Territorial Bancorp (US:TBNK)2021-11-12 14:31Financial Position - Total assets increased by $6.3 million, or 0.3%, to $2.1 billion at September 30, 2021[150]. - Total loans decreased by $104.7 million, or 7.4%, to $1.3 billion, representing 61.6% of total assets[152]. - Securities portfolio increased by $370.2 million, totaling $621.4 million, or 29.4% of total assets[153]. - Deposits grew by $5.2 million, or 0.3%, to $1.7 billion, driven by increases in savings and checking accounts[155]. - Total stockholders' equity rose by $3.0 million, or 1.2%, to $251.7 million, primarily due to net income of $13.2 million[157]. - Cash and cash equivalents decreased by $262.2 million to $101.4 million, mainly due to increased investment securities[151]. - Federal Home Loan Bank advances remained constant at $141.0 million for the nine months ended September 30, 2021[147]. Loan Performance - The company recorded a $1.5 million reversal of loan loss provisions for the nine months ended September 30, 2021[143]. - Nonperforming assets totaled $4.2 million, or 0.20% of total assets, showing a slight improvement from $4.4 million, or 0.21%[143]. - Nonaccrual loans totaled $4.2 million at September 30, 2021, or 0.32% of total loans, compared to $2.2 million, or 0.15% of total loans, at September 30, 2020[184]. - The company does not offer subprime or Alt-A loans, maintaining a conservative loan underwriting approach[144]. - The company originated $264.9 million in loans during the nine months ended September 30, 2021, compared to $190.9 million in the same period of 2020[200]. - The company had $22.1 million in loan commitments outstanding for fixed-rate loans and $16.5 million in unused lines of credit as of September 30, 2021[199]. Income and Expenses - Net income decreased by $156,000, or 3.6%, to $4.2 million for the three months ended September 30, 2021, compared to $4.3 million for the same period in 2020[165]. - Net interest income decreased by $601,000, or 4.2%, to $13.9 million for the three months ended September 30, 2021, from $14.5 million for the same period in 2020[166]. - Interest income decreased by $1.9 million, or 10.8%, to $15.3 million for the three months ended September 30, 2021, from $17.1 million for the same period in 2020[167]. - Interest income on loans decreased by $2.8 million, or 19.1%, to $11.8 million for the three months ended September 30, 2021, from $14.6 million for the same period in 2020[167]. - Non-interest income decreased by $354,000 for the three months ended September 30, 2021[165]. - Non-interest expense increased by $178,000 for the three months ended September 30, 2021[165]. - Interest expense decreased by $1.3 million, or 47.1%, to $1.4 million for the three months ended September 30, 2021, from $2.7 million for the same period in 2020[168]. - Noninterest income decreased by $354,000, or 22.4%, to $1.2 million for the three months ended September 30, 2021, compared to $1.6 million for the same period in 2020[171]. - Net interest income decreased by $3.6 million, or 8.2%, to $40.2 million for the nine months ended September 30, 2021, from $43.7 million for the same period in 2020[179]. - Interest income decreased by $8.6 million, or 16.0%, to $45.1 million for the nine months ended September 30, 2021, compared to $53.7 million for the same period in 2020[180]. - Provision for loan losses recorded a reversal of $1.5 million for the nine months ended September 30, 2021, compared to $2.3 million of provisions for the same period in 2020[184]. - Interest expense on interest-bearing deposits decreased by $4.1 million, or 56.0%, to $3.3 million for the nine months ended September 30, 2021, from $7.4 million for the same period in 2020[181]. - Total noninterest expense increased by $178,000, or 1.9%, to $9.6 million for the three months ended September 30, 2021, from $9.4 million for the same period in 2020[174]. - Total noninterest expense increased by $835,000 to $28.730 million for the nine months ended September 30, 2021, compared to $27.895 million in 2020, a 3.0% rise[189]. - Salaries and employee benefits increased by 1.7% to $16.576 million, primarily due to higher compensation and health insurance costs[189]. - Income tax expense remained stable at $4.8 million for both periods, with an effective tax rate of 26.7% in 2021 compared to 26.9% in 2020[191]. Capital and Regulatory Compliance - Territorial Savings Bank exceeded all regulatory capital requirements and is considered "well capitalized" under regulatory guidelines as of September 30, 2021[206]. - Total risk-based capital ratio for Territorial Savings Bank was 27.58% as of September 30, 2021, significantly above the required 12.50%[207]. - The federal regulators have established a community bank leverage ratio of 9%, effective March 31, 2020, temporarily reduced to 8% due to the CARES Act, transitioning back to 9% by year-end 2021[211]. Interest Rate Risk - The estimated economic value of equity (EVE) as of June 30, 2021, was $357.132 million, with a ratio of 16.25% of the present value of assets[220]. - A 400 basis point increase in interest rates would result in a decrease of $130.5 million in EVE, representing a 36.54% decline[220]. - Interest rates on Freddie Mac mortgage-backed securities increased by 10 basis points between June 30, 2021, and September 30, 2021, but this is not expected to significantly affect estimated EVE[221]. - The company sold $26.2 million of fixed-rate mortgage loans during the nine months ended September 30, 2021, to mitigate interest rate risk[215]. - The company does not engage in hedging activities or invest in high-risk mortgage derivatives[216]. - The majority of the company's assets consist of long-term, fixed-rate residential mortgage loans, making it vulnerable to interest rate increases[215]. - The company has established an Asset/Liability Management Committee to evaluate and manage interest rate risk[214]. - The EVE analysis assumes a uniform change in interest rates across all maturities, which may not reflect actual market conditions[222].