Territorial Bancorp Inc. Announces Fourth Quarter 2023 Results
- Tier one leverage and risk-based capital ratios of 11.69% and 28.89%, respectively
- Solid asset quality with a ratio of non-performing assets to total assets of 0.10%
- Strong liquidity position with $126.66 million in cash balances and access to liquidity totaling $937.38 million
- Approved a quarterly cash dividend of $0.05 per share
- Net income of $334,000 for the three months ended December 31, 2023
- Net interest income decreased by $3.86 million
- Total interest expense increased by $5.33 million
Insights
The recent financial update from Territorial Bancorp Inc. highlights several key metrics that are critical for evaluating the company's financial health and its performance in the context of the banking industry. The reported net income of $334,000 represents a snapshot of profitability which is essential for investors assessing the company's earnings quality. The tier one leverage and risk-based capital ratios of 11.69% and 28.89% respectively, are significantly above the regulatory requirements, indicating a robust capital structure. This is particularly important as it suggests a buffer against potential losses, which could reassure investors about the company's stability.
Furthermore, the liquidity position, with substantial cash balances and access to liquidity, is a positive sign for the company's ability to meet short-term obligations. However, the decline in net interest income and the increase in interest expenses due to rising market rates could be a concern as they directly affect the net interest margin, a key driver of profitability for banks. The dividend announcement of $0.05 per share is also noteworthy, marking the 57th consecutive quarterly dividend, which could be interpreted as a signal of confidence in the company's ability to generate consistent cash flows.
From a market perspective, the performance of Territorial Bancorp Inc. must be contextualized within the broader economic environment, particularly the rising interest rate landscape. The company's mention of the challenges posed by the uncertain interest rate environment reflects a widespread concern in the banking sector, where loan growth and deposit retention are sensitive to interest rate fluctuations. The shift in customer behavior, moving from lower-rate savings accounts to higher-rate CDs, is indicative of changing consumer preferences in response to the interest rate environment. This shift has implications for the bank's deposit strategies and interest expense management.
Additionally, the adoption of the CECL accounting standard and the subsequent increase in the allowance for credit losses is a significant change that investors should note. The updated standard requires banks to account for expected credit losses over the life of loans, potentially leading to earlier recognition of credit losses and affecting capital ratios. It is a development that could impact the bank's financial statements and investor perceptions in future quarters.
Assessing the company's asset quality and risk profile, the low ratio of non-performing assets to total assets at 0.10% is a positive indicator of healthy credit quality. This figure is particularly relevant in the context of the bank's risk management and underwriting standards. The impact of external events, such as the Maui wildfires, on the loan portfolio is also a critical point of analysis. Despite the destruction of collateral homes, the report indicates that the bank does not expect to incur losses due to insurance coverage, which speaks to the effectiveness of its risk mitigation strategies.
The increase in the allowance for credit losses following the adoption of CECL is a prudent measure that aligns with industry trends towards more conservative credit loss provisioning. The high ratio of the allowance for credit losses to non-performing loans suggests that the bank is well-prepared to absorb potential losses, which is reassuring for stakeholders concerned with credit risk.
- The Company’s tier one leverage and risk-based capital ratios were
11.69% and28.89% , respectively, and the Company is considered to be “well-capitalized” at December 31, 2023. - Solid asset quality with the ratio of non-performing assets to total assets of
0.10% as of December 31, 2023. - Strong liquidity position with
$126.66 million in cash balances and access to liquidity totaling$937.38 million as of December 31, 2023. - The Board of Directors approved a quarterly cash dividend of
$0.05 per share, representing Territorial Bancorp Inc.’s 57th consecutive quarterly dividend.
HONOLULU, Hawaii, Jan. 26, 2024 (GLOBE NEWSWIRE) -- Territorial Bancorp Inc. (NASDAQ: TBNK) (the “Company”), headquartered in Honolulu, Hawaii, the holding company parent of Territorial Savings Bank, announced net income of
The Board of Directors approved a dividend of
“The uncertain interest rate environment continues to be a challenge for the banking industry. The higher levels of interest rates will keep pressure on loan growth and deposit retention, which have an impact on our net interest margin. While interest rates may decrease in the future, we believe that the competition for loans and deposits will remain strong as we navigate through this cycle. We continue our focus on maintaining our strong capital levels, which are above regulatory required levels, preserving our solid asset quality, and maintaining our strong liquidity levels,” said Allan Kitagawa, Chairman and CEO.
Interest Income
Net interest income decreased by
Interest Expense and Provision for Credit Losses
As a result of the increases in short-term interest rates, total interest expense increased by
The Company recognized
Noninterest Income
Noninterest income was
Noninterest Expense
Noninterest expense decreased to
Income Taxes
Income tax expense for the three months ended December 31, 2023 was
Balance Sheet
Total assets were
Deposits decreased by
Asset Quality
In August 2023, wildfires on Maui partially or completely destroyed 12 homes which were collateral for
Credit quality continues to be extremely important as the Bank adheres to its strict underwriting standards. The Company had
About Us
Territorial Bancorp Inc., headquartered in Honolulu, Hawaii, is the stock holding company for Territorial Savings Bank. Territorial Savings Bank is a state chartered savings bank which was originally chartered in 1921 by the Territory of Hawaii. Territorial Savings Bank conducts business from its headquarters in Honolulu, Hawaii and has 28 branch offices in the state of Hawaii. For additional information, please visit the Company’s website at: https://www.tsbhawaii.bank.
Forward-looking statements - this earnings release contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:
- statements of our goals, intentions and expectations;
- statements regarding our business plans, prospects, growth and operating strategies;
- statements regarding the asset quality of our loan and investment portfolios; and
- estimates of our risks and future costs and benefits.
These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this earnings release.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
- general economic conditions, either internationally, nationally or in our market areas, that are worse than expected;
- competition among depository and other financial institutions;
- inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;
- adverse changes in the securities markets;
- changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
- changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board;
- our ability to enter new markets successfully and capitalize on growth opportunities;
- our ability to successfully integrate acquired entities, if any;
- changes in consumer demand, spending, borrowing and savings habits;
- changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;
- changes in our organization, compensation and benefit plans;
- the timing and amount of revenues that we may recognize;
- the value and marketability of collateral underlying our loan portfolios;
- our ability to retain key employees;
- cyberattacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data or disable our systems;
- technological change that may be more difficult or expensive than expected;
- the ability of third-party providers to perform their obligations to us;
- the ability of the U.S. Government to manage federal debt limits;
- the quality and composition of our investment portfolio;
- the effect of any pandemic disease, including COVID-19, natural disaster, war, act of terrorism, accident or similar action or event;
- changes in market and other conditions that would affect our ability to repurchase our common stock; and
- changes in our financial condition or results of operations that reduce capital available to pay dividends.
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
| Territorial Bancorp Inc. and Subsidiaries | ||||||||||||||
| Consolidated Statements of Income (Unaudited) | ||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||
| December 31, | December 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||
| Interest income: | ||||||||||||||
| Loans | $ | 12,006 | $ | 11,409 | $ | 47,043 | $ | 45,318 | ||||||
| Investment securities | 4,406 | 4,458 | 17,918 | 16,211 | ||||||||||
| Other investments | 1,279 | 357 | 4,127 | 1,173 | ||||||||||
| Total interest income | 17,691 | 16,224 | 69,088 | 62,702 | ||||||||||
| Interest expense: | ||||||||||||||
| Deposits | 6,223 | 2,348 | 19,484 | 4,925 | ||||||||||
| Advances from the Federal Home Loan Bank | 1,854 | 558 | 6,636 | 2,107 | ||||||||||
| Securities sold under agreements to repurchase | 46 | 46 | 183 | 183 | ||||||||||
| Advances from the Federal Reserve Bank | 154 | — | 154 | — | ||||||||||
| Total interest expense | 8,277 | 2,952 | 26,457 | 7,215 | ||||||||||
| Net interest income | 9,414 | 13,272 | 42,631 | 55,487 | ||||||||||
| Provision (reversal of provision) for credit/loan losses | 144 | 27 | (3 | ) | (576 | ) | ||||||||
| Net interest income after provision (reversal of provision) for credit/loan losses | 9,270 | 13,245 | 42,634 | 56,063 | ||||||||||
| Noninterest income: | ||||||||||||||
| Service and other fees | 305 | 324 | 1,327 | 1,416 | ||||||||||
| Income on bank-owned life insurance | 227 | 201 | 855 | 792 | ||||||||||
| Net gain (loss) on sale of loans | — | — | 10 | (3 | ) | |||||||||
| Other | 71 | 645 | 279 | 2,004 | ||||||||||
| Total noninterest income | 603 | 1,170 | 2,471 | 4,209 | ||||||||||
| Noninterest expense: | ||||||||||||||
| Salaries and employee benefits | 5,109 | 5,741 | 20,832 | 22,259 | ||||||||||
| Occupancy | 1,709 | 1,784 | 6,910 | 6,708 | ||||||||||
| Equipment | 1,278 | 1,257 | 5,156 | 5,006 | ||||||||||
| Federal deposit insurance premiums | 245 | 144 | 982 | 573 | ||||||||||
| Other general and administrative expenses | 1,137 | 961 | 4,388 | 4,252 | ||||||||||
| Total noninterest expense | 9,478 | 9,887 | 38,268 | 38,798 | ||||||||||
| Income before income taxes | 395 | 4,528 | 6,837 | 21,474 | ||||||||||
| Income taxes | 61 | 1,083 | 1,810 | 5,318 | ||||||||||
| Net income | $ | 334 | $ | 3,445 | $ | 5,027 | $ | 16,156 | ||||||
| Basic earnings per share | $ | 0.04 | $ | 0.39 | $ | 0.58 | $ | 1.81 | ||||||
| Diluted earnings per share | $ | 0.04 | $ | 0.39 | $ | 0.57 | $ | 1.80 | ||||||
| Cash dividends declared per common share | $ | 0.05 | $ | 0.33 | $ | 0.74 | $ | 1.02 | ||||||
| Basic weighted-average shares outstanding | 8,575,902 | 8,807,548 | 8,636,495 | 8,865,946 | ||||||||||
| Diluted weighted-average shares outstanding | 8,603,843 | 8,857,848 | 8,684,092 | 8,920,714 | ||||||||||
| Territorial Bancorp Inc. and Subsidiaries | ||||||||
| Consolidated Balance Sheets (Unaudited) | ||||||||
| (Dollars in thousands, except per share data) | ||||||||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 126,659 | $ | 40,553 | ||||
| Investment securities available for sale, at fair value | 20,171 | 20,821 | ||||||
| Investment securities held to maturity, at amortized cost (fair value of | 685,728 | 717,773 | ||||||
| Loans receivable | 1,308,552 | 1,296,796 | ||||||
| Allowance for credit/loan losses | (5,121 | ) | (2,032 | ) | ||||
| Loans receivable, net of allowance for credit/loan losses | 1,303,431 | 1,294,764 | ||||||
| Federal Home Loan Bank stock, at cost | 12,192 | 8,197 | ||||||
| Federal Reserve Bank stock, at cost | 3,180 | 3,170 | ||||||
| Accrued interest receivable | 6,105 | 6,115 | ||||||
| Premises and equipment, net | 7,185 | 7,599 | ||||||
| Right-of-use asset, net | 12,371 | 14,498 | ||||||
| Bank-owned life insurance | 48,638 | 47,783 | ||||||
| Income taxes receivable | 344 | — | ||||||
| Deferred income tax assets, net | 2,457 | 1,643 | ||||||
| Prepaid expenses and other assets | 8,211 | 6,676 | ||||||
| Total assets | $ | 2,236,672 | $ | 2,169,592 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities: | ||||||||
| Deposits | $ | 1,636,604 | $ | 1,716,152 | ||||
| Advances from the Federal Home Loan Bank | 242,000 | 141,000 | ||||||
| Advances from the Federal Reserve Bank | 50,000 | — | ||||||
| Securities sold under agreements to repurchase | 10,000 | 10,000 | ||||||
| Accounts payable and accrued expenses | 23,334 | 24,180 | ||||||
| Lease liability | 17,297 | 15,295 | ||||||
| Income taxes payable | — | 838 | ||||||
| Advance payments by borrowers for taxes and insurance | 6,351 | 5,577 | ||||||
| Total liabilities | 1,985,586 | 1,913,042 | ||||||
| Stockholders' Equity: | ||||||||
| Preferred stock, | — | — | ||||||
| Common stock, | ||||||||
| 8,826,613 and 9,071,076 shares as of December 31, 2023 and 2022, respectively | 88 | 91 | ||||||
| Additional paid-in capital | 48,022 | 51,825 | ||||||
| Unearned ESOP shares | (2,447 | ) | (2,936 | ) | ||||
| Retained earnings | 211,644 | 215,314 | ||||||
| Accumulated other comprehensive loss | (6,221 | ) | (7,744 | ) | ||||
| Total stockholders’ equity | 251,086 | 256,550 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,236,672 | $ | 2,169,592 | ||||
| Territorial Bancorp Inc. and Subsidiaries | |||||||||||
| Selected Financial Data (Unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Performance Ratios (annualized): | |||||||||||
| Return on average assets | |||||||||||
| Return on average equity | |||||||||||
| Net interest margin on average interest earning assets | |||||||||||
| Efficiency ratio (1) | |||||||||||
| At | At | ||||||||||
| December | December | ||||||||||
| 31, 2023 | 31, 2022 | ||||||||||
| Selected Balance Sheet Data: | |||||||||||
| Book value per share (2) | |||||||||||
| Stockholders' equity to total assets | |||||||||||
| Asset Quality | |||||||||||
| (Dollars in thousands): | |||||||||||
| Delinquent loans 90 days past due and not accruing | |||||||||||
| Non-performing assets (3) | |||||||||||
| Allowance for credit losses | |||||||||||
| Non-performing assets to total assets | |||||||||||
| Allowance for credit losses to total loans | |||||||||||
| Allowance for credit losses to non-performing assets | |||||||||||
| Note: | |||||||||||
| (1) Efficiency ratio is equal to noninterest expense divided by the sum of net interest income and noninterest income | |||||||||||
| (2) Book value per share is equal to stockholders' equity divided by number of shares issued and outstanding | |||||||||||
| (3) Non-performing assets consist of non-accrual loans and real estate owned. Amounts are net of charge-offs | |||||||||||
Contact: Walter Ida
(808) 946-1400
FAQ
What is the tier one leverage ratio of Territorial Bancorp Inc.?
What is the risk-based capital ratio of Territorial Bancorp Inc.?
What is the non-performing assets to total assets ratio of Territorial Bancorp Inc.?
What is the cash dividend approved by the Board of Directors of Territorial Bancorp Inc.?
What was the net income of Territorial Bancorp Inc. for the three months ended December 31, 2023?
