Territorial Bancorp (US:TBNK)2024-05-10 21:00Financial Position - Total assets decreased by $43.6 million, or 2.0%, to $2.2 billion as of March 31, 2024, primarily due to a decrease in cash and cash equivalents [133]. - Cash and cash equivalents were $90.1 million, a decrease of $36.6 million, or 28.9%, since December 31, 2023, mainly due to a drop in deposits [134]. - Total loans increased by $1.1 million, or 0.1%, to $1.3 billion, representing 59.5% of total assets [135]. - Total investment securities decreased by $8.8 million, or 1.3%, to $697.1 million, accounting for 31.8% of total assets [136]. - Deposits decreased by $36.5 million, or 2.2%, to $1.6 billion, primarily due to customers seeking higher interest rates [137]. - Total stockholders' equity was $250.0 million, a decrease of $1.1 million, or 0.4%, from December 31, 2023, attributed to net loss and unrealized losses on securities [139]. - Nonperforming assets totaled $2.2 million, or 0.10% of total assets, consistent with the previous quarter [126]. Credit and Loan Performance - Credit loss provisions recorded were $19,000 for the three months ended March 31, 2024, compared to a reversal of $100,000 in the same period of 2023 [126]. - Nonaccrual loans totaled $2.2 million at March 31, 2024, or 0.17% of total loans, compared to $2.4 million, or 0.18%, at March 31, 2023 [150]. - The company originated $19.2 million in loans during the three months ended March 31, 2024, compared to $21.2 million in the same period of 2023 [162]. Income and Expenses - The company reported a net loss of $482,000 for the three months ended March 31, 2024, a decrease of $2.8 million, or 120.8%, compared to a net income of $2.3 million for the same period in 2023 [144]. - Net interest income decreased by $3.3 million, or 27.5%, to $8.8 million for the three months ended March 31, 2024, from $12.1 million for the same period in 2023 [145]. - Interest expense increased by $4.6 million, or 99.4%, to $9.2 million for the three months ended March 31, 2024, primarily due to a 98 basis point increase in the cost of average interest-bearing liabilities [147]. - Interest income increased by $1.3 million, or 7.6%, to $18.0 million for the three months ended March 31, 2024, driven by a 20 basis point increase in the yield on average interest-earning assets [146]. - The net interest rate spread and net interest margin were 1.38% and 1.65%, respectively, for the three months ended March 31, 2024, compared to 2.16% and 2.30% for the same period in 2023 [145]. - The company experienced a decrease in service and other fees by $37,000, or 11.9%, to $273,000 for the three months ended March 31, 2024 [152]. - Noninterest expense increased by $447,000, or 4.6%, to $10,060,000 for the three months ended March 31, 2024, compared to $9,613,000 for the same period in 2023 [153]. - Salaries and employee benefits decreased by $442,000, or 8.2%, to $4,962,000, primarily due to a reduction in compensation expenses [153]. - Federal deposit insurance premiums increased by $251,000, or 102.4%, to $496,000, attributed to a rise in the FDIC premium rate retroactive to October 1, 2023 [153]. Regulatory and Capital Position - As of March 31, 2024, Territorial Savings Bank exceeded all regulatory capital requirements and is considered "well capitalized" under regulatory guidelines [165]. - Cash and cash equivalents totaled $90.1 million as of March 31, 2024, with additional borrowing capacity of $613.1 million from the FHLB and $163.5 million from the FRB [158]. - Estimated uninsured deposits were $404.2 million, or 25.3% of total deposits, as of March 31, 2024, down from $419.4 million, or 25.6%, as of December 31, 2023 [160]. Interest Rate Risk and Economic Value of Equity - As of December 31, 2023, the estimated EVE (Economic Value of Equity) is $215,097,000, with a ratio of 11.11% of the present value of assets [180]. - A 400 basis point increase in interest rates would result in a decrease in EVE by $204,587,000, representing a 95.11% change [180]. - The value of interest-earning assets has decreased due to a 21 basis point increase in mortgage interest rates between December 31, 2023, and March 31, 2024 [181]. - The EVE ratio is expected to decrease significantly with rising interest rates, with a 300 basis point increase leading to a 73.92% decrease in EVE [180]. - The EVE table indicates that a 100 basis point decrease in interest rates would increase EVE by $51,773,000, a 24.07% change [180]. - The present value of assets is calculated based on the discounted cash flows from interest-earning assets, which are sensitive to interest rate changes [181]. - The methodologies used to determine interest rate risk through EVE changes have inherent shortcomings, as they rely on certain assumptions [182]. - The EVE table assumes a constant composition of interest-sensitive assets and liabilities over the measured period [182]. - The actual impact of interest rate changes on EVE and net interest income may differ from the estimates provided in the EVE table [182]. - The company acknowledges that the EVE measurements are not intended to provide precise forecasts of market interest rate effects [182].