Territorial Bancorp (TBNK) - 2022 Q1 - Quarterly Report

Financial Position - Total assets decreased by $2.6 million, or 0.1%, to $2.1 billion at March 31, 2022[124]. - Total loans decreased by $6.5 million, or 0.5%, to $1.3 billion at March 31, 2022, representing 60.9% of total assets[128]. - Total securities increased by $32.7 million, or 5.1%, to $669.1 million at March 31, 2022, accounting for 31.4% of total assets[129]. - Deposits decreased by $6.3 million, or 0.4%, to $1.7 billion at March 31, 2022[131]. - Total stockholders' equity increased by $1.7 million, or 0.6%, to $258.0 million at March 31, 2022[133]. - Cash and cash equivalents decreased by $34.1 million, or 34.1%, to $65.8 million at March 31, 2022[125]. - Federal Home Loan Bank advances remained constant at $141.0 million for the three months ended March 31, 2022[121]. - Cash and cash equivalents totaled $65.8 million as of March 31, 2022, with $10.0 million in securities sold under agreements to repurchase and $141.0 million in Federal Home Loan Bank advances outstanding[151]. Loan Performance - Nonperforming assets totaled $3.2 million, or 0.15% of total assets, at March 31, 2022, unchanged from December 31, 2021[119]. - The company does not offer subprime or Alt-A loans, maintaining a conservative loan underwriting approach[120]. - The company originated $58.9 million in loans during the three months ended March 31, 2022, compared to $82.5 million in the same period of 2021[157]. - Nonaccrual loans decreased to $3.2 million, or 0.25% of total loans, in Q1 2022, down from $4.2 million, or 0.31%, in Q1 2021[143]. - The provision for loan losses recorded a reversal of $168,000 in Q1 2022 compared to $913,000 in Q1 2021, reflecting improved loan performance[142]. Income and Expenses - Net income decreased by $303,000, or 6.0%, from $5.0 million in Q1 2021 to $4.7 million in Q1 2022, primarily due to a reduction in loan loss provisions and non-interest income[138]. - Net interest income increased by $598,000, or 4.5%, to $13.8 million in Q1 2022, driven by a decrease in interest expense of $747,000, or 39.3%[139]. - Interest income decreased by $149,000, or 1.0%, to $15.0 million in Q1 2022, with a significant drop in loan interest income by $1.7 million, or 13.0%[140]. - Interest expense on interest-bearing deposits decreased by $720,000, or 54.7%, to $597,000 in Q1 2022, reflecting a decline in market interest rates[141]. - Noninterest income decreased by $586,000, or 26.2%, to $1.7 million in Q1 2022, primarily due to a drop in service fees and gains on securities sales[145]. - Noninterest expense increased by $44,000 to $9,598,000 for the three months ended March 31, 2022, compared to $9,554,000 for the same period in 2021, reflecting a 0.5% increase[147]. - Salaries and employee benefits rose by 1.6% to $5,613,000, primarily due to a decrease in deferred salary expense for originating new loans[147]. - Income tax expense decreased to $1.3 million for the three months ended March 31, 2022, with an effective tax rate of 21.9%, down from $1.8 million and 26.3% in the same period of 2021[148]. Capital and Regulatory Compliance - At March 31, 2022, Territorial Savings Bank exceeded all regulatory capital requirements and is considered "well capitalized" under regulatory guidelines[161]. - The Tier 1 Leverage Capital ratio for Territorial Savings Bank was 11.38% as of March 31, 2022, exceeding the required 5.00%[162]. - The company has $7.2 million in loan commitments outstanding for fixed-rate loans and $14.6 million in unused lines of credit as of March 31, 2022[153]. Interest Rate Sensitivity - As of December 31, 2021, the estimated Economic Value of Equity (EVE) was $342,393,000, with a ratio of 15.81% of the present value of assets[175]. - A 400 basis point increase in interest rates would decrease EVE by $104,640,000, representing a 30.56% decline[175]. - A 300 basis point increase in interest rates would decrease EVE by $65,328,000, representing a 19.08% decline[175]. - A 200 basis point increase in interest rates would decrease EVE by $22,048,000, representing a 6.44% decline[175]. - A 100 basis point increase in interest rates would increase EVE by $4,258,000, representing a 1.24% increase[175]. - A 100 basis point decrease in interest rates would decrease EVE by $59,776,000, representing a 17.46% decline[175]. - Interest rates on Freddie Mac mortgage-backed securities increased by 90 basis points between December 31, 2021, and March 31, 2022[176]. - The increase in mortgage interest rates has decreased the value of interest-earning assets, but this was offset by a decrease in the value of interest-bearing liabilities[176]. - The EVE table assumes a constant composition of interest-sensitive assets and liabilities over the measured period[177]. - The EVE measurements are not intended to provide a precise forecast of the effect of changes in market interest rates on EVE and net interest income[177].