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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 June 30, 2022

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.)

1132 Bishop Street, Suite 2200, 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, 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: 9,113,668 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of July 31, 2022.

PART I

ITEM 1.     FINANCIAL STATEMENTS

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, except share data)

 

 

June 30,

 

December 31,

 

 

 

2022

 

2021

 

ASSETS

Cash and cash equivalents

$

70,620

$

99,859

Investment securities available for sale, at fair value

23,222

Investment securities held to maturity, at amortized cost (fair value of $616,040 and $634,987 at June 30, 2022 and December 31, 2021, respectively)

 

705,904

 

636,442

Loans receivable, net

 

1,286,618

 

1,302,824

Federal Home Loan Bank stock, at cost

 

8,197

 

8,173

Federal Reserve Bank stock, at cost

3,167

3,158

Accrued interest receivable

 

5,913

 

5,786

Premises and equipment, net

 

4,023

 

4,065

Right-of-use asset, net

13,378

9,982

Bank-owned life insurance

 

47,383

 

51,423

Deferred income tax assets, net

 

2,087

 

1,927

Prepaid expenses and other assets

 

9,527

 

6,963

Total assets

$

2,180,039

$

2,130,602

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Deposits

$

1,729,592

$

1,681,828

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

 

21,299

 

22,638

Lease liability

14,175

10,744

Income taxes payable

 

2,180

 

1,863

Advance payments by borrowers for taxes and insurance

 

5,888

 

6,207

Total liabilities

 

1,924,134

 

1,874,280

Commitments and contingencies

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 9,120,458 and 9,324,060 shares at June 30, 2022 and December 31, 2021, respectively

 

91

 

93

Additional paid-in capital

 

52,464

 

56,951

Unearned ESOP shares

 

(3,181)

 

(3,425)

Retained earnings

 

212,932

 

208,227

Accumulated other comprehensive loss

 

(6,401)

 

(5,524)

Total stockholders’ equity

 

255,905

 

256,322

Total liabilities and stockholders’ equity

$

2,180,039

$

2,130,602

See accompanying notes to consolidated financial statements.

1

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,

 

 

 

2022

 

2021

 

2022

 

2021

 

Interest income:

Loans

$

11,176

$

12,134

$

22,533

$

25,183

Investment securities

3,928

2,394

7,351

4,219

Other investments

 

267

 

228

 

443

 

459

Total interest income

 

15,371

 

14,756

 

30,327

 

29,861

Interest expense:

Deposits

 

738

 

1,090

 

1,335

 

2,407

Advances from the Federal Home Loan Bank

 

516

 

537

 

1,027

 

1,073

Securities sold under agreements to repurchase

 

47

 

45

 

91

 

91

Total interest expense

 

1,301

 

1,672

 

2,453

 

3,571

Net interest income

 

14,070

 

13,084

 

27,874

 

26,290

Reversal of provision for loan losses

 

(326)

 

(372)

 

(494)

 

(1,285)

Net interest income after reversal of provision for loan losses

 

14,396

 

13,456

 

28,368

 

27,575

Noninterest income:

Service and other fees

 

412

 

530

 

753

 

1,525

Income on bank-owned life insurance

 

194

 

190

 

391

 

378

Gain on sale of investment securities

 

 

911

 

 

1,437

Gain on sale of loans

 

8

 

26

 

26

 

446

Other

 

186

 

70

 

1,283

 

180

Total noninterest income

 

800

 

1,727

 

2,453

 

3,966

Noninterest expense:

Salaries and employee benefits

 

5,392

 

5,560

 

11,005

 

11,083

Occupancy

 

1,648

 

1,572

 

3,242

 

3,219

Equipment

 

1,236

 

1,064

 

2,432

 

2,194

Federal deposit insurance premiums

 

143

 

142

 

284

 

283

Loss on sale of loans

29

29

Other general and administrative expenses

 

1,125

 

1,274

 

2,179

 

2,387

Total noninterest expense

 

9,573

 

9,612

 

19,171

 

19,166

Income before income taxes

 

5,623

 

5,571

 

11,650

 

12,375

Income taxes

 

1,513

 

1,513

 

2,830

 

3,304

Net income

$

4,110

$

4,058

$

8,820

$

9,071

Basic earnings per share

$

0.46

$

0.44

$

0.98

$

0.99

Diluted earnings per share

$

0.46

$

0.44

$

0.98

$

0.99

Cash dividends declared per common share

$

0.23

$

0.23

$

0.46

$

0.46

Basic weighted-average shares outstanding

 

8,876,691

 

9,117,467

 

8,928,127

 

9,124,086

Diluted weighted-average shares outstanding

 

8,927,173

 

9,162,348

 

8,977,834

 

9,166,003

See accompanying notes to consolidated financial statements.

2

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2022

    

2021

 

2022

 

2021

 

Net income

$

4,110

$

4,058

$

8,820

$

9,071

Unrealized loss on securities, net of tax

(774)

 

 

(877)

 

(3)

Amount reclassified from other comprehensive income, net of tax

 

 

(190)

 

 

(273)

Other comprehensive loss, net of tax

 

(774)

 

(190)

 

(877)

 

(276)

Comprehensive income

$

3,336

$

3,868

$

7,943

$

8,795

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

 

Balance at March 31, 2021

9,522,833

$

95

$

61,141

$

(3,792)

$

202,985

$

(8,777)

$

251,652

Net income

 

4,058

4,058

Other comprehensive loss

 

(190)

(190)

Cash dividends declared ($0.23 per share)

 

(2,115)

(2,115)

Share-based compensation

 

92

92

Allocation of 12,233 ESOP shares

 

193

122

315

Repurchase of shares of common stock

(101,273)

 

(1)

(2,566)

(2,567)

Balances at June 30, 2021

9,421,560

$

94

$

58,860

$

(3,670)

$

204,928

$

(8,967)

$

251,245

Balances at December 31, 2020

9,513,867

$

95

$

61,153

$

(3,915)

$

200,066

$

(8,691)

$

248,708

Net income

 

9,071

9,071

Other comprehensive loss

 

(276)

(276)

Cash dividends declared ($0.46 per share)

 

(4,209)

(4,209)

Share-based compensation

20,437

 

205

205

Allocation of 24,467 ESOP shares

 

387

245

632

Repurchase of shares of common stock

(112,744)

(1)

(2,885)

(2,886)

Balances at June 30, 2021

9,421,560

$

94

$

58,860

$

(3,670)

$

204,928

$

(8,967)

$

251,245

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

Balance at March 31, 2022

9,285,990

$

93

$

55,937

$

(3,303)

$

210,882

$

(5,627)

$

257,982

Net income

 

4,110

4,110

Other comprehensive loss

 

(774)

(774)

Cash dividends declared ($0.23 per share)

 

(2,060)

(2,060)

Share-based compensation

3,556

 

140

140

Allocation of 12,233 ESOP shares

 

150

122

272

Repurchase of shares of common stock

(169,088)

 

(2)

(3,763)

(3,765)

Balances at June 30, 2022

9,120,458

$

91

$

52,464

$

(3,181)

$

212,932

$

(6,401)

$

255,905

Balances at December 31, 2021

9,324,060

$

93

$

56,951

$

(3,425)

$

208,227

$

(5,524)

$

256,322

Net income

 

8,820

8,820

Other comprehensive loss

 

(877)

(877)

Cash dividends declared ($0.46 per share)

 

(4,115)

(4,115)

Share-based compensation

19,227

 

274

274

Allocation of 24,467 ESOP shares

 

332

244

576

Repurchase of shares of common stock

(222,829)

 

(2)

(5,093)

(5,095)

Balances at June 30, 2022

9,120,458

$

91

$

52,464

$

(3,181)

$

212,932

$

(6,401)

$

255,905

See accompanying notes to consolidated financial statements.

5

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

2021

 

Cash flows from operating activities:

Net income

$

8,820

$

9,071

Adjustments to reconcile net income to net cash from operating activities:

Reversal of provision for loan losses

 

(494)

 

(1,285)

Depreciation and amortization

 

635

 

587

Deferred income tax expense

 

158

 

338

Amortization of fees, discounts, and premiums, net

 

(3)

 

(253)

Amortization of right-of-use asset

1,434

1,551

Origination of loans held for sale

 

(4,946)

 

(12,761)

Proceeds from sales of loans held for sale

 

4,943

 

14,862

Loss (gain) on sale of loans, net

 

3

 

(446)

Gain on sale of investment securities available for sale

(339)

Gain on sale of investment securities held to maturity

 

 

(1,098)

ESOP expense

 

576

 

632

Share-based compensation expense

 

274

 

205

Net (increase) decrease in accrued interest receivable

 

(127)

 

170

Net increase in bank-owned life insurance

 

(391)

 

(378)

Net increase in prepaid expenses and other assets

 

(2,565)

 

(2,256)

Net decrease in accounts payable and accrued expenses

 

(1,531)

 

(324)

Net decrease in lease liability

(1,399)

(1,527)

Net decrease in advance payments by borrowers for taxes and insurance

 

(319)

 

(658)

Net increase in income taxes payable

 

317

 

193

Net cash from operating activities

 

5,385

 

6,284

Cash flows from investing activities:

Purchases of investment securities held to maturity

 

(105,892)

 

(432,614)

Purchases of investment securities available for sale

(24,760)

Principal repayments on investment securities held to maturity

 

36,390

 

56,243

Principal repayments on investment securities available for sale

363

198

Proceeds from sale of investment securities held to maturity

 

 

16,031

Proceeds from sale of investment securities available for sale

3,330

Principal repayments on loans receivable, net of loan originations

 

16,723

 

93,664

Purchases of Federal Home Loan Bank stock

(24)

(29)

Purchases of Federal Reserve Bank stock

(9)

(7)

Proceeds from bank-owned life insurance

4,431

Purchases of premises and equipment

 

(593)

 

(186)

Net cash from investing activities

 

(73,371)

 

(263,370)

(Continued)

6

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

 

Six Months Ended

 

 

June 30,

 

 

2022

 

2021

Cash flows from financing activities:

Net increase in deposits

$

47,764

$

18,894

Repurchases of common stock

 

(4,858)

 

(2,567)

Cash dividends paid

 

(4,159)

 

(5,206)

Net cash from financing activities

 

38,747

 

11,121

Net decrease in cash and cash equivalents

 

(29,239)

 

(245,965)