Territorial Bancorp (US:TBNK)2023-08-10 17:29Financial Position - Total assets increased by $49.6 million, or 2.3%, to $2.2 billion at June 30, 2023[138]. - Cash and cash equivalents rose to $87.7 million, an increase of $47.1 million, or 116.2%, since December 31, 2022[139]. - Total loans were $1.3 billion at June 30, 2023, representing 58.8% of total assets, with a $10.4 million, or 0.8%, increase during the six months ended June 30, 2023[140]. - Total liabilities rose to $1,959,783 thousand as of June 30, 2023, compared to $1,901,839 thousand in the previous year[155]. - Stockholders' equity decreased by $5.9 million, or 2.3%, to $250.6 million at June 30, 2023, primarily due to dividends declared and shares repurchased[145]. Deposits and Borrowings - Deposits decreased by $70.4 million, or 4.1%, to $1.6 billion since December 31, 2022, primarily due to a $119.5 million decrease in passbook savings accounts[143]. - Total borrowings increased by $125.0 million, or 82.8%, to $276.0 million at June 30, 2023, used to enhance liquidity and fund the decrease in deposits[144]. - The company obtained $125.0 million of advances from the Federal Home Loan Bank to enhance liquidity during the six months ended June 30, 2023[128]. - The company has seen an increase of $64.1 million in certificates of deposit between December 31, 2022, and June 30, 2023[198]. Income and Expenses - Net income decreased by $2.6 million, or 63.6%, to $1.5 million for the three months ended June 30, 2023, compared to $4.1 million for the same period in 2022[155]. - Net income decreased by $5.0 million, or 56.8%, to $3.8 million for the six months ended June 30, 2023, from $8.8 million for the same period in 2022[168]. - Net interest income fell by $3.0 million, or 21.2%, to $11.1 million for the three months ended June 30, 2023, from $14.1 million in the prior year[156]. - Noninterest income decreased by $81,000 for the three months ended June 30, 2023, compared to the same period in 2022[163]. - Noninterest income decreased by $1.1 million to $1,279,000 for the six months ended June 30, 2023, a decline of 47.2% compared to $2,424,000 in 2022[176]. - Total noninterest expense slightly decreased by $19,000 to $19,123,000 for the six months ended June 30, 2023, reflecting a 0.1% reduction from $19,142,000 in 2022[178]. Interest Income and Expense - Interest income increased by $1.9 million, or 12.5%, due to a 29 basis point rise in the yield on average interest-earning assets and a $56.1 million increase in the average balance of interest-earning assets[156]. - Interest income increased by $1.9 million, or 12.5%, to $17.3 million for the three months ended June 30, 2023, compared to $15.4 million for the same period in 2022[157]. - Interest expense surged by $4.9 million, or 376.6%, driven by a 106 basis point increase in the cost of average interest-bearing liabilities and a $55.3 million rise in the average balance of interest-bearing liabilities[156]. - Interest expense rose by $4.9 million, or 376.6%, to $6.2 million for the three months ended June 30, 2023, from $1.3 million for the same period in 2022[158]. - Interest expense on interest-bearing deposits increased by $6.5 million, or 488.2%, to $7.9 million for the six months ended June 30, 2023, from $1.3 million for the same period in 2022[171]. Credit Loss Provisions - The company recorded a credit loss provision of $112,000 under ASC 326 during the six months ended June 30, 2023[131]. - The provision for credit losses was $212,000 for the three months ended June 30, 2023, compared to a reversal of $326,000 for the same period in 2022[161]. - Credit loss provisions increased to $112,000 for the six months ended June 30, 2023, compared to a reversal of $494,000 in the same period of 2022, resulting in allowance ratios of 0.40% and 0.17% respectively[174]. - The company experienced a $538,000 increase in credit/loan loss provisions, contributing to the decline in net income[155]. - Nonaccrual loans totaled $2.3 million at June 30, 2023, or 0.18% of total loans, down from $4.0 million, or 0.31% of total loans, at June 30, 2022[161]. Interest Rate Risk Management - The company does not engage in hedging activities or invest in high-risk mortgage derivatives, maintaining a conservative risk management approach[201]. - The company’s interest rate risk is primarily due to the majority of its assets being long-term, fixed-rate residential mortgage loans[200]. - The Board of Directors has established an Asset/Liability Management Committee to manage interest rate risk in alignment with business strategy and performance objectives[199]. - The economic value of equity (EVE) decreased by $144,635 thousand with a 400 basis point increase in interest rates, reflecting a 59.56% decrease in EVE ratio as a percent of present value of assets[205]. - The EVE ratio as a percent of present value of assets was 12.60% at a 0 basis point change in interest rates[205]. - The company’s interest-bearing liabilities mature or reprice more quickly than its interest-earning assets, increasing vulnerability to interest rate hikes[200]. - Interest rates on Freddie Mac mortgage-backed securities increased by 33 basis points between March 31, 2023, and June 30, 2023, negatively impacting the value of interest-earning assets[206]. - The EVE analysis assumes a uniform change in interest rates across all maturities, which may not accurately reflect actual market conditions[207]. Regulatory Capital - Territorial Savings Bank exceeded all regulatory capital requirements and is considered "well capitalized" as of June 30, 2023[190]. - The total risk-based capital ratio for Territorial Savings Bank was 26.62% as of June 30, 2023, significantly above the required 12.50%[192]. Loan Activity - Loan commitments outstanding for fixed-rate loans were $2.0 million, with $13.8 million in unused lines of credit as of June 30, 2023[186]. - Loans originated during the six months ended June 30, 2023, amounted to $55.5 million, a decrease from $97.7 million in the same period of 2022[187]. - Deposits decreased by $70.4 million for the six months ended June 30, 2023, compared to an increase of $47.8 million in 2022[188].