixth-largest bank in the state in terms of assets, felt the time was right to take its message to television.
The bank had gotten its feet wet in the TV medium last spring by underwriting a locally produced lifestyle/wellness-themed show hosted by Emme Tomimbang.
Territorial, which always has advertised in newspapers, also began advertising on radio this month and last December sponsored a University of Hawaii Wahine basketball tournament.
"In the past, we've always felt that we were too small to advertise because we couldn't deliver the type of products that customers wanted," Tanaka said. "But now that we're bigger and we've grown in terms of the number of branches, we feel now it's a good time to start advertising."
Territorial's net interest margin, which reflects the difference of what a bank pays depositors and what it brings in from loans, slipped to 3.80 percent from 3.90 percent in the quarter from the final three months of 2002. For the year, though, it improved to 3.69 percent from 3.66 percent in 2002. The bank offers a 1.6 percent rate for its regular passbook account.
The bank's return on equity, a measure of how well it used reinvested earnings to generate additional earnings, fell to 20.77 percent from 23.43 percent, but for the year improved to 22.99 percent from 22.26 percent.
Territorial's return on assets ratio, which indicates how many dollars of profits it achieves for each dollar of assets it controls, dropped to 1.49 percent from 1.72 percent in the quarter but for the year improved to 1.60 percent from 1.38 percent in 2002.
Territorial's efficiency ratio in the fourth quarter improved to 48.84 percent from 51.85 percent and for the year was 46.90 percent from 58.27 percent in 2002.
The efficiency ratio measures in percentages how much it costs the bank to make a dollar of revenue.
"We've had a very profitable year," Tanaka said. "Our earnings have to be consistent because our growth has been really strong the last two years. It's going to be hard (going forward) to show, percentagewise, as big an impact. But you still need to improve."
