Executive Summary

Q1 2024 results were weak: revenue (net interest income + noninterest income) fell to $9.35M and diluted EPS was -$0.06, down sharply from $12.68M and $0.26 in Q1 2023, as deposit pricing pressure and higher wholesale funding costs compressed margins and swung earnings to a loss .
Net interest margin deteriorated to 1.65% (from 1.78% in Q4 and 2.30% a year ago) while the efficiency ratio worsened to 107.6%, reflecting operating deleverage amid lower NIM .
Capital and credit remained solid (Tier 1 leverage 11.58%, total risk-based 28.84%; NPAs/Assets 0.10%), with strong on- and off-balance sheet liquidity ($90M cash; $901.7M total access) .
The quarter’s strategic catalyst was the announced stock-for-stock merger with Hope Bancorp (0.8048 HOPE shares per TBNK; $78.6M deal value based on 4/26/24), expected to close by year-end 2024 subject to approvals; Hope intends to preserve the Territorial franchise/brand in Hawai‘i .

What Went Well and What Went Wrong

What Went Well

Asset quality and reserves were stable: NPAs/Assets held at 0.10% and ACL/Loans remained 0.39%; coverage improved to 233% of non-performing loans .
Capital and liquidity remained strong (Tier 1 leverage 11.58%, total risk-based 28.84%; $90M cash and $901.7M total liquidity access), keeping the bank “well-capitalized” .
Strategic path forward: management announced a definitive merger with Hope Bancorp. “Our name will remain Territorial Savings Bank… we expect a seamless transition… The proposed combination will strengthen Territorial Savings Bank for the long term, providing many advantages… as we become part of a larger organization with greater resources” — Allan S. Kitagawa, Chairman, President & CEO .

What Went Wrong

Funding costs surged: deposit interest expense rose $3.25M YoY on CDs and savings repricing; FHLB (+$0.76M) and new FRB borrowings (+$0.60M) further lifted total interest expense by $4.60M YoY, driving NIM compression and a net loss .
Operating leverage deteriorated: efficiency ratio worsened to 107.55% (vs. 94.62% in Q4 and 75.81% a year ago) as NIM pressure outpaced controllable expense reductions .
Deposits declined $36.5M QoQ as customers sought higher rates, and balances migrated from lower-rate savings to higher-rate CDs, elevating interest expense and compressing profitability .

Financial Results

Note: “Revenue” is defined as net interest income + total noninterest income (bank convention for total operating revenue).

Quarterly progression (oldest → newest)

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($M)	$10.62 (= $10.03 NII + $0.59 noninterest)	$10.02 (= $9.41 NII + $0.60 noninterest)	$9.35 (= $8.76 NII + $0.59 noninterest)
Diluted EPS ($)	$0.10	$0.04	-$0.06
Net Interest Margin %	1.90%	1.78%	1.65%
Efficiency Ratio %	91.00%	94.62%	107.55%

Year-over-year comparison (Q1 2023 vs Q1 2024)

Metric	Q1 2023	Q1 2024
Revenue ($M)	$12.68 (= $12.09 NII + $0.59 noninterest)	$9.35 (= $8.76 NII + $0.59 noninterest)
Diluted EPS ($)	$0.26	-$0.06
Net Interest Margin %	2.30%	1.65%
Efficiency Ratio %	75.81%	107.55%

Balance sheet and credit KPIs (oldest → newest)

KPI	Q3 2023	Q4 2023	Q1 2024
Total Assets ($M)	$2,211.23	$2,236.67	$2,193.03
Deposits ($M)	$1,651.01	$1,636.60	$1,600.15
Loans Receivable ($M)	$1,311.42	$1,308.55	$1,309.71
Cash & Equivalents ($M)	$89.12	$126.66	$90.06
FHLB Advances ($M)	$256.00	$242.00	$242.00
FRB Advances ($M)	—	$50.00	$50.00
Tier 1 Leverage %	11.70%	11.69%	11.58%
Total Risk-Based Capital %	28.78%	28.89%	28.84%
NPAs / Assets %	0.10%	0.10%	0.10%
ACL / Loans %	0.38%	0.39%	0.39%
NPL Coverage (ACL/NPL) %	216.11%	226.59%	233.20%
Total Liquidity Access ($M)	$985.52	$937.38	$901.70

Versus estimates (Q1 2024)

Metric	Actual	Consensus	Surprise
Diluted EPS ($)	-$0.06	$0.02 (Zacks/aggregated)	Miss
Revenue ($M)	$9.35	$9.88 (Zacks/aggregated)	Miss

Note: S&P Global consensus was not retrievable via our estimates tool for TBNK this quarter; we reference third-party reported consensus (Zacks) instead .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share	Next declared (paid 6/10/24)	$0.05 (Q4 2023 declared)	$0.01 (declared 5/13/24)	Lowered
Revenue, margins, OpEx, tax rate	2024	None provided	None provided	NA

No formal forward financial guidance was issued; management commentary focused on balance sheet, asset quality, liquidity, and the pending merger with Hope Bancorp .

Earnings Call Themes & Trends

No Q1 2024 earnings call transcript was available in our corpus.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2024)	Trend
Rates/NIM compression	Management cited challenging rate backdrop, expecting continued NIM pressure (Q3/Q4) . NIM fell to 1.90% (Q3) and 1.78% (Q4) .	NIM declined further to 1.65% .	Worsening
Deposit mix/pricing	Shift from savings to higher-rate CDs drove deposit expense higher (Q3/Q4) .	Deposit expense +$3.25M YoY; deposits -$36.5M QoQ; continued migration to CDs .	Persistent headwind
Liquidity & borrowings	Liquidity strengthened using FHLB; FRB advance added in Q4; access $985.5M (Q3) , $937.4M (Q4) .	Liquidity access $901.7M; FRB $50M and FHLB $242M outstanding .	Stable to slightly lower access
Asset quality	NPAs/Assets held ~0.10%; Maui wildfire exposures current/insured (Q3/Q4) .	NPAs/Assets 0.10%; coverage rose to 233% .	Stable/strong
Capital & dividends	Remained well-capitalized; dividend reduced to $0.05 in Oct (Q3) and paid again in Q4 .	Board declared $0.01 dividend in May 2024 .	Capital solid; dividend lower
Strategic M&A	—	Announced definitive merger with Hope Bancorp; preserve brand; 0.8048x exchange ratio .	New positive strategic path

Management Commentary

“Our merger with Hope Bancorp will bring together two companies that share long-standing commitments to our customers and the communities… The proposed combination will strengthen Territorial Savings Bank for the long term, providing many advantages… as we become part of a larger organization with greater resources” — Allan S. Kitagawa, Chairman, President & CEO .
Prior quarter context: “The uncertain interest rate environment continues to be a challenge… higher levels of interest rates will keep pressure on loan growth and deposit retention, which have an impact on our net interest margin… We continue our focus on maintaining our strong capital levels… preserving our solid asset quality, and maintaining our strong liquidity levels” — Allan Kitagawa (Q4 2023 release) .

Q&A Highlights

No Q1 2024 earnings call transcript was available in our corpus; no Q&A items to report. Key clarifications from filings:

Funding cost pressure stemmed from CD repricing and savings rate increases; customers shifted balances to CDs; wholesale funding (FHLB/FRB) increased to enhance liquidity .
Noninterest expense included $290K in merger-related legal expenses in “other G&A” .

Estimates Context

S&P Global consensus estimates were unavailable via our tool for TBNK this quarter.
Third-party reported consensus (Zacks/aggregators): EPS $0.02 and revenue ~$9.88M; TBNK printed -$0.06 and $9.35M, resulting in a dual miss; Zacks also noted TBNK has not surpassed consensus EPS over the last four quarters .
Implication: Estimate models are likely to incorporate continued NIM pressure and elevated funding costs highlighted by management, pending the outcome and timing of the HOPE merger .

Key Takeaways for Investors

Core profitability under pressure: NIM fell to 1.65% and the efficiency ratio breached 100%, reflecting deposit repricing and higher wholesale funding costs; further relief likely hinges on rate normalization or funding mix improvement .
Balance sheet resilience: Well-capitalized with strong credit metrics (NPAs/Assets 0.10%, ACL/Loans 0.39%) and substantial liquidity access ($901.7M), providing downside protection during prolonged margin pressure .
Dividend reset: Board declared a $0.01 dividend in May (down from $0.05 in Q4), aligning payouts with earnings pressure while preserving capital .
Strategic catalyst: The announced all-stock merger with Hope Bancorp (0.8048x exchange) offers a potential path to scale, broader product capabilities, and funding diversification; timing and regulatory approvals are the key milestones to watch .
Watch deposit trends and CD repricing: Continued migration from savings to CDs and elevated deposit betas remain key drivers of earnings trajectory; signs of stabilization could be a positive inflection .
Expense discipline vs. revenue pressure: Operating deleverage is evident; further cost control and merger-related synergies (post-close) could be needed to restore sub-60–70% efficiency longer-term .
Trading implications near term: Shares may trade primarily on merger headlines/approvals and HOPE share performance, with quarterly earnings sensitivity to funding costs and NIM trends as secondary drivers .

Sources: Q1 2024 8-K and press release with financials and KPIs ; Q4 2023 8-K and press release ; Q3 2023 8-K and press release ; HOPE–TBNK merger 8-K/press release ; TBNK dividend 8-K/press release ; Third-party consensus references .

Territorial Bancorp Inc. (TBNK)·Q1 2024 Earnings Summary