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Territorial Bancorp Inc. Announces Third Quarter 2012 Results

HONOLULU, Nov. 1, 2012 (GLOBE NEWSWIRE) -- Territorial Bancorp Inc., (Nasdaq:TBNK) (the "Company"), headquartered in Honolulu, Hawaii, the holding company parent of Territorial Savings Bank, announced net income of $3.6 million or $0.36 per basic and diluted share for the three months ended September 30, 2012, compared to $3.0 million or $0.28 per basic and diluted share for the three months ended September 30, 2011. Net income increased by $661,000 or 22.1% for the three months ended September 30, 2012, compared to the same period in 2011. The increase in earnings for the third quarter was primarily due to higher mortgage loan originations which in turn increased interest income and gain on sale of loans. The increase in earnings can also be attributed to lower interest expense on deposits and borrowings, a decrease in salaries and employee benefits costs and higher gain on sale of investment securities.

The Company also announced that its Board of Directors today approved an increase in its quarterly cash dividend from $0.11 to $0.12 per share of common stock. The dividend is expected to be paid on November 29, 2012, to stockholders of record as of November 15, 2012.

Allan Kitagawa, Chairman and Chief Executive Officer, said "Our loan portfolio continues to grow because of increasing loan originations which are being funded by an increase in our core deposits. I am also pleased to announce that based on our strong performance, we will increase our quarterly dividend from $0.11 to $0.12 per share of common stock."

Interest Income

For the three months ended September 30, 2012 and 2011, net interest income was $12.4 million and $13.0 million, respectively. Total interest and dividend income was $14.8 million for the three months ended September 30, 2012, compared to $15.8 million for the three months ended September 30, 2011. The decrease in net interest income is primarily due to a $1.4 million reduction in interest earned on investment securities, which was caused by an increase in principal repayments on mortgage-backed securities. The increase in repayments reduced our investment securities balance. The decrease in interest earned on securities was somewhat offset by a $389,000 increase in interest earned on loans due to higher loan originations. There was also a $646,000 decline in interest expense primarily due to the lower interest rate environment and the payoff of securities sold under agreements to repurchase. Our net interest margin for the three months ended September 30, 2012 was 3.33% compared to 3.53% for the three months ended September 30, 2011. The decrease in the net interest margin resulted from higher levels of liquidity and an increase in principal payments on higher yielding loans and mortgage-backed securities and reinvestment of these funds at lower interest rates.

Interest Expense and Provision for Loan Losses

Total interest expense decreased to $2.2 million for the three months ended September 30, 2012, compared to $2.9 million for the three months ended September 30, 2011. The decrease in interest expense is primarily due to a $438,000 decrease in interest expense on securities sold under agreements to repurchase which occurred when the Bank paid off borrowings during the year. Interest expense on deposits also declined by $208,000 due to the lower interest rate environment. Provision for loan losses increased to $167,000 for the three months ended September 30, 2012 from a reversal of $39,000 for the three months ended September 30, 2011.

Noninterest Income

Noninterest income was $1.9 million for the three months ended September 30, 2012, compared to $1.2 million for the three months ended September 30, 2011. The growth in noninterest income was primarily due to a $531,000 increase in gain on sale of loans and a $355,000 increase in gain on sale of investment securities. The increase in gain on sale of loans for 2012 was primarily due to an increase in the amount of loans sold which occurred because of higher mortgage originations during the quarter. These increases were partially offset by a $90,000 decrease in service fees on loan and deposit accounts.

Noninterest Expense

Noninterest expense decreased to $8.6 million for the three months ended September 30, 2012, as compared to $9.2 million for the three months ended September 30, 2011. The decrease in noninterest expense was primarily due to lower salaries and employee benefits expenses. This decrease was caused primarily by the death of a director which triggered the recognition of $696,000 of pre-tax stock benefit plan expense for the three months ended September 30, 2011. The Company also incurred a $123,000 loss on extinguishment of debt in the three months ended September 30, 2012 when the Bank prepaid $10.0 million of securities sold under agreements to repurchase, which had a weighted-average interest rate of 2.78%.

Assets and Equity

Total assets grew to $1.563 billion at September 30, 2012, from $1.538 billion at December 31, 2011. Cash and cash equivalents increased to $155.3 million at September 30, 2012, from $131.9 million at December 31, 2011. Investment securities held to maturity decreased to $595.6 million as of September 30, 2012, from $653.9 million at December 31, 2011, as repayments and sales exceeded the amount of security purchases. Loans receivable grew to $746.9 million at September 30, 2012, from $688.1 million at December 31, 2011 due to an increase in residential loan production. The growth in loans receivable since December 31, 2011 was primarily funded by a $60.4 million increase in deposits. Deposits increased to $1.227 billion at September 30, 2012, from $1.166 billion at December 31, 2011. Total stockholders' equity increased to $219.4 million at September 30, 2012, from $214.0 million at December 31, 2011. The growth in stockholders' equity was primarily due to the Company's earnings for the nine months ended September 30, 2012, which was offset by the cost of shares repurchased under the Company's stock repurchase program and dividend payments. The Company is in the middle of its third repurchase program.

Asset Quality

Total delinquent loans 90 days or more past due and not accruing was $1.9 million (7 loans) at September 30, 2012, compared to $2.3 million (9 loans) at December 31, 2011. Nonperforming assets was $4.8 million at September 30, 2012 compared to $3.3 million at December 31, 2011. The increase in nonperforming assets occurred after we classified $2.7 million of existing restructured loans as nonaccrual. However, the ratio of nonperforming assets to total assets remains one of the lowest in the country. The allowance for loan losses at September 30, 2012 was $1.5 million and represented 0.20% of total loans. At December 31, 2011, the allowance for loan losses was also $1.5 million and represented 0.22% of total loans.

Territorial Bancorp Inc., headquartered in Honolulu, Hawaii, is the stock holding company for Territorial Savings Bank. Territorial Savings Bank is a federally chartered savings bank which was originally chartered in 1921 by the Territory of Hawaii. Territorial Savings Bank conducts business from its headquarters in Honolulu, Hawaii and has 27 branch offices in the state of Hawaii.

The Territorial Bancorp Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7034

Forward-looking statements - this earnings release contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "plan," "seek," "expect," "will," "may" and words of similar meaning. These forward-looking statements include, but are not limited to:

  • statements of our goals, intentions and expectations;
  • statements regarding our business plans, prospects, growth and operating strategies;
  • statements regarding the asset quality of our loan and investment portfolios; and
  • estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this earnings release.

The following factors, among others, including those set forth in the Company's filings with the Securities and Exchange Commission, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

  • general economic conditions, either nationally or in our market areas, that are worse than expected;
  • competition among depository and other financial institutions;
  • inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;
  • adverse changes in the securities markets;
  • changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
  • our ability to enter new markets successfully and capitalize on growth opportunities;
  • our ability to successfully integrate acquired entities, if any;
  • changes in consumer spending, borrowing and savings habits;
  • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;
  • changes in our organization, compensation and benefit plans;
  • changes in our financial condition or results of operations that reduce capital available to pay dividends; and
  • changes in the financial condition or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
9/30/2012 9/30/2011 9/30/2012 9/30/2011
Interest and dividend income:
Investment securities $ 5,551 $ 6,907 $ 18,360 $ 20,167
Loans 9,187 8,798 27,326 26,444
Other investments 88 85 259 258
Total interest and dividend income 14,826 15,790 45,945 46,869
Interest expense:
Deposits 1,492 1,700 4,644 5,109
Advances from the Federal Home Loan Bank 105 105 313 295
Securities sold under agreements to repurchase 629 1,067 2,364 3,153
Total interest expense 2,226 2,872 7,321 8,557
Net interest income 12,600 12,918 38,624 38,312
Provision (reversal of allowance) for loan losses 167 (39) 172 83
Net interest income after provision for loan losses 12,433 12,957 38,452 38,229
Noninterest income:
Service fees on loan and deposit accounts 444 534 1,474 1,690
Income on bank-owned life insurance 239 245 706 725
Gain on sale of investment securities 429 74 729 140
Gain on sale of loans 669 138 1,516 374
Other 141 177 346 588
Total noninterest income 1,922 1,168 4,771 3,517
Noninterest expense:
Salaries and employee benefits 5,202 6,017 15,416 16,630
Occupancy 1,316 1,267 3,930 3,714
Equipment 800 792 2,423 2,366
Federal deposit insurance premiums 192 191 574 678
Loss on extinguishment of debt 123 -- 321 --
Other general and administrative expenses 964 954 3,069 2,887
Total noninterest expense 8,597 9,221 25,733 26,275
Income before income taxes 5,758 4,904 17,490 15,471
Income taxes 2,111 1,918 6,457 6,100
Net income $ 3,647 $ 2,986 $ 11,033 $ 9,371
Basic earnings per share $ 0.36 $ 0.28 $ 1.09 $ 0.85
Diluted earnings per share $ 0.36 $ 0.28 $ 1.08 $ 0.84
Cash dividends declared per common share $ 0.11 $ 0.09 $ 0.32 $ 0.25
Basic weighted average shares outstanding 10,052,630 10,659,532 10,126,371 10,969,320
Diluted weighted average shares outstanding 10,199,400 10,835,649 10,205,408 11,117,444

TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except share data)
Assets 9/30/2012 12/31/2011
Cash and cash equivalents $ 155,265 $ 131,937
Investment securities available for sale -- --
Investment securities held to maturity, at amortized cost (fair value of $633,513 and $687,319 at September 30, 2012 and December 31, 2011, respectively) 595,607 653,871
Federal Home Loan Bank stock, at cost 12,238 12,348
Loans held for sale 4,032 3,231
Loans receivable, net 746,874 688,095
Accrued interest receivable 4,676 4,780
Premises and equipment, net 5,082 5,450
Real estate owned 176 408
Bank-owned life insurance 30,940 30,234
Deferred income taxes receivable 3,035 2,648
Prepaid expenses and other assets 4,755 4,569
Total assets $ 1,562,680 $ 1,537,571
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 1,226,527 $ 1,166,116
Advances from the Federal Home Loan Bank 20,000 20,000
Securities sold under agreements to repurchase 70,000 108,300
Investment purchases pending settlement 1,136 --
Accounts payable and accrued expenses 23,158 22,816
Current income taxes payable 147 3,114
Advance payments by borrowers for taxes and insurance 2,295 3,264
Total liabilities 1,343,263 1,323,610
Stockholders' Equity:
Preferred stock, $.01 par value; authorized 50,000,000 shares, no shares issued or outstanding -- --
Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 10,901,705 and 11,022,309 shares at September 30, 2012 and December 31, 2011, respectively 109 110
Additional paid-in capital 94,920 97,640
Unearned ESOP shares (7,952) (8,319)
Retained earnings 135,915 128,300
Accumulated other comprehensive loss (3,575) (3,770)
Total stockholders' equity 219,417 213,961
Total liabilities and stockholders' equity $ 1,562,680 $ 1,537,571

CONTACT: Walter Ida (808) 946-1400

Source: Territorial Bancorp Inc.
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Selected Financial Data (Unaudited)
September 30, 2012
Three Months Ended
September 30,
2012 2011
Performance Ratios (annualized):
Return on average assets 0.93% 0.79%
Return on average equity 6.67% 5.37%
Net interest margin on average interest earning assets 3.33% 3.53%
At September At December
30, 2012 31, 2011
Selected Balance Sheet Data:
Book value per share (1) $20.13 $19.41
Stockholders' equity to total assets 14.04% 13.92%
Asset Quality
(Dollars in thousands):
Delinquent loans 90 days or more past due and not accruing interest(2) $1,855 $2,335
Nonperforming assets (2) 4,817 3,335
Allowance for loan losses 1,495 1,541
Nonperforming assets to total assets 0.31% 0.22%
Allowance for loan losses to total loans 0.20% 0.22%
Allowance for loan losses to non-performing assets 31.04% 46.21%
Note:
(1) Book value per share is equal to stockholders' equity divided by number of shares issued and outstanding
(2) Amounts are net of charge-offs