Territorial Bancorp (US:TBNK)2024-11-13 17:31Merger and Acquisition - 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[115]. Financial Performance - The company reported a net loss of $1.3 million for Q3 2024, a decrease of $2.2 million compared to a net income of $880,000 in Q3 2023[141]. - Net interest income decreased by $2.6 million, or 25.4%, to $7.5 million in Q3 2024 from $10.0 million in Q3 2023[142]. - The company experienced a decrease in income taxes by $946,000, partially offsetting the decline in net income[141]. - Noninterest income increased by $27,000, or 4.6%, to $616,000 for the three months ended September 30, 2024, compared to $589,000 for the same period in 2023[149]. - Noninterest income increased by $1,000 for the nine months ended September 30, 2024, with bank-owned life insurance income rising by 19.4% to $750,000[161]. Asset and Liability Management - Total assets decreased by $38.2 million, or 1.7%, to $2.2 billion as of September 30, 2024, primarily due to a $31.6 million decrease in total investment securities and a $20.8 million decrease in total loans[126]. - Total loans decreased by $20.8 million, or 1.6%, to $1.3 billion, representing 58.3% of total assets[128]. - Total investment securities decreased by $31.6 million, or 4.5%, to $674.3 million, accounting for 30.7% of total assets[129]. - Total borrowings decreased by $65.0 million, or 21.5%, to $237.0 million, consisting of advances from the Federal Home Loan Bank and Federal Reserve Bank[131]. - Cash and cash equivalents increased by $16.5 million, or 13.0%, to $143.1 million, driven by a $33.7 million increase in deposits[127]. - Deposits increased by $33.7 million, or 2.1%, to $1.7 billion, primarily due to a $114.7 million increase in certificates of deposit[130]. Credit Quality - Nonperforming assets totaled $2.3 million, or 0.11% of total assets, as of September 30, 2024, compared to 0.10% at December 31, 2023[122]. - The Company recorded a provision for credit losses of $22,000 for the nine months ended September 30, 2024, primarily due to an increase in loans in the consumer loan portfolio[122]. - Provision for credit losses recorded was $29,000 for the three months ended September 30, 2024, compared to a reversal of $259,000 for the same period in 2023[147]. - Provision for credit losses recorded was $22,000 for the nine months ended September 30, 2024, compared to a reversal of $147,000 in the same period of 2023[160]. Interest Income and Expense - Interest income increased by $929,000, or 5.3%, due to an 18 basis point increase in the yield on average interest-earning assets[142]. - Interest expense increased by $3.5 million, or 47.3%, primarily due to a 76 basis point increase in the cost of average interest-bearing liabilities[142]. - Interest expense increased by $3.5 million, or 47.3%, to $10.8 million for the three months ended September 30, 2024, from $7.4 million for the same period in 2023[144]. - Interest expense increased by $11.7 million, or 64.5%, to $29.9 million for the nine months ended September 30, 2024, from $18.2 million for the same period in 2023[157]. Capital Ratios - Territorial Savings Bank exceeded all regulatory capital requirements and is considered "well capitalized" as of September 30, 2024[176]. - As of September 30, 2024, Territorial Savings Bank's Tier 1 Leverage Capital ratio is 10.82%, significantly above the required 5.00%[177]. - Common Equity Tier 1 Risk-Based Capital ratio for Territorial Savings Bank is 26.67% as of September 30, 2024, exceeding the required 9.00%[177]. - Total Risk-Based Capital ratio for Territorial Bancorp Inc. is 29.07% as of September 30, 2024, well above the required 12.50%[177]. - The Bank's capital ratios exceeded the minimum capital thresholds for a "well-capitalized" institution as of both September 30, 2024, and December 31, 2023[179]. Interest Rate Impact - Interest rates on Freddie Mac mortgage-backed securities decreased by 57 basis points between June 30, 2024, and September 30, 2024, increasing the value of interest-earning assets[191]. - The estimated Economic Value of Equity (EVE) decreased by 201,647 thousand dollars with a 400 basis point increase in interest rates, reflecting a 136.52% decrease in EVE[188]. - The EVE ratio as a percent of the present value of assets is 8.13% at a 0 basis point change in interest rates[188]. Regulatory and Compliance - The company has not elected to follow the alternative framework for community bank leverage ratio, which is currently set at 9%[181]. - There have been no material changes in contractual obligations or funding needs between December 31, 2023, and September 30, 2024[183]. - The company does not permit hedging activities, limiting exposure to high-risk mortgage derivatives[186].