Territorial Bancorp Inc. (NASDAQ: TBNK) (the “Company”),
headquartered in Honolulu, Hawaii, the holding company parent of
Territorial Savings Bank, announced net income of $1.50 million, or
$0.17 per diluted share, for the three months ended June 30, 2023.
The Company also announced that its Board of Directors approved
a quarterly cash dividend of $0.23 per share. The dividend is
expected to be paid on August 25, 2023, to stockholders of record
as of August 11, 2023.
“Our financial results continue to be impacted by the record
pace and level of increases in short-term interest rates over the
last 15 months,” said Allan Kitagawa, Chairman and Chief Executive
Officer. “The efforts by the Federal Reserve to rein in inflation
by increasing short-term interest rates over the past six quarters
to historically high levels, has put increased pressure on our net
interest margins as lower cost transactional deposit and savings
accounts have migrated to higher cost time deposits. We expect our
net interest margin to continue to decline for the remainder of
2023. Despite these challenges, we have enhanced our liquidity
levels, continued to seek ways to retain and grow deposits through
promotional campaigns, and focused on maintaining our lending base.
Throughout all of this, we have been able to maintain our strong
capital levels, which are well above regulatory required levels,
our asset quality remains solid, and we continue to have ample
liquidity.”
Interest Income
The Federal Reserve Bank has increased short-term interest rates
by 475 basis points since March 2022, which has increased the
Company’s cost of funds. This coupled with the inverted yield curve
where longer term rates are not sufficiently higher than funding
costs, have made the Company’s conservative business model
challenging to fulfill its mission to continue to help its
customers achieve homeownership. This has led to continued pressure
on the Company’s net interest margin in the second quarter. To
mitigate the impact of a lower net interest margin, the Company
continues to focus on reducing expenses while being mindful of
preserving the strength of its underwriting standards and policies.
Net interest income decreased by $2.98 million to $11.09 million
for the three months ended June 30, 2023, from $14.07 million for
the three months ended June 30, 2022. Total interest income was
$17.29 million for the three months ended June 30, 2023, compared
to $15.37 million for the three months ended June 30, 2022. The
$1.92 million increase in total interest income was primarily due
to an $803,000 increase in interest earned on other investments, a
$597,000 increase in interest earned on investment securities, and
a $521,000 increase in interest earned on loans. Interest income on
other investments rose by $803,000 from $267,000 for the three
months ended June 30, 2022, to $1.07 million for the three months
ended June 30, 2023. The increase in interest income on other
investments is primarily due to a 328 basis point increase in the
interest rate paid on cash balances at the Federal Reserve Bank.
The increase in interest income on investment securities resulted
from a $28.70 million increase in the average securities balance
together with a 24 basis point increase in the average securities
yield. The increase in interest income on loans resulted from a
$9.52 million increase in the average loan balance together with a
13 basis point increase in the average loan yield.
Interest Expense and Provision for Credit
Losses
As the result of the increases in short-term interest rates,
total interest expense increased by $4.90 million to $6.20 million
for the three months ended June 30, 2023, from $1.30 million for
the three months ended June 30, 2022. Interest expense on deposits
increased by $3.59 million to $4.32 million for the three months
ended June 30, 2023, from $738,000 for the three months ended June
30, 2022. The increase in interest expense on deposits was
primarily due to an increase in interest expense on certificates of
deposit (CD). Interest expense on CDs rose by $3.31 million from
$512,000 for the three months ended June 30, 2022, to $3.82 million
for the three months ended June 30, 2023. The increase in interest
expense was primarily due to a 252 basis point increase in the
average cost of CDs and a $200.81 million increase in the average
CD balance. The increase in the average cost of CDs occurred as
interest rates were raised in response to the increase in market
interest rates. The increase in the average balance of CDs occurred
as customers transferred balances from lower rate savings accounts
to higher rate CDs. Interest expense on Federal Home Loan Bank
(FHLB) advances rose from $516,000 for the three months ended June
30, 2022, to $1.83 million for the three months ended June 30,
2023. The increase in interest expense on FHLB advances rose
primarily because of a 134 basis point increase in the average cost
of advances and a $120.39 million increase in the average advance
balance. To enhance the Company’s liquidity and to fund deposit
withdrawals, additional FHLB advances were obtained in 2023.
The Company recorded $212,000 of credit loss provisions in the
three months ended June 30, 2023. The Company reversed $326,000 of
credit loss provisions in the three months ended June 30, 2022. In
2023, the Company adopted the current expected credit loss
accounting standard to calculate its allowance for credit losses.
The increase in the credit loss provision for the three months
ended June 30, 2023, is primarily due to a decrease in forecasted
prepayments and recoveries in the real estate portfolio, which
increased the expected future losses on real estate loans.
Noninterest Income
Noninterest income was $690,000 for the three months ended June
30, 2023, compared to $800,000 for the three months ended June 30,
2022. Other non-interest income decreased by $126,000 to $60,000
for the three months ended June 30, 2023, from $186,000 for the
three months ended June 30, 2022, primarily due to interest
received on a bank-owned life insurance recovery in the three
months ended June 30, 2022.
Noninterest Expense
Noninterest expense decreased to $9.51 million for the three
months ended June 30, 2023, compared to $9.57 million for the three
months ended June 30, 2022. Salaries and employee benefits
decreased by $249,000 to $5.14 million for the three months ended
June 30, 2023, from $5.39 million for the three months ended June
30, 2022. The reduction in salaries and employee benefits is due to
decreases in stock benefit plan expenses and deferred compensation
accruals. Occupancy expenses rose from $1.65 million for the three
months ended June 30, 2022, to $1.76 million for the three months
ended June 30, 2023, primarily because of an increase in repair and
maintenance expenses. Federal deposit insurance premium expense
rose from $143,000 for the three months ended June 30, 2022, to
$246,000 for the three months ended June 30, 2023, because of an
increase in the FDIC insurance premium rate.
Income Taxes
Income tax expense for the three months ended June 30, 2023, was
$563,000 with an effective tax rate of 27.33% compared to $1.51
million with an effective tax rate of 26.91% for the three months
ended June 30, 2022. The decrease in income tax expense was
primarily due to a $3.56 million decrease in income before income
taxes during the three months ended June 30, 2023, compared to the
three months ended June 30, 2022.
Balance Sheet
Total assets were $2.22 billion at June 30, 2023 and $2.17
billion at December 31, 2022. Loans receivable increased by $10.42
million and was $1.31 billion at June 30, 2023 and $1.29 billion at
December 31, 2022. The increase in loans receivable occurred as new
loan originations exceeded loan repayments and sales. Investment
securities, including available for sale securities, decreased by
$12.56 million to $726.04 million at June 30, 2023 from $738.59
million at December 31, 2022. The decrease in investment securities
occurred because of principal repayments on mortgage-backed
securities. Cash and cash equivalents increased by $47.11 million
to $87.66 million at June 30, 2023 from $40.55 million at December
31, 2022. The increase in cash and cash equivalents occurred as the
Company obtained additional advances from the Federal Home Loan
Bank to enhance its liquidity.
Deposits decreased by $70.44 million from $1.72 billion at
December 31, 2022 to $1.65 billion at June 30, 2023. The decrease
in deposits included a planned decrease of $13.78 million in CDs
from state and local governments. The remaining $56.66 million
decrease in retail deposits occurred as customers sought higher
interest rates on their deposits than what the Company pays. As of
June 30, 2023, 85% of total deposits are FDIC insured or fully
collateralized. FHLB advances increased by $125.00 million to
$266.00 million at June 30, 2023 from $141.00 million at December
31, 2022. The proceeds from the advances were used to enhance
liquidity and to fund deposit withdrawals. Total stockholders’
equity decreased to $250.63 million at June 30, 2023 from $256.55
million at December 31, 2022. The decrease in stockholders’ equity
occurred primarily because the Company’s dividends paid to
shareholders, share repurchases, and the impact to retained
earnings from the adoption of the current expected credit loss
(CECL) standard to calculate its allowance for credit losses
exceeded the Company’s net income.
Capital Management
The Company is in its twelfth share repurchase program and
repurchased 162,143 shares during the three months ending June 30,
2023. Through June 30, 2023, the Company has repurchased 4,396,055
shares through all of its share repurchase programs. The shares
repurchased represent 35.94% of the total shares issued in its
initial public offering.
Asset Quality
Credit quality continues to be extremely important and we adhere
to our strict underwriting standards. The Company had $1.02 million
in delinquent mortgage loans 90 days or more past due at June 30,
2023, compared to $559,000 at December 31, 2022. Non-performing
assets totaled $2.35 million at June 30, 2023, compared to $2.30
million at December 31, 2022. The ratio of non-performing assets to
total assets was 0.11% at June 30, 2023 and December 31, 2022. The
allowance for credit losses at June 30, 2023 was $5.26 million and
represented 0.40% of total loans, compared to $2.03 million and
0.16% of total loans as of December 31, 2022. The increase in the
ratio of allowance for credit losses to total loans occurred when
the Company adopted the CECL accounting standard to calculate its
allowance for credit losses on January 1, 2023. Upon adoption of
the standard, the Company recorded a $3.16 million increase to its
allowance for credit losses. The ratio of the allowance for credit
losses to non-performing loans rose to 224.20% at June 30, 2023,
compared to 88.31% at December 31, 2022 as a result of the increase
in the allowance for credit losses.
About Us
Territorial Bancorp Inc., headquartered in Honolulu, Hawaii, is
the stock holding company for Territorial Savings Bank. Territorial
Savings Bank is a state 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 29 branch offices in the state of Hawaii. For additional
information, please visit the Company’s website at:
https://www.tsbhawaii.bank.
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, could cause actual results
to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements:
- general economic conditions, either internationally, 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;
- changes in monetary or fiscal policies of the U.S. Government,
including policies of the U.S. Treasury and the Federal Reserve
Board;
- our ability to enter new markets successfully and capitalize on
growth opportunities;
- our ability to successfully integrate acquired entities, if
any;
- changes in consumer demand, 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;
- the timing and amount of revenues that we may recognize;
- the value and marketability of collateral underlying our loan
portfolios;
- our ability to retain key employees;
- cyberattacks, computer viruses and other technological risks
that may breach the security of our websites or other systems to
obtain unauthorized access to confidential information, destroy
data or disable our systems;
- technological change that may be more difficult or expensive
than expected;
- the ability of third-party providers to perform their
obligations to us;
- the ability of the U.S. Government to manage federal debt
limits;
- the quality and composition of our investment portfolio;
- the effect of any pandemic disease, including COVID-19, natural
disaster, war, act of terrorism, accident or similar action or
event;
- changes in market and other conditions that would affect our
ability to repurchase our common stock; and
- changes in our financial condition or results of operations
that reduce capital available to pay dividends.
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 |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
|
2022 |
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
11,697 |
|
|
$ |
11,176 |
|
|
$ |
23,151 |
|
|
$ |
22,533 |
|
Investment securities |
|
|
4,525 |
|
|
|
3,928 |
|
|
|
9,065 |
|
|
|
7,351 |
|
Other investments |
|
|
1,070 |
|
|
|
267 |
|
|
|
1,797 |
|
|
|
443 |
|
Total interest income |
|
|
17,292 |
|
|
|
15,371 |
|
|
|
34,013 |
|
|
|
30,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
4,323 |
|
|
|
738 |
|
|
|
7,853 |
|
|
|
1,335 |
|
Advances from the Federal Home Loan Bank |
|
|
1,832 |
|
|
|
516 |
|
|
|
2,886 |
|
|
|
1,027 |
|
Securities sold under agreements to repurchase |
|
|
45 |
|
|
|
47 |
|
|
|
91 |
|
|
|
91 |
|
Total interest expense |
|
|
6,200 |
|
|
|
1,301 |
|
|
|
10,830 |
|
|
|
2,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
11,092 |
|
|
|
14,070 |
|
|
|
23,183 |
|
|
|
27,874 |
|
Provision (reversal of provision) for credit/loan losses |
|
|
212 |
|
|
|
(326 |
) |
|
|
112 |
|
|
|
(494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision (reversal of provision) for
credit/loan losses |
|
|
10,880 |
|
|
|
14,396 |
|
|
|
23,071 |
|
|
|
28,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service and other fees |
|
|
414 |
|
|
|
412 |
|
|
|
724 |
|
|
|
753 |
|
Income on bank-owned life insurance |
|
|
207 |
|
|
|
194 |
|
|
|
410 |
|
|
|
391 |
|
Net gain (loss) on sale of loans |
|
|
9 |
|
|
|
(21 |
) |
|
|
10 |
|
|
|
(3 |
) |
Other |
|
|
60 |
|
|
|
186 |
|
|
|
135 |
|
|
|
1,283 |
|
Total noninterest income |
|
|
690 |
|
|
|
771 |
|
|
|
1,279 |
|
|
|
2,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
5,143 |
|
|
|
5,392 |
|
|
|
10,547 |
|
|
|
11,005 |
|
Occupancy |
|
|
1,759 |
|
|
|
1,648 |
|
|
|
3,382 |
|
|
|
3,242 |
|
Equipment |
|
|
1,303 |
|
|
|
1,236 |
|
|
|
2,615 |
|
|
|
2,432 |
|
Federal deposit insurance premiums |
|
|
246 |
|
|
|
143 |
|
|
|
491 |
|
|
|
284 |
|
Other general and administrative expenses |
|
|
1,059 |
|
|
|
1,125 |
|
|
|
2,088 |
|
|
|
2,179 |
|
Total noninterest expense |
|
|
9,510 |
|
|
|
9,544 |
|
|
|
19,123 |
|
|
|
19,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
2,060 |
|
|
|
5,623 |
|
|
|
5,227 |
|
|
|
11,650 |
|
Income taxes |
|
|
563 |
|
|
|
1,513 |
|
|
|
1,414 |
|
|
|
2,830 |
|
Net income |
|
$ |
1,497 |
|
|
$ |
4,110 |
|
|
|
3,813 |
|
|
$ |
8,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.17 |
|
|
$ |
0.46 |
|
|
$ |
0.44 |
|
|
$ |
0.98 |
|
Diluted earnings per share |
|
$ |
0.17 |
|
|
$ |
0.46 |
|
|
$ |
0.43 |
|
|
$ |
0.98 |
|
Cash dividends paid per common share |
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.46 |
|
|
$ |
0.46 |
|
Basic weighted-average shares outstanding |
|
|
8,620,643 |
|
|
|
8,876,691 |
|
|
|
8,697,213 |
|
|
|
8,928,127 |
|
Diluted weighted-average shares outstanding |
|
|
8,658,927 |
|
|
|
8,927,173 |
|
|
|
8,740,699 |
|
|
|
8,977,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Territorial Bancorp Inc. and Subsidiaries |
Consolidated Balance Sheets (Unaudited) |
(Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2023 |
|
2022 |
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
87,660 |
|
|
$ |
40,553 |
|
Investment securities available for sale, at fair value |
|
|
20,455 |
|
|
|
20,821 |
|
Investment securities held to maturity, at amortized cost (fair
value of $580,714 and |
|
|
705,584 |
|
|
|
717,773 |
|
$591,084 at June 30, 2023 and December 31, 2022, respectively) |
|
|
|
|
|
|
|
|
Loans receivable |
|
|
1,310,446 |
|
|
|
1,296,796 |
|
Allowance for credit/loan losses |
|
|
(5,262 |
) |
|
|
(2,032 |
) |
Loans receivable, net of allowance for credit/loan losses |
|
|
1,305,184 |
|
|
|
1,294,764 |
|
Federal Home Loan Bank stock, at cost |
|
|
13,244 |
|
|
|
8,197 |
|
Federal Reserve Bank stock, at cost |
|
|
3,176 |
|
|
|
3,170 |
|
Accrued interest receivable |
|
|
5,967 |
|
|
|
6,115 |
|
Premises and equipment, net |
|
|
7,260 |
|
|
|
7,599 |
|
Right-of-use asset, net |
|
|
13,577 |
|
|
|
14,498 |
|
Bank-owned life insurance |
|
|
48,193 |
|
|
|
47,783 |
|
Deferred income tax assets, net |
|
|
2,430 |
|
|
|
1,643 |
|
Prepaid expenses and other assets |
|
|
6,469 |
|
|
|
6,676 |
|
Total assets |
|
$ |
2,219,199 |
|
|
$ |
2,169,592 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
Deposits |
|
$ |
1,645,711 |
|
|
$ |
1,716,152 |
|
Advances from the Federal Home Loan Bank |
|
|
266,000 |
|
|
|
141,000 |
|
Securities sold under agreements to repurchase |
|
|
10,000 |
|
|
|
10,000 |
|
Accounts payable and accrued expenses |
|
|
24,161 |
|
|
|
24,180 |
|
Lease liability |
|
|
15,321 |
|
|
|
15,295 |
|
Income taxes payable |
|
|
1,500 |
|
|
|
838 |
|
Advance payments by borrowers for taxes and insurance |
|
|
5,872 |
|
|
|
5,577 |
|
Total liabilities |
|
|
1,968,565 |
|
|
|
1,913,042 |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
8,848,511 and 9,071,076 shares as of June 30, 2023 and December 31,
2022, |
|
|
|
|
|
|
respectively |
|
|
88 |
|
|
|
91 |
|
Additional paid-in capital |
|
|
48,110 |
|
|
|
51,825 |
|
Unearned ESOP shares |
|
|
(2,691 |
) |
|
|
(2,936 |
) |
Retained earnings |
|
|
212,848 |
|
|
|
215,314 |
|
Accumulated other comprehensive loss |
|
|
(7,721 |
) |
|
|
(7,744 |
) |
Total stockholders’ equity |
|
|
250,634 |
|
|
|
256,550 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,219,199 |
|
|
$ |
2,169,592 |
|
|
|
|
|
|
|
|
Territorial Bancorp Inc. and Subsidiaries |
Selected Financial Data (Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
Performance Ratios (annualized): |
|
|
|
|
|
Return on average assets |
|
|
0.27% |
|
|
|
0.76% |
|
|
Return on average equity |
|
|
2.37% |
|
|
|
6.39% |
|
|
Net interest margin on average interest earning assets |
|
2.09% |
|
|
|
2.72% |
|
|
Efficiency ratio (1) |
|
|
80.72% |
|
|
|
64.38% |
|
|
|
|
|
|
|
|
|
|
At |
|
At |
|
|
|
June 30, |
|
December 31, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
Selected Balance Sheet Data: |
|
|
|
|
|
Book value per share (2) |
|
$28.32 |
|
|
$28.28 |
|
|
Stockholders' equity to total assets |
|
|
11.29% |
|
|
|
11.83% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality |
|
|
|
|
(Dollars in thousands): |
|
|
|
|
|
Delinquent loans 90 days past due and not accruing |
$1,018 |
|
|
$559 |
|
|
Non-performing assets (3) |
|
$2,347 |
|
|
$2,301 |
|
|
Allowance for credit losses |
|
$5,262 |
|
|
$2,032 |
|
|
Non-performing assets to total assets |
|
|
0.11% |
|
|
|
0.11% |
|
|
Allowance for credit losses to total loans |
|
|
0.40% |
|
|
|
0.16% |
|
|
Allowance for credit losses to non-performing assets |
|
224.20% |
|
|
|
88.31% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
|
|
|
|
|
|
|
|
|
|
(1) Efficiency ratio is equal to noninterest expense divided by the
sum of net interest income and noninterest income |
(2) Book value per share is equal to stockholders' equity divided
by number of shares issued and outstanding |
(3) Non-performing assets consist of non-accrual loans and real
estate owned. Amounts are net of charge-offs |
Contact: Walter Ida(808)
946-1400
Territorial Bancorp (NASDAQ:TBNK)
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From May 2024 to Jun 2024
Territorial Bancorp (NASDAQ:TBNK)
Historical Stock Chart
From Jun 2023 to Jun 2024