TBNK Territorial Bancorp Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): July 26, 2024

 

TERRITORIAL BANCORP INC.

(Exact Name of Registrant as Specified in its Charter)

 

Maryland	1-34403	26-4674701
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

 

1003 Bishop Street, Suite 500, Honolulu, Hawaii		96813
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (808) 946-1400 

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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. ¨

 

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, par value $0.01 per share		TBNK		The NASDAQ Stock Market LLC

  

  

 

Item 2.02

Results of Operations and Financial Condition

 

On July 26, 2024 Territorial Bancorp Inc. issued a press release announcing earnings for the three-month period ending June 30, 2024. A copy of the press release is attached as Exhibit 99 to this report.

 

The press release attached as an exhibit to this Current Report pursuant to this Item 2.02 is being furnished to, and not filed with, the Securities and Exchange Commission.

 

Item 9.01

Financial Statements and Exhibits

 

(a)

Not Applicable.

 

(b)

Not Applicable.

 

(c)

Not Applicable.

 

(d)

Exhibits.

 

Exhibit No.

 

99.1 June 30, 2024 Press Release: Territorial Bancorp Inc. Announces Second Quarter 2024 Results

 

104 Cover Page Interactive Data File (embedded with the inline XBRL document)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

	Territorial Bancorp Inc.
DATE: July 26, 2024	By:	/s/ Vernon Hirata
		Vernon Hirata
		Vice Chairman, Co-Chief Operating Officer and Secretary

 

 

 

Exhibit 99.1

 

PRESS RELEASE

 

FOR IMMEDIATE RELEASE

Contact: Walter Ida

(808) 946-1400

 

Territorial Bancorp Inc. Announces Second Quarter 2024 Results

 

·	The Company’s tier one leverage and risk-based capital ratios were 11.62% and 28.98%, respectively, and the Company is considered to be “well-capitalized” at June 30, 2024.
·	Ratio of non-performing assets to total assets of 0.06% at June 30, 2024.
·	Strong liquidity position with $83 million in cash balances and access to liquidity totaling $951 million as of June 30, 2024.

 

Honolulu, Hawaii, July 26, 2024- Territorial Bancorp Inc. (NASDAQ: TBNK) (the Company), headquartered in Honolulu, Hawaii, the holding company parent of Territorial Savings Bank, announced a net loss of $775,000, or $(0.09) per diluted share, for the three months ended June 30, 2024.

 

The Board of Directors approved a dividend of $0.01 per share. The dividend is expected to be paid on August 23, 2024, to stockholders of record as of August 9, 2024.

 

Hope Bancorp, Inc. Merger Agreement

 

As previously announced in a joint news release issued April 29, 2024, Hope Bancorp, Inc. (NASDAQ: HOPE) (Hope Bancorp) and the Company signed a definitive merger agreement.  Under the terms of the merger agreement, Company stockholders will receive a fixed exchange ratio of 0.8048 share of Hope Bancorp common stock in exchange for each share of Company common stock they own, in a 100% stock-for-stock transaction valued at approximately $78.6 million, based on the closing price of Hope Bancorp’s common stock on April 26, 2024. The transaction is intended to qualify as a tax-free reorganization for Territorial stockholders.

 

Upon completion of the transaction, Hope Bancorp intends to maintain the Territorial franchise in Hawaii and preserve the 100-plus year legacy of the Territorial Savings Bank brand name, culture and commitment to the local communities. The branches will continue to do business under the Territorial Savings Bank brand, as a trade name of Bank of Hope.

 

The transaction is subject to regulatory approvals, the approval of Territorial stockholders, and the satisfaction of other customary closing conditions.

 

Interest Income

 

Net interest income decreased by $2.85 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Total interest income was $18.09 million for the three months ended June 30, 2024, compared to $17.29 million for the three months ended June 30, 2023. The $801,000 increase in total interest income was primarily due to a $549,000 increase in interest earned on loans and a $520,000 increase in interest earned on other investments. The increase in interest income on other investments is primarily due to a $26.24 million increase in the average cash balance with the Federal Reserve Bank (FRB) and a 45 basis point increase in the average interest rate paid on cash balances. The $549,000 increase in interest income on loans resulted from a $4.11 million increase in the average loan balance together with a 16 basis point increase in the average loan yield. The increases in interest income on other investments and loans during the quarter was partially offset by a $268,000 decrease in interest on investment securities which occurred because of a $40.85 million decrease in the average securities balance.

 

 

Interest Expense

 

As a result of prolonged increases in short-term interest rates, total interest expense increased by $3.66 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Interest expense on deposits increased by $3.09 million for the three months ended June 30, 2024, primarily due to an increase in interest expense on certificates of deposit (CD) and savings accounts. Interest expense on CDs rose by $2.04 million for the three months ended June 30, 2024, due to a 100 basis point increase in the average cost of CDs and a $82.08 million increase in the average CD balance. Interest expense on savings accounts rose by $1.05 million for the three months ended June 30, 2024, due to a 62 basis point increase in the average cost of savings accounts which was offset by a $103.85 million decrease in the average savings account balance. The increase in the average cost of CDs and savings accounts occurred as interest rates were raised in response to the increase in market interest rates over that period. The increase in the average balance of CDs occurred as customers transferred balances from lower rate savings accounts to higher rate CDs. Interest expense on FRB borrowings rose by $594,000 for the three months ended June 30, 2024, as the Company obtained a $50.00 million advance from the FRB in the fourth quarter of 2023. FRB advances were obtained in 2023 to enhance the Company’s liquidity and to fund deposit withdrawals.

 

Noninterest Expense

 

Noninterest expense increased by $474,000 for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to a $690,000 increase in general and administrative expenses. General and administrative expenses included $509,000 of merger-related legal and other consulting expenses. Federal Deposit Insurance Corporation (FDIC) premium expense rose by $147,000 for the quarter because of an increase in the FDIC insurance premium rates. The increase in other general and administrative expenses and FDIC premiums was offset by a $398,000 decrease in salaries and employee benefits during the quarter. The decrease in salaries and employee benefits occurred primarily because of decreases in compensation expense, deferred salary expense for originating new loans, supplemental executive retirement plan benefits and accruals for the Employee Stock Ownership Plan (ESOP). The decrease in compensation expense is primarily due to a decrease in the number of employees, especially managers and highly compensated employees, working at the bank. The decrease in deferred salary expense for originating new loans occurred as fewer loans were originated during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The decrease in ESOP accruals is primarily due to a decline in the Company’s share price which is used to calculate the accrual.

 

Income Taxes

 

Income tax benefit for the three months ended June 30, 2024 was $285,000 with an effective tax rate of (26.89)% compared to income tax expense of $563,000 with an effective tax rate of 27.33% for the three months ended June 30, 2023. The decrease in income tax expense was primarily due to a $3.12 million decrease in income before income taxes during the quarter.

 

 

Balance Sheet

 

Total assets were $2.17 billion at June 30, 2024 and $2.24 billion at December 31, 2023. Cash and cash equivalents decreased by $43.88 million to $82.78 million at June 30, 2024 from $126.66 million at December 31, 2023. The decrease in cash and cash equivalents was used to fund deposit withdrawals during the quarter ended June 30, 2024. Investment securities, including available for sale securities, decreased by $20.70 million to $685.20 million at June 30, 2024 from $705.90 million at December 31, 2023. The decrease in investment securities occurred because of principal repayments on mortgage-backed securities.

 

Deposits decreased by $63.85 million from $1.64 billion at December 31, 2023 to $1.57 billion at June 30, 2024. The decrease in deposits occurred as customers sought higher interest rates on their deposits than what the Company offers.

 

Asset Quality

 

Credit quality continues to be extremely important as the Bank adheres to its strict underwriting standards. The Company had $87,000 in delinquent mortgage loans 90 days or more past due at June 30, 2024, compared to $227,000 at December 31, 2023. Non-performing assets totaled $1.23 million at June 30, 2024, compared to $2.26 million at December 31, 2023. The ratio of non-performing assets to total assets was 0.06% at June 30, 2024, compared to 0.10% at December 31, 2023. The allowance for credit losses was $5.12 million at June 30, 2024 and December 31,2023, representing 0.39% of total loans. The ratio of the allowance for credit losses to non-performing loans rose to 414.75% at June 30, 2024, compared to 226.59% at December 31, 2023.

 

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.

 

Additional Information and Where to Find it

 

In connection with the proposed merger, Hope Bancorp, Inc. filed with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 on June 21, 2024, which included a Proxy Statement of Territorial Bancorp Inc. that also constitutes a prospectus of Hope Bancorp, Inc. Territorial Bancorp stockholders are encouraged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information about the proposed merger. Territorial Bancorp stockholders are able to obtain a free copy of the Proxy Statement/Prospectus, as well as other filings containing information about Hope Bancorp and Territorial Bancorp at the SEC’s Internet site (www.sec.gov).

 

 

Participants in Solicitation

 

Territorial Bancorp and its directors, executive officers, management and employees may be deemed to be participants in the solicitation of proxies in respect of the merger. Information concerning Territorial Bancorp’s participants is set forth in the Proxy Statement, dated April 16, 2024, for Territorial Bancorp’s 2024 annual meeting of stockholders as filed with the SEC on Schedule 14A. Additional information regarding the participants in the solicitation of proxies in respect of the proposed transaction and interests of participants of Territorial Bancorp in the solicitation of proxies in respect of the merger is included in the Registration Statement and Proxy Statement/Prospectus filed with the SEC.

 

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:

 

	·	factors related to the proposed transaction with Hope Bancorp, including the receipt of regulatory and stockholder approvals, and other customary closing conditions;
	·	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, 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

Selected Financial Data (Unaudited)

 

		Three Months Ended
		June 30,
		2024				2023
Performance Ratios (annualized):
Return on average assets			(0.14	)%			0.27	%
Return on average equity			(1.24	)%			2.37	%
Net interest margin on average interest earning assets			1.56	%			2.09	%
Efficiency ratio (1)			112.20	%			80.72	%

 

		At				At
		March				December
		31, 2024				31, 2023
Selected Balance Sheet Data:
Book value per share (2)		$	28.21			$	28.45
Stockholders' equity to total assets			11.51	%			11.23	%
Asset Quality
(Dollars in thousands):
Delinquent loans 90 days past due and not accruing		$	87			$	227
Non-performing assets (3)		$	1,234			$	2,260
Allowance for credit losses		$	5,118			$	5,121
Non-performing assets to total assets			0.06	%			0.10	%
Allowance for credit losses to total loans			0.39	%			0.39	%
Allowance for credit losses to non-performing assets			414.75	%			226.59	%

 

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

 

 

Territorial Bancorp Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Interest income:
Loans		$	12,246			$	11,697			$	24,311			$	23,151
Investment securities			4,257				4,525				8,570				9,065
Other investments			1,590				1,070				3,203				1,797
Total interest income			18,093				17,292				36,084				34,013
Interest expense:
Deposits			7,410				4,323				14,189				7,853
Advances from the Federal Home Loan Bank			1,806				1,832				3,616				2,886
Advances from the Federal Reserve Bank			594				—				1,189				—
Securities sold under agreements to repurchase			45				45				91				91
Total interest expense			9,855				6,200				19,085				10,830
Net interest income			8,238				11,092				16,999				23,183
(Reversal of provision) provision for credit losses			(26	)			212				(7	)			112
Net interest income after provision (reversal of provision) for credit losses			8,264				10,880				17,006				23,071
Noninterest income:
Service and other fees			339				414				612				724
Income on bank-owned life insurance			249				207				495				410
Net gain on sale of loans			—				9				—				10
Other			72				60				146				135
Total noninterest income			660				690				1,253				1,279
Noninterest expense:
Salaries and employee benefits			4,745				5,143				9,707				10,547
Occupancy			1,768				1,759				3,506				3,382
Equipment			1,329				1,303				2,652				2,615
Federal deposit insurance premiums			393				246				889				491
Other general and administrative expenses			1,749				1,059				3,290				2,088
Total noninterest expense			9,984				9,510				20,044				19,123
(Loss) Income before income taxes			(1,060	)			2,060				(1,785	)			5,227
Income tax (benefit) expense			(285	)			563				(528	)			1,414
Net (loss) income		$	(775	)		$	1,497			$	(1,257	)		$	3,813
Basic (loss) earnings per share		$	(0.09	)		$	0.17			$	(0.15	)		$	0.44
Diluted (loss) earnings per share		$	(0.09	)		$	0.17			$	(0.15	)		$	0.43
Cash dividends declared per common share		$	0.01			$	0.23			$	0.06			$	0.46
Basic weighted-average shares outstanding			8,605,801				8,620,643				8,596,969				8,697,213
Diluted weighted-average shares outstanding			8,664,806				8,658,927				8,657,731				8,740,699

 

 

Territorial Bancorp Inc. and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, except per share data)

 

		June 30,				December 31,
		2024				2023
ASSETS
Cash and cash equivalents		$	82,782			$	126,659
Investment securities available for sale, at fair value			19,095				20,171
Investment securities held to maturity, at amortized cost (fair value of $535,799 and $568,128 at June 30, 2024 and December 31, 2023, respectively)			666,103				685,728
Loans held for sale			312				—
Loans receivable			1,301,057				1,308,552
Allowance for credit losses			(5,118	)			(5,121	)
Loans receivable, net of allowance for credit losses			1,295,939				1,303,431
Federal Home Loan Bank stock, at cost			12,007				12,192
Federal Reserve Bank stock, at cost			3,185				3,180
Accrued interest receivable			6,039				6,105
Premises and equipment, net			7,133				7,185
Right-of-use asset, net			12,063				12,371
Bank-owned life insurance			49,133				48,638
Income taxes receivable			1,063				344
Deferred income tax assets, net			2,799				2,457
Prepaid expenses and other assets			7,760				8,211
Total assets		$	2,165,413			$	2,236,672
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits		$	1,572,751			$	1,636,604
Advances from the Federal Home Loan Bank			237,000				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			22,699				23,334
Lease liability			17,613				17,297
Advance payments by borrowers for taxes and insurance			6,183				6,351
Total liabilities			1,916,246				1,985,586
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 8,832,210 shares at June 30, 2024 and 8,826,613 shares at December 31, 2023			88				88
Additional paid-in capital			48,105				48,022
Unearned ESOP shares			(2,203	)			(2,447	)
Retained earnings			209,909				211,644
Accumulated other comprehensive loss			(6,732	)			(6,221	)
Total stockholders’ equity			249,167				251,086
Total liabilities and stockholders’ equity		$	2,165,413			$	2,236,672

 

 

v3.24.2

Cover	Jul. 26, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 26, 2024
Entity File Number	1-34403
Entity Registrant Name	TERRITORIAL BANCORP INC.
Entity Central Index Key	0001447051
Entity Tax Identification Number	26-4674701
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	1003 Bishop Street
Entity Address, Address Line Two	Suite 500
Entity Address, City or Town	Honolulu
Entity Address, State or Province	HI
Entity Address, Postal Zip Code	96813
City Area Code	808
Local Phone Number	946-1400
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	TBNK
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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