According to their Fiscal Year 2018 audit, the Territorial Bank of American Samoa or TBAS received a $1.85 million capital infusion from the American Samoa Government in fiscal year 2018.
Without the cash infusion, the bank would have fallen below its minimum capital requirement. Section 28.0216 of the statue establishing TBAS says “The initial capital of for the Bank shall be no less than $10,000,000.” Capital requirements are put into place to ensure that financial institutions do not take on excess leverage and become insolvent.
Prior to the fiscal year 2018 cash infusion, the American Samoa Government provided TBAS with $10 million of initial capital and $3.5 million of start-up funding.
These funds were raised as part of a $23 million 2015 general revenue bond offering with an all-in interest rate of 14.1%. The addition of the most recent cash infusion brings the Government’s total investment into TBAS to $15.35 million. Unlike the initial $13.5 million, the $1.85 million was not brought to the Fono by the administration for appropriation.
This requirement of legislative appropriation before public funds are spent is at the foundation of our constitutional government.
As of September 30, 2018, TBAS’s net position or book value was $11,638,927.
This amount is considerably less than the $15.35 million invested by the American Samoa Government thus far.
This comparison does not include the interest the government has paid on the bond. The government and as a result the taxpayers would incur a substantial loss if the bank were sold today.
It should be noted that TBAS is not responsible for servicing the debt incurred to create it. However, if it were responsible for repaying the borrowed funds, the bank’s annual loss would increase by over $700,000.
From when it opened in October 3, 2016 through September 30, 2018, TBAS lost a total of $3.2 million. An additional $493,041 was loss prior to the bank opening its doors; bringing its cumulative deficit to $3.7 million.
This amount easily exceeds the $3.5 million of start-up capital provided by the Government.
During his TBAS Board confirmation hearing, Steve Watson said “If we increase our revenues, TBAS expects to be in the black” by July 2019.
This level of performance would see TBAS’s fiscal year 2018 loss of $1.4 eliminated within six-months. By comparison, TBAS’s fiscal year 2018 loss was a slight improvement over the bank’s fiscal year 2017 loss of $1,791,036.
In fiscal year 2018, TBAS had revenue of $1,118,672. The amount was a substantial increase over their first year’s revenue of $371,854. Non-interest expenses were $2,382,586 in fiscal year 2018 as opposed to $2,078,176 or a 14.6% increase.
Personnel expenses increased by 8.4% to $818,047 in fiscal year 2018 from $754,643 the previous fiscal year.
Meanwhile, premises and equipment expenses rose 11.7% to $653,864 in fiscal year 2018 from $585,340 in fiscal year 2017.
Bank of Hawaii will close is operations in American Samoa on August 16, 2019. After a long wait, the American Banking Association issued a routing transit number to TBAS in January 2018. TBAS will open its second branch when it assumes the lease on Bank of Hawaii’s Tafuna Branch and inherit Bankoh’sATMs. No timeframe has been given for TBAS securing FDIC deposit insurance.
Until then, deposits at the bank are secured by the good faith and credit of the American Samoa Government.
