Territorial Bancorp (US:TBNK)2022-11-10 15:01Financial Performance - Net income decreased by $271,000, or 6.5%, to $3.9 million for the three months ended September 30, 2022, compared to $4.2 million for the same period in 2021[143] - Net income decreased by $522,000, or 3.9%, to $12.7 million for the nine months ended September 30, 2022, from $13.2 million for the same period in 2021[155] - Noninterest income decreased by $608,000, or 49.7%, to $615,000 for the three months ended September 30, 2022, compared to $1.2 million for the same period in 2021[151] - Noninterest income decreased by $2.2 million, totaling $3.039 million for the nine months ended September 30, 2022, a 41.4% decline compared to $5.189 million in 2021[163] Assets and Liabilities - Total assets increased by $34.2 million, or 1.6%, to $2.2 billion at September 30, 2022, from $2.1 billion at December 31, 2021[128] - Total loans were $1.3 billion at September 30, 2022, representing 59.8% of total assets, with a decrease of $7.8 million, or 0.6%, during the nine months ended September 30, 2022[131] - Total securities increased by $102.1 million, or 16.0%, to $738.6 million at September 30, 2022, due to purchases exceeding principal repayments[132] - Cash and cash equivalents decreased by $63.6 million, or 63.7%, to $36.3 million at September 30, 2022, primarily due to increased investment securities[130] - Deposits increased by $30.0 million, or 1.8%, to $1.7 billion at September 30, 2022, primarily driven by a $110.2 million increase in certificates of deposit[134] Income and Expenses - Net interest income increased by $478,000, or 3.4%, to $14.3 million for the three months ended September 30, 2022, from $13.9 million for the same period in 2021[144] - Net interest income increased by $2.1 million, or 5.1%, to $42.2 million for the nine months ended September 30, 2022, compared to $40.2 million for the same period in 2021[156] - Interest income rose by $876,000, or 5.7%, to $16.2 million for the three months ended September 30, 2022, driven by a $47.1 million increase in the average balance of interest-earning assets[145] - Interest expense increased by $398,000, or 28.2%, to $1.8 million for the three months ended September 30, 2022, compared to $1.4 million for the same period in 2021[146] - Interest expense decreased by $720,000, or 14.4%, to $4.3 million for the nine months ended September 30, 2022, compared to $5.0 million for the same period in 2021[158] Loan Performance - Nonperforming assets totaled $2.0 million, or 0.09% of total assets, at September 30, 2022, down from $3.3 million, or 0.15% of total assets, at December 31, 2021[123] - The company recorded a reversal of loan loss provisions of $603,000 for the nine months ended September 30, 2022, compared to $1.5 million for the same period in 2021[123] - The ratio of the allowance for loan losses to total loans was 0.16% at September 30, 2022, down from 0.21% at September 30, 2021[161] - Nonaccrual loans totaled $2.0 million at September 30, 2022, or 0.15% of total loans, compared to $4.2 million, or 0.32% of total loans, at September 30, 2021[161] Interest Rate Risk - The company primarily faces interest rate risk due to its significant holdings in long-term, fixed-rate residential mortgage loans and mortgage-backed securities[185] - The Economic Value of Equity (EVE) analysis indicates that a 400 basis point increase in interest rates would result in a decrease of $162.5 million in EVE, representing a 54.80% decline[190] - Interest rates on Freddie Mac mortgage-backed securities increased by 57 basis points from June 30, 2022, to September 30, 2022, negatively impacting the value of interest-earning assets[192] - The company does not engage in hedging activities, such as futures or options, to manage interest rate risk[186] Capital and Commitments - Territorial Savings Bank exceeded all regulatory capital requirements and is considered "well capitalized" as of September 30, 2022[176] - The company had unpledged securities with a market value of $410.8 million, with the ability to borrow up to $386.2 million using these securities as collateral[170] - At September 30, 2022, the company had $6.4 million in loan commitments outstanding for fixed-rate loans and $14.1 million in unused lines of credit[172] Management and Governance - The company’s Board of Directors has established an Asset/Liability Management Committee to evaluate and manage interest rate risk[184]