Executive Summary

Q2 2024 produced a net loss of $0.775 million and diluted EPS of $(0.09), driven by elevated deposit and borrowing costs; net interest income fell to $8.238 million and the efficiency ratio rose to 112.20% .
Net interest margin compressed to 1.56% in Q2 from 1.65% in Q1, reflecting continued repricing pressure on deposits and FRB/FHLB borrowings; ROA/ROE were negative at (0.14)% and (1.24)%, respectively .
Liquidity and capital metrics remained strong: cash balances of $82.78 million with $951 million total liquidity access, Tier 1 leverage ratio of 11.62% and risk-based capital ratio of 28.98% (“well-capitalized”) .
Board declared a $0.01 dividend for Q2 (vs. $0.05 in Q4 2023); merger with Hope Bancorp proceeding under the definitive agreement with a 0.8048 fixed exchange ratio for TBNK shares, pending regulatory and shareholder approvals .

What Went Well and What Went Wrong

What Went Well

Capital and liquidity remained robust: Tier 1 leverage 11.62% and risk-based capital 28.98%; cash $82.78 million and liquidity access totaling $951 million as of June 30, 2024 .
Asset quality improved: non-performing assets fell to $1.23 million and NPA/Assets declined to 0.06% vs. 0.10% at year-end; 90+ day delinquencies decreased to $87,000 .
Management maintained focus on balance sheet strength; prior commentary emphasized navigating the interest rate cycle while preserving capital, asset quality, and liquidity (Chairman & CEO Allan Kitagawa) .

What Went Wrong

Interest expense surged YoY by $3.66 million as CDs repriced higher and funding costs increased; deposit interest expense rose $3.09 million, including a 100 bp increase in average CD cost and an $82.08 million increase in average CD balances .
Deposit outflows persisted, with deposits down $63.85 million YTD to $1.57 billion as customers shifted to higher-rate alternatives .
Noninterest expense increased YoY by $474,000, including $509,000 of merger-related legal/consulting costs and higher FDIC premiums (+$147,000); efficiency ratio deteriorated to 112.20% .

Financial Results

Income Statement Snapshot (USD Millions unless noted)

Metric	Q4 2023	Q1 2024	Q2 2024
Total Interest Income	$17.691	$17.991	$18.093
Total Interest Expense	$8.277	$9.230	$9.855
Net Interest Income	$9.414	$8.761	$8.238
Noninterest Income	$0.603	$0.593	$0.660
Noninterest Expense	$9.478	$10.060	$9.984
(Loss)/Income Before Tax	$0.395	$(0.725)	$(1.060)
Net (Loss)/Income	$0.334	$(0.482)	$(0.775)
Diluted EPS	$0.04	$(0.06)	$(0.09)

Performance Ratios

Metric	Q4 2023	Q1 2024	Q2 2024
Net Interest Margin (%)	1.78%	1.65%	1.56%
Efficiency Ratio (%)	94.62%	107.55%	112.20%
Return on Average Assets (%)	0.06%	-0.09%	-0.14%
Return on Average Equity (%)	0.53%	-0.77%	-1.24%

YoY (Q2 2024 vs. Q2 2023)

Metric	Q2 2023	Q2 2024
Total Interest Income ($m)	$17.292	$18.093
Total Interest Expense ($m)	$6.200	$9.855
Net Interest Income ($m)	$11.092	$8.238
Noninterest Income ($m)	$0.690	$0.660
Noninterest Expense ($m)	$9.510	$9.984
Net (Loss)/Income ($m)	$1.497	$(0.775)
Diluted EPS ($)	$0.17	$(0.09)
Net Interest Margin (%)	2.09%	1.56%
Efficiency Ratio (%)	80.72%	112.20%

KPIs and Balance Sheet

KPI	Q4 2023	Q1 2024	Q2 2024
Deposits ($B)	$1.6366	$1.6001	$1.5728
Cash & Equivalents ($m)	$126.659	$90.059	$82.782
Liquidity Access ($m)	$937.38	$901.70	$951.00
Tier 1 Leverage (%)	11.69%	11.58%	11.62%
Risk-Based Capital (%)	28.89%	28.84%	28.98%
Non-Performing Assets ($m)	$2.260	$2.205	$1.234
NPA/Assets (%)	0.10%	0.10%	0.06%
Allowance for Credit Losses ($m)	$5.121	$5.142	$5.118
ACL/Loans (%)	0.39%	0.39%	0.39%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share	Q2 2024	$0.05 (Q4 2023 payout)	$0.01 (to be paid Aug 23, record Aug 9)	Lowered
Company Guidance (Revenue/Margins/OpEx/Tax)	Q2 2024	None provided	None provided	Maintained (no guidance)

No formal quantitative guidance was issued for revenue, margins, OpEx, OI&E, tax rate, or segment metrics in Q2 2024 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q4 2023)	Previous Mentions (Q-1: Q1 2024)	Current Period (Q2 2024)	Trend
Interest Rate/Margin Pressure	CEO highlighted uncertain rate environment, pressure on NIM and deposit retention	NIM fell; higher FRB/FHLB funding costs; efficiency worsened	NIM down to 1.56%; efficiency 112.20%; elevated deposit costs persist	Deteriorating margin/efficiency
Deposit Mix & Flows	Customers shifting from savings to higher-rate CDs	Continued shift; deposit decline to $1.60B	Deposits down to $1.57B; CD balances higher; savings balances lower	Ongoing outflows and repricing
Liquidity & Funding	Increased FHLB/FRB advances to enhance liquidity	Liquidity access $901.70m; FRB advance $50m	Liquidity access $951m; FRB advance remains $50m	Strong/liquid, funding costs high
Regulatory/FDIC Premiums	FDIC premiums rising YoY	FDIC premium up $251k, retroactive rate increase	FDIC premium up $147k QoQ; rates higher	Structural cost pressure
Asset Quality	NPA/Assets 0.10%; Maui wildfire exposure monitored	NPA/Assets 0.10%; ACL/Loans 0.39%	NPA/Assets 0.06%; delinquency low; ACL/Loans 0.39%	Improving
Strategic/M&A	—	Announced definitive agreement with Hope Bancorp (Apr 29)	Merger terms reiterated; S-4 filed; brand to remain in HI	Progressing toward close

Management Commentary

“The uncertain interest rate environment continues to be a challenge for the banking industry. The 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, Chairman & CEO (Q4 2023) .
“Credit quality continues to be extremely important as the Bank adheres to its strict underwriting standards.” (Q2 2024 release) .
Merger update: Fixed exchange ratio 0.8048 HOPE share per TBNK share; tax-free reorganization; HOPE intends to maintain the Territorial franchise and brand in Hawaii post-close, subject to regulatory and shareholder approvals .

Q&A Highlights

No public Q2 2024 earnings call transcript was available in our document catalog; therefore, no Q&A themes or clarifications can be reported for this quarter.

Estimates Context

S&P Global consensus for Q2 2024 EPS and revenue was unavailable due to missing mapping for TBNK in our SPGI data connector. As a result, estimate comparisons are not provided for this quarter.
Given the continued compression in NIM and higher funding costs, consensus models likely need to reflect lower net interest income and elevated efficiency ratios until deposit pricing normalizes and/or rates decline (context derived from reported Q2 dynamics) .

Key Takeaways for Investors

Margin pressure remains the central earnings headwind: NIM declined to 1.56% and the efficiency ratio rose to 112.20%, reflecting higher deposit and borrowing costs that more than offset modest increases in interest income .
Deposits continue to decline ($1.57B), with mix shifting to higher-rate CDs; expect persistently elevated funding costs near-term, constraining earnings power .
Balance sheet resilience: well-capitalized (Tier 1 leverage 11.62%, risk-based capital 28.98%), strong liquidity ($951m access) — provides strategic flexibility despite earnings pressure .
Asset quality is a bright spot: NPA/Assets improved to 0.06% and delinquency remained minimal; ACL/Loans steady at 0.39% .
Dividend reset to $0.01 signals conservative capital stance ahead of merger completion; monitor for payout policy changes post-integration with HOPE .
Merger with HOPE is the principal stock catalyst: closing timeline hinges on regulatory and shareholder approvals; investors should assess potential synergy realization against sustained funding cost headwinds and the decision to preserve Territorial’s Hawaii franchise .
Near-term trading: earnings softness likely persists until rate relief or deposit pricing stabilizes; medium-term thesis depends on merger synergies, funding optimization, and maintaining asset quality through the cycle .

Territorial Bancorp Inc. (TBNK)·Q2 2024 Earnings Summary