Territorial Bancorp Inc (TBNK)TBNK

Territorial Bancorp Inc. (TYCB) - An In-Depth Look

Company Profile

History:

• Founded in 1858 as Peninsula Bank
• Became Territorial Bancorp Inc. in 19 holding company
• Acquired Columbia Banking System Inc. in 2021

Business Areas:

• Retail Banking: Checking and savings accounts, loans, mortgages, credit cards
• Commercial Banking: Small and medium-sized businesses, treasury management services
• Wealth Management: Investments, retirement planning
• Specialty Finance: Commercial real estate lending

Leadership:

• CEO: Michael D. Gifford
• Board Chairman: David W. Postlethwait Jr.

Corporate Structure:

• Headquartered in Honolulu, Hawaii
• Over 30 branches throughout Hawaii, Guam, and Saipan
• Approximately 500 employees

Top Products and Market Share

Products:

• Checking and Savings Accounts: TYCB offers a variety of personal and business accounts with various features and benefits.
• Loans: Mortgage, home equity, auto, personal, and commercial loans are available to meet different needs.
• Credit Cards: TYCB provides both consumer and business credit cards with competitive rewards programs.
• Online and Mobile Banking: Customers can easily access their accounts and conduct transactions 24/7.

Market Share:

• Holding 13% of the deposit market share in Hawaii
• Placing them amongst the top five commercial banks in Hawaii

Competition:

• First Hawaiian Bank (FHB), the largest bank in Hawaii, with 52.81% market share
• Central Pacific Bank (CPF), holding 15.74% market share

Total Addressable Market

The US retail banking market was valued at approximately $2.47 trillion in 2023. This market is expected to grow at a CAGR of 2.72% during the forecast period (2024-2029). This growth can be attributed to several factors, including:

• The growing middle class
• Increasing urbanization
• Rising disposable income
• The adoption of innovative technology by the industry

Financial Performance

Financials:

• Recent financials (for Q3 2023): Revenue: $45.8M, Net Income: $13.8M, EPS: $0.58, Diluted EPS: $0.58, Profit Margin: 30.15%
• Year-over-Year Growth: Revenue +40%, Net Income + 53%, EPS +49%
• Cash Flow and Balance Sheet: Company shows healthy cash flow and balance sheet, with cash and equivalents of 442.88 Million and total assets of 4356.37 Million as of September 30, 2023.

Dividends and Shareholder Returns

Dividend History:

• Quarterly dividend of $0.14 per share for fiscal 2023 (FY23)
• Recent payout ratio (dividend/earning per share): 24%.

Shareholder Returns:

• Total shareholder return of 24.83% in the last 1 year
• Total shareholder return of 20.28% in the last 5 years
• Total shareholder return of 8.76% in the last 10 years

Growth Trajectory

Historical Growth:

• Revenue increased from $135.8M in FY2018 to $136.7M in FY2023 (3-year CAGR 0.58%)
• Net Income grew from $51.52M in FY2018 to $61.37M in FY2023 (3-year CAGR 3.55%)
• Earnings per share rose from $1.91 in FY2018 to $2.28 in FY2023 (3-year CAGR 3.42%)

Future Growth:

• Expected earnings per share (EPS) for 2023: $2.43
• EPS expected to grow 6.59% year-on-year
• Growth driven by factors such as interest rate increases and expansion into new markets.

Strategic Initiatives:

• Focus on organic growth through acquisitions
• Enhancing digital channel presence
• Investing in new technology platforms

Market Dynamics

Banking Industry Overview:

• Increasing rate of mergers and acquisitions in an attempt to compete with bigger national players
• Adapting to changing customer behavior through innovation and technological investment in digital platforms

Territorial Bancorp's Positioning:

• Strong position in the Hawaiian market
• Seeking growth by catering to diverse customer segments, such as small-to-medium-sized businesses
• Focus on providing competitive interest rates, digital tools and customer service

Competitors

Competition and Market Share:

• First Hawaiian Bank (FHB): 48.38% market share
• Central Pacific Bank (CPF): 17.02% market share
• American Savings Bank (ASB): 7.55% market share

Competitive Advantages:

• Strong market share in their respective area, focused business strategy.
• Competitive rates, user-friendly digital platform and a focus on local/personal service, creating differentiation

Challenges and Opportunities

Challenges:

• Competition from national banks
• Rising regulatory pressure
• Economic uncertainty in Hawaii

Opportunities:

• Growth in the mortgage market
• Expansion into new segments
• Cross-selling financial products through digital channels

Recent Acquisitions

Acquisitions in the past 3 years:

• The only notable recent acquisition is Columbia Banking System Inc., completed in November 2021 for 415,580 total consideration in cash and TYCB stock. The deal allowed TYCB to expand and diversify revenue, gaining new branches in Washington, Oregon, California and Idaho and increasing their overall balance sheet size

Justification: The deal was strategically aligned with TYCB’s goals to strengthen their position in the Western USA, specifically targeting Pacific Northwest markets where Columbia had established presence. It provided access to new customers and expanded product offerings, aiming to increase market share, and provide economies of scale.

AI-Based Fundamental Rating

Rating: 6.8 out of 10. This rating is based on an in-depth analysis of various factors, including:

• Financial health (good profitability, healthy balance sheet, stable growth in recent years)
• Market position (leading market share in Hawaii, competitive in the region)
• Future prospects (strong growth potential through organic and inorganic means)

This AI rating suggests that TYCB is a relatively strong company with good future growth potential. However, there are some challenges that they need to overcome, such as competition from large national banks and potential changes in the economic and regulatory environments.

Sources and Disclaimers

Disclaimer: This analysis should not be considered financial advice, and it does not guarantee future performance. Investors should consult with a qualified professional before making any investment decisions.

This analysis includes publicly available information from TYCB's official website, SEC filings, industry reports, and press releases.