10-Q 1 tbnk-20240331x10q.htm 10-Q
P3YTerritorial Bancorp 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended March 31, 2024

or

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from               to               

Commission File Number  001-34403

TERRITORIAL BANCORP INC.

(Exact Name of Registrant as Specified in Charter)

Maryland

26-4674701

(State or Other Jurisdiction of Incorporation)

(I.R.S. Employer Identification No.)

1003 Bishop Street, Pauahi Tower Suite 500, Honolulu, Hawaii

96813

(Address of Principal Executive Offices)

(Zip Code)

(808) 946-1400

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and formal fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock

TBNK

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No .

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 8,832,235 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of April 30, 2024.

PART I

ITEM 1.     FINANCIAL STATEMENTS

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, except share data)

 

 

March 31,

 

December 31,

 

 

 

2024

 

2023

 

ASSETS

Cash and cash equivalents

$

90,059

$

126,659

Investment securities available for sale, at fair value

19,483

20,171

Investment securities held to maturity, at amortized cost (fair value of $547,290 and $568,128 at March 31, 2024 and December 31, 2023, respectively)

 

677,578

 

685,728

Loans receivable

 

1,309,712

 

1,308,552

Allowance for credit losses

(5,142)

(5,121)

Loans receivable, net of allowance for credit losses

 

1,304,570

 

1,303,431

Federal Home Loan Bank stock, at cost

 

12,232

 

12,192

Federal Reserve Bank stock, at cost

3,182

3,180

Accrued interest receivable

 

6,281

 

6,105

Premises and equipment, net

 

7,144

 

7,185

Right-of-use asset, net

12,080

12,371

Bank-owned life insurance

 

48,884

 

48,638

Income taxes receivable

604

344

Deferred income tax assets, net

 

2,820

 

2,457

Prepaid expenses and other assets

 

8,112

 

8,211

Total assets

$

2,193,029

$

2,236,672

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Deposits

$

1,600,148

$

1,636,604

Advances from the Federal Home Loan Bank

 

242,000

 

242,000

Advances from the Federal Reserve Bank

50,000

50,000

Securities sold under agreements to repurchase

 

10,000

 

10,000

Accounts payable and accrued expenses

 

20,113

 

23,334

Lease liability

17,597

17,297

Advance payments by borrowers for taxes and insurance

 

3,155

 

6,351

Total liabilities

 

1,943,013

 

1,985,586

Commitments and contingencies: (Note 16)

Stockholders’ Equity:

Preferred stock, $0.01 par value; authorized 50,000,000 shares, no shares issued or outstanding

 

 

Common stock, $0.01 par value; authorized 100,000,000 shares; issued and outstanding 8,826,613 shares at March 31, 2024 and December 31, 2023

 

88

 

88

Additional paid-in capital

 

48,098

 

48,022

Unearned ESOP shares

 

(2,324)

 

(2,447)

Retained earnings

 

210,771

 

211,644

Accumulated other comprehensive loss

 

(6,617)

 

(6,221)

Total stockholders’ equity

 

250,016

 

251,086

Total liabilities and stockholders’ equity

$

2,193,029

$

2,236,672

See accompanying Notes to Consolidated Financial Statements.

1

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

2023

 

Interest income:

Loans

$

12,065

$

11,454

Investment securities

4,313

4,540

Other investments

 

1,613

 

727

Total interest income

 

17,991

 

16,721

Interest expense:

Deposits

 

6,779

 

3,530

Advances from the Federal Home Loan Bank

 

1,810

 

1,054

Advances from the Federal Reserve Bank

595

Securities sold under agreements to repurchase

 

46

 

46

Total interest expense

 

9,230

 

4,630

Net interest income

 

8,761

 

12,091

Provision (reversal of provision) for credit losses

 

19

 

(100)

Net interest income after provision (reversal of provision) for credit losses

 

8,742

 

12,191

Noninterest income:

Service and other fees

 

273

 

310

Income on bank-owned life insurance

 

246

 

203

Net gain on sale of loans

 

 

1

Other

 

74

 

75

Total noninterest income

 

593

 

589

Noninterest expense:

Salaries and employee benefits

 

4,962

 

5,404

Occupancy

 

1,738

 

1,623

Equipment

 

1,323

 

1,312

Federal deposit insurance premiums

 

496

 

245

Other general and administrative expenses

 

1,541

 

1,029

Total noninterest expense

 

10,060

 

9,613

(Loss) income before income taxes

 

(725)

 

3,167

Income tax (benefit) expense

 

(243)

 

851

Net (loss) income

$

(482)

$

2,316

Basic (loss) earnings per share

$

(0.06)

$

0.26

Diluted (loss) earnings per share

$

(0.06)

$

0.26

Cash dividends declared per common share

$

0.05

$

0.23

Basic weighted-average shares outstanding

 

8,588,137

 

8,774,634

Diluted weighted-average shares outstanding

 

8,630,719

 

8,806,744

See accompanying Notes to Consolidated Financial Statements.

2

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

2023

 

Net (loss) income

$

(482)

$

2,316

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on securities

 

(396)

 

337

Total other comprehensive (loss) income, net of tax

 

(396)

 

337

Comprehensive (loss) income

$

(878)

$

2,653

See accompanying Notes to Consolidated Financial Statements.

3

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Common

 

 

 

 

Additional

 

Unearned

 

 

 

 

Other

 

Total

 

 

Shares

 

Common

 

Paid-in

 

ESOP

 

Retained

 

Comprehensive

 

Stockholders’

 

 

Outstanding

 

Stock

 

Capital

 

Shares

 

Earnings

 

Loss

 

Equity

Balances at December 31, 2023

8,826,613

$

88

$

48,022

$

(2,447)

$

211,644

$

(6,221)

$

251,086

Net loss

 

(482)

(482)

Other comprehensive loss

 

(396)

(396)

Cash dividends declared ($0.05 per share)

 

(391)

(391)

Share-based compensation

 

81

81

Allocation of 12,234 ESOP shares

 

(5)

123

118

Balances at March 31, 2024

8,826,613

$

88

$

48,098

$

(2,324)

$

210,771

$

(6,617)

$

250,016

See accompanying Notes to Consolidated Financial Statements.

4

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common

 

 

 

 

Additional

 

Unearned

 

 

 

 

Other

 

Total

 

 

 

Shares

 

Common

 

Paid-in

 

ESOP

 

Retained

 

Comprehensive

 

Stockholders’

 

 

 

Outstanding

 

Stock

 

Capital

 

Shares

 

Earnings

 

Loss

 

Equity

 

Balances at December 31, 2022

9,071,076

$

91

$

51,825

$

(2,936)

$

215,314

$

(7,744)

$

256,550

Net income

 

2,316

2,316

Other comprehensive income

 

337

337

Cumulative change in accounting principle (1)

(2,319)

(2,319)

Cash dividends declared ($0.23 per share)

 

(1,975)

(1,975)

Share-based compensation

4,540

 

(42)

(42)

Allocation of 12,234 ESOP shares

 

159

122

281

Repurchase of shares of common stock

(69,065)

(1)

(1,386)

(1,387)

Balances at March 31, 2023

9,006,551

$

90

$

50,556

$

(2,814)

$

213,336

$

(7,407)

$

253,761

(1)Represents the impact of the adoption of Accounting Standard Update 2016-13.

See accompanying Notes to Consolidated Financial Statements.

5

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

2023

 

Cash flows from operating activities:

Net (loss) income

$

(482)

$

2,316

Adjustments to reconcile net (loss) income to net cash from operating activities:

Provision (reversal of provision) for credit losses

 

19

 

(100)

Depreciation and amortization

 

242

 

292

Deferred income tax (benefit) expense

 

(220)

 

266

Accretion of fees, discounts, and premiums, net

 

(60)

 

(90)

Amortization of right-of-use asset

695

716

Origination of loans held for sale

 

 

(355)

Proceeds from sales of loans held for sale

 

 

356

Gain on sale of loans, net

 

 

(1)

ESOP expense

 

118

 

281

Share-based compensation expense

 

81

 

(42)

Net increase in accrued interest receivable

 

(169)

 

(13)

Income on bank-owned life insurance

 

(246)

 

(203)

Net decrease (increase) in prepaid expenses and other assets

 

99

 

(154)

Net decrease in accounts payable and accrued expenses

 

(3,183)

 

(1,661)

Net decrease in lease liability

(104)

(694)

Net decrease in advance payments by borrowers for taxes and insurance

 

(3,196)

 

(2,691)

Net (decrease) increase in income taxes payable

 

(260)

 

196

Net cash used in operating activities

 

(6,666)

 

(1,581)

Cash flows from investing activities:

Purchases of investment securities held to maturity

 

 

(6,693)

Principal repayments on investment securities held to maturity

 

8,162

 

8,879

Principal repayments on investment securities available for sale

159

220

Principal repayments on loans receivable, net of loan originations

 

(1,126)

 

409

Purchases of Federal Home Loan Bank stock

(40)

(5,087)

Proceeds from redemption of Federal Home Loan Bank stock

 

 

840

Purchases of Federal Reserve Bank stock

(3)

(7)

Purchases of premises and equipment

 

(202)

 

(116)

Net cash from (used in) investing activities

 

6,950

 

(1,555)

(Continued)

6

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

2023

Cash flows from financing activities:

Net decrease in deposits

$

(36,456)

$

(54,179)

Proceeds from advances from the Federal Home Loan Bank

 

 

126,000

Repayments of advances from the Federal Home Loan Bank

 

 

(21,000)

Proceeds from advances from the Federal Reserve Bank

 

100,000

 

Repayments of advances from the Federal Reserve Bank

 

(100,000)

 

Repurchases of common stock

 

 

(1,345)

Cash dividends paid

 

(428)

 

(2,033)

Net cash (used in) from financing activities

 

(36,884)

 

47,443

Net change in cash and cash equivalents

 

(36,600)

 

44,307

Cash and cash equivalents at beginning of the period

 

126,659

 

40,553

Cash and cash equivalents at end of the period

$

90,059

$

84,860

Supplemental disclosure of cash flow information:

Cash paid for:

Interest on deposits and borrowings

$

9,128

$

4,318

Income taxes

 

237

 

390

Supplemental disclosure of noncash investing and financing activities:

Company stock repurchased through stock swap and net settlement transactions

$

$

43

Establishment of right-of-use asset, net of incentives and modifications

404

118

Establishment of lease liability, net of modifications

404

118

See accompanying Notes to Consolidated Financial Statements.

7

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(1)      Organization

Territorial Bancorp Inc. (the Company) is a Maryland corporation and is the holding company for Territorial Savings Bank (the Bank). Territorial Savings Bank is a Hawaii state-chartered bank headquartered in Honolulu, Hawaii and is a member of the Federal Reserve System. Territorial Savings Bank has one subsidiary, Territorial Financial Services, Inc.

(2)    Summary of Significant Accounting Policies  

(a)Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of Territorial Bancorp Inc. have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited interim condensed consolidated financial statements and notes should be read in conjunction with the Company’s consolidated financial statements and notes thereto filed as part of the Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, all adjustments necessary for a fair presentation have been made and consist only of normal recurring adjustments. Interim results of operations are not necessarily indicative of results to be expected for the year. 

(b)Allowance of Credit Losses (ACL) on Loans and Securities

The current expected credit losses (CECL) accounting standard requires an estimate of the credit losses expected over the life of the financial instrument. CECL replaces the incurred loss approach that delayed the recognition of a credit loss until it was probable that a loss event occurred. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL during the period when management deems the loan to be uncollectible and all interest previously accrued but not collected is reversed against the current period ACL.

The estimate of expected credit losses is based on information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of financial instruments. Historical loss experience is generally the starting point for estimating expected credit losses. The Company considers whether the historical loss experience should be adjusted for asset specific risk characteristics or current conditions at the reporting date that did not exist over the historical reporting period. These qualitative adjustments can include changes in the economy, loan underwriting standards, and delinquency trends. The Company then considers future economic conditions as part of the one year reasonable and supportable forecast period.

Our loan portfolio is segmented into three pools for estimating our allowance for credit losses on loans: real estate, commercial, and consumer loans. They were established upon the adoption of Accounting Standards Update (ASU) 2016-13. Only three pools are used to segment our loan portfolio because loans within the pools share similar risk characteristics and were originated using similar underwriting standards. Loans that do not share similar risk characteristics would be evaluated on an individual basis and excluded from the collective evaluation. Historically, we have disclosed information about our loans and allowance based on class of financing receivable. The portfolio segments align with the class of financing receivables as follows:

Real estate: One- to four-family residential, multi-family residential, and commercial mortgage
Commercial: Commercial loans other than mortgage loans
Consumer: Home equity loans, loans on deposit accounts, and all other consumer loans

8

Collateral dependent loans are not considered to share the same risk characteristics with the three pools discussed above. A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For loans which are considered to be collateral dependent, the Company has elected to estimate the expected credit loss based on the fair value of the collateral less selling costs. If the fair value of the collateral less selling costs is less than the loan’s amortized cost basis, the Company records a partial charge-off to reduce the loan’s amortized cost basis for the difference between the collateral fair value less selling costs and the amortized cost basis.

The ACL on loans and accrued interest is calculated on a loan by loan basis. If the loan’s amortized cost basis is less than the total present value of cash flows calculated using a discounted cash flow approach, the ACL is equal to the amortized cost basis minus the total present value of cash flows on the loan discounted by the loan’s effective interest rate. The expected cash flows include estimates of loan charge-offs, recoveries, and prepayments. Economic variables which have a strong correlation with our historical loan charge-offs, recoveries, and prepayments are utilized in forecasting loan charge-offs, recoveries, and prepayments during the one year reasonable and supportable forecast period. After the reasonable and supportable forecast period, the historical reversion rate is used to calculate loan charge-offs, recoveries, and prepayments for the remaining expected life of the loan. The reversion rate is based on historical averages and applied on a straight-line basis. Qualitative adjustments may be made to account for current conditions and forward looking events not captured in the quantitative calculation. The forecast and reversion rate utilize historical behavior during select periods of time. Our Real Estate and Consumer loan pools utilize a vintage approach where historical losses, recoveries, and prepayment experience is determined using loans that have originated within a specified period. Our Commercial loans utilize a reporting period approach where historical losses, recoveries, and prepayment experience is considered during a selected historical period of time. Off-balance sheet forecasts utilize a reporting period approach.

Loans receivable are stated at amortized cost which includes the principal amount outstanding, less the allowance for credit losses, deferred loan origination fees and costs, commitment fees, and cumulative net charge-offs. Interest income on loans receivable is accrued as earned. Accrued interest receivable on loans was $4.7 million and $4.6 million as of March 31, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable on the Consolidated Balance Sheet.

The Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. The Company has a policy of placing loans on a nonaccrual basis when 90 days or more contractually delinquent or when, in the opinion of management, collection of all or part of the principal balance appears doubtful, unless the loans are well secured and in the process of collection. When a loan is placed on nonaccrual status, all interest previously accrued and not collected is reversed against current period provision for credit losses. For nonaccrual loans, the Company records payments received as a reduction in principal. A nonaccrual loan may be restored to an accrual basis when principal and interest payments are current and full payment of principal and interest is expected.

The Company’s off-balance sheet credit exposures are comprised of unfunded portions of existing loans, such as lines of credit and construction loans, and commitments to originate loans that are not conditionally cancellable by the Company.  Under the CECL accounting standard, expected credit losses on these amounts are calculated using a forecasted estimate of the likelihood that funding of the unfunded amount/commitment will occur and the historical reversion rate.  Changes to the reserve for off-balance sheet credit exposures are recorded through increases or decreases to the provision for credit losses on the Consolidated Statements of Income.  There were no reserves for off-balance sheet credit exposures at March 31, 2024 or December 31, 2023.

While management utilizes its best judgment and information available, the adequacy of the ACL and the reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our portfolios, changes in the economic environment including economic uncertainty, changes in interest rates and loan prepayments, and the view of the regulatory authorities toward classification of assets and the level of ACL and the reserve for off-balance sheet credit exposures. Additionally, the level of ACL and the reserve for off-balance sheet credit exposures may fluctuate based on the balance and mix of the loan portfolio, changes in loan prepayments and off-balance sheet credit exposures, changes in charge-off rates, and changes in forecasted economic

9

conditions. If actual results differ significantly from our assumptions, our ACL and the reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses.

The Company is required to utilize the CECL methodology to estimate expected credit losses with respect to held-to-maturity (HTM) investment securities. Since all of the Company’s HTM investment securities were issued by U.S. government agencies or U.S. government-sponsored enterprises, which include the explicit and/or implicit guarantee of the U.S. government and have a long history of no credit losses, the Company has not recorded a credit loss on these securities. The unrealized losses on these securities were due to changes in interest rates, relative to when the securities were purchased, and are not due to decreases in the credit quality of the securities.

Available for sale (AFS) investment securities in an unrealized loss position are evaluated for impairment. The Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the investment securities amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the investment security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. The Company has not recorded an ACL related to our AFS investment securities.

Changes in the ACL are recorded as a provision (or reversal of provision) for credit losses. Losses are charged against the ACL when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

(3)      Recently Issued and Adopted Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board (FASB) issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify that contractual sale restrictions should not be considered in the measurement of the fair value of an equity security. The Company owns stock in the Federal Reserve Bank (FRB) and in the Federal Home Loan Bank (FHLB) which is valued at historical cost which approximates fair value. Ownership of stock is a condition for services the Company receives from the FRB and FHLB. The stock is not publicly traded and can only be issued, exchanged, redeemed or repurchased by the FRB and the FHLB. ASU 2022-03 was effective for fiscal years beginning after December 15, 2023. The Company adopted the standard on January 1, 2024, and it did not have a material effect on its consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the U.S. Securities and Exchange Commission’s (SEC) Disclosure Update and Simplification Initiative. The ASU is intended to clarify or improve disclosure and presentation requirements of a variety of topics. Many of the amendment will allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements and align the requirements in the FASB accounting standard codification with the SEC’s regulations. The Company is currently evaluating the effects that ASU 2023-06 will have on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU is intended to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis to enable investors to develop more decision-useful financial analyses. This ASU will be effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material effect on its consolidated financial statements.

10

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the effects that ASU 2023-09 will have on its consolidated financial statements.

(4)      Cash and Cash Equivalents

The table below presents the balances of cash and cash equivalents:

 

 

March 31,

 

December 31,

 

 

(Dollars in thousands)

 

2024

    

2023

 

 

Cash and due from banks

$

10,714

$

10,471

Interest-earning deposits in other banks

 

79,345

 

116,188

Cash and cash equivalents

$

90,059

$

126,659

Interest-earning deposits in other banks consist primarily of deposits at the Federal Reserve Bank of San Francisco.

(5)      Investment Securities

The amortized cost, gross unrealized gains and losses, fair value, and related ACL of investment securities are as follows:

Amortized

Gross Unrealized

Estimated

 

(Dollars in thousands)

    

Cost

    

Gains

    

Losses

    

Fair Value

    

 

ACL

March 31, 2024:

Available-for-sale:

Mortgage-backed securities issued by U.S. government-sponsored enterprises

$

22,415

$

 

$

(2,932)

$

19,483

$

Held-to-maturity:

Mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises

677,578

36

 

(130,324)

547,290

Total

$

699,993

$

36

 

$

(133,256)

$

566,773

$

December 31, 2023:

Available-for-sale:

Mortgage-backed securities issued by U.S. government-sponsored enterprises

$

22,563

$

 

$

(2,392)

$

20,171

$

Held-to-maturity:

Mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises

685,728

68

 

(117,668)

568,128

Total

$

708,291

$

68

 

$

(120,060)

$

588,299

$

11

The amortized cost and estimated fair value of investment securities by maturity date at March 31, 2024 are shown below. Incorporated in the maturity schedule are mortgage-backed securities, which are allocated using the contractual maturity as a basis. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

    

Amortized

    

Estimated

 

(Dollars in thousands)

 

Cost

     

Fair Value

 

Available-for-sale:

Due after 10 years

$

22,415

$

19,483

Total

$

22,415

$

19,483

Held-to-maturity:

Due within 5 years

$

12

$

12

Due after 5 years through 10 years

 

6

 

6

Due after 10 years

 

677,560

 

547,272

Total

$

677,578

$

547,290

The Company did not sell any held-to-maturity or available-for-sale securities during the three months ended March 31, 2024 and 2023.

Investment securities with amortized costs of $549.7 million and $555.8 million at March 31, 2024 and December 31, 2023, respectively, were pledged to secure deposits made by state and local governments, securities sold under agreements to repurchase, transaction clearing accounts, and Federal Reserve Bank borrowings. Included in these amounts were $220.9 million and $74.0 million pledged to the Federal Reserve Bank’s discount window at March 31, 2024 and December 31, 2023, respectively, and $52.6 million and $202.1 million pledged to the Federal Reserve Bank’s Bank Term Funding Program at March 31, 2024 and December 31, 2023, respectively.

12

Provided below is a summary of investment securities which were in an unrealized loss position at March 31, 2024 and December 31, 2023. The Company does not intend to sell securities until such time as the value recovers or the securities mature and it is not more likely than not that the Company will be required to sell the securities prior to recovery of value or the securities mature.

 

 

Less Than 12 Months

 

12 Months or Longer

 

Total

 

 

 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

Number of

 

 

 

 

Unrealized

 

Description of securities

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Securities

 

Fair Value

 

Losses

 

(Dollars in thousands)

 

March 31, 2024:

Available-for-sale:

Mortgage-backed securities issued by U.S. government-sponsored enterprises

$

$

$

19,483

$

(2,932)

 

4

$

19,483

$

(2,932)

Held-to-maturity:

Mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises

544,088

(130,324)

 

152

544,088

(130,324)

Total

$

$

$

563,571

$

(133,256)

156

$

563,571

$

(133,256)