Territorial Bancorp (US:TBNK)2023-11-08 18:57Financial Position - Total assets increased by $41.6 million, or 1.9%, to $2.2 billion at September 30, 2023[139] - Cash and cash equivalents rose to $89.1 million, an increase of $48.6 million, or 119.8%, since December 31, 2022[140] - Total loans were $1.3 billion at September 30, 2023, representing 59.1% of total assets, with a $11.7 million increase, or 0.9%[141] - Deposits decreased by $65.1 million, or 3.8%, to $1.7 billion, primarily due to a $146.4 million decrease in passbook savings accounts[144] - Total borrowings increased by $115.0 million, or 76.2%, to $266.0 million, used to enhance liquidity and fund the decrease in deposits[146] - Total stockholders' equity decreased by $7.8 million, or 3.0%, to $248.8 million at September 30, 2023[147] Income and Expenses - Net income decreased by $3.0 million, or 77.4%, to $880,000 for the three months ended September 30, 2023, compared to $3.9 million for the same period in 2022[154] - Net interest income decreased by $4.3 million, or 30.0%, to $10.0 million for the three months ended September 30, 2023, from $14.3 million for the same period in 2022[155] - Interest expense increased by $5.5 million, or 306.1%, due to a 120 basis point increase in the cost of average interest-bearing liabilities[155] - Interest income increased by $1.2 million, or 7.6%, to $17.4 million for the three months ended September 30, 2023, from $16.2 million for the same period in 2022[156] - Noninterest income decreased by $26,000 for the three months ended September 30, 2023, compared to the same period in 2022, primarily due to a decrease in broker fee income[161] - Net income decreased by $8.0 million, or 63.1%, to $4.7 million for the nine months ended September 30, 2023, from $12.7 million for the same period in 2022[165] - Net interest income decreased by $9.0 million, or 21.3%, to $33.2 million for the nine months ended September 30, 2023, from $42.2 million for the same period in 2022[166] - Noninterest income decreased by $1.2 million to $1.868 million for the nine months ended September 30, 2023, a decline of 38.5% compared to $3.039 million in the same period of 2022[173] Interest Rates and Risk Management - The net interest rate spread decreased to 1.69% for the three months ended September 30, 2023, compared to 2.69% for the same period in 2022[155] - The net interest margin decreased to 1.90% for the three months ended September 30, 2023, compared to 2.75% for the same period in 2022[155] - The company has a significant exposure to interest rate risk due to its majority assets being long-term, fixed-rate residential mortgage loans and mortgage-backed securities[198] - The Economic Value of Equity (EVE) analysis indicates that a 400 basis point increase in interest rates could lead to a decrease in EVE by $196.911 million, representing a 125.33% decline[203] - Interest rates on Freddie Mac mortgage-backed securities increased by 41 basis points from June 30, 2023, to September 30, 2023, negatively impacting the value of interest-earning assets[204] - The company does not engage in hedging activities or invest in high-risk mortgage derivatives, which limits its risk management strategies[199] - The company’s interest-bearing liabilities mature or reprice more quickly than its interest-earning assets, increasing vulnerability to rising interest rates[198] Loan and Deposit Activity - The company originated $83.0 million in loans during the nine months ended September 30, 2023, compared to $127.4 million in the same period of 2022[185] - Deposits decreased by $65.1 million for the nine months ended September 30, 2023, following an increase of $30.0 million in the same period of 2022[186] - The company had $6.1 million in loan commitments outstanding for fixed-rate loans and $14.8 million in unused lines of credit as of September 30, 2023[184] Regulatory and Capital Position - Territorial Savings Bank exceeded all fully phased-in regulatory capital requirements and is considered "well capitalized" as of September 30, 2023[188] - The provision for credit/loan losses resulted in ratios of the allowance for credit/loan losses to total loans of 0.38% and 0.16% at September 30, 2023, and 2022, respectively[171] Other Financial Metrics - Interest income on other interest-earning assets increased by $678,000, or 181.8%, to $1.1 million for the three months ended September 30, 2023[156] - Interest income on loans increased by $510,000, or 4.5%, to $11.9 million for the three months ended September 30, 2023[156] - The average balance of interest-earning assets increased by $25.0 million for the three months ended September 30, 2023[155] - The average balance of interest-bearing liabilities increased by $28.4 million for the three months ended September 30, 2023[155] - Interest expense on interest-bearing deposits increased by $10.7 million, or 414.6%, to $13.3 million for the nine months ended September 30, 2023, from $2.6 million for the same period in 2022[168] - The average rate paid on certificates of deposit increased to 3.34% for the nine months ended September 30, 2023, from 0.96% for the same period in 2022[168] - Interest expense on FHLB advances rose by $3.2 million, or 208.7%, to $4.8 million for the nine months ended September 30, 2023, from $1.5 million for the same period in 2022[170] - Salaries and employee benefits decreased by $795,000 to $15.723 million, a reduction of 4.8% compared to $16.518 million for the nine months ended September 30, 2022[175] - Total noninterest expense decreased by $121,000 to $28.790 million, a decline of 0.4% compared to $28.911 million for the same period in 2022[176] - Income tax expense was $1.7 million for the nine months ended September 30, 2023, with an effective tax rate of 27.1%, down from $4.2 million and 25.0% in the prior year[177]