Territorial Bancorp Inc. Announces Second Quarter 2021 Results

Thursday, 29. July 2021 22:30
  • Net income for the three months ended June 30, 2021 was $4.06 million compared to $4.29 million for the three months ended June 30, 2020.
  • Fully-diluted earnings per share for the three months ended June 30, 2021 was $0.44 per share compared to $0.47 per share for the three months ended June 30, 2020. 
  • Fully-diluted earnings per share for the six months ended June 30, 2021 was $0.99 per share compared to $0.94 per share for the six months ended June 30, 2020.   Earnings per share for the first six months of 2021 has risen by $0.05 per share, or 5.32%.  
  • Board of Directors approved a quarterly cash dividend of $0.23 per share, representing Territorial Bancorp Inc.’s 46th consecutive quarterly dividend.  

HONOLULU, July 29, 2021 (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 $4.06 million, or $0.44 per diluted share, for the three months ended June 30, 2021.

The Company also announced that its Board of Directors approved a quarterly cash dividend of $0.23 per share. The dividend is expected to be paid on August 26, 2021 to stockholders of record as of August 12, 2021.

Allan Kitagawa, Chairman and Chief Executive Officer, said, “Hawaii’s economy has improved as more visitors arrive in the state. Our balance sheet and asset quality remain strong and we are well-positioned to help our customers with their banking needs. We also continue to return capital to our shareholders by paying dividends and repurchasing shares.”

Interest Income

Net interest income decreased to $13.08 million for the three months ended June 30, 2021 from $14.77 million for the three months ended June 30, 2020. Total interest income was
$14.76 million for the three months ended June 30, 2021 compared to $18.00 million for the three months ended June 30, 2020. The $3.24 million decrease in total interest income was primarily due to a $3.09 million decrease in interest earned on loans and a $216,000 decrease in interest income on investment securities. The decline in interest income on loans was due to a 26 basis point decrease in the average yield on loans receivable and a $228.84 million decrease in the average loan balance. The decrease in the average yield on loans occurred because of the payoff of higher yielding loans and the addition of new lower yielding loans to the loan portfolio. The decrease in the average loan balance occurred as loan repayments and sales of loans exceeded the origination of new loans. The decrease in interest income on investment securities occurred because of a 61 basis point decrease in the average securities yield, which was partially offset by a $55.34 million increase in the average balance of investment securities. The decrease in the average securities yield occurred as higher yielding securities were paid-off and the addition of new lower yielding securities to the investment portfolio. The increase in the average balance of investment securities occurred as security purchases exceeded repayments and the sale of securities.

Interest Expense and Provision for Loan Losses

Total interest expense decreased to $1.67 million for the three months ended June 30, 2021 from $3.24 million for the three months ended June 30, 2020. Interest expense on deposits decreased by $1.27 million to $1.09 million for the three months ended June 30, 2021 from $2.36 million for the three months ended June 30, 2020. The decrease in interest expense on deposits was primarily due to a 33 basis point decrease in the average cost of deposits. The decrease in the average cost of deposits occurred as the interest rates offered on deposits were lowered in response to the decline in market interest rates. Interest expense on Federal Home Loan Bank (FHLB) advances decreased by $292,000 to $537,000 for the three months ended June 30, 2021 from $829,000 for the three months ended June 30, 2020. The decrease in interest expense on FHLB advances resulted from an 80 basis point decrease in the average cost of advances. The decrease in the average cost of advances occurred as the Company restructured $102.00 million of FHLB advances at lower interest rates. The Company reversed loan loss provisions of $372,000 for the three months ended June 30, 2021 compared to loan loss provisions of $1.40 million for the three months ended June 30, 2020. The reversal of the loan loss provisions during the three months ended June 30, 2021 occurred primarily because of the decreases in the size of the mortgage loan portfolio, in Hawaii’s unemployment rate and in amount of loans in the payment deferral program, all of which contributed to the reduction in the allowance for loan losses.

Noninterest Income

Noninterest income was $1.73 million for the three months ended June 30, 2021 compared to $1.46 million for the three months ended June 30, 2020. The increase in noninterest income was primarily due to a $492,000 increase in the gain on sale of investment securities. The increase in gain on sale of investment securities was partially offset by a $233,000 decrease in the gain on sale of loans which occurred during the same period.

Noninterest Expense

Noninterest expense was $9.61 million for the three months ended June 30, 2021 compared to $8.97 million for the three months ended June 30, 2020. Salaries and benefits expense increased by $296,000 to $5.56 million for the three months ended June 30, 2021 from $5.26 million for the three months ended June 30, 2020. The increase in salaries and benefit expenses occurred primarily because of an increase in compensation and health insurance. The increases in these expenses were partially offset by decreases in the cost of equity incentive plans. Other general and administrative expenses increased by $431,000 to $1.27 million for the three months ended June 30, 2021 from $843,000 for the three months ended June 30, 2020. The increase in general and administrative expenses is primarily due to increases in accounting, marketing, and legal expenses.

Income Taxes

Income tax expense for the three months ended June 30, 2021 was $1.51 million compared to $1.57 million for the three months ended June 30, 2020. The decrease in income tax expense was primarily due to a $290,000 decrease in income before taxes during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Balance Sheet

Total assets were $2.13 billion at June 30, 2021 and $2.11 billion at December 31, 2020. Loans receivable decreased by $93.78 million to $1.31 billion at June 30, 2021 from $1.41 billion at December 31, 2020. The decrease in loans receivable occurred as loan repayments and sales exceeded new loan originations. Investment securities increased by $357.87 million to $609.07 million at June 30, 2021 from $251.20 million at December 31, 2020. The increase in investment securities occurred as the purchase of new mortgage-backed securities exceeded principal repayments and the sale of securities. Cash and cash equivalents decreased to $117.58 million at June 30, 2021 from $363.54 million at December 31, 2020. The decrease in cash and cash equivalents occurred because of the purchase of investment securities. Deposits increased to $1.68 billion at June 30, 2021 from $1.66 billion at December 31, 2020. Total stockholders’ equity increased to $251.25 million at June 30, 2021 from $248.71 million at December 31, 2020. The increase in stockholders’ equity occurred as the Company’s net income and the increase in capital from the allocation of ESOP shares exceeded dividends paid to shareholders and share repurchases.

Capital Management

During the three months ended June 30, 2021, the Company repurchased 101,273 shares. Through June 30, 2021, the Company repurchased 3,806,950 shares in all of its share repurchase programs. The shares repurchased represent 31.12% of the total shares issued in its initial public offering.  

Asset Quality

The Company had $99,000 of delinquent mortgage loans 90 days or more past due at June 30, 2021 compared to $240,000 of delinquent mortgage loans 90 days or more past due at December 31, 2020. Delinquent loans exclude loans which are receiving loan payment deferrals because of COVID-19. Non-performing assets totaled $4.19 million at June 30, 2021 compared to $4.41 million at December 31, 2020. The ratio of non-performing assets to total assets was 0.20% at June 30, 2021 and 0.21% at December 31, 2020. The allowance for loan losses at June 30, 2021 was $2.97 million and represented 0.23% of total loans compared to $4.26 million and 0.30% of total loans as of December 31. 2020.

As of June 30, 2021, the Company had $25.62 million of loans, or 1.95% of total loans receivable in its payment deferral program.   As of March 31, 2021, the Company had $29.30 million, or 2.18% of total loans receivable in its payment deferral program. In this program, the Company allowed borrowers, who experienced financial hardship because of COVID-19, to defer payments on their loans. The decrease in the amount of loans in the payment deferral program occurred as borrowers opted out of the program and repaid any deferred loan payments.   

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 29 branch offices in the state of Hawaii. For additional information, please visit the Company’s website at: https://www.territorialsavings.net.

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:

  • the effect of any pandemic disease, including COVID-19, natural disaster, war, act of terrorism, accident or similar action or event;
  • 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;
  • 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  Six Months Ended
  June 30,  June 30,
  2021  2020 2021  2020
Interest income:          
Loans $12,134  $15,225$25,183 $30,682
Investment securities  2,394   2,610 4,219  5,390
Other investments  228   170 459  514
Total interest income  14,756   18,005 29,861  36,586
           
Interest expense:          
Deposits  1,090   2,364 2,407  5,488
Advances from the Federal Home Loan Bank  537   829 1,073  1,724
Securities sold under agreements to repurchase  45   46 91  91
Total interest expense  1,672   3,239 3,571  7,303
           
Net interest income  13,084   14,766 26,290  29,283
(Reversal of provision) provision for loan losses  (372)  1,395 (1,285) 1,612
           
Net interest income after (reversal of provision) provision for loan losses  13,456   13,371 27,575  27,671
           
Non-interest income:          
Service fees on loan and deposit accounts  530   535 1,525  988
Income on bank-owned life insurance  190   201 378  403
Gain on sale of investment securities  911   419 1,437  597
Gain on sale of loans  26   259 446  666
Other  70   47 180  108
Total noninterest income  1,727   1,461 3,966  2,762
           
Noninterest expense:          
Salaries and employee benefits  5,560   5,264 11,083  10,948
Occupancy  1,572   1,626 3,219  3,271
Equipment  1,064   1,164 2,194  2,284
Federal deposit insurance premiums  142   74 283  74
Other general and administrative expenses  1,274   843 2,387  1,932
Total noninterest expense  9,612   8,971 19,166  18,509
           
Income before income taxes  5,571   5,861 12,375  11,924
Income taxes  1,513   1,570 3,304  3,160
Net income $4,058  $4,291$9,071 $8,764
           
Basic earnings per share $0.44  $0.47$0.99 $0.95
Diluted earnings per share $0.44  $0.47$0.99 $0.94
Cash dividends paid per common share $0.23  $0.23$0.46 $0.46
Basic weighted-average shares outstanding  9,117,467   9,092,287 9,124,086  9,164,877
Diluted weighted-average shares outstanding  9,162,348   9,139,135 9,166,003  9,228,421


Territorial Bancorp Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except per share data)
        
  June 30, December 31, 
  2021  2020  
ASSETS       
Cash and cash equivalents $117,578  $363,543  
Investment securities available for sale     3,562  
Investment securities held to maturity, at amortized cost (fair value of $615,721 and
$262,841 at June 30, 2021 and December 31, 2020, respectively).
  609,074   247,642  
Loans held for sale  540   2,195  
Loans receivable, net  1,314,871   1,406,995  
Federal Home Loan Bank stock, at cost  8,173   8,144  
Federal Reserve Bank stock, at cost  3,152   3,145  
Accrued interest receivable  6,345   6,515  
Premises and equipment, net  4,454   4,855  
Right-of-use asset, net  13,623   12,333  
Bank-owned life insurance  46,022   45,644  
Deferred income tax assets, net  3,145   3,382  
Prepaid expenses and other assets  5,100   2,844  
Total assets $2,132,077  $2,110,799  
        
LIABILITIES AND STOCKHOLDERS’ EQUITY       
Liabilities:       
Deposits $1,678,694  $1,659,800  
Advances from the Federal Home Loan Bank  141,000   141,000  
Securities sold under agreements to repurchase  10,000   10,000  
Accounts payable and accrued expenses  28,219   29,221  
Lease liability  14,433   13,119  
Income taxes payable  2,354   2,161  
Advance payments by borrowers for taxes and insurance  6,132   6,790  
Total liabilities  1,880,832   1,862,091  
        
Stockholders’ Equity:       
Preferred stock, $.01 par value; authorized 50,000,000 shares, no shares issued or outstanding       
Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding
9,421,560 and 9,513,867 shares at June 30, 2021 and December 31, 2020,
respectively.
  94   95  
Additional paid-in capital  58,860   61,153  
Unearned ESOP shares  (3,670)  (3,915) 
Retained earnings  204,928   200,066  
Accumulated other comprehensive loss  (8,967)  (8,691) 
Total stockholders’ equity  251,245   248,708  
Total liabilities and stockholders’ equity $2,132,077  $2,110,799  
        


Territorial Bancorp Inc. and Subsidiaries
Selected Financial Data (Unaudited)
            
            
            
       Three Months Ended  
       June 30,   
        2021   2020   
            
Performance Ratios (annualized):        
 Return on average assets     0.76%   0.83%   
 Return on average equity    6.43%   7.05%   
 Net interest margin on average interest earning assets  2.54%   2.94%   
 Efficiency ratio (1)     64.90%   55.28%   
            
            
       At June At December  
        30, 2021   31, 2020   
            
Selected Balance Sheet Data:        
 Book value per share (2)    $26.67  $26.14   
 Stockholders' equity to total assets    11.78%   11.78%   
            
            
Asset Quality          
(Dollars in thousands):         
 Delinquent loans 90 days past due and not accruing $99  $240   
 Non-performing assets (3)   $4,190  $4,405   
 Allowance for loan losses   $2,969  $4,262   
 Non-performing assets to total assets   0.20%   0.21%   
 Allowance for loan losses to total loans   0.23%   0.30%   
 Allowance for loan losses to non-performing assets  70.86%   96.75%   
            
            
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


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