Territorial Bancorp (US:TBNK)2024-08-12 20:00Merger Agreement - Hope Bancorp and the Company entered into a merger agreement valued at approximately $78.6 million, with a fixed exchange ratio of 0.8048 shares of Hope Bancorp common stock for each share of the Company's common stock[106]. Financial Performance - The company reported a net loss of $775,000 for Q2 2024, a decrease of $2.3 million or 151.8% compared to a net income of $1.5 million in Q2 2023[129]. - For the six months ended June 30, 2024, the company reported a net loss of $1.3 million, a decrease of $5.1 million, or 133.0%, compared to net income of $3.8 million for the same period in 2023[141]. - Net interest income decreased by $2.9 million, contributing significantly to the decline in net income[129]. - Net interest income for the six months ended June 30, 2024, decreased by $6.2 million, or 26.7%, to $17.0 million from $23.2 million for the same period in 2023[142]. - Noninterest income decreased by $30,000 for the three months ended June 30, 2024, primarily due to a decrease in service and other fees[137]. - Noninterest income decreased by $26,000, or 2.0%, for the six months ended June 30, 2024, primarily due to a decrease in service and other fees[149]. Asset and Liability Changes - Total assets decreased by $71.3 million, or 3.2%, to $2.2 billion as of June 30, 2024, primarily due to a $43.9 million decrease in cash and cash equivalents[118]. - Cash and cash equivalents were $82.8 million at June 30, 2024, a decrease of $43.9 million, or 34.6%, since December 31, 2023[118]. - Total loans were $1.3 billion at June 30, 2024, representing 59.9% of total assets, with a decrease of $7.2 million, or 0.6%, during the six months ended June 30, 2024[119]. - Total investment securities decreased by $20.7 million, or 2.9%, to $685.2 million at June 30, 2024[119]. - Deposits decreased by $63.9 million, or 3.9%, to $1.6 billion since December 31, 2023, primarily due to customers seeking higher interest rates[120]. - Federal Home Loan Bank advances decreased by $5.0 million to $237.0 million as of June 30, 2024[114]. Credit Losses and Provisions - The Company recorded a reversal of provision for credit losses of $7,000 for the six months ended June 30, 2024, compared to a provision of $112,000 for the same period in 2023[113]. - Provision for credit losses recorded a reversal of $26,000 for the three months ended June 30, 2024, compared to a provision of $212,000 for the same period in 2023[135]. - Provision for credit losses decreased by $238,000, also providing some relief to net income[129]. - Provision for credit losses recorded a reversal of $7,000 for the six months ended June 30, 2024, compared to a provision of $112,000 for the same period in 2023, resulting in an allowance for credit losses to total loans ratio of 0.39%[147]. Capital Ratios - Territorial Savings Bank exceeded all regulatory capital requirements and is considered "well capitalized" under regulatory guidelines as of June 30, 2024[159]. - As of June 30, 2024, Territorial Savings Bank's Tier 1 Leverage Capital ratio was 10.85%, significantly above the required 5.00%[161]. - Common Equity Tier 1 Risk-Based Capital ratio for Territorial Savings Bank was 26.54% as of June 30, 2024, exceeding the required 9.00%[161]. - Total Risk-Based Capital ratio for Territorial Bancorp Inc. was 28.98% as of June 30, 2024, surpassing the required 12.50%[161]. - The Bank's capital ratios exceeded the minimum thresholds for a "well-capitalized" institution as of both June 30, 2024, and December 31, 2023[162]. Interest Rates and Economic Value - Interest rates on Freddie Mac mortgage-backed securities increased by 23 basis points between March 31, 2024, and June 30, 2024, impacting the value of interest-earning assets[172]. - An instantaneous 400 basis point increase in interest rates would result in an estimated decrease in Economic Value of Equity (EVE) by $204,616, representing a 118.42% decline[171]. - The EVE ratio as a percent of the present value of assets was 9.32% at a 0 basis point change in interest rates[171]. Other Financial Metrics - Total interest-earning assets amounted to $2,120,652, with a yield of 3.40% for 2024[126]. - Total loans reached $1,305,844 with a yield of 3.72% for 2024, compared to $1,297,694 with a yield of 3.57% in 2023[126]. - Total interest-bearing liabilities were $1,840,256 with a cost of 2.07% for 2024, compared to $1,830,889 with a cost of 1.18% in 2023[126]. - The net interest margin for 2024 was reported at 1.60%, down from 2.19% in 2023[126]. - Interest income increased by $801,000, or 4.6%, to $18.1 million for the three months ended June 30, 2024, from $17.3 million for the same period in 2023[131]. - Interest expense increased by $3.7 million, or 59.0%, to $9.9 million for the three months ended June 30, 2024, from $6.2 million for the same period in 2023[132]. - Interest expense increased by $8.3 million, or 76.2%, to $19.1 million for the six months ended June 30, 2024, from $10.8 million for the same period in 2023[144]. - Interest expense on advances from the FRB was $1.2 million for the six months ended June 30, 2024, due to a $50.0 million advance from the FRB Bank Term Funding Program[146]. Operational Expenses - Noninterest expense increased by $474,000, further impacting profitability[129]. - Noninterest expense increased by $921,000, or 4.8%, for the six months ended June 30, 2024, totaling $20.0 million, with significant increases in federal deposit insurance premiums by 81.1% and other general and administrative expenses by 57.6%[148]. - Noninterest expense increased by $474,000 for the three months ended June 30, 2024, compared to the same period in 2023, driven by increases in merger-related legal and consulting expenses[139]. Deposit Trends - Estimated uninsured deposits were $394.1 million, or 25.1% of total deposits, as of June 30, 2024, down from $419.4 million, or 25.6%, at December 31, 2023[155]. - The company experienced a net decrease in deposits of $63.9 million for the six months ended June 30, 2024, as customers sought higher interest rates[157]. - The company originated $34.9 million in loans during the six months ended June 30, 2024, compared to $55.5 million in the same period of 2023[156]. Regulatory and Compliance - The company has not elected to follow the alternative framework for community bank leverage ratio, which is currently set at 9%[164]. - There have been no material changes in contractual obligations or funding needs between December 31, 2023, and June 30, 2024[166]. - The company does not permit hedging activities, limiting exposure to high-risk mortgage derivatives[169].