TBAS expects to end year in black — and will be handed to private sector
Pago Pago, AMERICAN SAMOA — While the Territorial Bank of American Samoa (TBAS) faced a yearly loss, described as “minimal”, it is the goal of the government-owned bank to achieve “monthly profitability” by July 2019, and “end the year in black”, according to a report by the Office of Financial Institution (OFI), a division of the ASG Treasury Department.
The report — submitted last November to bond investors involved in the 2018 bond series sale by the American Samoa Economic Development Authority (ASEDA) — was similar to testimony by TBAS board chairman, Steven Watson to the Senate Budget and Appropriations Committee during a hearing last Friday.
The OFI report states that TBAS' operational results since opening its doors Oct. 3, 2016 “is expected of a start-up” and “TBAS has been able to build up its asset and deposit base.” With the establishment of the Federal Reserve Bank master account, “it signals the move toward full operation as a bank and work its way toward profitability.”
It notes that as of Sept. 30, 2018 — the end of fiscal year 2018 — the “yearly loss is minimal and continues to improve. It is TBAS' goal to achieve monthly profitability by July 2019 and end the year in the black.”
Additionally, TBAS has adequate capital for a $60-million bank and the “loss to date is absorbed by bond proceeds and infrastructure gift from Bank of Hawaii.”
As reported several times by Samoa News, the start-up capital for TBAS — about $10 million — came from proceeds of the 2015 bond series sale while BoH’s gifted infrastructure includes ATMs and office equipment.
TBAS' balance sheet as of Oct. 31, 2018 shows over $34.71 million in total assets — including $7.06 million in cash; nearly $9.8 million in investments; more than $1.42 million in unsecured and secured consumer loans; $36,667 in commercial loans; and $6.03 million for “purchased loans/pools”.
(According to TBAS financial statements for fiscal years 2016 and 2017, TBAS purchased pools of automobile-secured consumer loans from businesses in American Samoa and pools of equipment-secured commercial loans from a loan originator in Utah, U.S. for re-sale in the U.S. secondary market purposes.)
Total liabilities stand at $23.2 million — including $23.1 million in deposit accounts —while total capital is $11.5 million.
Income Statement as of Oct. 31, 2018 shows a total budget income of $110,881 while “actual” year-to-date totaled $144,401. Total budget expenses were $289,091 while “actual” year-to-date expenditures totaled $278,68.
Watson, who is also the governor’s chief legal counsel, along with local businesswoman Leilua Stevenson, appeared last Friday for their Senate confirmation hearings to the TBAS Board. The committee hasn't acted on the nominations yet.
Specific issues and concerns regarding TBAS surfaced — prompted by Sen. Tuaolo Manaia Fruean — after a committee hearing initially scheduled last month was canceled because witnesses were not available.
Among Tuaolo’s questions is the status of TBAS and where it stands with getting insured by the Federal Deposit Insurance Corporation (FDIC) — which Samoa News notes has been a long standing issue raised by lawmakers and the public, including some businesses, in the past.
Although TBAS is a member of the Federal Reserve Bank, with a routing number allowing them to conduct many business transactions, there are still those in the community reluctant to do business with TBAS due to it not being a member of FDIC, like Bank of Hawaii and ANZ Amerika Samoa Bank.
As Samoa News reported in the past, based on interviews with previous TBAS officials, the goal is to have TBAS operating successfully over three or four years before turning over to the private sector and be FDIC insured.
Watson told the committee that TBAS being with the FDIC will happen once the bank is in the “hands of the private sector”, but as a member of the Federal Reserve Bank, TBAS is “moving forward in a positive direction.”
"We had some disappointment” from the start, in moving all government accounts to TBAS, Watson said. He recalled provision of the TBAS law, which calls for government accounts to be with TBAS but that hasn’t happened because there are ASG accounts still with other banks. (He did not go into detail about why all ASG accounts are not with TBAS.)
He explained that deposits will increase revenue resources for the bank, allowing the bank to increase its loan portfolio.
“If we increase our revenues,” TBAS “expects to be in the black” by July for the current fiscal year, he added.
Watson said TBAS has already filed its FY 2017 and FY 2018 reports as required by law and copies are expected to be forwarded to Fono leaders, as required by law. (Samoa News understands that the reports are filed with OFI, the local financial regulator, as well as the Governor’s Office.)
Sen. Fa’amausili Mau Mau Jr. questioned the bank’s financial status, to which Watson confirmed that the “bank is losing money” but added that it takes time for the bank — especially a start-up financial institution — to make a profit.
Watson revealed that TBAS is working with ASEDA to provide capital funding, saying “raising capital” is not an easy task for a new start-up bank.
Senate Budget and Appropriations Committee chairman Sen. Magalei Logovi’i continued the hearing to yesterday morning, during which Watson was to provide the bank’s “master plan” moving forward.
However, Watson told the committee yesterday the plan is being developed by financial advisors, and verbally-shared some of the developments the bank is working on, saying the establishment of TBAS is a “novel” idea, “breaking grounds everyday”.
“We are doing everything we can to make this a success,” he said. “I believe in the end, it will be a success” before turning TBAS over to the private sector.
Responding to committee questions regarding Bank of Hawaii’s move to completely close down its local operations, Watson said "at this point they won’t depart” until TBAS is fully operational.
He said BoH and TBAS continue to meet at least every six weeks during which both parties provide updates on their progress, especially TBAS, which will take over BoH’s Tafuna location once BoH completely shuts down its local operation.
Magalei said he likes the idea of BoH remaining here longer until TBAS is fully operational and ready to take over.
He also shared his concerns about TBAS not being insured by FDIC while local residents — many of them low-income people — continue to make deposits into their TBAS accounts. He suggested that TBAS inform its customers that the bank is not FDIC insured.
With the concurrence of other senators, Magalei requested that Watson and TBAS compile a complete report on its “master plan” or a “guide” to move the bank forward and provide that to the committee. He said it's important that there is something in writing for senators to review before asking more questions.
Watson asked the committee to give him this week to provide such a report, which will need the help of TBAS president, Drew Roberts who was scheduled to return last night from an off island trip.
Magalei plans to call another hearing in the future once the “master plan” and other requested documents are received.