Territorial earnings
fall 16.6 percentThe savings bank sacrificed
second-quarter net income to
improve its future outlook
Territorial Savings Bank posted a 16.6 percent drop in second-quarter net income as it moved into shorter-term investments in anticipation of rising interest rates.
The state's sixth-largest bank in terms of assets also saw new mortgage loan volume decline about 14 percent.
Territorial Senior Vice President Stanley Tanaka said yesterday the bank has positioned itself for future interest-rate increases by restructuring its balance sheet with shorter-term investments.
"We decided to sacrifice earnings this quarter so that we could enhance our earnings in the future quarters," Tanaka said. "If you look at our total net income for the six-month period of this year vs. last year, total net income is up 2.6 percent."
Territorial, which is privately held by Territorial Mutual Holding Co., had quarterly net income of $3.2 million compared with $3.8 million a year earlier.
Total assets grew 25.3 percent to $1.1 billion from $913.2 million. Total deposits increased 24.6 percent to $964.5 million from $773.9 million.
And mortgage loans and mortgage-backed securities rose 23.5 percent to $1 billion from $817.8 million.
"The dollar amount of the new loans that we originate in Hawaii is down approximately 14 percent," Tanaka said. "When we buy mortgage-backed securities through securities dealers, we don't have the fee income that we do when we originate the loans."
Mortgage-backed securities are loans guaranteed by federally sponsored companies Freddie Mac, Freddie Mae and Ginnie Mae.
Territorial, which opened its 19th branch last month in Pearl City, plans to add a 20th location in Mililani in September, Tanaka said. He said branches also are planned for Kapolei and Kahala during the next six to 12 months.
"We're optimistic the second half will be better than the first half," he said.
Territorial's net interest margin, which reflects the difference of what it pays depositors and what it brings in from loans, slipped to 3.77 percent from 3.81 percent. Net interest income grew 24.9 percent to $9.9 million from just under $8 million.
The bank's return on equity, a measure of how well it used reinvested earnings to generate additional earnings, dropped to 15.56 percent from 25.76 percent.
The bank's efficiency ratio, which measures in percentage terms how much it costs the bank to make a dollar of revenue, improved to 44.35 percent from 49.46 percent.
Territorial Savings Bank
www.territorialsavings.net