The reversal of the Caisse d’Épargne Territoriale credit reserve helps boost results

The Territorial Savings Bank released $ 679,000 from its loan loss reserve in the fourth quarter to help increase profits by 9.5% and exceed analysts’ estimates.

The state’s fifth bank said Thursday it is also paying non-management employees a $ 1,000 year-end bonus for their work during the pandemic.

“2020 has been a very difficult year for residents and businesses of Hawaii,” Territorial Bancorp Inc. president and CEO Allan Kitagawa said in a statement. “The fall in interest rates that occurred during the pandemic lowered asset returns and created challenges in the banking industry. Despite these obstacles, we have had a successful year, mainly due to the quality of our assets and our strong capitalization. “

Territorial earned $ 5.5 million, or 60 cents per share, in the quarter, beating estimates of 43 cents per share. A year earlier, Territorial had reported profit of $ 5 million, or 54 cents per share.

For the year, Territorial’s net income fell 15.4% to $ 18.6 million, or $ 2.01 per share, from $ 22 million, or $ 2.34 per share, in 2019.

Territorial said the reversal of its loan loss allowance was mainly due to a decrease in the size of the bank’s mortgage portfolio and a drop in the unemployment rate in Hawaii. Loans receivable fell 11.2% to $ 1.41 billion in the fourth quarter, from $ 1.58 billion a year earlier. Hawaii’s unemployment rate fell for three months in a row and ended December at 9.3%.

Territorial said that as of December 31, it had outstanding loan payment deferrals on $ 130.8 million in loans, which represented 9.3% of total loans receivable. The bank said $ 126.3 million of those deferrals were for residential mortgages for one to four families, or 9% of total loans receivable. Residential mortgages represent 97% of the bank’s total loan portfolio.

The bank also granted loan deferrals on $ 4.5 million of commercial, commercial and industrial mortgages and home equity lines of credit, representing 0.3% of total loans receivable at the bank. end of the fourth quarter.

The total amount of deferral program loans increased from $ 142.2 million as of September 30 to $ 130.8 million as of December 31.

By the end of the year, $ 92.2 million, or 73.1% of mortgage deferral program loans, had resumed full payment of principal and interest. In contrast, $ 304,000, or 0.2% of the mortgage deferral program loans, had completed their six-month forbearance period and had not resumed their payments.

The bank said it had $ 240,000 in mortgages that were 90 days or more past due as of December 31, compared to no mortgages that were 90 days or more past due at the end of 2019. The loans in arrears exclude loans benefiting from deferral of payment. because of COVID-19.

Non-performing assets – non-interest bearing delinquent loans and foreclosed real estate – totaled $ 4.41 million as of December 31, compared with $ 736,000 a year earlier.

Territorial’s net interest income, which is the difference between what the bank generates on loans and makes deposits, fell 4.6% to $ 13.8 million from $ 14.5 million. Its net interest margin deteriorated to 2.73% from 2.88% in the previous year quarter.

The bank’s non-interest income, which includes fees and commissions, more than doubled from $ 1 million to $ 2.5 million. The increase is mainly attributable to a $ 462,000 increase in the gain on sale of investment securities, an increase of $ 436,000 in loan and deposit account service fees and a $ 310,000 increase in the gain. in the sale of loans.

Deposits rose 1.7% to $ 1.66 billion from $ 1.63 billion.

Territorial also maintained its quarterly dividend of 23 cents per share. It will be payable on February 25 to shareholders of record on February 11.

Shares of the company closed down 71 cents, or 2.8%, at $ 25.04 ahead of the earnings announcement.

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