WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION For transition period from to Commission File Number 001-34403 TERRITORIAL BANCORP INC. (Exact Name of Registrant as Specified in Charter) (State or Other Jurisdiction of Incorporatio ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-34403 TERRITORIAL BANCORP INC. (Exact Name of Registrant as Specified in Charter) Maryland 26-4674701 (State or Other Jurisdi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-34403 Territorial Bancorp Inc. (Name of Registrant as Specified in its Charter) Maryland 26-4674701 (State or Other Jurisdict ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to For the Quarterly Period ended September 30, 2021 Commission File Number 001-34403 TERRITORIAL BANCORP INC. (Exact Name of Registrant as Specified in Charter) (Registrant's telephone number, includi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-34403 TERRITORIAL BANCORP INC. (Exact Name of Registrant as Specified in Charter) Maryland 26-4674701 (State or Other Jurisdic ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-34403 (Exact Name of Registrant as Specified in Charter) Maryland 26-4674701 (State or Other Jurisdiction of Incorporation) ( ...

Table of Contents ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-34403 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2020 OR Territorial Bancorp Inc. (Name of Registrant as Specified in its Charter) Maryland 26-4674701 (State or Other Jurisdict ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-34403 Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading symbol | Name of each e ...

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of Territorial Bancorp Inc. and its subsidiaries for the quarter ended June 30, 2020, including balance sheets, income statements, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, financial instrument specifics, and other relevant disclosures [Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Consolidated%20Balance%20Sheets%20%28Unaudited%29) | Metric (Dollars in thousands) | June 30, 2020 | December 31, 2019 | | :---------------------------- | :------------ | :---------------- | | **ASSETS** | | | | Cash and cash equivalents | $126,192 | $44,806 | | Total assets | $2,088,587 | $2,086,313 | | **LIABILITIES** | | | | Deposits | $1,645,312 | $1,631,933 | | Total liabilities | $1,844,560 | $1,842,423 | | **STOCKHOLDERS' EQUITY** | | | | Total stockholders' equity | $244,027 | $243,890 | | Total liabilities and stockholders' equity | $2,088,587 | $2,086,313 | [Consolidated Statements of Income (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20%28Unaudited%29) | Metric (Dollars in thousands, except per share data) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $18,005 | $19,114 | $36,586 | $37,819 | | Total interest expense | $3,239 | $4,452 | $7,303 | $8,321 | | Net interest income | $14,766 | $14,662 | $29,283 | $29,498 | | Provision (reversal of provision) for loan losses | $1,395 | $(51) | $1,612 | $(46) | | Total noninterest income | $1,461 | $1,273 | $2,762 | $4,713 | | Total noninterest expense | $8,971 | $9,511 | $18,509 | $19,285 | | Net income | $4,291 | $5,060 | $8,764 | $11,584 | | Basic earnings per share | $0.47 | $0.55 | $0.95 | $1.26 | | Diluted earnings per share | $0.47 | $0.54 | $0.94 | $1.24 | [Consolidated Statements of Comprehensive Income (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Unaudited%29) | Metric (Dollars in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $4,291 | $5,060 | $8,764 | $11,584 | | Other comprehensive (loss) gain, net of tax | $(93) | $119 | $(195) | $609 | | Comprehensive income | $4,198 | $5,179 | $8,569 | $12,193 | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=9&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29) | Metric (Dollars in thousands) | Balances at December 31, 2019 | Balances at June 30, 2020 | | :---------------------------- | :---------------------------- | :------------------------ | | Common Stock | $97 | $95 | | Additional Paid-in Capital | $65,057 | $60,606 | | Unearned ESOP Shares | $(4,404) | $(4,159) | | Retained Earnings | $190,808 | $195,348 | | Accumulated Other Comprehensive Loss | $(7,668) | $(7,863) | | Total Stockholders' Equity | $243,890 | $244,027 | - Total stockholders' equity increased slightly from **$243.89 million** at December 31, 2019, to **$244.03 million** at June 30, 2020, driven by net income and stock issuances, partially offset by common stock repurchases and dividends[14](index=14&type=chunk)[24](index=24&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) | Metric (Dollars in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash from operating activities | $10,220 | $10,098 | | Net cash from investing activities | $82,057 | $(9,861) | | Net cash from financing activities | $(10,891) | $(5,772) | | Net increase (decrease) in cash and cash equivalents | $81,386 | $(5,535) | | Cash and cash equivalents at end of the period | $126,192 | $41,528 | [Notes to Consolidated Financial Statements (Unaudited)](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) [(1) Organization](index=13&type=section&id=%281%29%20Organization) - Territorial Bancorp Inc. became the holding company for Territorial Savings Bank in 2009 after a conversion from a mutual holding company, and in 2014, Territorial Savings Bank converted to a Hawaii state-chartered savings bank and became a member of the Federal Reserve System[30](index=30&type=chunk)[31](index=31&type=chunk) [(2) Basis of Presentation](index=13&type=section&id=%282%29%20Basis%20of%20Presentation) - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, with certain disclosures condensed or omitted, and interim results are not necessarily indicative of full-year results[32](index=32&type=chunk) [(3) Recently Issued Accounting Pronouncements](index=13&type=section&id=%283%29%20Recently%20Issued%20Accounting%20Pronouncements) - The FASB amended accounting for credit losses (CECL model) effective for fiscal years beginning after December 15, 2019, but delayed for smaller reporting companies like the Company until after December 15, 2022, and the Company is evaluating the impact[33](index=33&type=chunk) - The Company adopted FASB amendments to Fair Value Measurement disclosures as of January 1, 2020, with no material effect, and amendments to Compensation – Retirement Benefits disclosures are effective after December 15, 2020, and are not expected to have a material effect[36](index=36&type=chunk)[37](index=37&type=chunk) [(4) Cash and Cash Equivalents](index=15&type=section&id=%284%29%20Cash%20and%20Cash%20Equivalents) | (Dollars in thousands) | June 30, 2020 | December 31, 2019 | | :--------------------- | :------------ | :---------------- | | Cash and due from banks | $11,271 | $9,571 | | Interest-earning deposits in other banks | $114,921 | $35,235 | | Cash and cash equivalents | $126,192 | $44,806 | - Interest-earning deposits primarily consist of deposits at the Federal Reserve Bank of San Francisco[39](index=39&type=chunk) [(5) Investment Securities](index=15&type=section&id=%285%29%20Investment%20Securities) | (Dollars in thousands) | Amortized Cost (June 30, 2020) | Fair Value (June 30, 2020) | Amortized Cost (Dec 31, 2019) | Fair Value (Dec 31, 2019) | | :--------------------- | :----------------------------- | :------------------------- | :---------------------------- | :------------------------ | | Available-for-sale: U.S. government-sponsored mortgage-backed securities | $3,782 | $4,212 | $7,905 | $8,628 | | Held-to-maturity: U.S. government-sponsored mortgage-backed securities | $332,533 | $351,799 | $363,883 | $371,305 | | (Dollars in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Proceeds from sales | $5,710 | $1,595 | $8,360 | $4,336 | | Gross gains | $419 | $70 | $597 | $2,787 | | Gross losses | — | — | — | — | - During the six months ended June 30, 2020, the Company sold **$4.4 million** of held-to-maturity mortgage-backed securities, recording a gain of **$307,000**, and **$3.4 million** of available-for-sale mortgage-backed securities, recording a gain of **$290,000**[44](index=44&type=chunk)[45](index=45&type=chunk) - Unrealized losses on mortgage-backed securities are due to increases in market interest rates, not credit quality, and are not considered other-than-temporarily impaired as the Company intends to hold them to maturity[48](index=48&type=chunk) - The Company securitized **$9.4 million** of fixed-rate first mortgage loans into Freddie Mac mortgage-backed securities, recording them at a fair value of **$9.8 million** and recognizing a net gain of **$377,000**[49](index=49&type=chunk) [(6) Loans Receivable and Allowance for Loan Losses](index=19&type=section&id=%286%29%20Loans%20Receivable%20and%20Allowance%20for%20Loan%20Losses) | (Dollars in thousands) | June 30, 2020 | December 31, 2019 | | :--------------------- | :------------ | :---------------- | | Real estate loans: One- to four-family residential | $1,491,552 | $1,536,781 | | Total real estate loans | $1,532,692 | $1,580,212 | | Total other loans | $11,381 | $9,719 | | Allowance for loan losses | $(4,256) | $(2,712) | | Loans receivable, net | $1,537,567 | $1,584,784 | | (Dollars in thousands) | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | | :--------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Provision (reversal of provision) for loan losses | $1,395 | $1,612 | $(51) | $(46) | | Net recoveries (charge-offs) | $(57) | $(68) | $8 | $20 | | Balance, end of period | $4,256 | $4,256 | $2,616 | $2,616 | - The loan loss provision increased significantly to **$1.4 million** for Q2 2020 (from a **$51,000** reversal in Q2 2019) due to an increase in qualitative factors reflecting Hawaii's rising unemployment rate from COVID-19 mandates[55](index=55&type=chunk) - As of June 30, 2020, the Company had seven nonaccrual loans with a book value of **$763,000**, up from six nonaccrual loans with a book value of **$736,000** at December 31, 2019[59](index=59&type=chunk) - The Company received loan forbearance requests totaling **$167.1 million** (**10.9%** of total loans) as of June 30, 2020, primarily for one- to four-family residential mortgage loans, due to COVID-19 impacts, and these loans are included in the ALLL calculation and are not considered contractually past due[68](index=68&type=chunk) [(7) Securities Sold Under Agreements to Repurchase](index=29&type=section&id=%287%29%20Securities%20Sold%20Under%20Agreements%20to%20Repurchase) | (Dollars in thousands) | June 30, 2020 Repurchase Liability | June 30, 2020 Weighted Average Rate | December 31, 2019 Repurchase Liability | December 31, 2019 Weighted Average Rate | | :--------------------- | :--------------------------------- | :---------------------------------- | :------------------------------------- | :------------------------------------ | | Maturing: 1 year or less | $— | — % | $5,000 | 1.65 % | | Maturing: Over 4 year to 5 years | $10,000 | 1.81 % | $5,000 | 1.88 % | | Total | $10,000 | 1.81 % | $10,000 | 1.77 % | - Securities sold under agreements to repurchase remained constant at **$10.0 million** from December 31, 2019, to June 30, 2020, with a weighted average rate of **1.81%** at June 30, 2020[75](index=75&type=chunk) [(8) Offsetting of Financial Liabilities](index=30&type=section&id=%288%29%20Offsetting%20of%20Financial%20Liabilities) | (Dollars in thousands) | Gross Amount of Recognized Liabilities | Gross Amount Offset in the Balance Sheet | Net Amount of Liabilities Presented in the Balance Sheet | | :--------------------- | :------------------------------------- | :--------------------------------------- | :------------------------------------------------------- | | June 30, 2020: Securities sold under agreements to repurchase | $10,000 | $10,000 | $10,000 | | December 31, 2019: Securities sold under agreements to repurchase | $10,000 | $10,000 | $10,000 | [(9) Employee Benefit Plans](index=30&type=section&id=%289%29%20Employee%20Benefit%20Plans) - The Company has a noncontributory defined benefit pension plan (Pension Plan) with no further benefit accruals since December 31, 2008, and also sponsors a Supplemental Employee Retirement Plan (SERP) for certain employees[79](index=79&type=chunk)[80](index=80&type=chunk) | Metric (Dollars in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net periodic benefit cost (SERP) | $66 | $66 | $131 | $132 | [(10) Employee Stock Ownership Plan](index=30&type=section&id=%2810%29%20Employee%20Stock%20Ownership%20Plan) - The ESOP acquired **978,650 shares** (**8%** of total shares) in 2009 for **$9.8 million**, with shares released annually from a suspense account as loan payments are made[82](index=82&type=chunk)[83](index=83&type=chunk) | Metric (Dollars in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Compensation expense recognized | $302 | $345 | $641 | $679 | | ESOP Shares | June 30, 2020 | December 31, 2019 | | :------------ | :------------ | :---------------- | | Allocated shares | 489,423 | 466,807 | | Unearned shares | 415,931 | 440,397 | | Total ESOP shares | 905,354 | 907,204 | | Fair value of unearned shares | $9,895 | $13,626 | [(11) Share-Based Compensation](index=32&type=section&id=%2811%29%20Share-Based%20Compensation) - The 2010 Equity Incentive Plan provides stock options and restricted stock awards to key officers and directors, with costs recognized over vesting periods (three, five, or six years)[86](index=86&type=chunk) | (In thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Compensation expense | $209 | $285 | $366 | $371 | | Income tax benefit | $57 | $78 | $100 | $101 | | Stock Options Activity | Options Outstanding at Dec 31, 2019 | Options Outstanding at June 30, 2020 | | :--------------------- | :---------------------------------- | :----------------------------------- | | Options | 116,409 | 34,582 | | Weighted Average Exercise Price | $17.53 | $17.92 | - As of June 30, 2020, the Company had no unrecognized compensation costs related to the stock option plan, but **$483,000** for restricted stock and **$531,000** for performance-based restricted stock units (PRSUs) based on performance conditions[91](index=91&type=chunk)[94](index=94&type=chunk)[97](index=97&type=chunk) [(12) Earnings Per Share](index=38&type=section&id=%2812%29%20Earnings%20Per%20Share) | (Dollars in thousands, except per share data) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common shareholders | $4,254 | $5,023 | $8,716 | $11,510 | | Basic earnings per share | $0.47 | $0.55 | $0.95 | $1.26 | | Diluted earnings per share | $0.47 | $0.54 | $0.94 | $1.24 | - Unvested restricted stock awards are considered participating securities in EPS computation using the two-class method due to nonforfeitable dividend rights[99](index=99&type=chunk) [(13) Other Comprehensive Income and Loss](index=40&type=section&id=%2813%29%20Other%20Comprehensive%20Income%20and%20Loss) | (Dollars in thousands) | Balances at Beginning of Period (June 30, 2020) | Balances at End of Period (June 30, 2020) | | :--------------------- | :---------------------------------------------- | :---------------------------------------- | | Unfunded Pension Liability | $8,178 | $8,178 | | Unrealized (Gain)/Loss on Securities | $(510) | $(315) | | Total | $7,668 | $7,863 | - For the six months ended June 30, 2020, the Company reported a net current period other comprehensive loss of **$195,000**, primarily driven by unrealized losses on securities[102](index=102&type=chunk) [(14) Revenue Recognition](index=42&type=section&id=%2814%29%20Revenue%20Recognition) - The Company's customer contracts are generally short-term, with service rendering and payment closely matched, leading to income recognition when payment is received, and revenue from financial instruments is excluded from this reporting requirement[104](index=104&type=chunk)[105](index=105&type=chunk) | (Dollars in thousands) | Service Fees on Loan and Deposit Accounts (Six Months Ended June 30, 2020) | Other (Six Months Ended June 30, 2020) | Total (Six Months Ended June 30, 2020) | | :--------------------- | :----------------------------------------------------------- | :------------------------------------- | :------------------------------------- | | Revenue from contracts with customers | $643 | $53 | $696 | | Other revenue | $345 | $55 | $400 | | Total | $988 | $108 | $1,096 | [(15) Leases](index=42&type=section&id=%2815%29%20Leases) - The Company leases premises, vehicles, and equipment under operating leases expiring through 2029, and has elected practical expedients for lease accounting and estimates discount rates using FHLB advance rates[107](index=107&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) | Lease Costs (Dollars in thousands) | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :----------------------------- | | Operating lease costs | $816 | $1,631 | | Short-term lease costs | $6 | $12 | | Variable lease costs | $36 | $77 | | Total lease costs | $858 | $1,720 | | Lease Information | June 30, 2020 | | :---------------- | :------------ | | Weighted-average remaining lease term (years) | 5.64 | | Weighted-average discount rate | 2.75 % | | Present value of leases (Dollars in thousands) | $12,542 | [(16) Fair Value](index=45&type=section&id=%2816%29%20Fair%20Value) - The Company categorizes assets and liabilities measured at fair value into three levels based on observability of inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) | (Dollars in thousands) | Carrying Amount (June 30, 2020) | Fair Value (June 30, 2020) | Level 1 | Level 2 | Level 3 | | :--------------------- | :------------------------------ | :------------------------- | :------ | :------ | :------ | | **Assets** | | | | | | | Cash and cash equivalents | $126,192 | $126,192 | $126,192 | $— | $— | | Investment securities available for sale | $4,212 | $4,212 | $— | $4,212 | $— | | Loans receivable, net | $1,537,567 | $1,642,432 | $— | $— | $1,642,432 | | **Liabilities** | | | | | | | Deposits | $1,645,312 | $1,650,538 | $— | $1,242,879 | $407,659 | | (Dollars in thousands) | Fair Value (June 30, 2020) | Valuation Technique | Unobservable Input | Range (Weighted Average) | | :--------------------- | :------------------------- | :------------------ | :----------------- | :----------------------- | | Mortgage servicing assets | $510 | Discounted cash flow | Discount rate | 9.25% - 11.25% (10.25%) | | | | | Prepayment speed (CPR) | 9.39 - 17.52 (13.38) | | | | | Annual cost to service (per loan, in dollars) | $75 | [(17) Subsequent Events](index=49&type=section&id=%2817%29%20Subsequent%20Events) - On July 30, 2020, the Board of Directors declared a quarterly cash dividend of **$0.23** per common share, payable on August 27, 2020[129](index=129&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=51&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition and operating results, highlighting the impact of COVID-19 on the Hawaiian economy and the Company's operations, detailing changes in assets, liabilities, equity, and income statement components, along with discussions on liquidity, capital resources, and critical accounting policies [Cautionary Statement Regarding Forward-Looking Information](index=51&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) - The report contains forward-looking statements subject to significant business, economic, and competitive uncertainties, including the impact of COVID-19, general economic conditions, interest rate changes, and regulatory policies[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - Specific risks related to COVID-19 include potential declines in demand for products/services, increased loan delinquencies, decreased collateral values, higher loan loss allowances, reduced net interest margin, and increased cybersecurity risks[138](index=138&type=chunk) [Overview](index=55&type=section&id=Overview) - The Company operates as a traditional thrift, primarily funded by deposits and mortgage-backed securities, making it vulnerable to interest rate increases[140](index=140&type=chunk) - Hawaii's economy has been significantly impacted by COVID-19, leading to increased unemployment due to tourism decline and government mandates[141](index=141&type=chunk) - The Company provided forbearance to COVID-19-affected borrowers, originated Paycheck Protection Program loans, and waived certain fees, with forbearance inquiries totaling **$164.2 million** (**10.7%** of total loans) as of July 9, 2020, primarily residential mortgages[143](index=143&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk) - Nonperforming assets remained low at **$763,000** (**0.04%** of total assets) at June 30, 2020, but loan loss provisions increased to **$1.6 million** for the six months ended June 30, 2020, due to rising unemployment in Hawaii[151](index=151&type=chunk) [Critical Accounting Policies](index=59&type=section&id=Critical%20Accounting%20Policies) - There are no material changes to the critical accounting policies disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2019[155](index=155&type=chunk) [Comparison of Financial Condition at June 30, 2020 and December 31, 2019](index=59&type=section&id=Comparison%20of%20Financial%20Condition%20at%20June%2030%2C%202020%20and%20December%2031%2C%202019) [Assets](index=59&type=section&id=Assets) - Total assets increased by **$2.3 million** (**0.1%**) to **$2.1 billion** at June 30, 2020, primarily due to an **$81.4 million** increase in cash and cash equivalents, offset by decreases in loans and investment securities[156](index=156&type=chunk) [Cash and Cash Equivalents](index=59&type=section&id=Cash%20and%20Cash%20Equivalents) - Cash and cash equivalents increased by **$81.4 million** to **$126.2 million** at June 30, 2020, driven by decreases in total loans receivable and total investment securities[157](index=157&type=chunk) [Loans](index=59&type=section&id=Loans) - Total loans, including loans held for sale, decreased by **$44.8 million** (**2.8%**) to **$1.5 billion** at June 30, 2020, mainly due to principal repayments, loan sales, and securitizations exceeding new originations[158](index=158&type=chunk) [Securities](index=59&type=section&id=Securities) - The securities portfolio decreased by **$35.8 million** (**9.6%**) to **$336.7 million** at June 30, 2020, as repayments and sales outpaced loan securitizations[159](index=159&type=chunk) [Deposits](index=59&type=section&id=Deposits) - Deposits increased by **$13.4 million** (**0.8%**) to **$1.6 billion** at June 30, 2020, primarily from increases in passbook savings, checking, and noninterest-bearing accounts, partially offset by a **$61.5 million** decrease in certificates of deposit[161](index=161&type=chunk) [Borrowings](index=59&type=section&id=Borrowings) - Total borrowings decreased by **$15.0 million** to **$151.0 million** at June 30, 2020, with Federal Home Loan Bank advances decreasing and securities sold under agreements to repurchase remaining constant[162](index=162&type=chunk) [Stockholders' Equity](index=59&type=section&id=Stockholders%27%20Equity) - Total stockholders' equity increased slightly to **$244.0 million** at June 30, 2020, from **$243.9 million** at December 31, 2019, due to net income and stock issuances, offset by stock repurchases and dividends[163](index=163&type=chunk) [Average Balances and Yields](index=59&type=section&id=Average%20Balances%20and%20Yields) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :----- | :------------------------------- | :------------------------------- | | Average Interest-Earning Assets | $2,008,819 | $1,999,650 | | Yield on Interest-Earning Assets | 3.59 % | 3.82 % | | Average Interest-Bearing Liabilities | $1,736,758 | $1,736,245 | | Cost of Interest-Bearing Liabilities | 0.75 % | 1.03 % | | Net Interest Rate Spread | 2.84 % | 2.79 % | | Net Interest Margin | 2.94 % | 2.93 % | | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----- | :----------------------------- | :----------------------------- | | Average Interest-Earning Assets | $2,017,141 | $1,992,569 | | Yield on Interest-Earning Assets | 3.63 % | 3.80 % | | Average Interest-Bearing Liabilities | $1,746,061 | $1,729,718 | | Cost of Interest-Bearing Liabilities | 0.84 % | 0.96 % | | Net Interest Rate Spread | 2.79 % | 2.84 % | | Net Interest Margin | 2.90 % | 2.96 % | [Comparison of Operating Results for the Three Months Ended June 30, 2020 and 2019](index=65&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202020%20and%202019) [General](index=65&type=section&id=General) - Net income decreased by **$769,000** (**15.2%**) to **$4.3 million** for Q2 2020, primarily due to a **$1.4 million** increase in loan loss provisions and a **$1.1 million** decrease in interest income, partially offset by lower interest and noninterest expenses[172](index=172&type=chunk) [Net Interest Income](index=65&type=section&id=Net%20Interest%20Income) - Net interest income increased by **$104,000** (**0.7%**) to **$14.8 million** for Q2 2020, with the net interest rate spread improving to **2.84%** (from **2.79%**) and net interest margin to **2.94%** (from **2.93%**), driven by a larger decrease in the cost of interest-bearing liabilities than the yield on interest-earning assets[173](index=173&type=chunk) [Interest Income](index=65&type=section&id=Interest%20Income) - Interest income decreased by **$1.1 million** (**5.8%**) to **$18.0 million** for Q2 2020, mainly due to a **23 basis point** decrease in the average yield on interest-earning assets, with loan interest income falling by **$778,000** due to lower average balances and yields, and securities interest income decreasing by **$237,000** due to lower average balances and yields[174](index=174&type=chunk) [Interest Expense](index=65&type=section&id=Interest%20Expense) - Interest expense decreased by **$1.2 million** (**27.2%**) to **$3.2 million** for Q2 2020, primarily due to a **$1.2 million** (**32.7%**) decrease in interest expense on interest-bearing deposits, driven by a **28 basis point** decrease in the average rate paid on deposits, particularly savings accounts and certificates of deposit[175](index=175&type=chunk) [Provision for Loan Losses](index=65&type=section&id=Provision%20for%20Loan%20Losses) - The Company recorded **$1.4 million** in loan loss provisions for Q2 2020, a significant increase from a **$51,000** reversal in Q2 2019, attributed to higher qualitative factors reflecting increased unemployment in Hawaii due to COVID-19[176](index=176&type=chunk) - Nonaccrual loans totaled **$763,000** (**0.05%** of total loans) at June 30, 2020, compared to **$892,000** (**0.06%**) at June 30, 2019[177](index=177&type=chunk)[178](index=178&type=chunk) [Noninterest Income](index=67&type=section&id=Noninterest%20Income) | (Dollars in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | $ Change | % Change | | :--------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Service fees on loan and deposit accounts | $535 | $485 | $50 | 10.3 % | | Gain on sale of investment securities | $419 | $70 | $349 | 498.6 % | | Gain on sale of loans | $259 | $— | $259 | — % | | Other | $47 | $508 | $(461) | (90.7)% | | Total | $1,461 | $1,273 | $188 | 14.8 % | - Noninterest income increased by **$188,000** for Q2 2020, primarily due to higher gains on sale of investment securities (**$419,000** vs. **$70,000**) and gains on sale of loans (**$259,000** vs. **$0**), partially offset by a decrease in other income due to bank-owned life insurance proceeds in the prior year[180](index=180&type=chunk) [Noninterest Expense](index=67&type=section&id=Noninterest%20Expense) | (Dollars in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | $ Change | % Change | | :--------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Salaries and employee benefits | $5,264 | $5,730 | $(466) | (8.1)% | | Equipment | $1,164 | $1,018 | $146 | 14.3 % | | Other general and administrative expenses | $843 | $1,042 | $(199) | (19.1)% | | Total | $8,971 | $9,511 | $(540) | (5.7)% | - Noninterest expense decreased by **$540,000** for Q2 2020, mainly due to lower salaries and employee benefits (driven by increased capitalized loan origination costs and decreased ESOP expense) and reduced advertising and accounting expenses[182](index=182&type=chunk) [Income Tax Expense](index=67&type=section&id=Income%20Tax%20Expense) - Income taxes were **$1.6 million** for Q2 2020, with an effective tax rate of **26.8%**, compared to **$1.4 million** and **21.9%** for Q2 2019, with the Q2 2019 rate being lower due to non-taxable bank-owned life insurance proceeds[183](index=183&type=chunk)[185](index=185&type=chunk) [Comparison of Operating Results for the Six Months Ended June 30, 2020 and 2019](index=69&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202020%20and%202019) [General](index=69&type=section&id=General) - Net income decreased by **$2.8 million** (**24.3%**) to **$8.8 million** for the six months ended June 30, 2020, primarily due to lower noninterest income, higher loan loss provisions, and decreased interest income, partially offset by reduced interest and noninterest expenses[186](index=186&type=chunk) [Net Interest Income](index=69&type=section&id=Net%20Interest%20Income) - Net interest income decreased by **$215,000** (**0.7%**) to **$29.3 million** for the six months ended June 30, 2020, with the net interest rate spread decreasing to **2.79%** (from **2.84%**) and net interest margin to **2.90%** (from **2.96%**), mainly due to a larger decrease in asset yields than liability costs[187](index=187&type=chunk) [Interest Income](index=69&type=section&id=Interest%20Income) - Interest income decreased by **$1.2 million** (**3.3%**) to **$36.6 million** for the six months ended June 30, 2020, driven by a **17 basis point** decrease in the average yield of interest-earning assets, with loan interest income falling by **$929,000** due to lower average balances and yields, and securities interest income decreasing by **$328,000** due to lower average balances and yields[188](index=188&type=chunk) [Interest Expense](index=69&type=section&id=Interest%20Expense) - Interest expense decreased by **$1.0 million** (**12.2%**) to **$7.3 million** for the six months ended June 30, 2020, with interest expense on deposits decreasing by **$1.3 million** (**18.6%**) due to lower average rates on savings and certificates of deposit, while interest expense on Federal Home Loan Bank advances rose by **$272,000** due to a **$34.5 million** increase in average balance[189](index=189&type=chunk)[191](index=191&type=chunk) [Provision for Loan Losses](index=71&type=section&id=Provision%20for%20Loan%20Losses) - The Company recorded **$1.6 million** in loan loss provisions for the six months ended June 30, 2020, compared to a **$46,000** reversal in the prior year, primarily due to increased qualitative factors reflecting Hawaii's rising unemployment from COVID-19[192](index=192&type=chunk) - Nonaccrual loans totaled **$763,000** (**0.05%** of total loans) at June 30, 2020, compared to **$892,000** (**0.06%**) at June 30, 2019[192](index=192&type=chunk) [Noninterest Income](index=71&type=section&id=Noninterest%20Income) | (Dollars in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | $ Change | % Change | | :--------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Gain on sale of investment securities | $597 | $2,787 | $(2,190) | (78.6)% | | Gain on sale of loans | $666 | $6 | $660 | 11,000.0 % | | Other | $108 | $580 | $(472) | (81.4)% | | Total | $2,762 | $4,713 | $(1,951) | (41.4)% | - Noninterest income decreased by **$2.0 million** for the six months ended June 30, 2020, primarily due to a **$2.7 million** gain on sale of a trust preferred security in the prior year, partially offset by increased gains on loan sales and securitization transactions in 2020[194](index=194&type=chunk) [Noninterest Expense](index=72&type=section&id=Noninterest%20Expense) | (Dollars in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | $ Change | % Change | | :--------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Salaries and employee benefits | $10,948 | $11,416 | $(468) | (4.1)% | | Federal deposit insurance premiums | $74 | $287 | $(213) | (74.2)% | | Other general and administrative expenses | $1,932 | $2,301 | $(369) | (16.0)% | | Total | $18,509 | $19,285 | $(776) | (4.0)% | - Noninterest expense decreased by **$776,000** for the six months ended June 30, 2020, mainly due to lower salaries and employee benefits (increased loan capitalization and decreased ESOP expense), reduced federal deposit insurance premiums (due to FDIC credits), and lower advertising and accounting expenses[196](index=196&type=chunk) [Income Tax Expense](index=72&type=section&id=Income%20Tax%20Expense) - Income taxes were **$3.2 million** for the six months ended June 30, 2020, with an effective tax rate of **26.5%**, compared to **$3.4 million** and **22.6%** for the prior year, with the prior year's rate being lower due to non-taxable bank-owned life insurance proceeds[197](index=197&type=chunk) [Liquidity and Capital Resources](index=72&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company's primary liquidity sources include deposit inflows, cash balances, loan/security repayments, FHLB advances, and proceeds from securities/loan sales, with an Asset/Liability Management Committee monitoring liquidity targets[198](index=198&type=chunk) - At June 30, 2020, cash and cash equivalents totaled **$126.2 million**, and the Company had **$141.0 million** in FHLB advances outstanding with an additional borrowing capacity of **$808.5 million**, and **$10.0 million** in securities sold under repurchase agreements[203](index=203&type=chunk)[208](index=208&type=chunk) - Territorial Savings Bank is considered 'well capitalized' under regulatory guidelines, exceeding all required capital ratios at June 30, 2020, and December 31, 2019[213](index=213&type=chunk)[217](index=217&type=chunk) | Capital Ratio | Required Ratio (Well-Capitalized) | Actual Ratio (June 30, 2020) | | :------------ | :-------------------------------- | :--------------------------- | | Tier 1 Leverage Capital | 5.00 % | 11.37 % | | Common Equity Tier 1 Risk-Based Capital | 9.00 % | 24.94 % | | Tier 1 Risk-Based Capital | 10.50 % | 24.94 % | | Total Risk-Based Capital | 12.50 % | 25.40 % | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=79&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the Company's exposure to market risk, primarily interest rate risk, due to its traditional thrift operations with long-term, fixed-rate assets funded by shorter-term liabilities, detailing the use of Economic Value of Equity (EVE) analysis to assess risk and stating the Company's policy against hedging activities - The Company's primary market risk is interest rate risk, as its long-term, fixed-rate residential mortgage loans and mortgage-backed securities are funded by liabilities that reprice more quickly[222](index=222&type=chunk)[223](index=223&type=chunk) - The Company uses Economic Value of Equity (EVE) analysis to compute changes in the present value of assets, liabilities, and off-balance sheet items under various interest rate scenarios (e.g., 100 to 400 basis point increases, 100 basis point decrease)[225](index=225&type=chunk) | Change in Interest Rates (bp) | Estimated EVE (March 31, 2020, Dollars in thousands) | Percentage Change in EVE | | :---------------------------- | :--------------------------------------------------- | :----------------------- | | +400 | $159,477 | (45.42)% | | +300 | $206,691 | (29.26)% | | +200 | $256,510 | (12.21)% | | +100 | $291,595 | (0.20)% | | 0 | $292,174 | — % | | -100 | $231,534 | (20.75)% | - The Company's policies do not permit hedging activities or investments in high-risk mortgage derivatives[224](index=224&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=81&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2020, and no material changes to internal control over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were effective as of June 30, 2020[232](index=232&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2020[233](index=233&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=82&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company and its subsidiaries are involved in routine legal actions incidental to their business, and management believes the resolution of these actions will not have a material adverse effect on the Company's results of operations - Legal actions are considered ordinary and routine, with no claims for money damages exceeding ten percent of consolidated assets[235](index=235&type=chunk) - Management expects the resolution of current legal actions not to have a material adverse effect on the Company's results[235](index=235&type=chunk) [ITEM 1A. RISK FACTORS](index=82&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the Company's Form 10-Q for the period ended March 31, 2020, and its Annual Report on Form 10-K for the period ended December 31, 2019 - No material changes to risk factors since the last 10-Q and 10-K filings[236](index=236&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=82&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the Company's common stock repurchases during the three months ended June 30, 2020, including the completion of its ninth share repurchase program | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | | :----- | :----------------------------------- | :--------------------------- | | April 1, 2020 through April 30, 2020 | 98,769 | $24.92 | | May 1, 2020 through May 31, 2020 | 20,975 | $24.03 | | June 1, 2020 through June 30, 2020 | 22,205 | $25.34 | | Total | 141,949 | $24.85 | - The Company completed its ninth share repurchase program, authorizing up to **$5,000,000** of common stock repurchases, on April 21, 2020[238](index=238&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=82&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The Company reported no defaults upon senior securities - No defaults upon senior securities[239](index=239&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=82&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company - Not applicable[240](index=240&type=chunk) [ITEM 5. OTHER INFORMATION](index=82&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The Company reported no other information for this period - None[241](index=241&type=chunk) [ITEM 6. EXHIBITS](index=82&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications, XBRL interactive data files, and the cover page interactive data file - Exhibits include certifications (31.1, 31.2, 32) and XBRL interactive data files (101, 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[246](index=246&type=chunk) [SIGNATURES](index=85&type=section&id=SIGNATURES) The report is duly signed on behalf of Territorial Bancorp Inc. by Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer, and Melvin M. Miyamoto, Senior Vice President and Chief Financial Officer, on August 7, 2020 - The report was signed by Allan S. Kitagawa (Chairman, President, CEO) and Melvin M. Miyamoto (SVP, CFO) on August 7, 2020[249](index=249&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-34403 TERRITORIAL BANCORP INC. (Exact Name of Registrant as Specified in Charter) Maryland 26-4674701 (State or Other Jurisdi ...