This disclosure applies to all Adjustable Rate Mortgage (ARM) loans which Territorial Savings has available to owner occupants. You will receive a Consumer Handbook on Adjustable Rate Mortgages with this disclosure.

This document is not a contract and is not part of your loan agreement with us. This is a disclosure – you should read your loan documents for the legal terms of your loan. You may request a draft of a promissory note and mortgage if you want to know about the legal terms of your loan.

We have three ARM loan programs. The term of these loans is 30 years. The disclosures below contain examples of each program.

HOW YOUR INTEREST RATE AND PAYMENT ARE DETERMINED

Your interest rate will be based on an index rate plus a margin and either a premium or discount.

Your payment will be based on the interest rate, loan balance, and loan term.

The interest rate will be based on the weekly average yield on the United States Treasury securities adjusted to a constant maturity of one year (your index), plus our margin and either a premium or discount. Ask us for our current interest rate, margin and premium or discount, whichever is applicable. If this index is no longer available to us, we will choose a comparable index and tell you.

Information about the index rate is published weekly in the Wall Street Journal or can be requested from the Federal Reserve Board as Statistical Release H.15.

Your interest rate will equal the index rate plus our margin and either a premium or discount, rounded to the nearest one-eighth percent (0.125) unless your interest rate “caps” limit the amount of the change in the interest rate.

HOW YOUR INTEREST RATE CAN CHANGE

Your interest rate can change yearly.

Your interest rate cannot increase or decrease more than two percentage points at each adjustment.

Your interest rate cannot increase more than five percentage points over the term of the loan.

HOW YOUR MONTHLY PAYMENT CAN CHANGE

Your monthly payment can increase or decrease substantially based on annual changes in the interest rate.You will be notified in writing at least 25, but not more than 120, days before the due date of a payment at a new level. This notice will contain information about your interest rates, payment amount and loan balance.

EXAMPLES OF INITIAL RATE AND PAYMENT, MAXIMUM INTEREST RATE AND PAYMENT AND HOW TO CALCULATE YOUR PAYMENT

ONE-YEAR ARM PROGRAM

For example, in June, 2009, on a $10,000, 30-year loan with an initial interest rate of 4.50%, (the index for 2009* of .50% plus a 2.50% margin plus a 1.50% premium, rounded to the nearest 1/8%), the maximum amount that the interest rate can rise under this program is five percentage points, to 9.50%, and the monthly payment can rise from a first year payment of $50.67 to a maximum payment of $84.09 in the fourth year.

To see what the payment for your loan will be using the initial interest rate, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, the monthly payment for a mortgage amount of $60,000 would be: $60,000 ÷ $10,000 = 6; 6 X 50.67 = $304.02 per month.)

THREE-YEAR ARM PROGRAM

For example, in June, 2009, on a $10,000, 30-year loan with an initial interest rate of 4.75%, (the index for 2009* of .50% plus a 2.50% margin plus a 1.75% premium, rounded to the nearest 1/8%), the maximum amount that the interest rate can rise under this program is five percentage points, to 9.75%, and the monthly payment can rise from a first year payment of $52.16 to a maximum payment of $85.92 in the sixth year.

To see what the payment for your loan will be using the initial interest rate, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, the monthly payment for a mortgage amount of $60,000 would be: $60,000 ÷ $10,000 = 6; 6 X 52.16 = $312.96 per month.)

FIVE-YEAR ARM PROGRAM

For example, in June, 2009, on a $10,000, 30-year loan with an initial interest rate of 5.00%, (the index for 2009* of .50% plus a 2.50% margin plus a 2.00% premium, rounded to the nearest 1/8%), the maximum amount that the interest rate can rise under this program is five percentage points, to 10.0%, and the monthly payment can rise from a first year payment of $53.68 to a maximum payment of 87.76 in the eighth year.

To see what the payment for your loan will be using the initial interest rate, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, the monthly payment for a mortgage amount of $60,000 would be: $60,000 ÷ $10,000 = 6; 6 X 53.68 = $322.08 per month.)