10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2015

or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from               to          

Commission File Number1-34403

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 or former address, if changed since last report)

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 x  No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).Yes  x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer  o	Accelerated filer  x
Non-accelerated filer  o	Smaller reporting company   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x.

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock as of the latest practicable date:

9,719,600 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of July 31, 2015.

TERRITORIAL BANCORP INC.

Form 10-Q Quarterly Report

Table of Contents

PART I
ITEM 1.	FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	44
ITEM 4.	CONTROLS AND PROCEDURES	45
PART II
ITEM 1.	LEGAL PROCEEDINGS	47
ITEM 1A.	RISK FACTORS	47
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	47
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	47
ITEM 4.	MINE SAFETY DISCLOSURES	48
ITEM 5.	OTHER INFORMATION	48
ITEM 6.	EXHIBITS	48
SIGNATURES		49

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,
	2015			2014
ASSETS
Cash and cash equivalents	$	36,250		$	75,060
Investment securities held to maturity, at amortized cost (fair value of $530,136 and $586,710 at June 30, 2015 and December 31, 2014, respectively)	525,708			572,922
Loans receivable, net	1,110,823			968,212
Loans held for sale	455			1,048
Federal Home Loan Bank stock, at cost	4,310			11,234
Federal Reserve Bank stock, at cost	2,971			2,925
Accrued interest receivable	4,587			4,436
Premises and equipment, net	5,314			5,629
Real estate owned	192			—
Bank-owned life insurance	41,814			41,303
Deferred income taxes receivable	8,568			7,254
Prepaid expenses and other assets	2,086			1,874
Total assets	$	1,743,078		$	1,691,897
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits	$	1,373,379		$	1,359,679
Advances from the Federal Home Loan Bank	57,000			15,000
Securities sold under agreements to repurchase	60,000			72,000
Accounts payable and accrued expenses	27,011			24,098
Current income taxes payable	2,647			826
Advance payments by borrowers for taxes and insurance	4,677			3,916
Total liabilities	1,524,714			1,475,519
Stockholders’ Equity:
Preferred stock, $.01 par value; authorized 50,000,000 shares, no shares issued or outstanding	—			—
Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 9,719,600 and 9,919,064 shares at June 30, 2015 and December 31, 2014, respectively	97			99
Additional paid-in capital	72,528			75,229
Unearned ESOP shares	(6,606		)	(6,851		)
Retained earnings	157,673			153,289
Accumulated other comprehensive loss	(5,328		)	(5,388		)
Total stockholders’ equity	218,364			216,378
Total liabilities and stockholders’ equity	$	1,743,078		$	1,691,897

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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Interest and dividend income:
Loans	$	11,266	$	9,760	$	21,952	$	19,300
Investment securities	4,274		5,086		8,797		10,160
Other investments	70		35		149		78
Total interest and dividend income	15,610		14,881		30,898		29,538
Interest expense:
Deposits	1,154		1,103		2,288		2,194
Advances from the Federal Home Loan Bank	157		66		227		132
Securities sold under agreements to repurchase	243		343		555		686
Total interest expense	1,554		1,512		3,070		3,012
Net interest income	14,056		13,369		27,828		26,526
Provision for loan losses	101		156		295		165
Net interest income after provision for loan losses	13,955		13,213		27,533		26,361
Noninterest income:
Service fees on loan and deposit accounts	527		524		987		1,023
Income on bank-owned life insurance	256		264		511		532
Gain on sale of investment securities	240		309		476		655
Gain on sale of loans	110		86		239		165
Other	115		96		281		262
Total noninterest income	1,248		1,279		2,494		2,637
Noninterest expense:
Salaries and employee benefits	5,064		5,297		10,163		10,660
Occupancy	1,428		1,409		2,865		2,831
Equipment	953		905		1,898		1,819
Federal deposit insurance premiums	211		201		420		400
Other general and administrative expenses	1,187		935		2,401		1,901
Total noninterest expense	8,843		8,747		17,747		17,611
Income before income taxes	6,360		5,745		12,280		11,387
Income taxes	2,523		2,026		4,917		4,206
Net income	$	3,837	$	3,719	$	7,363	$	7,181
Basic earnings per share	$	0.42	$	0.41	$	0.81	$	0.78
Diluted earnings per share	$	0.41	$	0.40	$	0.79	$	0.77
Cash dividends declared per common share	$	0.16	$	0.15	$	0.32	$	0.29
Basic weighted-average shares outstanding	9,053,383		9,164,801		9,086,865		9,176,108
Diluted weighted-average shares outstanding	9,307,988		9,346,872		9,314,776		9,363,631

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 June 30,					Six Months Ended June 30,
	2015			2014		2015			2014
Net income	$	3,837		$	3,719	$	7,363		$	7,181
Change in unfunded pension liability	(64		)	—		(64		)	—
Change in unrealized loss on securities	7			1		16			4
Change in noncredit related loss on trust preferred securities	77			—		108			72
Other comprehensive income, net of tax	20			1		60			76
Comprehensive income	$	3,857		$	3,720	$	7,423		$	7,257

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)

	Common Stock			Additional Paid-in Capital			Unearned ESOP Shares			Retained Earnings			Accumulated Other Comprehensive (Loss)/Income			Total Stockholders’ Equity
Balances at December 31, 2013	$	101		$	77,340		$	(7,340	)	$	145,826		$	(3,787	)	$	212,140
Net income	—			—			—			7,181			—			7,181
Other comprehensive income	—			—			—			—			76			76
Cash dividends declared ($0.29 per share)	—			—			—			(2,752		)	—			(2,752		)
Share-based compensation	—			1,327			—			—			—			1,327
Allocation of 24,466 ESOP shares	—			282			245			—			—			527
Repurchase of 170,994 shares of company common stock	(2		)	(3,885		)	—			—			—			(3,887		)
Balances at June 30, 2014	$	99		$	75,064		$	(7,095	)	$	150,255		$	(3,711	)	$	214,612
Balances at December 31, 2014	$	99		$	75,229		$	(6,851	)	$	153,289		$	(5,388	)	$	216,378
Net income	—			—			—			7,363			—			7,363
Other comprehensive income	—			—			—			—			60			60
Cash dividends declared ($0.32 per share)	—			—			—			(2,979		)	—			(2,979		)
Share-based compensation	—			1,328			—			—			—			1,328
Allocation of 24,466 ESOP shares	—			308			245			—			—			553
Repurchase of 199,464 shares of company common stock	(2		)	(4,337		)	—			—			—			(4,339		)
Balances at June 30, 2015	$	97		$	72,528		$	(6,606	)	$	157,673		$	(5,328	)	$	218,364

See accompanying notes to consolidated financial statements.

4

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

	Six Months Ended
	June 30,
	2015			2014
Cash flows from operating activities:
Net income	$	7,363		$	7,181
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses	295			165
Depreciation and amortization	666			677
Deferred income tax benefit	(1,354		)	(1,457		)
Amortization of fees, discounts, and premiums	(204		)	(208		)
Origination of loans held for sale	(28,108		)	(16,086		)
Proceeds from sales of loans held for sale	28,684			16,957
Gain on sale of loans, net	(239		)	(165		)
Purchases of investment securities held for trading	—			(5,041		)
Proceeds from sale of investment securities held for trading	—			5,071
Gain on sale of investment securities held for trading	—			(30		)
Gain on sale of investment securities held to maturity	(476		)	(625		)
ESOP expense	553			527
Share-based compensation expense	1,328			1,327
Increase in accrued interest receivable	(151		)	(137		)
Net increase in bank-owned life insurance	(511		)	(531		)
Net increase in prepaid expenses and other assets	(212		)	(303		)
Net increase (decrease) in accounts payable and accrued expenses	3,197			(960		)
Net increase in advance payments by borrowers for taxes and insurance	761			10
Net increase in income taxes payable	1,821			679
Net cash from operating activities	13,413			7,051
Cash flows from investing activities:
Purchases of investment securities held to maturity	(6,671		)	(34,831		)
Principal repayments on investment securities held to maturity	49,390			28,479
Proceeds from sale of investment securities held to maturity	5,083			7,199
Loan originations, net of principal repayments on loans receivable	(142,545		)	(46,313		)
Purchases of Federal Home Loan Bank stock	(1,600		)	—
Proceeds from redemption of Federal Home Loan Bank stock	8,524			222
Purchases of Federal Reserve Bank stock	(46		)	—
Purchases of premises and equipment	(351		)	(560		)
Net cash from investing activities	(88,216		)	(45,804		)

(Continued)

5

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)

	Six Months Ended
	June 30,
	2015			2014
Cash flows from financing activities:
Net increase in deposits	$	13,700		$	29,238
Proceeds from advances from the Federal Home Loan Bank	82,000			—
Repayments of advances from the Federal Home Loan Bank	(40,000		)	—
Proceeds from securities sold under agreements to repurchase	30,000			—
Repayments of securities sold under agreements to repurchase	(42,000		)	—
Repurchases of common stock	(4,728		)	(4,412		)
Cash dividends paid	(2,979		)	(2,752		)
Net cash from financing activities	35,993			22,074
Net decrease in cash and cash equivalents	(38,810		)	(16,679		)
Cash and cash equivalents at beginning of the period	75,060			75,365
Cash and cash equivalents at end of the period	$	36,250		$	58,686
Supplemental disclosure of cash flow information:
Cash paid for:
Interest on deposits and borrowings	$	3,149		$	2,953
Income taxes	4,450			4,984
Supplemental disclosure of noncash investing and financing activities:
Loans transferred to real estate owned	$	192		$	—

See accompanying notes to consolidated financial statements.

6

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(1)Basis of Presentation

The accompanying unaudited consolidated financial statements of Territorial Bancorp Inc. (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.  These interim condensed consolidated financial statements and notes should be read in conjunction with Territorial Bancorp Inc.’s consolidated financial statements and notes thereto filed as part of the Annual Report on Form 10-K for the year ended December 31, 2014.  In the opinion of management, all adjustments necessary for a fair presentation have been made and consist only of normal recurring adjustments.  Interim results of operations are not necessarily indicative of results to be expected for the year.

(2)Organization

On November 4, 2008, the Board of Directors of Territorial Mutual Holding Company (MHC) approved a plan of conversion and reorganization under which the MHC would convert from a mutual holding company to a stock holding company.  The conversion to a stock holding company was approved by the depositors and borrowers of Territorial Savings Bank and the Office of Thrift Supervision (OTS) and included the filing of a registration statement with the U.S. Securities and Exchange Commission.  Upon the completion of the conversion and reorganization on July 10, 2009, Territorial Mutual Holding Company and Territorial Savings Group, Inc. ceased to exist as separate legal entities and Territorial Bancorp Inc. became the holding company for Territorial Savings Bank.

Upon completion of the conversion and reorganization, a special “liquidation account” was established in an amount equal to the total equity of Territorial Mutual Holding Company as of December 31, 2008.  The liquidation account is to provide eligible account holders and supplemental eligible account holders who maintain their deposit accounts with Territorial Savings Bank after the conversion with a liquidation interest in the unlikely event of the complete liquidation of Territorial Savings Bank after the conversion.  The balance of the liquidation account at December 31, 2014 was $15.2 million.

On June 25, 2014, Territorial Savings Bank converted from a federal savings bank to a Hawaii state-chartered savings bank.  On July 10, 2014, Territorial Savings Bank became a member of the Federal Reserve System.

(3)Recently Adopted Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board (FASB) amended the Receivables topic of the FASB Accounting Standards Codification (ASC).  The amendment clarifies when an in substance repossession or foreclosure occurs and when a mortgage loan should be derecognized and the related real property recognized.  The amendment also requires disclosures about the amount of foreclosed residential real property held and the recorded investment in mortgage loans collateralized by residential real property in the process of foreclosure.  The amendment was effective for interim and annual periods beginning after December 15, 2014.  The Company adopted this amendment on January 1, 2015, and the adoption did not have a material effect on its consolidated financial statements.

7

In May 2014, the FASB amended the Revenue Recognition topic of the FASB ASC.  The amendment seeks to clarify the principles for recognizing revenue as well as to develop common revenue standards for U.S. generally accepted accounting principles and International Financial Reporting Standards.  The amendment is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  The Company does not expect the adoption of this amendment to have a material effect on its consolidated financial statements.

In June 2014, the FASB amended the Transfers and Servicing topic of the FASB ASC.  The amendment modifies the accounting for certain types of repurchase transactions as well as adds new disclosure requirements for repurchase transactions.  The amendment was effective for interim and annual periods beginning after December 15, 2014, with early adoption prohibited.  The Company adopted this amendment on January 1, 2015, and the adoption did not have a material effect on its consolidated financial statements.  See Footnote 9, Securities Sold Under Agreements to Repurchase.

In August 2014, the FASB amended the Receivables topic of the FASB ASC.  The amendment seeks to clarify the classification of foreclosed mortgage loans that are either fully or partially guaranteed under government programs, such as from the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA).  The amendment was effective for interim and annual periods beginning after December 15, 2014.  The Company adopted this amendment on January 1, 2015, and the adoption did not have any effect on its consolidated financial statements.

In April 2015, the FASB amended the Intangibles — Goodwill and Other topic of the FASB ASC.  The amendment adds guidance to help entities evaluate the accounting for fees paid in cloud computing arrangements.  The amendment is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015.  The Company does not expect the adoption of this amendment to have a material effect on its consolidated financial statements.

(4)Cash and Cash Equivalents

The table below presents the balances of cash and cash equivalents:

	June 30,		December 31,
(Dollars in thousands)	2015		2014
Cash and due from banks	$	11,020	$	10,803
Interest-earning deposits in other banks	25,230		64,257
Cash and cash equivalents	$	36,250	$	75,060

Interest-earning deposits in other banks consist primarily of deposits at the Federal Reserve Bank.

8

(5)Investment Securities

The amortized cost and fair values of investment securities are as follows:

	Amortized		Gross Unrealized					Estimated
(Dollars in thousands)	Cost		Gains		Losses			Fair Value
June 30, 2015:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	524,840	$	12,061	$	(7,633	)	$	529,268
Trust preferred securities	868		—		—			868
Total	$	525,708	$	12,061	$	(7,633	)	$	530,136
December 31, 2014:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	572,232	$	18,078	$	(4,290	)	$	586,020
Trust preferred securities	690		—		—			690
Total	$	572,922	$	18,078	$	(4,290	)	$	586,710

The amortized cost and estimated fair value of investment securities at June 30, 2015 are shown below.  Incorporated in the maturity schedule are mortgage-backed and trust preferred securities, which are allocated using the contractual maturity as a basis.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Estimated
(Dollars in thousands)	Cost		Fair Value
Held to maturity:
Due within 5 years	$	41	$	43
Due after 5 years through 10 years	8		9
Due after 10 years	525,659		530,084
Total	$	525,708	$	530,136

Realized gains and losses and the proceeds from sales of securities held to maturity and trading are shown in the table below.  All sales of securities were U.S. government-sponsored mortgage-backed securities.

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2015		2014		2015		2014
Proceeds from sales	$	2,503	$	3,475	$	5,083	$	12,270
Gross gains	240		309		476		655
Gross losses	—		—		—		—

9

During the three months ended June 30, 2015 and 2014, the Company received proceeds of $2.4 million and $3.5 million, respectively, from the sale of $2.3 million and $3.2 million, respectively, of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $179,000 and $309,000, respectively. During the six months ended June 30, 2015 and 2014, the Company received proceeds of $5.0 million and $7.2 million, respectively, from the sale of $4.6 million and $6.6 million, respectively, of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $415,000 and $625,000, respectively.  The sale of these mortgage-backed securities, for which the Company had already collected a substantial portion of the original purchased principal (at least 85%), is in accordance with the Investments — Debt and Equity Securities topic of the FASB ASC and does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.

During the three months ended June 30, 2015, the Company received proceeds of $61,000 from the sale of one of the trust preferred securities the Company owned, PreTSL XXIV.  The Company previously wrote off the entire book value of this security when it incurred an other-than-temporary impairment charge in prior years.  The trust preferred security sold was classified in the held-to-maturity portfolio.  Since the credit rating of this security was downgraded, in accordance with the Investments — Debt and Equity Securities topic of the FASB ASC, the sale of this security does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.

During the six months ended June 30, 2014, the Company received proceeds of $5.0 million from the sale of a held-for-trading security and recognized a gain of $30,000.

Investment securities with amortized costs of $256.3 million and $270.2 million at June 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and transaction clearing accounts.

Provided below is a summary of investment securities which were in an unrealized loss position at June 30, 2015 and December 31, 2014.  The Company does not intend to sell these securities until such time as the value recovers or the securities mature and it is not more likely than not that the Company will be required to sell the securities prior to recovery of value or the securities mature.

	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized		Number of			Unrealized
Description of Securities	Fair Value		Losses		Fair Value		Losses		Securities	Fair Value		Losses
(Dollars in thousands)
June 30, 2015:
Mortgage-backed securities	$	166,679	$	5,022	$	54,835	$	2,611	45	$	221,514	$	7,633
December 31, 2014:
Mortgage-backed securities	$	12,717	$	65	$	183,349	$	4,225	37	$	196,066	$	4,290

Mortgage-Backed Securities.  The unrealized losses on the Company’s investment in mortgage-backed securities were caused by increases in market interest rates.  All of the mortgage-backed securities are guaranteed by Freddie Mac or Fannie Mae, which are U.S. government-sponsored enterprises, or Ginnie Mae, which is a U.S. government agency.  Since the decline in market value is attributable to changes in interest rates and not credit quality, and the Company does not intend to sell these investments until maturity and it is not more likely than not that the Company will be required to sell such investments prior to recovery of its cost basis, the Company does not consider these investments to be other-than-temporarily impaired as of June 30, 2015 and December 31, 2014.

10

Trust Preferred Securities.  At June 30, 2015, the Company owns one trust preferred security, PreTSL XXIII.  The trust preferred security represents an investment in a pool of debt obligations issued primarily by holding companies for Federal Deposit Insurance Corporation-insured financial institutions. This security is classified in the Company’s held-to-maturity investment portfolio.

The trust preferred securities market is considered to be inactive as only six transactions have occurred over the past 45 months in the same tranche of securities owned by the Company.  The Company uses a discounted cash flow model to determine whether this security is other-than-temporarily impaired.  The assumptions used in preparing the discounted cash flow model include the following: estimated discount rates, estimated deferral and default rates on collateral, and estimated cash flows.

Based on the Company’s review, the Company’s investment in PreTSL XXIII did not incur additional impairment during the quarter ended June 30, 2015.

PreTSL XXIII has an amortized cost of $868,000 at June 30, 2015.  The difference between the amortized cost of $868,000 and the remaining cost basis of $1.1 million is reported as other comprehensive loss and is related to noncredit factors.

It is reasonably possible that the fair value of the trust preferred security could decline in the near term if the overall economy and the financial condition of some of the issuers continue to deteriorate and the liquidity of this security remains low.  As a result, there is a risk that the Company’s remaining cost basis of $1.1 million on its trust preferred security could be credit-related other-than-temporarily impaired in the near term.  The impairment, if any, could be material to the Company’s consolidated statements of income.

The table below provides a cumulative roll forward of credit losses recognized in earnings for debt securities held and not intended to be sold:

(Dollars in thousands)	2015			2014
Balance at January 1,	$	5,885		$	5,885
Credit losses on debt securities for which other-than-temporary impairment was not previously recognized	—			—
Credit losses on debt securities which were sold	(3,482		)	—
Balance at June 30,	$	2,403		$	5,885

The table below shows the components of comprehensive loss, net of taxes, resulting from other-than-temporarily impaired securities:

	June 30,
(Dollars in thousands)	2015		2014
Noncredit losses on other-than-temporarily impaired securities, net of taxes	$	176	$	304

11

(6)Loans Receivable and Allowance for Loan Losses

The components of loans receivable are as follows:

	June 30,			December 31,
(Dollars in thousands)	2015			2014
Real estate loans:
First mortgages:
One- to four-family residential	$	1,069,243		$	926,074
Multi-family residential	9,840			8,920
Construction, commercial, and other	17,129			18,415
Home equity loans and lines of credit	16,200			15,992
Total real estate loans	1,112,412			969,401
Other loans:
Loans on deposit accounts	269			441
Consumer and other loans	4,214			4,173
Total other loans	4,483			4,614
Less:
Net unearned fees and discounts	(4,078		)	(4,112		)
Allowance for loan losses	(1,994		)	(1,691		)
Total unearned fees, discounts and allowance for loan losses	(6,072		)	(5,803		)
Loans receivable, net	$	1,110,823		$	968,212

12

The table below presents the activity in the allowance for loan losses by portfolio segment:

(Dollars in thousands)	Residential Mortgage		Construction, Commercial and Other Mortgage Loans			Home Equity Loans and Lines of Credit			Consumer and Other			Unallocated		Totals
Three months ended June 30, 2015:
Balance, beginning of period	$	1,111	$	543		$	4		$	149		$	65	$	1,872
Provision (reversal of allowance) for loan losses	129		(142		)	(16		)	(45		)	175		101
	1,240		401			(12		)	104			240		1,973
Charge-offs	—		—			—			(6		)	—		(6		)
Recoveries	3		6			15			3			—		27
Net charge-offs	3		6			15			(3		)	—		21
Balance, end of period	$	1,243	$	407		$	3		$	101		$	240	$	1,994
Six months ended June 30, 2015:
Balance, beginning of period	$	413	$	977		$	5		$	263		$	33	$	1,691
Provision (reversal of allowance) for loan losses	827		(577		)	(18		)	(144		)	207		295
	1,240		400			(13		)	119			240		1,986
Charge-offs	—		—			—			(25		)	—		(25		)
Recoveries	3		7			16			7			—		33
Net charge-offs	3		7			16			(18		)	—		8
Balance, end of period	$	1,243	$	407		$	3		$	101		$	240	$	1,994

(Dollars in thousands)	Residential Mortgage			Construction, Commercial and Other Mortgage Loans		Home Equity Loans and Lines of Credit			Consumer and Other			Unallocated			Totals
Three months ended June 30, 2014:
Balance, beginning of period	$	434		$	823	$	7		$	153		$	68		$	1,485
Provision for loan losses	28			109		9			10			—			156
	462			932		16			163			68			1,641
Charge-offs	(118		)	—		(10		)	(8		)	—			(136		)
Recoveries	—			—		1			4			—			5
Net charge-offs	(118		)	—		(9		)	(4		)	—			(131		)
Balance, end of period	$	344		$	932	$	7		$	159		$	68		$	1,510
Six months ended June 30, 2014:
Balance, beginning of period	$	376		$	799	$	10		$	229		$	72		$	1,486
Provision (reversal of allowance) for loan losses	86			133		5			(55		)	(4		)	165
	462			932		15			174			68			1,651
Charge-offs	(118		)	—		(10		)	(25		)	—			(153		)
Recoveries	—			—		2			10			—			12
Net charge-offs	(118		)	—		(8		)	(15		)	—			(141		)
Balance, end of period	$	344		$	932	$	7		$	159		$	68		$	1,510

13

During the six months ended June 30, 2015, the Company increased the loan loss provisions for residential mortgage loans based on the growth of this segment of the loan portfolio and the concentration of loans in Hawaii.  The Company also reduced the loan loss provisions on construction, commercial and other mortgage loans, home equity loans and lines of credit and consumer and other loans based on a continued limited loss experience.  The allocation of a portion of the allowance from one category of loans does not preclude its availability to absorb losses in other loan categories.

Management considers the allowance for loan losses at June 30, 2015 to be at an appropriate level to provide for probable losses that can be reasonably estimated based on general and specific conditions at that date. While the Company uses the best information it has available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations.  To the extent actual outcomes differ from the estimates, additional provisions for credit losses may be required that would reduce future earnings.  In addition, as an integral part of their examination process, the bank regulators and the Hawaii Department of Financial Institutions periodically review the allowance for loan losses and may require the Company to increase the allowance based on their analysis of information available at the time of their examination.

The table below presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:

(Dollars in thousands)	Residential Mortgage		Construction, Commercial and Other Mortgage Loans		Home Equity Loans and Lines of Credit		Consumer and Other		Unallocated		Totals
June 30, 2015:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	1,243		407		3		101		240		1,994
Total ending allowance balance	$	1,243	$	407	$	3	$	101	$	240	$	1,994
Loans:
Ending loan balance:
Individually evaluated for impairment	$	6,294	$	—	$	129	$	—	$	—	$	6,423
Collectively evaluated for impairment	1,068,734		17,086		16,077		4,497		—		1,106,394
Total ending loan balance	$	1,075,028	$	17,086	$	16,206	$	4,497	$	—	$	1,112,817
December 31, 2014:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	413		977		5		263		33		1,691
Total ending allowance balance	$	413	$	977	$	5	$	263	$	33	$	1,691
Loans:
Ending loan balance:
Individually evaluated for impairment	$	6,158	$	—	$	296	$	4	$	—	$	6,458
Collectively evaluated for impairment	924,732		18,399		15,702		4,612		—		963,445
Total ending loan balance	$	930,890	$	18,399	$	15,998	$	4,616	$	—	$	969,903

14

The table below presents the balance of impaired loans individually evaluated for impairment by class of loans:

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance
June 30, 2015:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,294	$	6,994
Home equity loans and lines of credit	129		161
Total	$	6,423	$	7,155
December 31, 2014:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,158	$	6,775
Home equity loans and lines of credit	296		324
Consumer and other	4		4
Total	$	6,458	$	7,103

The table below presents the average recorded investment and interest income recognized on impaired loans by class of loans:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
2015:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,331	$	17	$	6,366	$	36
Home equity loans and lines of credit	131		—		132		—
Total	$	6,462	$	17	$	6,498	$	36
2014:
With no related allowance recorded:
One- to four-family residential mortgages	$	7,106	$	29	$	7,141	$	60
Home equity loans and lines of credit	149		—		151		—
Total	$	7,255	$	29	$	7,292	$	60

There were no loans individually evaluated for impairment with a related allowance for loan loss as of June 30, 2015 or December 31, 2014.  Loans individually evaluated for impairment do not have an allocated allowance for loan loss because they are written down to fair value.

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The table below presents the aging of loans and accrual status by class of loans:

(Dollars in thousands)	30 — 59 Days Past Due		60 — 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total Loans		Nonaccrual Loans		Loans More Than 90 Days Past Due and Still Accruing
June 30, 2015:
One- to four-family residential mortgages	$	618	$	287	$	1,805	$	2,710	$	1,062,504	$	1,065,214	$	5,082	$	—
Multi-family residential mortgages	—		—		—		—		9,814		9,814		—		—
Construction, commercial and other mortgages	—		—		—		—		17,086		17,086		—		—
Home equity loans and lines of credit	43		—		—		43		16,163		16,206		129		—
Loans on deposit accounts	—		—		—		—		269		269		—		—
Consumer and other	6		—		—		6		4,222		4,228		—		—
Total	$	667	$	287	$	1,805	$	2,759	$	1,110,058	$	1,112,817	$	5,211	$	—
December 31, 2014:
One- to four-family residential mortgages	$	1,040	$	736	$	593	$	2,369	$	919,624	$	921,993	$	4,153	$	—
Multi-family residential mortgages	—		—		—		—		8,897		8,897		—		—
Construction, commercial and other mortgages	—		—		—		—		18,399		18,399		—		—
Home equity loans and lines of credit	—		—		161		161		15,837		15,998		296		—
Loans on deposit accounts	—		—		—		—		440		440		—		—
Consumer and other	7		1		4		12		4,164		4,176		4		—
Total	$	1,047	$	737	$	758	$	2,542	$	967,361	$	969,903	$	4,453	$	—

The Company primarily uses the aging of loans and accrual status to monitor the credit quality of its loan portfolio.  When a mortgage loan becomes seriously delinquent (90 days or more contractually past due), it displays weaknesses that may result in a loss. As a loan becomes more delinquent, the likelihood of the borrower repaying the loan decreases and the loan becomes more collateral-dependent.  A mortgage loan becomes collateral-dependent when the proceeds for repayment can be expected to come only from the sale or operation of the collateral and not from borrower repayments.  Generally, appraisals are obtained after a loan becomes collateral-dependent or is five months delinquent.  The carrying value of collateral-dependent loans is adjusted to the fair value of the collateral less selling costs.  Any commercial real estate, commercial, construction or equity loan that has a loan balance in excess of a specified amount is also periodically reviewed to determine whether the loan exhibits any weaknesses and is performing in accordance with its contractual terms.

The Company had 18 nonaccrual loans with a book value of $5.2 million at June 30, 2015 and 18 nonaccrual loans with a book value of $4.5 million as of December 31, 2014.  The Company collected interest on nonaccrual loans of $105,000 and $135,000 during the six months ended June 30, 2015 and 2014, respectively, but due to regulatory requirements, the Company recorded the interest as a reduction

16

of principal.  The Company would have recognized additional interest income of $151,000 and $96,000 during the six months ended June 30, 2015 and 2014, respectively, had the loans been accruing interest.  The Company did not have any loans more than 90 days past due and still accruing interest as of June 30, 2015 and December 31, 2014.

There were no loans modified in a troubled debt restructuring during the six months ended June 30, 2015 or 2014.  There were no new troubled debt restructurings within the past 12 months that subsequently defaulted.

The Company had 15 troubled debt restructurings totaling $3.5 million as of June 30, 2015 that were considered to be impaired.  This total included 14 one- to four-family residential mortgage loans totaling $3.4 million and one home equity loan for $129,000.  Five of the loans, totaling $1.2 million, are performing in accordance with their restructured terms and accruing interest at June 30, 2015.  Nine of the loans, totaling $2.1 million, are performing in accordance with their restructured terms but not accruing interest at June 30, 2015.  One of the loans, for $149,000, was more than 149 days delinquent and not accruing interest as of June 30, 2015.  The Company had 17 troubled debt restructurings totaling $4.6 million as of December 31, 2014 that were considered to be impaired.  This total included 16 one- to four-family residential mortgage loans totaling $4.4 million and one home equity loan for $135,000.  Six of the loans, totaling $2.0 million, were performing in accordance with their restructured terms and accruing interest at December 31, 2014.  Nine of the loans, totaling $2.2 million, were performing in accordance with their restructured terms but not accruing interest at December 31, 2014.  Two of the loans, totaling $343,000, were delinquent and not accruing interest at December 31, 2014.  Restructurings include deferrals of interest and/or principal payments and temporary or permanent reductions in interest rates due to the financial difficulties of the borrowers.  At June 30, 2015, we had no commitments to lend any additional funds to these borrowers.

The Company had $192,000 and $0 of real estate owned as of June 30, 2015 and December 31, 2014, respectively.  There were two one-to four-family residential mortgage loans totaling $499,000 in process of foreclosure as of June 30, 2015, and two one- to four-family residential mortgage loans totaling $367,000 in process of foreclosure as of June 30, 2014.

Nearly all of our real estate loans are collateralized by real estate located in the State of Hawaii.  Loan-to-value ratios on these real estate loans generally do not exceed 80% at the time of origination.

During the six months ended June 30, 2015 and 2014, the Company sold $28.6 million and $16.9 million, respectively, of mortgage loans held for sale and recognized gains of $239,000 and $165,000, respectively.  During the three months ended June 30, 2015 and 2014, the Company sold $15.3 million and $7.0 million, respectively, of mortgage loans held for sale and recognized gains of $110,000 and $86,000, respectively.  The Company had one loan held for sale for $455,000 at June 30, 2015 and six loans held for sale totaling $1.0 million at December 31, 2014.

The Company serviced loans for others of $55.9 million at June 30, 2015 and $60.5 million at December 31, 2014. Of these amounts, $2.8 million and $3.0 million relate to securitizations for which the Company continues to hold the related mortgage-backed securities at June 30, 2015 and December 31, 2014, respectively.  The amount of contractually specified servicing fees earned for the six-month periods ended June 30, 2015 and 2014 was $80,000 and $93,000, respectively.  The amount of contractually specified servicing fees earned for the three-month periods ended June 30, 2015 and 2014 was $39,000 and $46,000, respectively.  The fees are reported in service fees on loan and deposit accounts in the consolidated statements of income.

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(7)Federal Home Loan Bank Stock

On June 1, 2015, the Federal Home Loan Bank of Seattle (FHLB Seattle) completed its merger with the Federal Home Loan Bank of Des Moines (FHLB Des Moines).  After the merger, the FHLB Des Moines repurchased all outstanding excess capital stock, resulting in the repurchase of $7.2 million of capital stock we held in the FHLB Des Moines.  Combined with $279,000 of additional net stock purchases related to collateral on new advances, this resulted in a decrease in our investment in FHLB stock from $11.2 million at December 31, 2014 to $4.3 million at June 30, 2015.

(8)Advances from the Federal Home Loan Bank

Federal Home Loan Bank advances are secured by a blanket pledge on the Bank’s assets not otherwise pledged.  Our credit line with the FHLB Seattle was equal to 25% of Territorial Savings Bank’s total assets and as of December 31, 2014, we had the capacity to borrow an additional $399.0 million.  After the FHLB Seattle merged with the FHLB Des Moines, our credit line was raised to 35% of Territorial Savings Bank’s total assets and as of June 30, 2015, we had the capacity to borrow an additional $543.3 million.

Advances outstanding consisted of the following:

	June 30, 2015			December 31, 2014
			Weighted			Weighted
			Average			Average
(Dollars in thousands)	Amount		Rate	Amount		Rate
Due within one year	$	10,000	0.29%	$	10,000	2.06%
Due over 2 years to 3 years	15,000		1.26	—		—
Due over 3 years to 4 years	22,000		1.66	5,000		1.20
Due over 4 years to 5 years	10,000		1.66	—		—
Total	$	57,000	1.31%	$	15,000	1.77%

(9)Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are treated as financings and the obligations to repurchase the identical securities sold are reflected as a liability with the dollar amount of securities underlying the agreements remaining in the asset accounts.  Securities sold under agreements to repurchase are summarized as follows:

	June 30, 2015			December 31, 2014
			Weighted			Weighted
	Repurchase		Average	Repurchase		Average
(Dollars in thousands)	Liability		Rate	Liability		Rate
Maturing:
1 year or less	$	5,000	1.90%	$	47,000	2.11%
Over 2 years to 3 years	25,000		1.46	25,000		1.46
Over 3 years to 4 years	20,000		1.66	—		—
Over 4 years to 5 years	10,000		1.65	—		—
Total	$	60,000	1.60%	$	72,000	1.88%

18

Below is a summary comparing the carrying value and fair value of securities pledged to secure repurchase agreements, the repurchase liability, and the amount at risk at June 30, 2015.  The amount at risk is the greater of the carrying value or fair value over the repurchase liability and refers to the potential loss to the Company if the secured lender fails to return the security at the maturity date of the agreement.  All the agreements to repurchase are with JP Morgan Securities and the securities pledged are mortgage-backed securities issued and guaranteed by U.S. government-sponsored enterprises.  The repurchase liability cannot exceed 90% of the fair value of securities pledged.  In the event of a decline in the fair value of securities pledged to less than the required amount due to market conditions or principal repayments, the Company is obligated to pledge additional securities or other suitable collateral to cure the deficiency.

									Weighted
	Carrying		Fair						Average
	Value of		Value of		Repurchase		Amount		Months to
(Dollars in thousands)	Securities		Securities		Liability		at Risk		Maturity
Maturing:
Over 90 days	$	73,743	$	73,780	$	60,000	$	13,780	35

(10)Offsetting of Financial Liabilities

Securities sold under agreements to repurchase are subject to a right of offset in the event of default.  See Footnote 9, Securities Sold Under Agreements to Repurchase, for additional information.

	Gross Amount		Gross Amount		Net Amount of Liabilities		Gross Amount Not Offset in the Balance Sheet
(Dollars in thousands)	of Recognized Liabilities		Offset in the Balance Sheet		Presented in the Balance Sheet		Financial Instruments		Cash Collateral Pledged		Net Amount
June 30, 2015:
Securities sold under agreements to repurchase	$	60,000	$	—	$	60,000	$	60,000	$	—	$	—
December 31, 2014:
Securities sold under agreements to repurchase	$	72,000	$	—	$	72,000	$	72,000	$	—	$	—

(11)Employee Benefit Plans

The Company has a noncontributory defined benefit pension plan (Pension Plan) that covers most employees with at least one year of service.  Effective December 31, 2008, under approved changes to the Pension Plan, there were no further accruals of benefits for any participants and benefits will not increase with any additional years of service.  Net periodic benefit cost, subsequent to December 31, 2008, has not been significant and is not disclosed in the table below.

In addition, the Company sponsors a Supplemental Employee Retirement Plan (SERP), a noncontributory supplemental retirement benefit plan, which covers certain current and former employees of the Company for amounts in addition to those provided under the Pension Plan.

19

The components of net periodic benefit cost were as follows:

	SERP				SERP
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2015		2014		2015		2014
Net periodic benefit cost for the period
Service cost	$	21	$	25	$	42	$	50
Interest cost	31		29		62		59
Expected return on plan assets	—		—		—		—
Amortization of prior service cost	—		—		—		—
Recognized actuarial loss	—		—		—		—
Recognized curtailment loss	—		—		—		—
Net periodic benefit cost	$	52	$	54	$	104	$	109

(12)Employee Stock Ownership Plan

Effective January 1, 2009, Territorial Savings Bank adopted an Employee Stock Ownership Plan (ESOP) for eligible employees.  The ESOP borrowed $9.8 million from the Company and used those funds to acquire 978,650 shares, or 8%, of the total number of shares issued by the Company in its initial public offering.  The shares were acquired at a price of $10.00 per share.

The loan is secured by the shares purchased with the loan proceeds and will be repaid by the ESOP over the 20-year term of the loan with funds from Territorial Savings Bank’s contributions to the ESOP and dividends payable on the shares.  The interest rate on the ESOP loan is an adjustable rate equal to the prime rate, as published in The Wall Street Journal.  The interest rate adjusts annually and will be the prime rate on the first business day of the calendar year.

Shares purchased by the ESOP are held by a trustee in an unallocated suspense account, and shares are released annually from the suspense account on a pro-rata basis as principal and interest payments are made by the ESOP to the Company.  The trustee allocates the shares released among participants on the basis of each participant’s proportional share of compensation relative to all participants.  As shares are committed to be released from the suspense account, Territorial Savings Bank reports compensation expense based on the average fair value of shares released with a corresponding credit to stockholders’ equity.  The shares committed to be released are considered outstanding for earnings per share computations.  Compensation expense recognized for the three months ended June 30, 2015 and 2014 amounted to $241,000 and $217,000, respectively.  Compensation expense recognized for the six months ended June 30, 2015 and 2014 amounted to $463,000 and $458,000, respectively.

20

Shares held by the ESOP trust were as follows:

	June 30,		December 31,
	2015		2014
Allocated shares	303,036		283,381
Unearned shares	660,591		685,057
Total ESOP shares	963,627		968,438
Fair value of unearned shares, in thousands	$	16,026	$	14,763

The ESOP restoration plan is a nonqualified plan that provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the ESOP’s benefit formula.  The supplemental cash payments consist of payments representing shares that cannot be allocated to the participants under the ESOP due to IRS limitations imposed on tax-qualified plans.  We accrue for these benefits over the period during which employees provide services to earn these benefits.  For the three months ended June 30, 2015 and 2014, we accrued $40,000 and $19,000, respectively, for the ESOP restoration plan.  For the six months ended June 30, 2015 and 2014, we accrued $104,000 and $93,000, respectively, for the ESOP restoration plan.

(13)Share-Based Compensation

On August 19, 2010, Territorial Bancorp Inc. adopted the 2010 Equity Incentive Plan, which provides for awards of stock options and restricted stock to key officers and outside directors.  In accordance with the Compensation — Stock Compensation topic of the FASB ASC, the cost of the 2010 Equity Incentive Plan is based on the fair value of the awards on the grant date.  The fair value of restricted stock is based on the closing price of the Company’s stock on the grant date.  The fair value of stock options is estimated using a Black-Scholes option pricing model using assumptions for dividend yield, stock price volatility, risk-free interest rate and option term.  These assumptions are based on our judgments regarding future events, are subjective in nature, and cannot be determined with precision.  The cost of the awards will be recognized on a straight-line basis over the five- to six-year vesting period during which participants are required to provide services in exchange for the awards.

The Company recognized compensation expense, measured as the fair value of the share-based award on the date of grant, on a straight-line basis over the vesting period. Share-based compensation is recorded in the statement of income as a component of salaries and employee benefits with a corresponding increase in shareholders’ equity. The table below presents information on compensation expense and the related tax benefit for all share-based awards:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In thousands)	2015		2014		2015		2014
Compensation expense	$	667	$	667	$	1,328	$	1,327
Income tax benefit	268		299		533		612

Shares of our common stock issued under the 2010 Equity Incentive Plan shall be authorized but unissued shares.  The maximum number of shares that will be awarded under the plan will be 1,712,637 shares.

21

Stock Options

The table below presents the stock option activity for the six months ended June 30, 2015 and 2014:

	Options	Weighted Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2014	832,954	$	17.38	5.68	$	3,471
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Options outstanding at June 30, 2015	832,954	$	17.38	5.18	$	5,728
Options outstanding at December 31, 2013	832,954	$	17.38	6.68	$	4,845
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Options outstanding at June 30, 2014	832,954	$	17.38	6.18	$	2,913
Options vested and exercisable at June 30, 2015	555,097	$	17.38	5.18	$	3,818

There were no stock options exercised or vested during the three and six months ended June 30, 2015 and 2014.

As of June 30, 2015, the Company had $831,000 of unrecognized compensation costs related to the stock options. The cost of the stock options is being amortized over the five- to six-year vesting period.

There were no options granted in the three or six months ended June 30, 2015 and 2014.

Restricted Stock Awards

Restricted stock awards are accounted for as fixed grants using the fair value of the Company’s stock at the time of grant.  Unvested restricted stock awards may not be disposed of or transferred during the vesting period.  Restricted stock awards carry with them the right to receive dividends.

22

The table below presents the restricted stock award activity:

	Restricted Stock Awards	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2014	226,733	$	17.39
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at June 30, 2015	226,733	$	17.39
Nonvested at December 31, 2013	340,065	$	17.39
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at June 30, 2014	340,065	$	17.39

As of June 30, 2015, the Company had $2.3 million of unrecognized compensation costs related to restricted stock awards.  The cost of the restricted stock awards is being amortized over the five- or six-year vesting period.

(14)Earnings Per Share

The table below presents the information used to compute basic and diluted earnings per share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share data)	2015		2014		2015		2014
Net income	$	3,837	$	3,719	$	7,363	$	7,181
Weighted-average number of shares used in:
Basic earnings per share	9,053,383		9,164,801		9,086,865		9,176,108
Dilutive common stock equivalents:
Stock options and restricted stock units	254,605		182,071		227,911		187,523
Diluted earnings per share	9,307,988		9,346,872		9,314,776		9,363,631
Net income per common share, basic	$	0.42	$	0.41	$	0.81	$	0.78
Net income per common share, diluted	$	0.41	$	0.40	$	0.79	$	0.77

We have two forms of our outstanding common stock: common stock and unvested restricted stock awards.  Holders of unvested restricted stock awards receive nonforfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings.  The computed basic and diluted earnings per share presented are substantially equivalent using both the two-class and the treasury stock methods of calculating earnings per share.

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(15)Other Comprehensive Loss

The table below presents the changes in the components of accumulated other comprehensive loss, net of taxes:

(Dollars in thousands)	Unfunded Pension Liability		Noncredit Related Loss on Trust Preferred Securities			Unrealized Loss on Securities			Total
Three months ended June 30, 2015
Balances at beginning of period	$	5,032	$	253		$	63		$	5,348
Other comprehensive income, net of taxes	64		(77		)	(7		)	(20		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(77		)	(7		)	(20		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Three months ended June 30, 2014
Balances at beginning of period	$	3,338	$	304		$	70		$	3,712
Other comprehensive income, net of taxes	—		—			(1		)	(1		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		—			(1		)	(1		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711
Six months ended June 30, 2015
Balances at beginning of period	$	5,032	$	284		$	72		$	5,388
Other comprehensive income, net of taxes	64		(108		)	(16		)	(60		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(108		)	(16		)	(60		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Six months ended June 30, 2014
Balances at beginning of period	$	3,338	$	376		$	73		$	3,787
Other comprehensive income, net of taxes	—		(72		)	(4		)	(76		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		(72		)	(4		)	(76		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711

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The table below presents the tax effect on each component of other comprehensive loss:

	Three Months Ended June 30,
	2015									2014
(Dollars in thousands)	Pretax Amount			Tax			After Tax Amount			Pretax Amount			Tax		After Tax Amount
Unfunded pension liability	$	106		$	(42	)	$	64		$	—		$	—	$	—
Noncredit related loss on trust preferred securities	(128		)	51			(77		)	(1		)	1		—
Unrealized loss on securities	(12		)	5			(7		)	(2		)	1		(1		)
Total	$	(34	)	$	14		$	(20	)	$	(3	)	$	2	$	(1	)

	Six Months Ended June 30,
	2015									2014
(Dollars in thousands)	Pretax Amount			Tax			After Tax Amount			Pretax Amount			Tax		After Tax Amount
Unfunded pension liability	$	106		$	(42	)	$	64		$	—		$	—	$	—
Noncredit related loss on trust preferred securities	(179		)	71			(108		)	(119		)	47		(72		)
Unrealized loss on securities	(27		)	11			(16		)	(7		)	3		(4		)
Total	$	(100	)	$	40		$	(60	)	$	(126	)	$	50	$	(76	)

(16)Fair Value of Financial Instruments

In accordance with the Fair Value Measurements and Disclosures topic of the FASB ASC, the Company groups its financial assets and liabilities valued at fair value into three levels based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

·Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities traded in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

·Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

·Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques that require the use of significant judgment or estimation.

In accordance with the Fair Value Measurements and Disclosures topic, the Company bases its fair values on the price that it would expect to receive if an asset were sold or the price that it would expect to pay to transfer a liability in an orderly transaction between market participants at the measurement date.  Also as required, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when developing fair value measurements.

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The Company uses fair value measurements to determine fair value disclosures.  Investment securities held for sale and derivatives are recorded at fair value on a recurring basis.  From time to time, the Company may be required to record other financial assets at fair value on a nonrecurring basis, such as loans held for sale, impaired loans and investments, and mortgage servicing assets. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

Cash and Cash Equivalents, Accrued Interest Receivable, Accounts Payable and Accrued Expenses, Current Income Taxes Payable, and Advance Payments by Borrowers for Taxes and Insurance. The carrying amount approximates fair value because of the short maturity of these instruments.

Investment Securities.  The estimated fair values of U.S. government-sponsored mortgage-backed securities are considered Level 2 inputs because the valuation for investment securities utilized pricing models that varied based on asset class and included trade, bid and other observable market information.

The trust preferred securities represent investments in a pool of debt obligations issued primarily by holding companies for Federal Deposit Insurance Corporation-insured financial institutions.  The trust preferred securities market is considered to be inactive as only six transactions have occurred over the past 45 months in the same tranche of securities we own and no new issues of pooled trust preferred securities have occurred since 2007.  The fair value of our trust preferred securities was determined using a discounted cash flow model.  Our model used a discount rate equal to three-month LIBOR plus 20.00% and provided a fair value estimate of $24.51 per $100 of par value for PreTSL XXIII.

The discounted cash flow analysis included a review of all issuers within the pool.  The fair value of the trust preferred securities are classified as Level 3 inputs because they are based on discounted cash flow models.

FHLB Stock. FHLB stock, which is redeemable for cash at par value, is reported at its par value.

FRB Stock. FRB stock, which is redeemable for cash at par value, is reported at its par value.

Loans. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  The fair value of loans is not based on the concept of exit price.

Loans Held for Sale.  The fair value of loans held for sale is determined based on the prices quoted in the secondary market for similar loans.

Deposits. The fair value of checking and Super NOW savings accounts, passbook accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows using the rates currently offered for deposits with similar remaining maturities.

Advances From the FHLB and Securities Sold Under Agreements to Repurchase. Fair value is estimated by discounting future cash flows using the rates currently offered to the Company for debt with similar remaining maturities.

Interest Rate Contracts.  The Company may enter into interest rate lock commitments with borrowers on loans intended to be sold.  To manage interest rate risk on the lock commitments, the Company may also enter into forward loan sale commitments.  The interest rate lock commitments and forward loan sale commitments are treated as derivatives and are recorded at their fair value determined by referring to prices quoted in the secondary market for similar contracts.  Interest rate contracts that are classified as assets are included with prepaid expenses and other assets on the consolidated balance sheet while interest rate contracts that are classified as liabilities are included with accounts payable and accrued expenses.

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The estimated fair values of the Company’s financial instruments are as follows:

					Fair Value Measurements Using
(Dollars in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Assets
Cash and cash equivalents	$	36,250	$	36,250	$	36,250	$	—	$	—
Investment securities held to maturity	525,708		530,136		—		529,268		868
Loans receivable, net	1,110,823		1,140,423		—		—		1,140,423
Loans held for sale	455		458		—		458		—
FHLB stock	4,310		4,310				4,310		—
FRB stock	2,971		2,971		—		2,971		—
Accrued interest receivable	4,587		4,587		4,587		—		—
Interest rate contracts	71		71		—		71		—
Liabilities
Deposits	1,373,379		1,373,623		1,156,090		—		217,533
Advances from the Federal Home Loan Bank	57,000		57,096		—		—		57,096
Securities sold under agreements to repurchase	60,000		60,300		—		—		60,300
Accounts payable and accrued expenses (excluding interest rate contracts)	26,933		26,933		26,933		—		—
Interest rate contracts	78		78		—		78		—
Current income taxes payable	2,647		2,647		2,647		—		—
Advance payments by borrowers for taxes and insurance	4,677		4,677		4,677		—		—
December 31, 2014
Assets
Cash and cash equivalents	$	75,060	$	75,060	$	75,060	$	—	$	—
Investment securities held to maturity	572,922		586,710		—		586,020		690
Loans receivable, net	968,212		998,183		—		—		998,183
Loans held for sale	1,048		1,079		—		1,079		—
FHLB stock	11,234		11,234		—		11,234		—
FRB stock	2,925		2,925		—		2,925		—
Accrued interest receivable	4,436		4,436		4,436		—		—
Interest rate contracts	62		62		—		62		—
Liabilities
Deposits	1,359,679		1,360,074		1,137,942		—		222,132
Advances from the Federal Home Loan Bank	15,000		14,977		—		—		14,977
Securities sold under agreements to repurchase	72,000		72,334		—		—		72,334
Accounts payable and accrued expenses (excluding interest rate contracts)	24,044		24,044		24,044		—		—
Interest rate contracts	54		54		—		54		—
Current income taxes payable	826		826		826		—		—
Advance payments by borrowers for taxes and insurance	3,916		3,916		3,916		—		—

At June 30, 2015 and December 31, 2014, neither the commitment fees received on commitments to extend credit nor the fair value thereof was material to the consolidated financial statements of the Company.

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The table below presents the balance of assets and liabilities measured at fair value on a recurring basis:

(Dollars in thousands)	Level 1		Level 2			Level 3		Total
June 30, 2015:
Interest rate contracts — assets	$	—	$	71		$	—	$	71
Interest rate contracts — liabilities	—		(78		)	—		(78		)
December 31, 2014:
Interest rate contracts — assets	$	—	$	62		$	—	$	62
Interest rate contracts — liabilities	—		(54		)	—		(54		)

The fair value of interest rate contracts was determined by referring to prices quoted in the secondary market for similar contracts.

The table below presents the balance of assets measured at fair value on a nonrecurring basis as of June 30, 2015 and December 31, 2014 and the related gains and losses for the six months ended June 30, 2015 and the year ended December 31, 2014:

(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Total Gains/ (Losses)
June 30, 2015:
Trust preferred securities	$	—	$	—	$	868	$	868	$	179
Real estate owned	—		—		192		192		—
December 31, 2014:
Impaired loans	$	—	$	—	$	327	$	327	$	(4	)
Trust preferred securities	—		—		690		690		153
Mortgage servicing assets	—		—		505		505		(15		)

The fair values of real estate owned and impaired loans that are considered to be collateral-dependent are determined using the value of collateral less estimated selling costs. The fair value of impaired loans not considered to be collateral-dependent is determined using a discounted cash flow analysis.  Assumptions used in the analysis include the discount rate and projected cash flows.  Gains and losses on real estate owned are included in other general and administrative expenses in the consolidated statements of income.  Changes in the measurement of impaired loans are included in the provision for loan losses in the consolidated statements of income.  The fair value of trust preferred securities is determined using a discounted cash flow model.  The assumptions used in the discounted cash flow model are discussed above.  Gains and losses on trust preferred securities that are credit related are included in net other-than-temporary impairment losses in the consolidated statements of income.  Gains and losses on trust preferred securities that are not credit related are included in other comprehensive

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income in the consolidated statements of comprehensive income.  Mortgage servicing assets are valued using a discounted cash flow model.  Assumptions used in the model include mortgage prepayment speeds, discount rates and cost of servicing.  Losses on mortgage servicing assets are included in service fees on loan and deposit accounts in the consolidated statements of income.

The table below presents the significant unobservable inputs for Level 3 nonrecurring fair value measurements:

(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Value
June 30, 2015:
Trust preferred securities	$	868	Discounted cash flow	Discount rate	Three-month LIBOR plus 20%
December 31, 2014:
Impaired loans — non-collateral dependent	$	327	Discounted cash flow	Discount rate (1)	6.10%
Trust preferred securities	690		Discounted cash flow	Discount rate	Three-month LIBOR plus 20%
Mortgage servicing assets	505		Discounted cash flow	Discount rate	10.50%
				Prepayment speed (PSA)	164.8 – 262.5
				Annual cost to service (per loan)	$55

(1) Represents the yield on contractual cash flows prior to modification in troubled debt restructurings.

(17)Subsequent Events

On July 30, 2015, the Board of Directors of Territorial Bancorp Inc. declared a quarterly cash dividend of $0.17 per share of common stock.  The dividend is expected to be paid on August 27, 2015 to stockholders of record as of August 13, 2015.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report 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

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·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 Quarterly Report.

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:

·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;

·our ability to enter new markets successfully and capitalize on growth opportunities;

·our ability to successfully integrate acquired entities, if any;

·changes in consumer 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;

·changes in our financial condition or results of operations that reduce capital available to pay dividends; and

·changes in the financial condition or future prospects of issuers of securities that we own.

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.

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Overview

We have historically operated as a traditional thrift institution.  The significant majority of our assets consist of long-term, fixed-rate residential mortgage loans and mortgage-backed securities, which we have funded primarily with deposit accounts, securities sold under agreements to repurchase and Federal Home Loan Bank advances.  This has resulted in our being particularly vulnerable to increases in interest rates, as our interest-bearing liabilities mature or reprice more quickly than our interest-earning assets.

We have continued our focus on originating one- to four-family residential real estate loans.  Our emphasis on conservative loan underwriting has resulted in continued low levels of nonperforming assets.  Our nonperforming assets totaled $5.4 million, or 0.31% of total assets at June 30, 2015, compared to $4.5 million, or 0.26% of total assets at December 31, 2014.  As of June 30, 2015, nonperforming assets consisted primarily of 18 mortgage loans totaling $5.2 million.  Our nonperforming loans and loss experience has enabled us to maintain a relatively low allowance for loan losses in relation to other peer institutions and correspondingly resulted in low levels of provisions for loan losses.  Our provisions for loan losses were $295,000 and $165,000 for the six months ended June 30, 2015 and 2014, respectively.

Other than our loans for the construction of one- to four-family residential homes, we do not offer “interest only” mortgage loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan) on one- to four-family residential properties.  We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan.  We do not offer “subprime loans” (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as nonconforming loans having less than full documentation).  We also do not own any private label mortgage-backed securities that are collateralized by Alt-A, low or no documentation or subprime mortgage loans.

Our operations in recent years have been affected by our efforts to manage our interest rate risk position.  For the six months ended June 30, 2015, we sold $28.6 million of fixed-rate mortgage loans and obtained $30.0 million of long-term, fixed-rate borrowings.  For the six months ended June 30, 2014, we sold $16.9 million of fixed-rate mortgage loans while long-term, fixed-rate borrowings remained constant.

Territorial Savings Bank’s investments in mortgage-backed securities and collateralized mortgage obligations have been issued by Freddie Mac, Fannie Mae or Ginnie Mae, U.S. government-sponsored enterprises.  These agencies guarantee the payment of principal and interest on the Bank’s mortgage-backed securities.  We do not own any preferred stock issued by Fannie Mae or Freddie Mac.  As of June 30, 2015, our borrowing capacity at the Federal Home Loan Bank was $543.3 million compared to $399.0 million at December 31, 2014.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in Territorial Bancorp Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Comparison of Financial Condition at June 30, 2015 and December 31, 2014

Assets.  At June 30, 2015, our assets were $1.743 billion, an increase of $51.2 million, or 3.0%, from $1.692 billion at December 31, 2014.  The increase in assets was primarily the result of a $142.0 million increase in total loans that was partially offset by a $38.8 million decrease in cash and a $47.2 million decrease in investment securities.

Cash and Cash Equivalents.  Cash and cash equivalents were $36.3 million at June 30, 2015, a decrease of $38.8 million since December 31, 2014.  The decrease in cash and cash equivalents was primarily caused by funding a $142.0 million increase in total loans, the payoff of $12.0 million of securities sold under agreements to repurchase, the repurchase of $4.3 million of common stock and the payment of $3.0 million of common stock dividends.  This was partially offset by funds received from a $47.2 million decrease in investment securities, $42.0 million of new FHLB advances, a $13.7 million increase in deposits, $7.4 million of net income and $6.9 million of net FHLB stock redemptions.

Loans.  Total loans, including $455,000 of loans held for sale, were $1.111 billion at June 30, 2015, or 63.8% of total assets.  During the six months ended June 30, 2015, the loan portfolio, including loans held for sale, increased by $142.0 million, or 14.7%.  The increase in the loan portfolio primarily occurred as the production of new one- to four-family residential loans exceeded principal repayments and loan sales.

Securities.  At June 30, 2015, our securities portfolio totaled $525.7 million, or 30.2% of total assets.  During the six months ended June 30, 2015, the securities portfolio decreased by $47.2 million, or 8.2%.  The decrease in the securities portfolio occurred as repayments and the amount of securities sold exceeded the amount of securities purchased.

At June 30, 2015, all of such securities were classified as held-to-maturity and none of the underlying collateral consisted of subprime or Alt-A (traditionally defined as nonconforming loans having less than full documentation) loans.

At June 30, 2015, we owned a trust preferred security with an amortized cost of $868,000.  This security represents an investment in a pool of debt obligations primarily issued by holding companies of Federal Deposit Insurance Corporation-insured financial institutions.

The trust preferred securities market is considered to be inactive as only six transactions have occurred over the past 45 months in the same tranche of securities that we own and no new issues of pooled trust preferred securities have occurred since 2007.  We use a discounted cash flow model to determine whether this security is other-than-temporarily impaired.  The assumptions used in preparing the discounted cash flow model include the following: estimated discount rates, estimated deferral and default rates on collateral, and estimated cash flows.  We used a discount rate equal to three-month LIBOR plus 20.00% and provided a fair value estimate of $24.51 per $100 of par value for PreTSL XXIII.

Based on the Company’s review, the Company’s investment in the trust preferred security did not incur additional impairment during the six months ended June 30, 2015.

It is reasonably possible that the fair value of the trust preferred security could decline in the near term if the overall economy and the financial condition of some of the issuers continue to deteriorate and the liquidity of this security remains low.  As a result, there is a risk that the Company’s remaining cost basis of $1.1 million on its trust preferred security could be credit-related other-than-temporarily impaired in the near term.  The impairment, if any, could be material to the Company’s consolidated statements of income.

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Deposits. Deposits were $1.373 billion at June 30, 2015, an increase of $13.7 million, or 1.0%, since December 31, 2014.  The growth in deposits occurred primarily in savings and checking accounts, which increased by $18.0 million during the six months ended June 30, 2015. This was offset by a $4.4 million decrease in certificates of deposit.

Borrowings.  Our borrowings consist of advances from the Federal Home Loan Bank and funds borrowed under securities sold under agreements to repurchase.  During the six months ended June 30, 2015, total borrowing increased to $117.0 million as Federal Home Loan Bank advances rose by $42.0 million while securities sold under agreements to repurchase decreased by $12.0 million.  We have not required any other borrowings to fund our operations.  Instead, we have primarily funded our operations with additional deposits, proceeds from loan sales and principal repayments on loans and mortgage-backed securities.

Average Balances and Yields

The following tables set forth average balance sheets, average yields and rates, and certain other information at and for the periods indicated.  No tax-equivalent yield adjustments were made, as the effect thereof was not material.  All average balances are daily average balances.  Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield.  The yields set forth below include the effect of net deferred costs, discounts and premiums that are amortized or accreted to interest income.

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	For the Three Months Ended June 30,
	2015					2014
	Average Outstanding Balance		Interest		Yield/ Rate (1)	Average Outstanding Balance		Interest		Yield/ Rate (1)
	(Dollars in thousands)
Interest-earning assets:
Loans:
Real estate loans:
First mortgage:
One- to four-family residential (2)	$	1,023,897	$	10,706	4.18%	$	844,303	$	9,208	4.36%
Multi-family residential	9,818		115		4.69	4,739		67		5.66
Construction, commercial and other	17,891		203		4.54	17,895		226		5.05
Home equity loans and lines of credit	16,125		182		4.51	15,588		192		4.93
Other loans	4,349		60		5.52	4,691		67		5.71
Total loans	1,072,080		11,266		4.20	887,216		9,760		4.40
Investment securities:
U.S. government sponsored mortgage-backed securities (2)	539,712		4,274		3.17	620,848		5,086		3.28
Trust preferred securities	744		—		—	655		—		—
Total securities	540,456		4,274		3.16	621,503		5,086		3.27
Other	54,082		70		0.52	70,428		35		0.20
Total interest-earning assets	1,666,618		15,610		3.75	1,579,147		14,881		3.77
Non-interest-earning assets	66,135					64,470
Total assets	$	1,732,753				$	1,643,617
Interest-bearing liabilities:
Savings accounts	$	958,379	$	892	0.37%	$	923,491	$	834	0.36%
Certificates of deposit	219,437		253		0.46	209,269		261		0.50
Money market accounts	876		1		0.46	850		—		—
Checking and Super NOW accounts	154,842		8		0.02	143,120		8		0.02
Total interest-bearing deposits	1,333,534		1,154		0.35	1,276,730		1,103		0.35
Federal Home Loan Bank advances	41,615		157		1.51	15,000		66		1.76
Securities sold under agreements to repurchase	60,001		243		1.62	72,000		343		1.91
Total interest-bearing liabilities	1,435,150		1,554		0.43	1,363,730		1,512		0.44
Non-interest-bearing liabilities	79,547					65,964
Total liabilities	1,514,697					1,429,694
Stockholders’ equity	218,056					213,923
Total liabilities and stockholders’ equity	$	1,732,753				$	1,643,617
Net interest income			$	14,056				$	13,369
Net interest rate spread (3)					3.32%					3.33%
Net interest-earning assets (4)	$	231,468				$	215,417
Net interest margin (5)					3.37%					3.39%
Interest-earning assets to interest-bearing liabilities	116.13%					115.80%

(1)Annualized

(2)Average balance includes loans or investments available for sale, as applicable.

(3)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5)Net interest margin represents net interest income divided by average total interest-earning assets.

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	For the Six Months Ended June 30,
	2015					2014
	Average Outstanding Balance		Interest		Yield/ Rate (1)	Average Outstanding Balance		Interest		Yield/ Rate (1)
	(Dollars in thousands)
Interest-earning assets:
Loans:
Real estate loans:
First mortgage:
One- to four-family residential (2)	$	988,225	$	20,806	4.21%	$	833,656	$	18,218	4.37%
Multi-family residential	9,496		227		4.78	4,795		135		5.63
Construction, commercial and other	18,617		427		4.59	16,617		422		5.08
Home equity loans and lines of credit	16,018		373		4.66	15,967		391		4.90
Other loans	4,374		119		5.44	4,646		134		5.77
Total loans	1,036,730		21,952		4.23	875,681		19,300		4.41
Investment securities:
U.S. government sponsored mortgage-backed securities (2)	551,452		8,797		3.19	619,290		10,160		3.28
Trust preferred securities	717		—		—	597		—		—
Total securities	552,169		8,797		3.19	619,887		10,160		3.28
Other	64,149		149		0.46	76,879		78		0.20
Total interest-earning assets	1,653,048		30,898		3.74	1,572,447		29,538		3.76
Non-interest-earning assets	66,409					64,958
Total assets	$	1,719,457				$	1,637,405
Interest-bearing liabilities:
Savings accounts	$	955,967	$	1,758	0.37%	$	919,571	$	1,639	0.36%
Certificates of deposit	220,808		513		0.46	211,370		539		0.51
Money market accounts	856		1		0.23	838		1		0.24
Checking and Super NOW accounts	152,007		16		0.02	140,748		15		0.02
Total interest-bearing deposits	1,329,638		2,288		0.34	1,272,527		2,194		0.34
Federal Home Loan Bank advances	30,105		227		1.51	15,000		132		1.76
Securities sold under agreements to repurchase	64,945		555		1.71	72,000		686		1.91
Total interest-bearing liabilities	1,424,688		3,070		0.43	1,359,527		3,012		0.44
Non-interest-bearing liabilities	77,258					65,096
Total liabilities	1,501,946					1,424,623
Stockholders’ equity	217,511					212,782
Total liabilities and stockholders’ equity	$	1,719,457				$	1,637,405
Net interest income			$	27,828				$	26,526
Net interest rate spread (3)					3.31%					3.32%
Net interest-earning assets (4)	$	228,360				$	212,920
Net interest margin (5)					3.37%					3.37%
Interest-earning assets to interest-bearing liabilities	116.03%					115.66%

(1)Annualized

(2)Average balance includes loans or investments available for sale, as applicable.

(3)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5)Net interest margin represents net interest income divided by average total interest-earning assets.

35

Comparison of Operating Results for the Three Months Ended June 30, 2015 and 2014

General.  Net income increased by $118,000, or 3.2%, from $3.7 million for the three months ended June 30, 2014 to $3.8 million for the three months ended June 30, 2015.  The increase in net income was primarily due to a $729,000 increase in interest and dividend income and a $55,000 decrease in the provision for loan losses.  This was partially offset by a $497,000 increase in income taxes, a $96,000 increase in noninterest expense, a $42,000 increase in interest expense and a $31,000 decrease in noninterest income.

Net Interest Income.  Net interest income increased by $687,000, or 5.1%, to $14.1 million for the three months ended June 30, 2015 compared to $13.4 million for the three months ended June 30, 2014.  Interest and dividend income increased by $729,000, or 4.9%, due to an $87.5 million increase in the average balance of interest-earning assets that was partially offset by a two basis point decrease in the average yield on interest earning assets.  Interest expense increased by $42,000, or 2.8%, due to a $71.4 million increase in the average balance of interest-bearing liabilities that was partially offset by a one basis point decrease in the average cost of interest-bearing liabilities.  The interest rate spread and net interest margin were 3.32% and 3.37%, respectively, for the three months ended June 30, 2015, compared to 3.33% and 3.39%, respectively, for the three months ended June 30, 2014.

Interest and Dividend Income.  Interest and dividend income increased by $729,000, or 4.9%, to $15.6 million for the three months ended June 30, 2015 from $14.9 million for the three months ended June 30, 2014.  Interest income on loans increased by $1.5 million, or 15.4%, to $11.3 million for the three months ended June 30, 2015 from $9.8 million for the three months ended June 30, 2014.  The increase in interest income on loans occurred because the average balance of loans grew by $184.9 million, or 20.8%, as new loan originations exceeded loan repayments and loan sales. The increase in interest income that occurred because of growth in the loan portfolio was partially offset by a 20 basis point decline in the average loan yield to 4.20% for the three months ended June 30, 2015.  The decline in the average yield on loans occurred because of repayments on higher-yielding loans and additions of new loans with lower yields to the loan portfolio.  Interest income on investment securities decreased by $812,000, or 16.0%, to $4.3 million for the three months ended June 30, 2015 from $5.1 million for the three months ended June 30, 2014.  The decrease in interest income on securities occurred because of an $81.0 million decrease in the average securities balance and an 11 basis point decrease in the average securities yield.  The decrease in the securities yield occurred as higher yielding securities were paid off and new securities with lower yields were added to the investment portfolio.

Interest Expense.  Interest expense increased by $42,000, or 2.8% from $1.5 million for the three months ended June 30, 2014 to $1.6 million for the three months ended June 30, 2015.  Interest expense on FHLB advances increased by $91,000, or 137.9%, during the three months ended June 30, 2015 compared to the three months ended June 30, 2014.  The increase in interest expense was primarily due to a $26.6 million, or 177.4%, increase in the average balance of FHLB advances.  This was partially offset by a 25 basis point decrease in the average interest rate to 1.51% for the three months ended June 30, 2015 compared to 1.76% for the three months ended June 30, 2014.  Interest expense on deposits increased by $51,000, or 4.6%, from $1.1 million for the three months ended June 30, 2014 to $1.2 million for the three months ended June 30, 2015. The average outstanding balance of deposits increased by $56.8 million, or 4.4%, to $1.334 billion for the three months ended June 30, 2015 compared to $1.277 billion for the three months ended June 30, 2014.  The average interest rate on deposits remained constant at 0.35% during the three months ended June 30, 2015 and 2014.  Interest expense on securities sold under agreements to repurchase decreased by $100,000, or 29.2%, during the three months ended June 30, 2015 compared to the three months ended June 30, 2014.  The decrease in interest expense was

36

caused by a $12.0 million, or 16.7%, decrease in the average outstanding balance of securities sold under agreements to repurchase.  The decrease in the average balance was augmented by a 29 basis point decrease in the interest rate to 1.62% for the three months ended June 30, 2015 from 1.91% for the three months ended June 30, 2014.

Provision for Loan Losses.  We recorded provisions for loan losses of $101,000 and $156,000 for the three months ended June 30, 2015 and 2014, respectively.  The provisions for loan losses included net recoveries of $21,000 for the three months ended June 30, 2015 and net charge-offs of $131,000 for the three months ended June 30, 2014.  The provisions recorded resulted in ratios of the allowance for loan losses to total loans of 0.18% and 0.17% at June 30, 2015 and 2014, respectively.  Nonaccrual loans totaled $5.2 million at June 30, 2015, or 0.47% of total loans at that date, compared to $5.1 million of nonaccrual loans at June 30, 2014, or 0.56% of total loans at that date.  Nonaccrual loans as of June 30, 2015 and 2014 consisted primarily of one- to four-family residential real estate loans.  To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at June 30, 2015 and 2014.  For additional information see footnote (6), “Loans Receivable and Allowance for Loan Losses” in our Notes to Consolidated Financial Statements.

Noninterest Income.  The following table summarizes changes in noninterest income between the three months ended June 30, 2015 and 2014.

	Three Months Ended June 30,				Change
	2015		2014		$ Change			% Change
	(Dollars in thousands)
Service fees on loan and deposit accounts	$	527	$	524	$	3		0.6%
Income on bank-owned life insurance	256		264		(8		)	(3.0)%
Gain on sale of investment securities	240		309		(69		)	(22.3)%
Gain on sale of loans	110		86		24			27.9%
Other	115		96		19			19.8%
Total	$	1,248	$	1,279	$	(31	)	(2.4)%

Noninterest income decreased by $31,000 for the three months ended June 30, 2015 compared to the three months ended June 30, 2014.  During the three months ended June 30, 2015, we sold $2.3 million of held-to-maturity mortgage-backed securities and recognized a gain of $179,000.  During the three months ended June 30, 2014, we sold $3.2 million of held-to-maturity mortgage-backed securities and recognized a gain of $309,000.  The sale of held-to-maturity securities, for which the Company had already received a substantial portion of the outstanding principal (at least 85%), is in accordance with the Investments - Debt and Equity Securities topic of the FASB ASC and does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.  In addition, during the three months ended June 30, 2015, we sold a trust preferred security that was previously written off and recognized a gain of $61,000.

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Noninterest Expense.  The following table summarizes changes in noninterest expense between the three months ended June 30, 2015 and 2014.

	Three Months Ended June 30,				Change
	2015		2014		$ Change			% Change
	(Dollars in thousands)
Salaries and employee benefits	$	5,064	$	5,297	$	(233	)	(4.4)%
Occupancy	1,428		1,409		19			1.3%
Equipment	953		905		48			5.3%
Federal deposit insurance premiums	211		201		10			5.0%
Other general and administrative expenses	1,187		935		252			27.0%
Total	$	8,843	$	8,747	$	96		1.1%

Noninterest expense rose by $96,000 for the three months ended June 30, 2015 compared to the three months ended June 30, 2014.  Other general and administrative expenses increased by $252,000 to $1.2 million for the three months ended June 30, 2015 from $935,000 for the three months ended June 30, 2014.  The increase in expenses was primarily due to increases in advertising expenses and other professional fees.  This was partially offset by a decrease in legal expenses and supervisory examination fees.  Salaries and employee benefits expense decreased by $233,000 to $5.1 million for the three months ended June 30, 2015 from $5.3 million for the three months ended June 30, 2014.  The Company recognized a $555,000 increase in the credit to compensation expense for the cost of originating new mortgage loans because of an increase in new loan originations.  The Receivables topic of the FASB ASC allows financial institutions to take a credit against compensation expense for the direct cost of originating loans.  This was partially offset by a bank-wide budgeted salary increase of approximately 2.0%, which was effective July 1, 2014, and higher loan officer compensation that occurred primarily because of the increase in new loan originations.

Income Tax Expense.  Income taxes were $2.5 million for the three months ended June 30, 2015, reflecting an effective tax rate of 39.7%, compared to $2.0 million for the three months ended June 30, 2014, reflecting an effective tax rate of 35.3%.  The increase in the effective tax rate is primarily due to a decrease in permanent tax benefits related to our share-based compensation plans and an increase in deferred tax rates.

Comparison of Operating Results for the Six Months Ended June 30, 2015 and 2014

General.  Net income increased by $182,000, or 2.5%, from $7.2 million for the six months ended June 30, 2014 to $7.4 million for the six months ended June 30, 2015.  The increase in net income was primarily due to a $1.4 million increase in interest and dividend income.  This was partially offset by a $711,000 increase in income taxes, a $143,000 decrease in noninterest income, a $136,000 increase in noninterest expense, a $130,000 increase in the provision for loan losses and a $58,000 increase in interest expense.

Net Interest Income.  Net interest income increased by $1.3 million, or 4.9%, to $27.8 million for the six months ended June 30, 2015 compared to $26.5 million for the six months ended June 30, 2014.  Interest and dividend income increased by $1.4 million, or 4.6%, due to an $80.6 million increase in the average balance of interest-earning assets that was partially offset by a two basis point decline in the average yield on interest earning assets.  Interest expense increased by $58,000, or 1.9%, due to a $65.2 million increase in the average balance of interest-bearing liabilities that was partially offset by a one basis point decrease in the average cost of interest-bearing liabilities.  The interest rate spread and net interest margin were 3.31% and 3.37%, respectively, for the six months ended June 30, 2015, compared to 3.32% and 3.37%, respectively, for the six months ended June 30, 2014.

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Interest and Dividend Income.  Interest and dividend income increased by $1.4 million, or 4.6%, to $30.9 million for the six months ended June 30, 2015 from $29.5 million for the six months ended June 30, 2014.  Interest income on loans increased by $2.7 million, or 13.7%, to $22.0 million for the six months ended June 30, 2015 from $19.3 million for the six months ended June 30, 2014.  The increase in interest income on loans occurred because the average balance of loans grew by $161.0 million, or 18.4%, as new loan originations exceeded loan repayments and loan sales. The increase in interest income that occurred because of growth in the loan portfolio was partially offset by an 18 basis point decline in the average loan yield to 4.23% for the six months ended June 30, 2015.  The decline in the average yield on loans occurred because of repayments on higher-yielding loans and additions of new loans with lower yields to the loan portfolio.  Interest income on investment securities decreased by $1.4 million, or 13.4%, to $8.8 million for the six months ended June 30, 2015 from $10.2 million for the six months ended June 30, 2014.  The decrease in interest income on securities occurred because of a $67.8 million decrease in the average securities balance and a nine basis point decrease in the average securities yield.

Interest Expense.  Interest expense increased by $58,000, or 1.9% from $3.0 million for the six months ended June 30, 2014 to $3.1 million for the six months ended June 30, 2015.  Interest expense on FHLB advances increased by $95,000, or 72.0%, during the six months ended June 30, 2015 compared to the six months ended June 30, 2014.  The increase in interest expense was primarily due to a $15.1 million, or 100.7%, increase in the average balance of FHLB advances.  This was partially offset by a 25 basis point decrease in the average interest rate to 1.51% for the six months ended June 30, 2015 compared to 1.76% for the six months ended June 30, 2014.  Interest expense on deposits increased by $94,000, or 4.3%, from $2.2 million for the six months ended June 30, 2014 to $2.3 million for the six months ended June 30, 2015. The average outstanding balance of deposits increased by $57.1 million, or 4.5%, to $1.330 billion for the six months ended June 30, 2015 compared to $1.273 billion for the six months ended June 30, 2014.  The average interest rate on deposits remained constant at 0.34% during the six months ended June 30, 2015 and 2014.  Interest expense on securities sold under agreements to repurchase decreased by $131,000, or 19.1%, during the six months ended June 30, 2015 compared to the six months ended June 30, 2014.  The decrease in interest expense was caused by a $7.1 million, or 9.8%, decrease in the average outstanding balance of securities sold under agreements to repurchase.  The decrease in the average balance was augmented by a 20 basis point decrease in the interest rate to 1.71% for the six months ended June 30, 2015 from 1.91% for the six months ended June 30, 2014.

Provision for Loan Losses.  We recorded provisions for loan losses of $295,000 and $165,000 for the six months ended June 30, 2015 and 2014, respectively.  The provisions for loan losses included net recoveries of $8,000 for the six months ended June 30, 2015 and net charge-offs of $141,000 for the six months ended June 30, 2014.  The provisions recorded resulted in ratios of the allowance for loan losses to total loans of 0.18% and 0.17% at June 30, 2015 and 2014, respectively.  Nonaccrual loans totaled $5.2 million at June 30, 2015, or 0.47% of total loans at that date, compared to $5.1 million of nonaccrual loans at June 30, 2014, or 0.56% of total loans at that date.  Nonaccrual loans as of June 30, 2015 and 2014 consisted primarily of one- to four-family residential real estate loans.  To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at June 30, 2015 and 2014.  For additional information see footnote (6), “Loans Receivable and Allowance for Loan Losses” in our Notes to Consolidated Financial Statements.

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Noninterest Income.  The following table summarizes changes in noninterest income between the six months ended June 30, 2015 and 2014.

	Six Months Ended June 30,				Change
	2015		2014		$ Change			% Change
	(Dollars in thousands)
Service fees on loan and deposit accounts	$	987	$	1,023	$	(36	)	(3.5)%
Income on bank-owned life insurance	511		532		(21		)	(3.9)%
Gain on sale of investment securities	476		655		(179		)	(27.3)%
Gain on sale of loans	239		165		74			44.8%
Other	281		262		19			7.3%
Total	$	2,494	$	2,637	$	(143	)	(5.4)%

Noninterest income decreased by $143,000 for the six months ended June 30, 2015 compared to the six months ended June 30, 2014.  During the six months ended June 30, 2015, we sold $4.6 million of held-to-maturity mortgage-backed securities and recognized a gain of $415,000.  During the six months ended June 30, 2014, we sold $6.6 million of held-to-maturity mortgage-backed securities and recognized a gain of $625,000.  The sale of held-to-maturity securities, for which the Company had already received a substantial portion of the outstanding principal (at least 85%), is in accordance with the Investments - Debt and Equity Securities topic of the FASB ASC and does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.  In addition, during the six months ended June 30, 2015, we sold a trust preferred security that was previously written off and recognized a gain of $61,000, and during the six months ended June 30, 2014, we sold a $5.0 million held-for-trading investment security and recognized a gain of $30,000.

Noninterest Expense.  The following table summarizes changes in noninterest expense between the six months ended June 30, 2015 and 2014.

	Six Months Ended June 30,				Change
	2015		2014		$ Change			% Change
	(Dollars in thousands)
Salaries and employee benefits	$	10,163	$	10,660	$	(497	)	(4.7)%
Occupancy	2,865		2,831		34			1.2%
Equipment	1,898		1,819		79			4.3%
Federal deposit insurance premiums	420		400		20			5.0%
Other general and administrative expenses	2,401		1,901		500			26.3%
Total	$	17,747	$	17,611	$	136		0.8%

Noninterest expense rose by $136,000 for the six months ended June 30, 2015 compared to the six months ended June 30, 2014.  Other general and administrative expenses increased by $500,000 to $2.4 million for the six months ended June 30, 2015 from $1.9 million for the six months ended June 30, 2014.  The increase was primarily due to increases in advertising expenses, auditing expenses, other loan expenses, and other professional fees.  This was partially offset by a decrease in legal expenses and supervisory examination fees.  Salaries and employee benefits expense decreased by $497,000 to $10.2 million for the six months ended June 30, 2015 from $10.7 million for the six months ended June 30, 2014.  The Company recognized a $1.0 million increase in the credit to compensation expense for the cost of originating new mortgage loans because of an increase in new loan originations.  The Receivables topic of the FASB ASC allows financial institutions to take a credit against compensation expense for the direct cost of originating loans.  This was partially offset by a bank-wide budgeted salary increase of approximately 2.0%, which was effective July 1, 2014, and higher loan officer compensation and bonuses that occurred primarily because of the increase in new loan originations.

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Income Tax Expense.  Income taxes were $4.9 million for the six months ended June 30, 2015, reflecting an effective tax rate of 40.0%, compared to $4.2 million for the six months ended June 30, 2014, reflecting an effective tax rate of 36.9%.  The increase in the effective tax rate is primarily due to a decrease in permanent tax benefits related to our share-based compensation plans and an increase in deferred tax rates.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations.  Our primary sources of funds consist of deposit inflows, cash balances at the Federal Reserve Bank, loan repayments, advances from the Federal Home Loan Bank, securities sold under agreements to repurchase, proceeds from loan sales and principal repayments on securities.  While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.  We have established an Asset/Liability Management Committee, consisting of our President and Chief Executive Officer, our Vice Chairman and Co-Chief Operating Officer, our Senior Vice President and Chief Financial Officer and our Vice President and Controller, which is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies.  We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2015.

We regularly monitor and adjust our investments in liquid assets based upon our assessment of:

(i)	expected loan demand;
(ii)	purchases and sales of investment securities;
(iii)	expected deposit flows and borrowing maturities;
(iv)	yields available on interest-earning deposits and securities; and
(v)	the objectives of our asset/liability management program.

Excess liquid assets are invested generally in interest-earning deposits or securities and may also be used to pay off short-term borrowings.

Our most liquid asset is cash.  The amount of this asset is dependent on our operating, financing, lending and investing activities during any given period.  At June 30, 2015, our cash and cash equivalents totaled $36.3 million. On that date, we had $60.0 million in securities sold under agreements to repurchase outstanding and $57.0 million of Federal Home Loan Bank advances outstanding, with the ability to borrow an additional $543.3 million under Federal Home Loan Bank advances.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated Financial Statements.

At June 30, 2015, we had $34.6 million in loan commitments outstanding, most of which were for fixed-rate loans, and had $25.9 million in unused lines of credit to borrowers.  Certificates of deposit due within one year at June 30, 2015 totaled $168.3 million, or 12.3% of total deposits.  If these deposits

41

do not remain with us, we may be required to seek other sources of funds, including loan sales, brokered deposits, securities sold under agreements to repurchase and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before June 30, 2016.  We believe, however, based on past experience that a significant portion of such deposits will remain with us.  We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our primary investing activities are originating loans and purchasing mortgage-backed securities. During the six months ended June 30, 2015 and 2014, we originated $248.9 million and $106.6 million of loans, respectively, and purchased $6.7 million and $34.8 million of securities, respectively.

Financing activities consist primarily of activity in deposit accounts, Federal Home Loan Bank advances, securities sold under agreements to repurchase, stock repurchases and dividend payments.  We experienced a net increase in deposits of $13.7 million and $29.2 million for the six months ended June 30, 2015 and 2014, respectively.  Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

Liquidity management is both a daily and long-term function of business management.  If we require funds beyond our ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank, which provide an additional source of funds.  Federal Home Loan Bank advances increased by $42.0 million during the six months ended June 30, 2015 to $57.0 million and remained constant at $15.0 million during the six months ended June 30, 2014.  We had the ability to borrow up to an additional $543.3 million and $399.0 million from the Federal Home Loan Bank as of June 30, 2015 and December 31, 2014, respectively.  The increase in our borrowing capacity is due to a higher credit line at the Federal Home Loan Bank.  We also utilize securities sold under agreements to repurchase as another borrowing source.  Securities sold under agreements to repurchase decreased by $12.0 million to $60.0 million at June 30, 2015 and remained constant at $72.0 million for the six months ended June 30, 2014.

Territorial Bancorp Inc. is a separate legal entity from Territorial Savings Bank and must provide for its own liquidity to pay dividends, repurchase shares of its common stock and for other corporate purposes.  Territorial Bancorp Inc.’s primary source of liquidity is dividend payments from Territorial Savings Bank.  The ability of Territorial Savings Bank to pay dividends to Territorial Bancorp Inc. is subject to regulatory requirements.  At June 30, 2015, Territorial Bancorp Inc. (on an unconsolidated, stand-alone basis) had liquid assets of $10.2 million.

Territorial Savings Bank and the Company are subject to various regulatory capital requirements, including a risk-based capital measure.  The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories.  On July 10, 2014, Territorial Savings Bank became a member of the Federal Reserve System.  The Federal Reserve requires that Territorial Savings Bank maintain a Tier 1 Leverage Capital ratio of 9.0% for the next three years as a condition of membership.  Effective January 1, 2015, the well capitalized threshold for Tier 1 risk-based capital was increased from 6.0% to 8.0% and a new capital standard, common equity tier 1 risk-based capital, was implemented with a 6.5% ratio requirement for a financial institution to be considered well capitalized.  Additionally, effective January 1, 2015, consolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions became applicable to savings and loan holding companies over $1.0 billion in assets, such as the Company.  At June 30, 2015, Territorial Savings Bank and the Company exceeded all regulatory capital requirements and are considered to be “well capitalized” under regulatory guidelines.  The tables below present the capital required to be considered

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“well-capitalized” as a percentage of total and risk-weighted assets and the percentage and the total amount of capital maintained for both Territorial Savings Bank and the Company at June 30, 2015 and  for Territorial Savings Bank at December 31, 2014:

As of June 30, 2015

(Dollars in Thousands)

	Required Ratio	Actual Amount		Actual Ratio
Tier 1 Leverage Capital
Territorial Savings Bank (1)	9.00%	$	212,768	12.32	%
Territorial Bancorp Inc.	5.00%	$	223,692	12.95	%
Common Equity Tier 1 Risk- Based Capital (2)
Territorial Savings Bank	9.00%	$	212,768	27.67	%
Territorial Bancorp Inc.	9.00%	$	223,692	29.08	%
Tier 1 Risk-Based Capital (2)
Territorial Savings Bank	10.50%	$	212,768	27.67	%
Territorial Bancorp Inc.	10.50%	$	223,692	29.08	%
Total Risk-Based Capital (2)
Territorial Savings Bank	12.50%	$	214,823	27.93	%
Territorial Bancorp Inc.	12.50%	$	225,747	29.35	%

(1)As a condition of membership in the Federal Reserve System, Territorial Savings Bank is required to maintain a Tier 1 Leverage Capital ratio of 9.00% for three years beginning on July 10, 2014.

(2)The required Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios are based on the fully-phased in capital ratios in the Basel III capital regulations plus the 2.50% capital conservation buffer that becomes effective on January 1, 2019.

As of December 31, 2014

(Dollars in Thousands)

	Required Ratio	Actual Amount		Actual Ratio
Tier 1 Leverage Capital
Territorial Savings Bank (1)	9.00%	$	203,708	12.10	%
Tier 1 Risk-Based Capital
Territorial Savings Bank	4.00%	$	203,708	29.68	%
Total Risk-Based Capital
Territorial Savings Bank	8.00%	$	205,403	29.93	%

(1)As a condition of membership in the Federal Reserve System, Territorial Savings Bank is required to maintain a Tier 1 Leverage Capital ratio of 9.00% for three years beginning on July 10, 2014.

43

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments.  As a financial services provider, we routinely are a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon.  Such commitments are subject to the same credit policies and approval process accorded to loans we make.  In addition, we enter into commitments to sell mortgage loans.

Contractual Obligations.  In the ordinary course of our operations, we enter into certain contractual obligations.  Such obligations include operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities and agreements with respect to investments.  Except for a decrease of $4.4 million in certificates of deposit and an increase of $16.5 million in loan commitments between December 31, 2014 and June 30, 2015, there have not been any material changes in contractual obligations and funding needs since December 31, 2014.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General.  Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates.  Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our net interest income to changes in market interest rates.  Our Board of Directors has established an Asset/Liability Management Committee, which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors.

Because we have historically operated as a traditional thrift institution, the significant majority of our assets consist of long-term, fixed-rate residential mortgage loans and mortgage-backed securities, which we have funded primarily with checking and savings accounts and short-term borrowings.  In addition, there is little demand for adjustable-rate mortgage loans in the Hawaii market area.  This has resulted in our being particularly vulnerable to increases in interest rates, as our interest-bearing liabilities mature or reprice more quickly than our interest-earning assets.

Our policies do not permit hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.

Economic Value of Equity. We use an interest rate sensitivity analysis that computes changes in the economic value of equity (EVE) of our cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. EVE represents the market value of portfolio equity and is equal to the present value of assets minus the present value of liabilities, with adjustments made for off-balance sheet items. This analysis assesses the risk of loss in market-risk-sensitive instruments in the event of an instantaneous and sustained 100 to 400 basis point increase or a 100 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below. Given the current relatively low level of market interest rates, an EVE calculation for an interest rate decrease of greater than 100 basis points has not been prepared.

44

The following table presents our internal calculations of the estimated changes in our EVE as of March 31, 2015 that would result from the designated instantaneous changes in the interest rate yield curve.

Change in Interest Rates (bp) (1)	Estimated EVE (2)		Estimated Increase (Decrease) in EVE			Percentage Change in EVE	EVE Ratio as a Percent of Present Value of Assets (3)(4)		Increase (Decrease) in EVE Ratio as a Percent of Present Value of Assets (3)(4)
(Dollars in thousands)
+400	$	176,630	$	(73,937	)	(29.51)%	10.57	%	(3.64)%
+300	$	206,715	$	(43,852	)	(17.50)%	12.12	%	(2.09)%
+200	$	234,085	$	(16,482	)	(6.58)%	13.47	%	(0.74)%
+100	$	251,904	$	1,337		0.53%	14.31	%	0.10%
0	$	250,567	$	—		—%	14.21	%	—%
-100	$	217,403	$	(33,164	)	(13.24)%	12.53	%	(1.68)%

(1)Assumes an instantaneous uniform change in interest rates at all maturities.

(2)EVE is the difference between the present value of an institution’s assets and liabilities.

(3)Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4)EVE Ratio represents EVE divided by the present value of assets.

Interest rates on mortgage-backed securities rose by approximately 38 basis points between March 31, 2015 and June 30, 2015.  The increase in interest rates has likely decreased our EVE.  However, we do not believe that the decrease in EVE is material.

Certain shortcomings are inherent in the methodologies used in determining interest rate risk through changes in EVE.  Modeling changes in EVE requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.  In this regard, the EVE table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.  Accordingly, although the EVE table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and net interest income and will differ from actual results.

ITEM 4.CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chairman of the Board, President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2015. Based on that evaluation, the Company’s management, including the Chairman of the Board, President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

45

During the quarter ended June 30, 2015, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

46

PART II

ITEM 1.LEGAL PROCEEDINGS

The Company and its subsidiaries are subject to various legal actions that are considered ordinary, routine litigation incidental to the business of the Company, and no claim for money damages exceeds ten percent of the Company’s consolidated assets.  In the opinion of management, based on currently available information, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s results of operations.

ITEM 1A.RISK FACTORS

There have been no material changes from Risk Factors as previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the period ended December 31, 2014.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)Not applicable.

(b)Not applicable.

(c)Stock Repurchases.  The following table sets forth information in connection with repurchases of our shares of common stock during the three months ended June 30, 2015.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs (1)
April 1, 2015 through April 30, 2015	1,359	$	23.06	1,359	—
May 1, 2015 through May 31, 2015	—	—		—	—
June 1, 2015 through June 30, 2015	—	—		—	—
Total	1,359	$	23.06	1,359	—

(1) On December 4, 2014, our Board of Directors authorized the repurchase of up to 400,000 shares of our common stock. The Company may initially repurchase up to a total of 250,000 shares. Further repurchases would be subject to the receipt of regulatory approvals or non-objections for the employee stock ownership plan to own 10% or more of the Company’s outstanding shares of common stock. In accordance with this authorization, we had repurchased 250,000 shares of our common stock as of June 30, 2015. This repurchase authorization expires on February 17, 2016. We have entered into a Rule 10b5-1 plan with respect to our stock repurchase plan.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

47

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed on the “Index to Exhibits” immediately following the Signatures.

48

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 thereunto duly authorized.

	TERRITORIAL BANCORP INC.
	(Registrant)
Date: August 7, 2015		/s/ Allan S. Kitagawa
		Allan S. Kitagawa
		Chairman of the Board, President and
		Chief Executive Officer
Date: August 7, 2015		/s/ Melvin M. Miyamoto
		Melvin M. Miyamoto
		Senior Vice President and Chief Financial Officer

49

INDEX TO EXHIBITS

Exhibit
Number	Description
31.1	Certification of Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2	Certification of Melvin M. Miyamoto, Senior Vice President and Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32	Certification of Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer, and Melvin M. Miyamoto, Senior Vice President and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Interactive datafile	XBRL Instance Document
101.SCH	Interactive datafile	XBRL Taxonomy Extension Schema Document
101.CAL	Interactive datafile	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Interactive datafile	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Interactive datafile	XBRL Taxonomy Extension Label Linkbase
101.PRE	Interactive datafile	XBRL Taxonomy Extension Presentation Linkbase Document

50

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Allan S. Kitagawa, certify that:

1)I have reviewed this report on Form 10-Q of Territorial Bancorp Inc.;

2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2015

/s/ Allan S. Kitagawa

Allan S. Kitagawa

Chairman of the Board, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Melvin M. Miyamoto, certify that:

1)I have reviewed this report on Form 10-Q of Territorial Bancorp Inc.;

2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2015

/s/ Melvin M. Miyamoto

Melvin M. Miyamoto

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Territorial Bancorp Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer of the Company, and Melvin M. Miyamoto, Senior Vice President and Chief Financial Officer, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Allan S. Kitagawa	Date: August 7, 2015
Allan S. Kitagawa
Chairman of the Board, President and Chief Executive Officer
/s/ Melvin M. Miyamoto	Date: August 7, 2015
Melvin M. Miyamoto
Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Territorial Bancorp Inc. and will be retained by Territorial Bancorp Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Cash and Cash Equivalents
Cash and due from banks	$ 11,020	$ 10,803
Interest-earning deposits in other banks	25,230	64,257
Cash and cash equivalents	$ 36,250	$ 75,060	$ 58,686	$ 75,365

XML

Loans Receivable and Allowance for Loan Losses (Details 8)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($) loan
Accounts, Notes, Loans and Financing Receivable
Loans serviced for others	$ 55,900,000		$ 55,900,000		$ 60,500,000
Loans serviced for others, securitization for which the company continues to hold the related mortgage-backed securities	2,800,000		2,800,000		$ 3,000,000
Loans serviced for others, amount of contractually specified servicing fees earned	$ 39,000	$ 46,000	$ 80,000	$ 93,000
Mortgage Loans on Real Estate | Maximum
Accounts, Notes, Loans and Financing Receivable
Loan to value ratio (as a percent)	80.00%		80.00%
Residential Mortgage Loans Held For Sale
Accounts, Notes, Loans and Financing Receivable
Residential mortgage loans sold, loan amount	$ 15,300,000	7,000,000	$ 28,600,000	16,900,000
Residential mortgage loans sold, recognized gains	110,000	$ 86,000	$ 239,000	$ 165,000
Number of loans | loan			1		6
Residential mortgage loans held for sale	$ 455,000		$ 455,000		$ 1,000,000

XML

Loans Receivable and Allowance for Loan Losses (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Activity in allowance for loan losses
Balance, beginning of year	$ 1,872	$ 1,485	$ 1,691	$ 1,486
Provision (reversal of allowance) for loan losses	101	156	295	165
Allowance for loan losses on loans receivable after provision (reversal of allowance)	1,973	1,641	1,986	1,651
Charge-offs	(6)	(136)	(25)	(153)
Recoveries	27	5	33	12
Net charge-offs	21	(131)	8	(141)
Balance, end of year	1,994	1,510	1,994	1,510
Residential Mortgage
Activity in allowance for loan losses
Balance, beginning of year	1,111	434	413	376
Provision (reversal of allowance) for loan losses	129	28	827	86
Allowance for loan losses on loans receivable after provision (reversal of allowance)	1,240	462	1,240	462
Charge-offs		(118)		(118)
Recoveries	3		3
Net charge-offs	3	(118)	3	(118)
Balance, end of year	1,243	344	1,243	344
Construction, Commercial and Other Mortgage Loans
Activity in allowance for loan losses
Balance, beginning of year	543	823	977	799
Provision (reversal of allowance) for loan losses	(142)	109	(577)	133
Allowance for loan losses on loans receivable after provision (reversal of allowance)	401	932	400	932
Recoveries	6		7
Net charge-offs	6		7
Balance, end of year	407	932	407	932
Home Equity Loans and Lines of Credit
Activity in allowance for loan losses
Balance, beginning of year	4	7	5	10
Provision (reversal of allowance) for loan losses	(16)	9	(18)	5
Allowance for loan losses on loans receivable after provision (reversal of allowance)	(12)	16	(13)	15
Charge-offs		(10)		(10)
Recoveries	15	1	16	2
Net charge-offs	15	(9)	16	(8)
Balance, end of year	3	7	3	7
Consumer and Other
Activity in allowance for loan losses
Balance, beginning of year	149	153	263	229
Provision (reversal of allowance) for loan losses	(45)	10	(144)	(55)
Allowance for loan losses on loans receivable after provision (reversal of allowance)	104	163	119	174
Charge-offs	(6)	(8)	(25)	(25)
Recoveries	3	4	7	10
Net charge-offs	(3)	(4)	(18)	(15)
Balance, end of year	101	159	101	159
Unallocated
Activity in allowance for loan losses
Balance, beginning of year	65	68	33	72
Provision (reversal of allowance) for loan losses	175		207	(4)
Allowance for loan losses on loans receivable after provision (reversal of allowance)	240	68	240	68
Balance, end of year	$ 240	$ 68	$ 240	$ 68

XML

Federal Home Loan Bank Stock (Details) - USD ($)		6 Months Ended
	Jun. 01, 2015	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Federal Home Loan Bank Stock
Proceeds from redemption of Federal Home Loan Bank stock	$ 7,200,000	$ 8,524,000	$ 222,000
Purchases of Federal Home Loan Bank stock	$ 279,000	1,600,000
Federal Home Loan Bank stock, at cost		$ 4,310,000		$ 11,234,000

XML

Investment Securities (Details 7) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cumulative roll forward of credit losses recognized in earnings for debt securities held and not intended to be sold
Beginning balance	$ 5,885
Credit losses on debt securities which were sold	(3,482)
Ending balance	2,403
Components of comprehensive loss, net of taxes, resulting from other-than-temporarily impaired securities
Noncredit losses on other-than-temporarily impaired securities, net of taxes	$ 176	$ 304

XML

Employee Stock Ownership Plan (Tables)

6 Months Ended

Jun. 30, 2015

Employee Stock Ownership Plan

Schedule of shares held by ESOP trust

	June 30,		December 31,
	2015		2014
Allocated shares	303,036		283,381
Unearned shares	660,591		685,057
Total ESOP shares	963,627		968,438
Fair value of unearned shares, in thousands	$	16,026	$	14,763

XML

Fair Value of Financial Instruments (Details 4) - Fair Value, Measurements, Nonrecurring - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Impaired loans - non-collateral dependent
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Total Gains (Losses)		$ (4)
Trust preferred securities
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Total Gains (Losses)	$ 179	153
Mortgage servicing assets
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Total Gains (Losses)		(15)
Level 3 | Impaired loans - non-collateral dependent
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value		327
Level 3 | Trust preferred securities
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value	868	690
Level 3 | Real estate owned
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value	192
Level 3 | Mortgage servicing assets
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value		505
Estimated Fair Value | Impaired loans - non-collateral dependent
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value		327
Estimated Fair Value | Trust preferred securities
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value	868	690
Estimated Fair Value | Real estate owned
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value	$ 192
Estimated Fair Value | Mortgage servicing assets
Assets Measured at Fair Value on Nonrecurring Basis and Related Losses
Fair value		$ 505

XML

Securities Sold Under Agreements to Repurchase (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Securities sold under agreements to repurchase
Repurchase Liability	$ 60,000	$ 72,000
Repurchase liability maximum	90.00%
Weighted Average
Securities sold under agreements to repurchase
Rate (as a percent)	1.60%	1.88%
1 year or less
Securities sold under agreements to repurchase
Repurchase Liability	$ 5,000	$ 47,000
1 year or less | Weighted Average
Securities sold under agreements to repurchase
Rate (as a percent)	1.90%	2.11%
Over 2 years to 3 years
Securities sold under agreements to repurchase
Repurchase Liability	$ 25,000	$ 25,000
Over 2 years to 3 years | Weighted Average
Securities sold under agreements to repurchase
Rate (as a percent)	1.46%	1.46%
Over 3 years to 4 years
Securities sold under agreements to repurchase
Repurchase Liability	$ 20,000
Over 3 years to 4 years | Weighted Average
Securities sold under agreements to repurchase
Rate (as a percent)	1.66%
Over 4 years to 5 years
Securities sold under agreements to repurchase
Repurchase Liability	$ 10,000
Over 4 years to 5 years | Weighted Average
Securities sold under agreements to repurchase
Rate (as a percent)	1.65%

XML

Fair Value of Financial Instruments (Details 2) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets
Investment securities held to maturity	$ 530,136	$ 586,710
Accrued interest receivable	4,587	4,436
Liabilities
Current income taxes payable	2,647	826
Advance payments by borrowers for taxes and insurance	4,677	3,916
Carrying Amount
Assets
Cash and cash equivalents	36,250	75,060
Investment securities held to maturity	525,708	572,922
Loans receivable, net	1,110,823	968,212
Loans held for sale	455	1,048
FHLB stock	4,310	11,234
FRB stock	2,971	2,925
Accrued interest receivable	4,587	4,436
Interest rate contracts	71	62
Liabilities
Deposits	1,373,379	1,359,679
Advances from the Federal Home Loan Bank	57,000	15,000
Securities sold under agreements to repurchase	60,000	72,000
Accounts payable and accrued expenses (excluding interest rate contracts)	26,933	24,044
Interest rate contracts	78	54
Current income taxes payable	2,647	826
Advance payments by borrowers for taxes and insurance	4,677	3,916
Estimated Fair Value
Assets
Cash and cash equivalents	36,250	75,060
Investment securities held to maturity	530,136	586,710
Loans receivable, net	1,140,423	998,183
Loans held for sale	458	1,079
FHLB stock	4,310	11,234
FRB stock	2,971	2,925
Accrued interest receivable	4,587	4,436
Interest rate contracts	71	62
Liabilities
Deposits	1,373,623	1,360,074
Advances from the Federal Home Loan Bank	57,096	14,977
Securities sold under agreements to repurchase	60,300	72,334
Accounts payable and accrued expenses (excluding interest rate contracts)	26,933	24,044
Interest rate contracts	78	54
Current income taxes payable	2,647	826
Advance payments by borrowers for taxes and insurance	4,677	3,916
Estimated Fair Value | Level 1
Assets
Cash and cash equivalents	36,250	75,060
Accrued interest receivable	4,587	4,436
Liabilities
Deposits	1,156,090	1,137,942
Accounts payable and accrued expenses (excluding interest rate contracts)	26,933	24,044
Current income taxes payable	2,647	826
Advance payments by borrowers for taxes and insurance	4,677	3,916
Estimated Fair Value | Level 2
Assets
Investment securities held to maturity	529,268	586,020
Loans held for sale	458	1,079
FHLB stock	4,310	11,234
FRB stock	2,971	2,925
Interest rate contracts	71	62
Liabilities
Interest rate contracts	78	54
Estimated Fair Value | Level 3
Assets
Investment securities held to maturity	868	690
Loans receivable, net	1,140,423	998,183
Liabilities
Deposits	217,533	222,132
Advances from the Federal Home Loan Bank	57,096	14,977
Securities sold under agreements to repurchase	$ 60,300	$ 72,334

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Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events

Subsequent Events

(17)Subsequent Events

On July 30, 2015, the Board of Directors of Territorial Bancorp Inc. declared a quarterly cash dividend of $0.17 per share of common stock.  The dividend is expected to be paid on August 27, 2015 to stockholders of record as of August 13, 2015.

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Loans Receivable and Allowance for Loan Losses (Details 4) - Individually Evaluated for Impairment - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Impaired loans
Recorded Investment	$ 6,423		$ 6,423		$ 6,458
Unpaid Principal Balance	7,155		7,155		7,103
Average Recorded Investment	6,462	$ 7,255	6,498	$ 7,292
Interest Income Recognized	17	29	36	60
Loans individually evaluated for impairment with a related allowance for loan loss	0		0		0
One- to four-family residential
Impaired loans
Recorded Investment	6,294		6,294		6,158
Unpaid Principal Balance	6,994		6,994		6,775
Average Recorded Investment	6,331	7,106	6,366	7,141
Interest Income Recognized	17	29	36	60
Home Equity Loans and Lines of Credit
Impaired loans
Recorded Investment	129		129		296
Unpaid Principal Balance	161		161		324
Average Recorded Investment	$ 131	$ 149	$ 132	$ 151
Consumer and Other
Impaired loans
Recorded Investment					4
Unpaid Principal Balance					$ 4

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Investment Securities (Details 3) - U.S. government-sponsored mortgage-backed securities - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Realized gains and losses and the proceeds from sales of securities available for sale, held to maturity and trading
Proceeds from sales	$ 2,503	$ 3,475	$ 5,083	$ 12,270
Gross gains	$ 240	$ 309	$ 476	$ 655

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Subsequent Events (Details) - $ / shares		3 Months Ended		6 Months Ended
	Jul. 31, 2015	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Subsequent Events
Quarterly cash dividend declared on common stock (in dollars per share)		$ 0.16	$ 0.15	$ 0.32	$ 0.29
Subsequent event
Subsequent Events
Quarterly cash dividend declared on common stock (in dollars per share)	$ 0.17

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value of Financial Instruments

Schedule of estimated fair values of financial instruments

					Fair Value Measurements Using
(Dollars in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Assets
Cash and cash equivalents	$	36,250	$	36,250	$	36,250	$	—	$	—
Investment securities held to maturity	525,708		530,136		—		529,268		868
Loans receivable, net	1,110,823		1,140,423		—		—		1,140,423
Loans held for sale	455		458		—		458		—
FHLB stock	4,310		4,310				4,310		—
FRB stock	2,971		2,971		—		2,971		—
Accrued interest receivable	4,587		4,587		4,587		—		—
Interest rate contracts	71		71		—		71		—
Liabilities
Deposits	1,373,379		1,373,623		1,156,090		—		217,533
Advances from the Federal Home Loan Bank	57,000		57,096		—		—		57,096
Securities sold under agreements to repurchase	60,000		60,300		—		—		60,300
Accounts payable and accrued expenses (excluding interest rate contracts)	26,933		26,933		26,933		—		—
Interest rate contracts	78		78		—		78		—
Current income taxes payable	2,647		2,647		2,647		—		—
Advance payments by borrowers for taxes and insurance	4,677		4,677		4,677		—		—
December 31, 2014
Assets
Cash and cash equivalents	$	75,060	$	75,060	$	75,060	$	—	$	—
Investment securities held to maturity	572,922		586,710		—		586,020		690
Loans receivable, net	968,212		998,183		—		—		998,183
Loans held for sale	1,048		1,079		—		1,079		—
FHLB stock	11,234		11,234		—		11,234		—
FRB stock	2,925		2,925		—		2,925		—
Accrued interest receivable	4,436		4,436		4,436		—		—
Interest rate contracts	62		62		—		62		—
Liabilities
Deposits	1,359,679		1,360,074		1,137,942		—		222,132
Advances from the Federal Home Loan Bank	15,000		14,977		—		—		14,977
Securities sold under agreements to repurchase	72,000		72,334		—		—		72,334
Accounts payable and accrued expenses (excluding interest rate contracts)	24,044		24,044		24,044		—		—
Interest rate contracts	54		54		—		54		—
Current income taxes payable	826		826		826		—		—
Advance payments by borrowers for taxes and insurance	3,916		3,916		3,916		—		—

Schedule of assets and liabilities measured at fair value on a recurring basis

(Dollars in thousands)	Level 1		Level 2			Level 3		Total
June 30, 2015:
Interest rate contracts — assets	$	—	$	71		$	—	$	71
Interest rate contracts — liabilities	—		(78		)	—		(78		)
December 31, 2014:
Interest rate contracts — assets	$	—	$	62		$	—	$	62
Interest rate contracts — liabilities	—		(54		)	—		(54		)

Schedule of assets measured at fair value on nonrecurring basis and related gains and losses

(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Total Gains/ (Losses)
June 30, 2015:
Trust preferred securities	$	—	$	—	$	868	$	868	$	179
Real estate owned	—		—		192		192		—
December 31, 2014:
Impaired loans	$	—	$	—	$	327	$	327	$	(4	)
Trust preferred securities	—		—		690		690		153
Mortgage servicing assets	—		—		505		505		(15		)

Schedule of significant unobservable inputs for Level 3 nonrecurring fair value measurements

(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Value
June 30, 2015:
Trust preferred securities	$	868	Discounted cash flow	Discount rate	Three-month LIBOR plus 20%
December 31, 2014:
Impaired loans — non-collateral dependent	$	327	Discounted cash flow	Discount rate (1)	6.10%
Trust preferred securities	690		Discounted cash flow	Discount rate	Three-month LIBOR plus 20%
Mortgage servicing assets	505		Discounted cash flow	Discount rate	10.50%
				Prepayment speed (PSA)	164.8 – 262.5
				Annual cost to service (per loan)	$55

(1) Represents the yield on contractual cash flows prior to modification in troubled debt restructurings.

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Loans Receivable and Allowance for Loan Losses (Details 6)	6 Months Ended		12 Months Ended
	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($) loan
Accounts, Notes, Loans and Financing Receivable
Nonaccrual Loans	$ 5,211,000		$ 4,453,000
Mortgage Loans on Real Estate | Minimum
Accounts, Notes, Loans and Financing Receivable
Loan delinquency period that may result in loss	90 days
Loan delinquency period after which an appraisal is obtained of the underlying collateral	5 months
Non Accrual Loans
Accounts, Notes, Loans and Financing Receivable
Number of loans | loan	18		18
Nonaccrual Loans	$ 5,200,000		$ 4,500,000
Interest collected on nonaccrual loans recorded as a reduction of principal	105,000	$ 135,000
Non accrual loans, additional interest income that would have been recognized had the loans been accruing interest	$ 151,000	$ 96,000

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Earnings Per Share (Details) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) $ / shares shares	Jun. 30, 2014 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) item $ / shares shares	Jun. 30, 2014 USD ($) $ / shares shares
Earnings Per Share
Net income | $	$ 3,837	$ 3,719	$ 7,363	$ 7,181
Weighted-average number of shares used in:
Basic earnings per share (in shares)	9,053,383	9,164,801	9,086,865	9,176,108
Dilutive common stock equivalents:
Stock options and restricted stock units (in shares)	254,605	182,071	227,911	187,523
Diluted earnings per share (in shares)	9,307,988	9,346,872	9,314,776	9,363,631
Net income per common share, basic (in dollars per share) | $ / shares	$ 0.42	$ 0.41	$ 0.81	$ 0.78
Net income per common share, diluted (in dollars per share) | $ / shares	$ 0.41	$ 0.40	$ 0.79	$ 0.77
Number of different forms of outstanding common stock | item			2

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Employee Stock Ownership Plan (Details) - USD ($)		3 Months Ended		6 Months Ended
	Jul. 10, 2009	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Employee Stock Ownership Plan
ESOP expense				$ 553,000	$ 527,000
ESOP
Employee Stock Ownership Plan
Amount borrowed from employer	$ 9,800,000
Shares purchased	978,650
Percentage of shares issued in initial public offering	8.00%
Employee stock ownership plan, price per share of shares acquired in initial public offering (in dollars per share)	$ 10.00
Term of loan				20 years
ESOP expense		$ 241,000	$ 217,000	$ 463,000	$ 458,000
Allocated shares		303,036		303,036		283,381
Unearned shares		660,591		660,591		685,057
Total ESOP shares		963,627		963,627		968,438
Fair value of unearned shares, in thousands		$ 16,026,000		$ 16,026,000		$ 14,763,000
ESOP | Prime rate
Employee Stock Ownership Plan
Variable interest rate				Wall Street Journal Prime Rate

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Loans Receivable and Allowance for Loan Losses (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Real estate loans:
Total real estate loans	$ 1,112,412		$ 969,401
Other loans:
Total other loans	4,483		4,614
Less: Net unearned fees and discounts	(4,078)		(4,112)
Less: Allowance for loan losses	(1,994)	$ (1,872)	(1,691)	$ (1,510)	$ (1,485)	$ (1,486)
Total unearned fees, discounts and allowance for loan losses	(6,072)		(5,803)
Loans receivable, net	1,110,823		968,212
One- to four-family residential
Real estate loans:
Total real estate loans	1,069,243		926,074
Multi-family residential
Real estate loans:
Total real estate loans	9,840		8,920
Construction, Commercial and Other Mortgage Loans
Real estate loans:
Total real estate loans	17,129		18,415
Other loans:
Less: Allowance for loan losses	(407)	(543)	(977)	(932)	(823)	(799)
Home Equity Loans and Lines of Credit
Real estate loans:
Total real estate loans	16,200		15,992
Other loans:
Less: Allowance for loan losses	(3)	$ (4)	(5)	$ (7)	$ (7)	$ (10)
Loans on deposit accounts
Other loans:
Total other loans	269		441
Consumer and other loans
Other loans:
Total other loans	$ 4,214		$ 4,173

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Basis of Presentation

6 Months Ended

Jun. 30, 2015

Summary of Significant Accounting Policies

Basis of Presentation

(1)Basis of Presentation

The accompanying unaudited consolidated financial statements of Territorial Bancorp Inc. (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.  These interim condensed consolidated financial statements and notes should be read in conjunction with Territorial Bancorp Inc.’s consolidated financial statements and notes thereto filed as part of the Annual Report on Form 10-K for the year ended December 31, 2014.  In the opinion of management, all adjustments necessary for a fair presentation have been made and consist only of normal recurring adjustments.  Interim results of operations are not necessarily indicative of results to be expected for the year.

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Employee Stock Ownership Plan (Details 2) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
ESOP restoration | Certain executives
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits
Accrued benefits	$ 40,000	$ 19,000	$ 104,000	$ 93,000

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Investment Securities (Details 4) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Sale of held-to-maturity debt securities
Proceeds from sale of held-to-maturity securities			$ 5,083,000	$ 7,199,000
Gross realized gains of held-to-maturity debt securities sold			476,000	625,000
Sale of a held-for-trading security
Proceeds from the sale of a held-for-trading security				5,071,000
Recognized gain from the sale of a held-for-trading security				30,000
Pledged investment securities
Investment securities pledged to secure public deposit, securities sold under agreement to repurchase and transaction clearing accounts	$ 256,300,000		256,300,000		$ 270,200,000
U.S. government-sponsored mortgage-backed securities | Held-to-maturity debt securities
Sale of held-to-maturity debt securities
Proceeds from sale of held-to-maturity securities	2,400,000	$ 3,500,000	5,000,000	7,200,000
Carrying value of held-to-maturity debt securities sold	2,300,000	3,200,000	4,600,000	6,600,000
Gross realized gains of held-to-maturity debt securities sold	179,000	$ 309,000	$ 415,000	$ 625,000
PreTSL XXIV | Trust preferred securities
Sale of held-to-maturity debt securities
Proceeds from sale of held-to-maturity securities	$ 61,000

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Advances from the Federal Home Loan Bank (Tables)

6 Months Ended

Jun. 30, 2015

Advances from the Federal Home Loan Bank

Schedule of advances outstanding

	June 30, 2015			December 31, 2014
			Weighted			Weighted
			Average			Average
(Dollars in thousands)	Amount		Rate	Amount		Rate
Due within one year	$	10,000	0.29%	$	10,000	2.06%
Due over 2 years to 3 years	15,000		1.26	—		—
Due over 3 years to 4 years	22,000		1.66	5,000		1.20
Due over 4 years to 5 years	10,000		1.66	—		—
Total	$	57,000	1.31%	$	15,000	1.77%

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Loans Receivable and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2015

Loans Receivable and Allowance for Loan Losses

Schedule of components of loans receivable

	June 30,			December 31,
(Dollars in thousands)	2015			2014
Real estate loans:
First mortgages:
One- to four-family residential	$	1,069,243		$	926,074
Multi-family residential	9,840			8,920
Construction, commercial, and other	17,129			18,415
Home equity loans and lines of credit	16,200			15,992
Total real estate loans	1,112,412			969,401
Other loans:
Loans on deposit accounts	269			441
Consumer and other loans	4,214			4,173
Total other loans	4,483			4,614
Less:
Net unearned fees and discounts	(4,078		)	(4,112		)
Allowance for loan losses	(1,994		)	(1,691		)
Total unearned fees, discounts and allowance for loan losses	(6,072		)	(5,803		)
Loans receivable, net	$	1,110,823		$	968,212

Schedule of activity in allowance for loan losses on loans receivable and by portfolio segment

(Dollars in thousands)	Residential Mortgage		Construction, Commercial and Other Mortgage Loans			Home Equity Loans and Lines of Credit			Consumer and Other			Unallocated		Totals
Three months ended June 30, 2015:
Balance, beginning of period	$	1,111	$	543		$	4		$	149		$	65	$	1,872
Provision (reversal of allowance) for loan losses	129		(142		)	(16		)	(45		)	175		101
	1,240		401			(12		)	104			240		1,973
Charge-offs	—		—			—			(6		)	—		(6		)
Recoveries	3		6			15			3			—		27
Net charge-offs	3		6			15			(3		)	—		21
Balance, end of period	$	1,243	$	407		$	3		$	101		$	240	$	1,994
Six months ended June 30, 2015:
Balance, beginning of period	$	413	$	977		$	5		$	263		$	33	$	1,691
Provision (reversal of allowance) for loan losses	827		(577		)	(18		)	(144		)	207		295
	1,240		400			(13		)	119			240		1,986
Charge-offs	—		—			—			(25		)	—		(25		)
Recoveries	3		7			16			7			—		33
Net charge-offs	3		7			16			(18		)	—		8
Balance, end of period	$	1,243	$	407		$	3		$	101		$	240	$	1,994

(Dollars in thousands)	Residential Mortgage			Construction, Commercial and Other Mortgage Loans		Home Equity Loans and Lines of Credit			Consumer and Other			Unallocated			Totals
Three months ended June 30, 2014:
Balance, beginning of period	$	434		$	823	$	7		$	153		$	68		$	1,485
Provision for loan losses	28			109		9			10			—			156
	462			932		16			163			68			1,641
Charge-offs	(118		)	—		(10		)	(8		)	—			(136		)
Recoveries	—			—		1			4			—			5
Net charge-offs	(118		)	—		(9		)	(4		)	—			(131		)
Balance, end of period	$	344		$	932	$	7		$	159		$	68		$	1,510
Six months ended June 30, 2014:
Balance, beginning of period	$	376		$	799	$	10		$	229		$	72		$	1,486
Provision (reversal of allowance) for loan losses	86			133		5			(55		)	(4		)	165
	462			932		15			174			68			1,651
Charge-offs	(118		)	—		(10		)	(25		)	—			(153		)
Recoveries	—			—		2			10			—			12
Net charge-offs	(118		)	—		(8		)	(15		)	—			(141		)
Balance, end of period	$	344		$	932	$	7		$	159		$	68		$	1,510

Schedule of balance in allowance for loan losses and recorded investment in loans by portfolio segment and based on impairment method

(Dollars in thousands)	Residential Mortgage		Construction, Commercial and Other Mortgage Loans		Home Equity Loans and Lines of Credit		Consumer and Other		Unallocated		Totals
June 30, 2015:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	1,243		407		3		101		240		1,994
Total ending allowance balance	$	1,243	$	407	$	3	$	101	$	240	$	1,994
Loans:
Ending loan balance:
Individually evaluated for impairment	$	6,294	$	—	$	129	$	—	$	—	$	6,423
Collectively evaluated for impairment	1,068,734		17,086		16,077		4,497		—		1,106,394
Total ending loan balance	$	1,075,028	$	17,086	$	16,206	$	4,497	$	—	$	1,112,817
December 31, 2014:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	413		977		5		263		33		1,691
Total ending allowance balance	$	413	$	977	$	5	$	263	$	33	$	1,691
Loans:
Ending loan balance:
Individually evaluated for impairment	$	6,158	$	—	$	296	$	4	$	—	$	6,458
Collectively evaluated for impairment	924,732		18,399		15,702		4,612		—		963,445
Total ending loan balance	$	930,890	$	18,399	$	15,998	$	4,616	$	—	$	969,903

Schedule of balance of impaired loans individually evaluated for impairment by class of loans

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance
June 30, 2015:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,294	$	6,994
Home equity loans and lines of credit	129		161
Total	$	6,423	$	7,155
December 31, 2014:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,158	$	6,775
Home equity loans and lines of credit	296		324
Consumer and other	4		4
Total	$	6,458	$	7,103

Schedule of average recorded investment and interest income recognized on impaired loans by class of loans

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
2015:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,331	$	17	$	6,366	$	36
Home equity loans and lines of credit	131		—		132		—
Total	$	6,462	$	17	$	6,498	$	36
2014:
With no related allowance recorded:
One- to four-family residential mortgages	$	7,106	$	29	$	7,141	$	60
Home equity loans and lines of credit	149		—		151		—
Total	$	7,255	$	29	$	7,292	$	60

Schedule of aging of loans and accrual status by class of loans

(Dollars in thousands)	30 — 59 Days Past Due		60 — 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total Loans		Nonaccrual Loans		Loans More Than 90 Days Past Due and Still Accruing
June 30, 2015:
One- to four-family residential mortgages	$	618	$	287	$	1,805	$	2,710	$	1,062,504	$	1,065,214	$	5,082	$	—
Multi-family residential mortgages	—		—		—		—		9,814		9,814		—		—
Construction, commercial and other mortgages	—		—		—		—		17,086		17,086		—		—
Home equity loans and lines of credit	43		—		—		43		16,163		16,206		129		—
Loans on deposit accounts	—		—		—		—		269		269		—		—
Consumer and other	6		—		—		6		4,222		4,228		—		—
Total	$	667	$	287	$	1,805	$	2,759	$	1,110,058	$	1,112,817	$	5,211	$	—
December 31, 2014:
One- to four-family residential mortgages	$	1,040	$	736	$	593	$	2,369	$	919,624	$	921,993	$	4,153	$	—
Multi-family residential mortgages	—		—		—		—		8,897		8,897		—		—
Construction, commercial and other mortgages	—		—		—		—		18,399		18,399		—		—
Home equity loans and lines of credit	—		—		161		161		15,837		15,998		296		—
Loans on deposit accounts	—		—		—		—		440		440		—		—
Consumer and other	7		1		4		12		4,164		4,176		4		—
Total	$	1,047	$	737	$	758	$	2,542	$	967,361	$	969,903	$	4,453	$	—

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Advances from the Federal Home Loan Bank (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Advances from the Federal Home Loan Bank
Percentage of total assets used to determine maximum line of credit	35.00%	25.00%
Available additional unused FHLB advances	$ 543,300	$ 399,000
Advances outstanding
Due within one year	10,000	10,000
Due over 2 years to 3 years	15,000
Due over 3 years to 4 years	22,000	5,000
Due over 4 years to 5 years	10,000
Total	$ 57,000	$ 15,000
Weighted Average Rate
Due within one year (as a percent)	0.29%	2.06%
Due over 2 years to 3 years (as a percent)	1.26%
Due over 3 years to 4 years (as a percent)	1.66%	1.20%
Due over 4 years to 5 years (as a percent)	1.66%
Total (as a percent)	1.31%	1.77%

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Investment Securities (Details 5) - U.S. government-sponsored mortgage-backed securities $ in Thousands	Jun. 30, 2015 USD ($) item	Dec. 31, 2014 USD ($) item
Investment Securities
Less Than 12 Months Fair Value	$ 166,679	$ 12,717
Less Than 12 Months Unrealized Losses	5,022	65
12 Months or Longer Fair Value	54,835	183,349
12 Months or Longer Unrealized Losses	$ 2,611	$ 4,225
Total Number of Securities | item	45,000	37,000
Total Fair Value	$ 221,514	$ 196,066
Total Unrealized Losses	$ 7,633	$ 4,290

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Securities Sold Under Agreements to Repurchase (Tables)

6 Months Ended

Jun. 30, 2015

Securities Sold Under Agreements to Repurchase

Summary of securities sold under agreements to repurchase

	June 30, 2015			December 31, 2014
			Weighted			Weighted
	Repurchase		Average	Repurchase		Average
(Dollars in thousands)	Liability		Rate	Liability		Rate
Maturing:
1 year or less	$	5,000	1.90%	$	47,000	2.11%
Over 2 years to 3 years	25,000		1.46	25,000		1.46
Over 3 years to 4 years	20,000		1.66	—		—
Over 4 years to 5 years	10,000		1.65	—		—
Total	$	60,000	1.60%	$	72,000	1.88%

Summary comparing carrying value and fair value of securities pledged to secure repurchase agreements, repurchase liability, and amount at risk

									Weighted
	Carrying		Fair						Average
	Value of		Value of		Repurchase		Amount		Months to
(Dollars in thousands)	Securities		Securities		Liability		at Risk		Maturity
Maturing:
Over 90 days	$	73,743	$	73,780	$	60,000	$	13,780	35

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Offsetting of Financial Liabilities (Tables)

6 Months Ended

Jun. 30, 2015

Offsetting of Financial Liabilities

Schedule of securities sold under agreements to repurchase subject to conditional right of offset

	Gross Amount		Gross Amount		Net Amount of Liabilities		Gross Amount Not Offset in the Balance Sheet
(Dollars in thousands)	of Recognized Liabilities		Offset in the Balance Sheet		Presented in the Balance Sheet		Financial Instruments		Cash Collateral Pledged		Net Amount
June 30, 2015:
Securities sold under agreements to repurchase	$	60,000	$	—	$	60,000	$	60,000	$	—	$	—
December 31, 2014:
Securities sold under agreements to repurchase	$	72,000	$	—	$	72,000	$	72,000	$	—	$	—

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Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net income	$ 7,363,000	$ 7,181,000
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses	295,000	165,000
Depreciation and amortization	666,000	677,000
Deferred income tax benefit	(1,354,000)	(1,457,000)
Amortization of fees, discounts, and premiums	(204,000)	(208,000)
Origination of loans held for sale	(28,108,000)	(16,086,000)
Proceeds from sales of loans held for sale	28,684,000	16,957,000
Gain on sale of loans, net	(239,000)	(165,000)
Purchases of investment securities held for trading		(5,041,000)
Proceeds from the sale of investment securities held for trading		5,071,000
Gain on sale of investment securities held for trading		(30,000)
Gain on sale of investment securities held to maturity	(476,000)	(625,000)
ESOP expense	553,000	527,000
Share-based compensation expense	1,328,000	1,327,000
Increase in accrued interest receivable	(151,000)	(137,000)
Net increase in bank-owned life insurance	(511,000)	(531,000)
Net increase in prepaid expenses and other assets	(212,000)	(303,000)
Net increase (decrease) in accounts payable and accrued expenses	3,197,000	(960,000)
Net increase in advance payments by borrowers for taxes and insurance	761,000	10,000
Net increase in income taxes payable	1,821,000	679,000
Net cash from operating activities	13,413,000	7,051,000
Cash flows from investing activities:
Purchases of investment securities held to maturity	(6,671,000)	(34,831,000)
Principal repayments on investment securities held to maturity	49,390,000	28,479,000
Proceeds from sale of investment securities held to maturity	5,083,000	7,199,000
Loan originations, net of principal repayments on loans receivable	(142,545,000)	(46,313,000)
Purchases of Federal Home Loan Bank stock	(1,600,000)
Proceeds from redemption of Federal Home Loan Bank stock	8,524,000	222,000
Purchases of Federal Reserve Bank stock	(46,000)
Purchases of premises and equipment	(351,000)	(560,000)
Net cash from investing activities	(88,216,000)	(45,804,000)
Cash flows from financing activities:
Net increase (decrease) in deposits	13,700,000	29,238,000
Proceeds from advances from the Federal Home Loan Bank	82,000,000
Repayments of advances from the Federal Home Loan Bank	(40,000,000)
Proceeds from securities sold under agreements to repurchase	30,000,000
Repayments of securities sold under agreements to repurchase	(42,000,000)
Repurchases of common stock	(4,728,000)	(4,412,000)
Cash dividends paid	(2,979,000)	(2,752,000)
Net cash from financing activities	35,993,000	22,074,000
Net decrease in cash and cash equivalents	(38,810,000)	(16,679,000)
Cash and cash equivalents at beginning of the year	75,060,000	75,365,000
Cash and cash equivalents at end of the year	36,250,000	58,686,000
Cash paid for:
Interest on deposits and borrowings	3,149,000	2,953,000
Income taxes	4,450,000	$ 4,984,000
Supplemental disclosure of noncash investing and financing activities:
Loans transferred to real estate owned	$ 192,000

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Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2015

Employee Benefit Plans

Schedule of components of net periodic benefit cost

	SERP				SERP
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2015		2014		2015		2014
Net periodic benefit cost for the period
Service cost	$	21	$	25	$	42	$	50
Interest cost	31		29		62		59
Expected return on plan assets	—		—		—		—
Amortization of prior service cost	—		—		—		—
Recognized actuarial loss	—		—		—		—
Recognized curtailment loss	—		—		—		—
Net periodic benefit cost	$	52	$	54	$	104	$	109

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Investment Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Held to maturity:
Amortized Cost	$ 525,708	$ 572,922
Gross Unrealized Gains	12,061	18,078
Gross Unrealized Losses	(7,633)	(4,290)
Estimated Fair Value	530,136	586,710
U.S. government-sponsored mortgage-backed securities
Held to maturity:
Amortized Cost	524,840	572,232
Gross Unrealized Gains	12,061	18,078
Gross Unrealized Losses	(7,633)	(4,290)
Estimated Fair Value	529,268	586,020
Trust preferred securities
Held to maturity:
Amortized Cost	868	690
Estimated Fair Value	$ 868	$ 690

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Loans Receivable and Allowance for Loan Losses (Details 7)	12 Months Ended
	Jun. 30, 2015 USD ($) item loan	Dec. 31, 2014 USD ($) loan	Jun. 30, 2014 USD ($) loan
Troubled debt restructurings
Number of loans subsequently defaulted | loan	0
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | loan	15	17
Loans modified by troubled debt restructurings considered impaired	$ 3,500,000	$ 4,600,000
Real estate owned	$ 192,000	$ 0
Loans modified in troubled debt restructuring
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | loan	0		0
Commitments to lend additional funds to borrowers	$ 0
Performing Financing Receivable
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | loan		6
Loans modified by troubled debt restructurings considered impaired		$ 2,000,000
Performing Financing Receivable | Accruing interest
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | item	5
Loans modified by troubled debt restructurings considered impaired	$ 1,200,000
Performing Financing Receivable | Non Accrual Loans
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | loan	9	9
Loans modified by troubled debt restructurings considered impaired	$ 2,100,000	$ 2,200,000
Nonperforming Financing Receivable | Non Accrual Loans
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | loan	1	2
Loans modified by troubled debt restructurings considered impaired		$ 343,000
Loan modified by troubled debt restructurings greater than 149 days delinquent	$ 149,000
One- to four-family residential
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | loan	14	16
Loans modified by troubled debt restructurings considered impaired	$ 3,400,000	$ 4,400,000
Mortgage loans in process of foreclosure, number of contracts | loan	2		2
Mortgage loans in process of foreclosure, total value	$ 499,000		$ 367,000
Home Equity Loans and Lines of Credit
Additional disclosures
Number of loans modified by troubled debt restructurings considered impaired | loan	1	1
Loans modified by troubled debt restructurings considered impaired	$ 129,000	$ 135,000

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Fair Value of Financial Instruments (Details 3) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Level 2
Assets and Liabilities Measured at Fair Value on Recurring Basis
Interest rate contracts - assets	$ 71	$ 62
Interest rate contracts - liabilities	(78)	(54)
Estimated Fair Value
Assets and Liabilities Measured at Fair Value on Recurring Basis
Interest rate contracts - assets	71	62
Interest rate contracts - liabilities	$ (78)	$ (54)

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Consolidated Balance Sheets - USD ($)	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and cash equivalents	$ 36,250,000	$ 75,060,000
Investment securities held to maturity, at amortized cost (fair value of $530,136 and $586,710 at June 30, 2015 and December 31, 2014, respectively)	525,708,000	572,922,000
Loans receivable, net	1,110,823,000	968,212,000
Loans held for sale	455,000	1,048,000
Federal Home Loan Bank stock, at cost	4,310,000	11,234,000
Federal Reserve Bank Stock, at cost	2,971,000	2,925,000
Accrued interest receivable	4,587,000	4,436,000
Premises and equipment, net	5,314,000	5,629,000
Real estate owned	192,000	0
Bank-owned life insurance	41,814,000	41,303,000
Deferred income taxes receivable	8,568,000	7,254,000
Prepaid expenses and other assets	2,086,000	1,874,000
Total assets	1,743,078,000	1,691,897,000
Liabilities:
Deposits	1,373,379,000	1,359,679,000
Advances from the Federal Home Loan Bank	57,000,000	15,000,000
Securities sold under agreements to repurchase	60,000,000	72,000,000
Accounts payable and accrued expenses	27,011,000	24,098,000
Current income taxes payable	2,647,000	826,000
Advance payments by borrowers for taxes and insurance	4,677,000	3,916,000
Total liabilities	$ 1,524,714,000	$ 1,475,519,000
Stockholders' Equity:
Preferred stock, $.01 par value; authorized 50,000,000 shares, no shares issued or outstanding
Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 9,719,600 and 9,919,064 shares at June 30, 2015 and December 31, 2014, respectively	$ 97,000	$ 99,000
Additional paid-in capital	72,528,000	75,229,000
Unearned ESOP shares	(6,606,000)	(6,851,000)
Retained earnings	157,673,000	153,289,000
Accumulated other comprehensive loss	(5,328,000)	(5,388,000)
Total stockholders' equity	218,364,000	216,378,000
Total liabilities and stockholders' equity	$ 1,743,078,000	$ 1,691,897,000

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Investment Securities (Details 6)	6 Months Ended		45 Months Ended
	Jun. 30, 2015 USD ($) security	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) Transaction security	Dec. 31, 2014 USD ($)
Investment Securities
Purchase of mortgage-backed security	$ 6,671,000	$ 34,831,000
Amortized cost	525,708,000		$ 525,708,000	$ 572,922,000
U.S. government-sponsored mortgage-backed securities
Investment Securities
Amortized cost	$ 524,840,000		$ 524,840,000	572,232,000
Trust preferred securities
Investment Securities
Number of securities owned | security	1		1
Number of market transactions of the security | Transaction			6
Amortized cost	$ 868,000		$ 868,000	$ 690,000
Remaining amortized cost basis	1,100,000		1,100,000
Trust preferred securities | PreTSL XXIII
Investment Securities
Amortized cost	$ 868,000		$ 868,000

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Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Unearned ESOP Shares	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Dec. 31, 2013	$ 101	$ 77,340	$ (7,340)	$ 145,826	$ (3,787)	$ 212,140
Increase (Decrease) in Stockholders' Equity
Net income				7,181		7,181
Other comprehensive income					76	76
Cash dividends declared ($0.32 per share and $0.29 per share for the six months ended June 30, 2015 and June 30, 2014, respectively)				(2,752)		(2,752)
Share-based compensation		1,327				1,327
Allocation of ESOP shares (24,466 shares for six months ended June 30, 2015 and June 30, 2014)		282	245			527
Repurchase of company common stock (199,464 and 170,994 shares for the six months ended June 30, 2015 and June 30, 2014, respectively)	(2)	(3,885)				(3,887)
Balance at Jun. 30, 2014	99	75,064	(7,095)	150,255	(3,711)	214,612
Balance at Mar. 31, 2014					(3,712)
Increase (Decrease) in Stockholders' Equity
Net income						3,719
Other comprehensive income					1	1
Balance at Jun. 30, 2014	99	75,064	(7,095)	150,255	(3,711)	214,612
Balance at Dec. 31, 2014	99	75,229	(6,851)	153,289	(5,388)	216,378
Increase (Decrease) in Stockholders' Equity
Net income				7,363		7,363
Other comprehensive income					60	60
Cash dividends declared ($0.32 per share and $0.29 per share for the six months ended June 30, 2015 and June 30, 2014, respectively)				(2,979)		(2,979)
Share-based compensation		1,328				1,328
Allocation of ESOP shares (24,466 shares for six months ended June 30, 2015 and June 30, 2014)		308	245			553
Repurchase of company common stock (199,464 and 170,994 shares for the six months ended June 30, 2015 and June 30, 2014, respectively)	(2)	(4,337)				(4,339)
Balance at Jun. 30, 2015	97	72,528	(6,606)	157,673	(5,328)	218,364
Balance at Mar. 31, 2015					(5,348)
Increase (Decrease) in Stockholders' Equity
Net income						3,837
Other comprehensive income					20	20
Balance at Jun. 30, 2015	$ 97	$ 72,528	$ (6,606)	$ 157,673	$ (5,328)	$ 218,364

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Offsetting of Financial Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Securities sold under agreements to repurchase
Gross Amount of Recognized Liabilities	$ 60,000	$ 72,000
Net Amount of Liabilities Presented in the Balance Sheet	60,000	72,000
Gross amount not offset in the balance sheet
Financial Instruments	$ 60,000	$ 72,000

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share

Schedule of information used to compute basic and diluted earnings per share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share data)	2015		2014		2015		2014
Net income	$	3,837	$	3,719	$	7,363	$	7,181
Weighted-average number of shares used in:
Basic earnings per share	9,053,383		9,164,801		9,086,865		9,176,108
Dilutive common stock equivalents:
Stock options and restricted stock units	254,605		182,071		227,911		187,523
Diluted earnings per share	9,307,988		9,346,872		9,314,776		9,363,631
Net income per common share, basic	$	0.42	$	0.41	$	0.81	$	0.78
Net income per common share, diluted	$	0.41	$	0.40	$	0.79	$	0.77

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Share-Based Compensation (Details 3) - Stock Options - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-Based Compensation
Unrecognized compensation costs	$ 831,000		$ 831,000
Vested (in shares)	0	0	0	0
Granted (in shares)	0	0	0	0
Minimum
Share-Based Compensation
Unrecognized compensation costs, period of recognition			5 years
Vesting period			5 years
Maximum
Share-Based Compensation
Unrecognized compensation costs, period of recognition			6 years
Vesting period			6 years

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Earnings Per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share

Earnings Per Share

(14)Earnings Per Share

The table below presents the information used to compute basic and diluted earnings per share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share data)	2015		2014		2015		2014
Net income	$	3,837	$	3,719	$	7,363	$	7,181
Weighted-average number of shares used in:
Basic earnings per share	9,053,383		9,164,801		9,086,865		9,176,108
Dilutive common stock equivalents:
Stock options and restricted stock units	254,605		182,071		227,911		187,523
Diluted earnings per share	9,307,988		9,346,872		9,314,776		9,363,631
Net income per common share, basic	$	0.42	$	0.41	$	0.81	$	0.78
Net income per common share, diluted	$	0.41	$	0.40	$	0.79	$	0.77

We have two forms of our outstanding common stock: common stock and unvested restricted stock awards.  Holders of unvested restricted stock awards receive nonforfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings.  The computed basic and diluted earnings per share presented are substantially equivalent using both the two-class and the treasury stock methods of calculating earnings per share.

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Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2015

Other Comprehensive Loss

Schedule of changes in components of accumulated other comprehensive loss, net of taxes

(Dollars in thousands)	Unfunded Pension Liability		Noncredit Related Loss on Trust Preferred Securities			Unrealized Loss on Securities			Total
Three months ended June 30, 2015
Balances at beginning of period	$	5,032	$	253		$	63		$	5,348
Other comprehensive income, net of taxes	64		(77		)	(7		)	(20		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(77		)	(7		)	(20		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Three months ended June 30, 2014
Balances at beginning of period	$	3,338	$	304		$	70		$	3,712
Other comprehensive income, net of taxes	—		—			(1		)	(1		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		—			(1		)	(1		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711
Six months ended June 30, 2015
Balances at beginning of period	$	5,032	$	284		$	72		$	5,388
Other comprehensive income, net of taxes	64		(108		)	(16		)	(60		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(108		)	(16		)	(60		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Six months ended June 30, 2014
Balances at beginning of period	$	3,338	$	376		$	73		$	3,787
Other comprehensive income, net of taxes	—		(72		)	(4		)	(76		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		(72		)	(4		)	(76		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711

Schedule of tax effect on each component of other comprehensive loss

	Three Months Ended June 30,
	2015									2014
(Dollars in thousands)	Pretax Amount			Tax			After Tax Amount			Pretax Amount			Tax		After Tax Amount
Unfunded pension liability	$	106		$	(42	)	$	64		$	—		$	—	$	—
Noncredit related loss on trust preferred securities	(128		)	51			(77		)	(1		)	1		—
Unrealized loss on securities	(12		)	5			(7		)	(2		)	1		(1		)
Total	$	(34	)	$	14		$	(20	)	$	(3	)	$	2	$	(1	)

	Six Months Ended June 30,
	2015									2014
(Dollars in thousands)	Pretax Amount			Tax			After Tax Amount			Pretax Amount			Tax		After Tax Amount
Unfunded pension liability	$	106		$	(42	)	$	64		$	—		$	—	$	—
Noncredit related loss on trust preferred securities	(179		)	71			(108		)	(119		)	47		(72		)
Unrealized loss on securities	(27		)	11			(16		)	(7		)	3		(4		)
Total	$	(100	)	$	40		$	(60	)	$	(126	)	$	50	$	(76	)

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value of Financial Instruments

Fair Value of Financial Instruments

(16)Fair Value of Financial Instruments

In accordance with the Fair Value Measurements and Disclosures topic of the FASB ASC, the Company groups its financial assets and liabilities valued at fair value into three levels based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities traded in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques that require the use of significant judgment or estimation.

In accordance with the Fair Value Measurements and Disclosures topic, the Company bases its fair values on the price that it would expect to receive if an asset were sold or the price that it would expect to pay to transfer a liability in an orderly transaction between market participants at the measurement date.  Also as required, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when developing fair value measurements.

The Company uses fair value measurements to determine fair value disclosures.  Investment securities held for sale and derivatives are recorded at fair value on a recurring basis.  From time to time, the Company may be required to record other financial assets at fair value on a nonrecurring basis, such as loans held for sale, impaired loans and investments, and mortgage servicing assets. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

Cash and Cash Equivalents, Accrued Interest Receivable, Accounts Payable and Accrued Expenses, Current Income Taxes Payable, and Advance Payments by Borrowers for Taxes and Insurance. The carrying amount approximates fair value because of the short maturity of these instruments.

Investment Securities.  The estimated fair values of U.S. government-sponsored mortgage-backed securities are considered Level 2 inputs because the valuation for investment securities utilized pricing models that varied based on asset class and included trade, bid and other observable market information.

The trust preferred securities represent investments in a pool of debt obligations issued primarily by holding companies for Federal Deposit Insurance Corporation-insured financial institutions.  The trust preferred securities market is considered to be inactive as only six transactions have occurred over the past 45 months in the same tranche of securities we own and no new issues of pooled trust preferred securities have occurred since 2007.  The fair value of our trust preferred securities was determined using a discounted cash flow model.  Our model used a discount rate equal to three-month LIBOR plus 20.00% and provided a fair value estimate of $24.51 per $100 of par value for PreTSL XXIII.

The discounted cash flow analysis included a review of all issuers within the pool.  The fair value of the trust preferred securities are classified as Level 3 inputs because they are based on discounted cash flow models.

FHLB Stock. FHLB stock, which is redeemable for cash at par value, is reported at its par value.

FRB Stock. FRB stock, which is redeemable for cash at par value, is reported at its par value.

Loans. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  The fair value of loans is not based on the concept of exit price.

Loans Held for Sale.  The fair value of loans held for sale is determined based on the prices quoted in the secondary market for similar loans.

Deposits. The fair value of checking and Super NOW savings accounts, passbook accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows using the rates currently offered for deposits with similar remaining maturities.

Advances From the FHLB and Securities Sold Under Agreements to Repurchase. Fair value is estimated by discounting future cash flows using the rates currently offered to the Company for debt with similar remaining maturities.

Interest Rate Contracts.  The Company may enter into interest rate lock commitments with borrowers on loans intended to be sold.  To manage interest rate risk on the lock commitments, the Company may also enter into forward loan sale commitments.  The interest rate lock commitments and forward loan sale commitments are treated as derivatives and are recorded at their fair value determined by referring to prices quoted in the secondary market for similar contracts.  Interest rate contracts that are classified as assets are included with prepaid expenses and other assets on the consolidated balance sheet while interest rate contracts that are classified as liabilities are included with accounts payable and accrued expenses.

The estimated fair values of the Company’s financial instruments are as follows:

					Fair Value Measurements Using
(Dollars in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Assets
Cash and cash equivalents	$	36,250	$	36,250	$	36,250	$	—	$	—
Investment securities held to maturity	525,708		530,136		—		529,268		868
Loans receivable, net	1,110,823		1,140,423		—		—		1,140,423
Loans held for sale	455		458		—		458		—
FHLB stock	4,310		4,310				4,310		—
FRB stock	2,971		2,971		—		2,971		—
Accrued interest receivable	4,587		4,587		4,587		—		—
Interest rate contracts	71		71		—		71		—
Liabilities
Deposits	1,373,379		1,373,623		1,156,090		—		217,533
Advances from the Federal Home Loan Bank	57,000		57,096		—		—		57,096
Securities sold under agreements to repurchase	60,000		60,300		—		—		60,300
Accounts payable and accrued expenses (excluding interest rate contracts)	26,933		26,933		26,933		—		—
Interest rate contracts	78		78		—		78		—
Current income taxes payable	2,647		2,647		2,647		—		—
Advance payments by borrowers for taxes and insurance	4,677		4,677		4,677		—		—
December 31, 2014
Assets
Cash and cash equivalents	$	75,060	$	75,060	$	75,060	$	—	$	—
Investment securities held to maturity	572,922		586,710		—		586,020		690
Loans receivable, net	968,212		998,183		—		—		998,183
Loans held for sale	1,048		1,079		—		1,079		—
FHLB stock	11,234		11,234		—		11,234		—
FRB stock	2,925		2,925		—		2,925		—
Accrued interest receivable	4,436		4,436		4,436		—		—
Interest rate contracts	62		62		—		62		—
Liabilities
Deposits	1,359,679		1,360,074		1,137,942		—		222,132
Advances from the Federal Home Loan Bank	15,000		14,977		—		—		14,977
Securities sold under agreements to repurchase	72,000		72,334		—		—		72,334
Accounts payable and accrued expenses (excluding interest rate contracts)	24,044		24,044		24,044		—		—
Interest rate contracts	54		54		—		54		—
Current income taxes payable	826		826		826		—		—
Advance payments by borrowers for taxes and insurance	3,916		3,916		3,916		—		—

At June 30, 2015 and December 31, 2014, neither the commitment fees received on commitments to extend credit nor the fair value thereof was material to the consolidated financial statements of the Company.

The table below presents the balance of assets and liabilities measured at fair value on a recurring basis:

(Dollars in thousands)	Level 1		Level 2			Level 3		Total
June 30, 2015:
Interest rate contracts — assets	$	—	$	71		$	—	$	71
Interest rate contracts — liabilities	—		(78		)	—		(78		)
December 31, 2014:
Interest rate contracts — assets	$	—	$	62		$	—	$	62
Interest rate contracts — liabilities	—		(54		)	—		(54		)

The fair value of interest rate contracts was determined by referring to prices quoted in the secondary market for similar contracts.

The table below presents the balance of assets measured at fair value on a nonrecurring basis as of June 30, 2015 and December 31, 2014 and the related gains and losses for the six months ended June 30, 2015 and the year ended December 31, 2014:

(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Total Gains/ (Losses)
June 30, 2015:
Trust preferred securities	$	—	$	—	$	868	$	868	$	179
Real estate owned	—		—		192		192		—
December 31, 2014:
Impaired loans	$	—	$	—	$	327	$	327	$	(4	)
Trust preferred securities	—		—		690		690		153
Mortgage servicing assets	—		—		505		505		(15		)

The fair values of real estate owned and impaired loans that are considered to be collateral-dependent are determined using the value of collateral less estimated selling costs. The fair value of impaired loans not considered to be collateral-dependent is determined using a discounted cash flow analysis.  Assumptions used in the analysis include the discount rate and projected cash flows.  Gains and losses on real estate owned are included in other general and administrative expenses in the consolidated statements of income.  Changes in the measurement of impaired loans are included in the provision for loan losses in the consolidated statements of income.  The fair value of trust preferred securities is determined using a discounted cash flow model.  The assumptions used in the discounted cash flow model are discussed above.  Gains and losses on trust preferred securities that are credit related are included in net other-than-temporary impairment losses in the consolidated statements of income.  Gains and losses on trust preferred securities that are not credit related are included in other comprehensive income in the consolidated statements of comprehensive income.  Mortgage servicing assets are valued using a discounted cash flow model.  Assumptions used in the model include mortgage prepayment speeds, discount rates and cost of servicing.  Losses on mortgage servicing assets are included in service fees on loan and deposit accounts in the consolidated statements of income.

The table below presents the significant unobservable inputs for Level 3 nonrecurring fair value measurements:

(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Value
June 30, 2015:
Trust preferred securities	$	868	Discounted cash flow	Discount rate	Three-month LIBOR plus 20%
December 31, 2014:
Impaired loans — non-collateral dependent	$	327	Discounted cash flow	Discount rate (1)	6.10%
Trust preferred securities	690		Discounted cash flow	Discount rate	Three-month LIBOR plus 20%
Mortgage servicing assets	505		Discounted cash flow	Discount rate	10.50%
				Prepayment speed (PSA)	164.8 – 262.5
				Annual cost to service (per loan)	$55

(1) Represents the yield on contractual cash flows prior to modification in troubled debt restructurings.

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Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Changes in the components of accumulated other comprehensive loss, net of taxes
Balance at beginning of year			$ (216,378)	$ (212,140)
Net current period other comprehensive income	$ (20)	$ (1)	(60)	(76)
Balance at end of period	(218,364)	(214,612)	(218,364)	(214,612)
Accumulated Other Comprehensive Income (Loss)
Changes in the components of accumulated other comprehensive loss, net of taxes
Balance at beginning of year	5,348	3,712	5,388	3,787
Other comprehensive income before reclassifications	(20)	(1)	(60)	(76)
Net current period other comprehensive income	(20)	(1)	(60)	(76)
Balance at end of period	5,328	3,711	5,328	3,711
Unfunded Pension Liability
Changes in the components of accumulated other comprehensive loss, net of taxes
Balance at beginning of year	5,032	3,338	5,032	3,338
Other comprehensive income before reclassifications	64		64
Net current period other comprehensive income	64		64
Balance at end of period	5,096	3,338	5,096	3,338
Noncredit Related Loss | Trust preferred securities
Changes in the components of accumulated other comprehensive loss, net of taxes
Balance at beginning of year	253	304	284	376
Other comprehensive income before reclassifications	(77)		(108)	(72)
Net current period other comprehensive income	(77)		(108)	(72)
Balance at end of period	176	304	176	304
Unrealized Loss on Securities
Changes in the components of accumulated other comprehensive loss, net of taxes
Balance at beginning of year	63	70	72	73
Other comprehensive income before reclassifications	(7)	(1)	(16)	(4)
Net current period other comprehensive income	(7)	(1)	(16)	(4)
Balance at end of period	$ 56	$ 69	$ 56	$ 69

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Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Consolidated Statements of Stockholders' Equity, Share Data
Cash dividends declared (in dollars per share)	$ 0.32	$ 0.29
Common Stock
Consolidated Statements of Stockholders' Equity, Share Data
Allocation of ESOP shares, shares	24,466	24,466
Repurchase of company common stock, shares	199,464	170,994

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Consolidated Balance Sheets
Investment securities held to maturity, fair value (in dollars)	$ 530,136	$ 586,710
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized shares	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares	100,000,000	100,000,000
Common stock, shares issued	9,719,600	9,919,064
Common stock, shares outstanding	9,719,600	9,919,064

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Securities Sold Under Agreements to Repurchase

6 Months Ended

Jun. 30, 2015

Securities Sold Under Agreements to Repurchase

Securities Sold Under Agreements to Repurchase

(9)Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are treated as financings and the obligations to repurchase the identical securities sold are reflected as a liability with the dollar amount of securities underlying the agreements remaining in the asset accounts.  Securities sold under agreements to repurchase are summarized as follows:

	June 30, 2015			December 31, 2014
			Weighted			Weighted
	Repurchase		Average	Repurchase		Average
(Dollars in thousands)	Liability		Rate	Liability		Rate
Maturing:
1 year or less	$	5,000	1.90%	$	47,000	2.11%
Over 2 years to 3 years	25,000		1.46	25,000		1.46
Over 3 years to 4 years	20,000		1.66	—		—
Over 4 years to 5 years	10,000		1.65	—		—
Total	$	60,000	1.60%	$	72,000	1.88%

Below is a summary comparing the carrying value and fair value of securities pledged to secure repurchase agreements, the repurchase liability, and the amount at risk at June 30, 2015.  The amount at risk is the greater of the carrying value or fair value over the repurchase liability and refers to the potential loss to the Company if the secured lender fails to return the security at the maturity date of the agreement.  All the agreements to repurchase are with JP Morgan Securities and the securities pledged are mortgage-backed securities issued and guaranteed by U.S. government-sponsored enterprises.  The repurchase liability cannot exceed 90% of the fair value of securities pledged.  In the event of a decline in the fair value of securities pledged to less than the required amount due to market conditions or principal repayments, the Company is obligated to pledge additional securities or other suitable collateral to cure the deficiency.

									Weighted
	Carrying		Fair						Average
	Value of		Value of		Repurchase		Amount		Months to
(Dollars in thousands)	Securities		Securities		Liability		at Risk		Maturity
Maturing:
Over 90 days	$	73,743	$	73,780	$	60,000	$	13,780	35

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document and Entity Information
Entity Registrant Name	Territorial Bancorp Inc.
Entity Central Index Key	0001447051
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		9,719,600
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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Offsetting of Financial Liabilities

6 Months Ended

Jun. 30, 2015

Offsetting of Financial Liabilities

Offsetting of Financial Liabilities

(10)Offsetting of Financial Liabilities

Securities sold under agreements to repurchase are subject to a right of offset in the event of default.  See Footnote 9, Securities Sold Under Agreements to Repurchase, for additional information.

	Gross Amount		Gross Amount		Net Amount of Liabilities		Gross Amount Not Offset in the Balance Sheet
(Dollars in thousands)	of Recognized Liabilities		Offset in the Balance Sheet		Presented in the Balance Sheet		Financial Instruments		Cash Collateral Pledged		Net Amount
June 30, 2015:
Securities sold under agreements to repurchase	$	60,000	$	—	$	60,000	$	60,000	$	—	$	—
December 31, 2014:
Securities sold under agreements to repurchase	$	72,000	$	—	$	72,000	$	72,000	$	—	$	—

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Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest and dividend income:
Loans	$ 11,266	$ 9,760	$ 21,952	$ 19,300
Investment securities	4,274	5,086	8,797	10,160
Other investments	70	35	149	78
Total interest and dividend income	15,610	14,881	30,898	29,538
Interest expense:
Deposits	1,154	1,103	2,288	2,194
Advances from the Federal Home Loan Bank	157	66	227	132
Securities sold under agreements to repurchase	243	343	555	686
Total interest expense	1,554	1,512	3,070	3,012
Net interest income	14,056	13,369	27,828	26,526
Provision for loan losses	101	156	295	165
Net interest income after provision for loan losses	13,955	13,213	27,533	26,361
Noninterest income:
Service fees on loan and deposit accounts	527	524	987	1,023
Income on bank-owned life insurance	256	264	511	532
Gain on sale of investment securities	240	309	476	655
Gain on sale of loans	110	86	239	165
Other	115	96	281	262
Total noninterest income	1,248	1,279	2,494	2,637
Noninterest expense:
Salaries and employee benefits	5,064	5,297	10,163	10,660
Occupancy	1,428	1,409	2,865	2,831
Equipment	953	905	1,898	1,819
Federal deposit insurance premiums	211	201	420	400
Other general and administrative expenses	1,187	935	2,401	1,901
Total noninterest expense	8,843	8,747	17,747	17,611
Income before income taxes	6,360	5,745	12,280	11,387
Income taxes	2,523	2,026	4,917	4,206
Net income	$ 3,837	$ 3,719	$ 7,363	$ 7,181
Basic earnings per share (in dollars per share)	$ 0.42	$ 0.41	$ 0.81	$ 0.78
Diluted earnings per share (in dollars per share)	0.41	0.40	0.79	0.77
Cash dividends declared per common share (in dollars per share)	$ 0.16	$ 0.15	$ 0.32	$ 0.29
Basic weighted-average shares outstanding (in shares)	9,053,383	9,164,801	9,086,865	9,176,108
Diluted weighted-average shares outstanding (in shares)	9,307,988	9,346,872	9,314,776	9,363,631

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Cash and Cash Equivalents

6 Months Ended

Jun. 30, 2015

Cash and Cash Equivalents

Cash and Cash Equivalents

(4)Cash and Cash Equivalents

The table below presents the balances of cash and cash equivalents:

	June 30,		December 31,
(Dollars in thousands)	2015		2014
Cash and due from banks	$	11,020	$	10,803
Interest-earning deposits in other banks	25,230		64,257
Cash and cash equivalents	$	36,250	$	75,060

Interest-earning deposits in other banks consist primarily of deposits at the Federal Reserve Bank.

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Recently Adopted Accounting Pronouncements

6 Months Ended

Jun. 30, 2015

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

(3)Recently Adopted Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board (FASB) amended the Receivables topic of the FASB Accounting Standards Codification (ASC).  The amendment clarifies when an in substance repossession or foreclosure occurs and when a mortgage loan should be derecognized and the related real property recognized.  The amendment also requires disclosures about the amount of foreclosed residential real property held and the recorded investment in mortgage loans collateralized by residential real property in the process of foreclosure.  The amendment was effective for interim and annual periods beginning after December 15, 2014.  The Company adopted this amendment on January 1, 2015, and the adoption did not have a material effect on its consolidated financial statements.

In May 2014, the FASB amended the Revenue Recognition topic of the FASB ASC.  The amendment seeks to clarify the principles for recognizing revenue as well as to develop common revenue standards for U.S. generally accepted accounting principles and International Financial Reporting Standards.  The amendment is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  The Company does not expect the adoption of this amendment to have a material effect on its consolidated financial statements.

In June 2014, the FASB amended the Transfers and Servicing topic of the FASB ASC.  The amendment modifies the accounting for certain types of repurchase transactions as well as adds new disclosure requirements for repurchase transactions.  The amendment was effective for interim and annual periods beginning after December 15, 2014, with early adoption prohibited.  The Company adopted this amendment on January 1, 2015, and the adoption did not have a material effect on its consolidated financial statements.  See Footnote 9, Securities Sold Under Agreements to Repurchase.

In August 2014, the FASB amended the Receivables topic of the FASB ASC.  The amendment seeks to clarify the classification of foreclosed mortgage loans that are either fully or partially guaranteed under government programs, such as from the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA).  The amendment was effective for interim and annual periods beginning after December 15, 2014.  The Company adopted this amendment on January 1, 2015, and the adoption did not have any effect on its consolidated financial statements.

In April 2015, the FASB amended the Intangibles — Goodwill and Other topic of the FASB ASC.  The amendment adds guidance to help entities evaluate the accounting for fees paid in cloud computing arrangements.  The amendment is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015.  The Company does not expect the adoption of this amendment to have a material effect on its consolidated financial statements.

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Other Comprehensive Loss

6 Months Ended

Jun. 30, 2015

Other Comprehensive Loss

Other Comprehensive Loss

(15)Other Comprehensive Loss

The table below presents the changes in the components of accumulated other comprehensive loss, net of taxes:

(Dollars in thousands)	Unfunded Pension Liability		Noncredit Related Loss on Trust Preferred Securities			Unrealized Loss on Securities			Total
Three months ended June 30, 2015
Balances at beginning of period	$	5,032	$	253		$	63		$	5,348
Other comprehensive income, net of taxes	64		(77		)	(7		)	(20		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(77		)	(7		)	(20		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Three months ended June 30, 2014
Balances at beginning of period	$	3,338	$	304		$	70		$	3,712
Other comprehensive income, net of taxes	—		—			(1		)	(1		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		—			(1		)	(1		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711
Six months ended June 30, 2015
Balances at beginning of period	$	5,032	$	284		$	72		$	5,388
Other comprehensive income, net of taxes	64		(108		)	(16		)	(60		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(108		)	(16		)	(60		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Six months ended June 30, 2014
Balances at beginning of period	$	3,338	$	376		$	73		$	3,787
Other comprehensive income, net of taxes	—		(72		)	(4		)	(76		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		(72		)	(4		)	(76		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711

The table below presents the tax effect on each component of other comprehensive loss:

	Three Months Ended June 30,
	2015									2014
(Dollars in thousands)	Pretax Amount			Tax			After Tax Amount			Pretax Amount			Tax		After Tax Amount
Unfunded pension liability	$	106		$	(42	)	$	64		$	—		$	—	$	—
Noncredit related loss on trust preferred securities	(128		)	51			(77		)	(1		)	1		—
Unrealized loss on securities	(12		)	5			(7		)	(2		)	1		(1		)
Total	$	(34	)	$	14		$	(20	)	$	(3	)	$	2	$	(1	)

	Six Months Ended June 30,
	2015									2014
(Dollars in thousands)	Pretax Amount			Tax			After Tax Amount			Pretax Amount			Tax		After Tax Amount
Unfunded pension liability	$	106		$	(42	)	$	64		$	—		$	—	$	—
Noncredit related loss on trust preferred securities	(179		)	71			(108		)	(119		)	47		(72		)
Unrealized loss on securities	(27		)	11			(16		)	(7		)	3		(4		)
Total	$	(100	)	$	40		$	(60	)	$	(126	)	$	50	$	(76	)

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Employee Benefit Plans

6 Months Ended

Jun. 30, 2015

Employee Benefit Plans

Employee Benefit Plans

(11)Employee Benefit Plans

The Company has a noncontributory defined benefit pension plan (Pension Plan) that covers most employees with at least one year of service.  Effective December 31, 2008, under approved changes to the Pension Plan, there were no further accruals of benefits for any participants and benefits will not increase with any additional years of service.  Net periodic benefit cost, subsequent to December 31, 2008, has not been significant and is not disclosed in the table below.

In addition, the Company sponsors a Supplemental Employee Retirement Plan (SERP), a noncontributory supplemental retirement benefit plan, which covers certain current and former employees of the Company for amounts in addition to those provided under the Pension Plan.

The components of net periodic benefit cost were as follows:

	SERP				SERP
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2015		2014		2015		2014
Net periodic benefit cost for the period
Service cost	$	21	$	25	$	42	$	50
Interest cost	31		29		62		59
Expected return on plan assets	—		—		—		—
Amortization of prior service cost	—		—		—		—
Recognized actuarial loss	—		—		—		—
Recognized curtailment loss	—		—		—		—
Net periodic benefit cost	$	52	$	54	$	104	$	109

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Federal Home Loan Bank Stock

6 Months Ended

Jun. 30, 2015

FHLB stock

Federal Home Loan Bank Stock

Federal Home Loan Bank Stock

(7)Federal Home Loan Bank Stock

On June 1, 2015, the Federal Home Loan Bank of Seattle (FHLB Seattle) completed its merger with the Federal Home Loan Bank of Des Moines (FHLB Des Moines).  After the merger, the FHLB Des Moines repurchased all outstanding excess capital stock, resulting in the repurchase of $7.2 million of capital stock we held in the FHLB Des Moines.  Combined with $279,000 of additional net stock purchases related to collateral on new advances, this resulted in a decrease in our investment in FHLB stock from $11.2 million at December 31, 2014 to $4.3 million at June 30, 2015.

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Employee Benefit Plans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Pension Plan | Minimum
Employee benefit plans
Defined Benefit Plan Requisite Service Period			1 year
Supplemental Employee Retirement Plan (SERP)
Net periodic benefit cost for the year:
Service cost	$ 21	$ 25	$ 42	$ 50
Interest cost	31	29	62	59
Net periodic benefit cost	$ 52	$ 54	$ 104	$ 109

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Investment Securities

6 Months Ended

Jun. 30, 2015

Investment Securities

Investment Securities

(5)Investment Securities

The amortized cost and fair values of investment securities are as follows:

	Amortized		Gross Unrealized					Estimated
(Dollars in thousands)	Cost		Gains		Losses			Fair Value
June 30, 2015:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	524,840	$	12,061	$	(7,633	)	$	529,268
Trust preferred securities	868		—		—			868
Total	$	525,708	$	12,061	$	(7,633	)	$	530,136
December 31, 2014:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	572,232	$	18,078	$	(4,290	)	$	586,020
Trust preferred securities	690		—		—			690
Total	$	572,922	$	18,078	$	(4,290	)	$	586,710

The amortized cost and estimated fair value of investment securities at June 30, 2015 are shown below.  Incorporated in the maturity schedule are mortgage-backed and trust preferred securities, which are allocated using the contractual maturity as a basis.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Estimated
(Dollars in thousands)	Cost		Fair Value
Held to maturity:
Due within 5 years	$	41	$	43
Due after 5 years through 10 years	8		9
Due after 10 years	525,659		530,084
Total	$	525,708	$	530,136

Realized gains and losses and the proceeds from sales of securities held to maturity and trading are shown in the table below.  All sales of securities were U.S. government-sponsored mortgage-backed securities.

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2015		2014		2015		2014
Proceeds from sales	$	2,503	$	3,475	$	5,083	$	12,270
Gross gains	240		309		476		655
Gross losses	—		—		—		—

During the three months ended June 30, 2015 and 2014, the Company received proceeds of $2.4 million and $3.5 million, respectively, from the sale of $2.3 million and $3.2 million, respectively, of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $179,000 and $309,000, respectively. During the six months ended June 30, 2015 and 2014, the Company received proceeds of $5.0 million and $7.2 million, respectively, from the sale of $4.6 million and $6.6 million, respectively, of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $415,000 and $625,000, respectively.  The sale of these mortgage-backed securities, for which the Company had already collected a substantial portion of the original purchased principal (at least 85%), is in accordance with the Investments — Debt and Equity Securities topic of the FASB ASC and does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.

During the three months ended June 30, 2015, the Company received proceeds of $61,000 from the sale of one of the trust preferred securities the Company owned, PreTSL XXIV.  The Company previously wrote off the entire book value of this security when it incurred an other-than-temporary impairment charge in prior years.  The trust preferred security sold was classified in the held-to-maturity portfolio.  Since the credit rating of this security was downgraded, in accordance with the Investments — Debt and Equity Securities topic of the FASB ASC, the sale of this security does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.

During the six months ended June 30, 2014, the Company received proceeds of $5.0 million from the sale of a held-for-trading security and recognized a gain of $30,000.

Investment securities with amortized costs of $256.3 million and $270.2 million at June 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and transaction clearing accounts.

Provided below is a summary of investment securities which were in an unrealized loss position at June 30, 2015 and December 31, 2014.  The Company does not intend to sell these securities until such time as the value recovers or the securities mature and it is not more likely than not that the Company will be required to sell the securities prior to recovery of value or the securities mature.

	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized		Number of			Unrealized
Description of Securities	Fair Value		Losses		Fair Value		Losses		Securities	Fair Value		Losses
(Dollars in thousands)
June 30, 2015:
Mortgage-backed securities	$	166,679	$	5,022	$	54,835	$	2,611	45	$	221,514	$	7,633
December 31, 2014:
Mortgage-backed securities	$	12,717	$	65	$	183,349	$	4,225	37	$	196,066	$	4,290

Mortgage-Backed Securities.  The unrealized losses on the Company’s investment in mortgage-backed securities were caused by increases in market interest rates.  All of the mortgage-backed securities are guaranteed by Freddie Mac or Fannie Mae, which are U.S. government-sponsored enterprises, or Ginnie Mae, which is a U.S. government agency.  Since the decline in market value is attributable to changes in interest rates and not credit quality, and the Company does not intend to sell these investments until maturity and it is not more likely than not that the Company will be required to sell such investments prior to recovery of its cost basis, the Company does not consider these investments to be other-than-temporarily impaired as of June 30, 2015 and December 31, 2014.

Trust Preferred Securities.  At June 30, 2015, the Company owns one trust preferred security, PreTSL XXIII.  The trust preferred security represents an investment in a pool of debt obligations issued primarily by holding companies for Federal Deposit Insurance Corporation-insured financial institutions. This security is classified in the Company’s held-to-maturity investment portfolio.

The trust preferred securities market is considered to be inactive as only six transactions have occurred over the past 45 months in the same tranche of securities owned by the Company.  The Company uses a discounted cash flow model to determine whether this security is other-than-temporarily impaired.  The assumptions used in preparing the discounted cash flow model include the following: estimated discount rates, estimated deferral and default rates on collateral, and estimated cash flows.

Based on the Company’s review, the Company’s investment in PreTSL XXIII did not incur additional impairment during the quarter ended June 30, 2015.

PreTSL XXIII has an amortized cost of $868,000 at June 30, 2015.  The difference between the amortized cost of $868,000 and the remaining cost basis of $1.1 million is reported as other comprehensive loss and is related to noncredit factors.

It is reasonably possible that the fair value of the trust preferred security could decline in the near term if the overall economy and the financial condition of some of the issuers continue to deteriorate and the liquidity of this security remains low.  As a result, there is a risk that the Company’s remaining cost basis of $1.1 million on its trust preferred security could be credit-related other-than-temporarily impaired in the near term.  The impairment, if any, could be material to the Company’s consolidated statements of income.

The table below provides a cumulative roll forward of credit losses recognized in earnings for debt securities held and not intended to be sold:

(Dollars in thousands)	2015			2014
Balance at January 1,	$	5,885		$	5,885
Credit losses on debt securities for which other-than-temporary impairment was not previously recognized	—			—
Credit losses on debt securities which were sold	(3,482		)	—
Balance at June 30,	$	2,403		$	5,885

The table below shows the components of comprehensive loss, net of taxes, resulting from other-than-temporarily impaired securities:

	June 30,
(Dollars in thousands)	2015		2014
Noncredit losses on other-than-temporarily impaired securities, net of taxes	$	176	$	304

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Loans Receivable and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2015

Loans Receivable and Allowance for Loan Losses

Loans Receivable and Allowance for Loan Losses

(6)Loans Receivable and Allowance for Loan Losses

The components of loans receivable are as follows:

	June 30,			December 31,
(Dollars in thousands)	2015			2014
Real estate loans:
First mortgages:
One- to four-family residential	$	1,069,243		$	926,074
Multi-family residential	9,840			8,920
Construction, commercial, and other	17,129			18,415
Home equity loans and lines of credit	16,200			15,992
Total real estate loans	1,112,412			969,401
Other loans:
Loans on deposit accounts	269			441
Consumer and other loans	4,214			4,173
Total other loans	4,483			4,614
Less:
Net unearned fees and discounts	(4,078		)	(4,112		)
Allowance for loan losses	(1,994		)	(1,691		)
Total unearned fees, discounts and allowance for loan losses	(6,072		)	(5,803		)
Loans receivable, net	$	1,110,823		$	968,212

The table below presents the activity in the allowance for loan losses by portfolio segment:

(Dollars in thousands)	Residential Mortgage		Construction, Commercial and Other Mortgage Loans			Home Equity Loans and Lines of Credit			Consumer and Other			Unallocated		Totals
Three months ended June 30, 2015:
Balance, beginning of period	$	1,111	$	543		$	4		$	149		$	65	$	1,872
Provision (reversal of allowance) for loan losses	129		(142		)	(16		)	(45		)	175		101
	1,240		401			(12		)	104			240		1,973
Charge-offs	—		—			—			(6		)	—		(6		)
Recoveries	3		6			15			3			—		27
Net charge-offs	3		6			15			(3		)	—		21
Balance, end of period	$	1,243	$	407		$	3		$	101		$	240	$	1,994
Six months ended June 30, 2015:
Balance, beginning of period	$	413	$	977		$	5		$	263		$	33	$	1,691
Provision (reversal of allowance) for loan losses	827		(577		)	(18		)	(144		)	207		295
	1,240		400			(13		)	119			240		1,986
Charge-offs	—		—			—			(25		)	—		(25		)
Recoveries	3		7			16			7			—		33
Net charge-offs	3		7			16			(18		)	—		8
Balance, end of period	$	1,243	$	407		$	3		$	101		$	240	$	1,994

(Dollars in thousands)	Residential Mortgage			Construction, Commercial and Other Mortgage Loans		Home Equity Loans and Lines of Credit			Consumer and Other			Unallocated			Totals
Three months ended June 30, 2014:
Balance, beginning of period	$	434		$	823	$	7		$	153		$	68		$	1,485
Provision for loan losses	28			109		9			10			—			156
	462			932		16			163			68			1,641
Charge-offs	(118		)	—		(10		)	(8		)	—			(136		)
Recoveries	—			—		1			4			—			5
Net charge-offs	(118		)	—		(9		)	(4		)	—			(131		)
Balance, end of period	$	344		$	932	$	7		$	159		$	68		$	1,510
Six months ended June 30, 2014:
Balance, beginning of period	$	376		$	799	$	10		$	229		$	72		$	1,486
Provision (reversal of allowance) for loan losses	86			133		5			(55		)	(4		)	165
	462			932		15			174			68			1,651
Charge-offs	(118		)	—		(10		)	(25		)	—			(153		)
Recoveries	—			—		2			10			—			12
Net charge-offs	(118		)	—		(8		)	(15		)	—			(141		)
Balance, end of period	$	344		$	932	$	7		$	159		$	68		$	1,510

During the six months ended June 30, 2015, the Company increased the loan loss provisions for residential mortgage loans based on the growth of this segment of the loan portfolio and the concentration of loans in Hawaii.  The Company also reduced the loan loss provisions on construction, commercial and other mortgage loans, home equity loans and lines of credit and consumer and other loans based on a continued limited loss experience.  The allocation of a portion of the allowance from one category of loans does not preclude its availability to absorb losses in other loan categories.

Management considers the allowance for loan losses at June 30, 2015 to be at an appropriate level to provide for probable losses that can be reasonably estimated based on general and specific conditions at that date. While the Company uses the best information it has available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations.  To the extent actual outcomes differ from the estimates, additional provisions for credit losses may be required that would reduce future earnings.  In addition, as an integral part of their examination process, the bank regulators and the Hawaii Department of Financial Institutions periodically review the allowance for loan losses and may require the Company to increase the allowance based on their analysis of information available at the time of their examination.

The table below presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:

(Dollars in thousands)	Residential Mortgage		Construction, Commercial and Other Mortgage Loans		Home Equity Loans and Lines of Credit		Consumer and Other		Unallocated		Totals
June 30, 2015:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	1,243		407		3		101		240		1,994
Total ending allowance balance	$	1,243	$	407	$	3	$	101	$	240	$	1,994
Loans:
Ending loan balance:
Individually evaluated for impairment	$	6,294	$	—	$	129	$	—	$	—	$	6,423
Collectively evaluated for impairment	1,068,734		17,086		16,077		4,497		—		1,106,394
Total ending loan balance	$	1,075,028	$	17,086	$	16,206	$	4,497	$	—	$	1,112,817
December 31, 2014:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	413		977		5		263		33		1,691
Total ending allowance balance	$	413	$	977	$	5	$	263	$	33	$	1,691
Loans:
Ending loan balance:
Individually evaluated for impairment	$	6,158	$	—	$	296	$	4	$	—	$	6,458
Collectively evaluated for impairment	924,732		18,399		15,702		4,612		—		963,445
Total ending loan balance	$	930,890	$	18,399	$	15,998	$	4,616	$	—	$	969,903

The table below presents the balance of impaired loans individually evaluated for impairment by class of loans:

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance
June 30, 2015:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,294	$	6,994
Home equity loans and lines of credit	129		161
Total	$	6,423	$	7,155
December 31, 2014:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,158	$	6,775
Home equity loans and lines of credit	296		324
Consumer and other	4		4
Total	$	6,458	$	7,103

The table below presents the average recorded investment and interest income recognized on impaired loans by class of loans:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
2015:
With no related allowance recorded:
One- to four-family residential mortgages	$	6,331	$	17	$	6,366	$	36
Home equity loans and lines of credit	131		—		132		—
Total	$	6,462	$	17	$	6,498	$	36
2014:
With no related allowance recorded:
One- to four-family residential mortgages	$	7,106	$	29	$	7,141	$	60
Home equity loans and lines of credit	149		—		151		—
Total	$	7,255	$	29	$	7,292	$	60

There were no loans individually evaluated for impairment with a related allowance for loan loss as of June 30, 2015 or December 31, 2014.  Loans individually evaluated for impairment do not have an allocated allowance for loan loss because they are written down to fair value.

The table below presents the aging of loans and accrual status by class of loans:

(Dollars in thousands)	30 — 59 Days Past Due		60 — 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total Loans		Nonaccrual Loans		Loans More Than 90 Days Past Due and Still Accruing
June 30, 2015:
One- to four-family residential mortgages	$	618	$	287	$	1,805	$	2,710	$	1,062,504	$	1,065,214	$	5,082	$	—
Multi-family residential mortgages	—		—		—		—		9,814		9,814		—		—
Construction, commercial and other mortgages	—		—		—		—		17,086		17,086		—		—
Home equity loans and lines of credit	43		—		—		43		16,163		16,206		129		—
Loans on deposit accounts	—		—		—		—		269		269		—		—
Consumer and other	6		—		—		6		4,222		4,228		—		—
Total	$	667	$	287	$	1,805	$	2,759	$	1,110,058	$	1,112,817	$	5,211	$	—
December 31, 2014:
One- to four-family residential mortgages	$	1,040	$	736	$	593	$	2,369	$	919,624	$	921,993	$	4,153	$	—
Multi-family residential mortgages	—		—		—		—		8,897		8,897		—		—
Construction, commercial and other mortgages	—		—		—		—		18,399		18,399		—		—
Home equity loans and lines of credit	—		—		161		161		15,837		15,998		296		—
Loans on deposit accounts	—		—		—		—		440		440		—		—
Consumer and other	7		1		4		12		4,164		4,176		4		—
Total	$	1,047	$	737	$	758	$	2,542	$	967,361	$	969,903	$	4,453	$	—

The Company primarily uses the aging of loans and accrual status to monitor the credit quality of its loan portfolio.  When a mortgage loan becomes seriously delinquent (90 days or more contractually past due), it displays weaknesses that may result in a loss. As a loan becomes more delinquent, the likelihood of the borrower repaying the loan decreases and the loan becomes more collateral-dependent.  A mortgage loan becomes collateral-dependent when the proceeds for repayment can be expected to come only from the sale or operation of the collateral and not from borrower repayments.  Generally, appraisals are obtained after a loan becomes collateral-dependent or is five months delinquent.  The carrying value of collateral-dependent loans is adjusted to the fair value of the collateral less selling costs.  Any commercial real estate, commercial, construction or equity loan that has a loan balance in excess of a specified amount is also periodically reviewed to determine whether the loan exhibits any weaknesses and is performing in accordance with its contractual terms.

The Company had 18 nonaccrual loans with a book value of $5.2 million at June 30, 2015 and 18 nonaccrual loans with a book value of $4.5 million as of December 31, 2014.  The Company collected interest on nonaccrual loans of $105,000 and $135,000 during the six months ended June 30, 2015 and 2014, respectively, but due to regulatory requirements, the Company recorded the interest as a reduction of principal.  The Company would have recognized additional interest income of $151,000 and $96,000 during the six months ended June 30, 2015 and 2014, respectively, had the loans been accruing interest.  The Company did not have any loans more than 90 days past due and still accruing interest as of June 30, 2015 and December 31, 2014.

There were no loans modified in a troubled debt restructuring during the six months ended June 30, 2015 or 2014.  There were no new troubled debt restructurings within the past 12 months that subsequently defaulted.

The Company had 15 troubled debt restructurings totaling $3.5 million as of June 30, 2015 that were considered to be impaired.  This total included 14 one- to four-family residential mortgage loans totaling $3.4 million and one home equity loan for $129,000.  Five of the loans, totaling $1.2 million, are performing in accordance with their restructured terms and accruing interest at June 30, 2015.  Nine of the loans, totaling $2.1 million, are performing in accordance with their restructured terms but not accruing interest at June 30, 2015.  One of the loans, for $149,000, was more than 149 days delinquent and not accruing interest as of June 30, 2015.  The Company had 17 troubled debt restructurings totaling $4.6 million as of December 31, 2014 that were considered to be impaired.  This total included 16 one- to four-family residential mortgage loans totaling $4.4 million and one home equity loan for $135,000.  Six of the loans, totaling $2.0 million, were performing in accordance with their restructured terms and accruing interest at December 31, 2014.  Nine of the loans, totaling $2.2 million, were performing in accordance with their restructured terms but not accruing interest at December 31, 2014.  Two of the loans, totaling $343,000, were delinquent and not accruing interest at December 31, 2014.  Restructurings include deferrals of interest and/or principal payments and temporary or permanent reductions in interest rates due to the financial difficulties of the borrowers.  At June 30, 2015, we had no commitments to lend any additional funds to these borrowers.

The Company had $192,000 and $0 of real estate owned as of June 30, 2015 and December 31, 2014, respectively.  There were two one-to four-family residential mortgage loans totaling $499,000 in process of foreclosure as of June 30, 2015, and two one- to four-family residential mortgage loans totaling $367,000 in process of foreclosure as of June 30, 2014.

Nearly all of our real estate loans are collateralized by real estate located in the State of Hawaii.  Loan-to-value ratios on these real estate loans generally do not exceed 80% at the time of origination.

During the six months ended June 30, 2015 and 2014, the Company sold $28.6 million and $16.9 million, respectively, of mortgage loans held for sale and recognized gains of $239,000 and $165,000, respectively.  During the three months ended June 30, 2015 and 2014, the Company sold $15.3 million and $7.0 million, respectively, of mortgage loans held for sale and recognized gains of $110,000 and $86,000, respectively.  The Company had one loan held for sale for $455,000 at June 30, 2015 and six loans held for sale totaling $1.0 million at December 31, 2014.

The Company serviced loans for others of $55.9 million at June 30, 2015 and $60.5 million at December 31, 2014. Of these amounts, $2.8 million and $3.0 million relate to securitizations for which the Company continues to hold the related mortgage-backed securities at June 30, 2015 and December 31, 2014, respectively.  The amount of contractually specified servicing fees earned for the six-month periods ended June 30, 2015 and 2014 was $80,000 and $93,000, respectively.  The amount of contractually specified servicing fees earned for the three-month periods ended June 30, 2015 and 2014 was $39,000 and $46,000, respectively.  The fees are reported in service fees on loan and deposit accounts in the consolidated statements of income.

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Advances from the Federal Home Loan Bank

6 Months Ended

Jun. 30, 2015

Advances from the Federal Home Loan Bank

Advances from the Federal Home Loan Bank

(8)Advances from the Federal Home Loan Bank

Federal Home Loan Bank advances are secured by a blanket pledge on the Bank’s assets not otherwise pledged.  Our credit line with the FHLB Seattle was equal to 25% of Territorial Savings Bank’s total assets and as of December 31, 2014, we had the capacity to borrow an additional $399.0 million.  After the FHLB Seattle merged with the FHLB Des Moines, our credit line was raised to 35% of Territorial Savings Bank’s total assets and as of June 30, 2015, we had the capacity to borrow an additional $543.3 million.

Advances outstanding consisted of the following:

	June 30, 2015			December 31, 2014
			Weighted			Weighted
			Average			Average
(Dollars in thousands)	Amount		Rate	Amount		Rate
Due within one year	$	10,000	0.29%	$	10,000	2.06%
Due over 2 years to 3 years	15,000		1.26	—		—
Due over 3 years to 4 years	22,000		1.66	5,000		1.20
Due over 4 years to 5 years	10,000		1.66	—		—
Total	$	57,000	1.31%	$	15,000	1.77%

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Share-Based Compensation (Details 2) - Stock Options - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2013
Stock option activity
Balance at beginning of year (in shares)			832,954	832,954	832,954
Granted (in shares)	0	0	0	0
Balance at end of year (in shares)	832,954	832,954	832,954	832,954	832,954	832,954
Options vested and exercisable (in shares)	555,097		555,097
Weighted Average Exercise Price
Balance at beginning of year (in dollars per share)			$ 17.38	$ 17.38	$ 17.38
Balance at end of year (in dollars per share)	$ 17.38	$ 17.38	17.38	$ 17.38	$ 17.38	$ 17.38
Options vested and exercisable (in dollars per share)	$ 17.38		$ 17.38
Remaining Contractual Life
SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2			5 years 2 months 5 days	6 years 2 months 5 days	5 years 8 months 5 days	6 years 8 months 5 days
SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2			5 years 2 months 5 days	6 years 2 months 5 days	5 years 8 months 5 days	6 years 8 months 5 days
Options vested and exercisable			5 years 2 months 5 days
Aggregate Intrinsic Value
Beginning of year			$ 3,471	$ 4,845	$ 4,845
End of year	$ 5,728	$ 2,913	5,728	$ 2,913	$ 3,471	$ 4,845
Options vested and exercisable	$ 3,818		$ 3,818

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Share-Based Compensation (Details 4) - Jun. 30, 2015 - Restricted Stock - USD ($) $ / shares in Units, $ in Millions	Total
Restricted Stock Awards
Non-vested at beginning of year (in shares)	226,733
Non-vested at end of year (in shares)	226,733
Weighted Average Grant Date Fair Value
Non-vested at beginning of year (in dollars per share)	$ 17.39
Non-vested at end of year (in dollars per share)	$ 17.39
Unrecognized compensation
Unrecognized compensation costs	$ 2.3
Minimum
Unrecognized compensation
Unrecognized compensation costs, period of recognition	5 years
Vesting period	5 years
Maximum
Unrecognized compensation
Unrecognized compensation costs, period of recognition	6 years
Vesting period	6 years

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Share-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-Based Compensation
Compensation expense	$ 667	$ 667	$ 1,328	$ 1,327
Income tax benefit	$ 268	$ 299	$ 533	$ 612
Number of shares authorized	1,712,637		1,712,637
2010 Equity Incentive Plan | Minimum
Share-Based Compensation
Period for recognition of award cost			5 years
Vesting period			5 years
2010 Equity Incentive Plan | Maximum
Share-Based Compensation
Period for recognition of award cost			6 years
Vesting period			6 years

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2015

Share-Based Compensation

Schedule of compensation expense and related tax benefit for all share-based awards

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In thousands)	2015		2014		2015		2014
Compensation expense	$	667	$	667	$	1,328	$	1,327
Income tax benefit	268		299		533		612

Schedule of stock option activity

	Options	Weighted Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2014	832,954	$	17.38	5.68	$	3,471
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Options outstanding at June 30, 2015	832,954	$	17.38	5.18	$	5,728
Options outstanding at December 31, 2013	832,954	$	17.38	6.68	$	4,845
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Options outstanding at June 30, 2014	832,954	$	17.38	6.18	$	2,913
Options vested and exercisable at June 30, 2015	555,097	$	17.38	5.18	$	3,818

Schedule of restricted stock award activity

	Restricted Stock Awards	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2014	226,733	$	17.39
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at June 30, 2015	226,733	$	17.39
Nonvested at December 31, 2013	340,065	$	17.39
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at June 30, 2014	340,065	$	17.39

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Loans Receivable and Allowance for Loan Losses (Details 5) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due
Total Past Due	$ 2,759	$ 2,542
Loans Not Past Due	1,110,058	967,361
Total ending loan balance	1,112,817	969,903
Nonaccrual Loans	5,211	4,453
One- to four-family residential
Financing Receivable, Recorded Investment, Past Due
Total Past Due	2,710	2,369
Loans Not Past Due	1,062,504	919,624
Total ending loan balance	1,065,214	921,993
Nonaccrual Loans	5,082	4,153
Multi-family residential
Financing Receivable, Recorded Investment, Past Due
Loans Not Past Due	9,814	8,897
Total ending loan balance	9,814	8,897
Construction, Commercial and Other Mortgage Loans
Financing Receivable, Recorded Investment, Past Due
Loans Not Past Due	17,086	18,399
Total ending loan balance	17,086	18,399
Home Equity Loans and Lines of Credit
Financing Receivable, Recorded Investment, Past Due
Total Past Due	43	161
Loans Not Past Due	16,163	15,837
Total ending loan balance	16,206	15,998
Nonaccrual Loans	129	296
Loans on deposit accounts
Financing Receivable, Recorded Investment, Past Due
Loans Not Past Due	269	440
Total ending loan balance	269	440
Consumer and other loans
Financing Receivable, Recorded Investment, Past Due
Total Past Due	6	12
Loans Not Past Due	4,222	4,164
Total ending loan balance	4,228	4,176
Nonaccrual Loans		4
30 - 59 Days Past Due
Financing Receivable, Recorded Investment, Past Due
Total Past Due	667	1,047
30 - 59 Days Past Due | One- to four-family residential
Financing Receivable, Recorded Investment, Past Due
Total Past Due	618	1,040
30 - 59 Days Past Due | Home Equity Loans and Lines of Credit
Financing Receivable, Recorded Investment, Past Due
Total Past Due	43
30 - 59 Days Past Due | Consumer and other loans
Financing Receivable, Recorded Investment, Past Due
Total Past Due	6	7
60 - 89 Days Past Due
Financing Receivable, Recorded Investment, Past Due
Total Past Due	287	737
60 - 89 Days Past Due | One- to four-family residential
Financing Receivable, Recorded Investment, Past Due
Total Past Due	287	736
60 - 89 Days Past Due | Consumer and other loans
Financing Receivable, Recorded Investment, Past Due
Total Past Due		1
90 Days or Greater Past Due
Financing Receivable, Recorded Investment, Past Due
Total Past Due	1,805	758
90 Days or Greater Past Due | One- to four-family residential
Financing Receivable, Recorded Investment, Past Due
Total Past Due	$ 1,805	593
90 Days or Greater Past Due | Home Equity Loans and Lines of Credit
Financing Receivable, Recorded Investment, Past Due
Total Past Due		161
90 Days or Greater Past Due | Consumer and other loans
Financing Receivable, Recorded Investment, Past Due
Total Past Due		$ 4

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Share-Based Compensation

6 Months Ended

Jun. 30, 2015

2010 Equity Incentive Plan

Share-Based Compensation

Share-Based Compensation

(13)Share-Based Compensation

On August 19, 2010, Territorial Bancorp Inc. adopted the 2010 Equity Incentive Plan, which provides for awards of stock options and restricted stock to key officers and outside directors.  In accordance with the Compensation — Stock Compensation topic of the FASB ASC, the cost of the 2010 Equity Incentive Plan is based on the fair value of the awards on the grant date.  The fair value of restricted stock is based on the closing price of the Company’s stock on the grant date.  The fair value of stock options is estimated using a Black-Scholes option pricing model using assumptions for dividend yield, stock price volatility, risk-free interest rate and option term.  These assumptions are based on our judgments regarding future events, are subjective in nature, and cannot be determined with precision.  The cost of the awards will be recognized on a straight-line basis over the five- to six-year vesting period during which participants are required to provide services in exchange for the awards.

The Company recognized compensation expense, measured as the fair value of the share-based award on the date of grant, on a straight-line basis over the vesting period. Share-based compensation is recorded in the statement of income as a component of salaries and employee benefits with a corresponding increase in shareholders’ equity. The table below presents information on compensation expense and the related tax benefit for all share-based awards:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In thousands)	2015		2014		2015		2014
Compensation expense	$	667	$	667	$	1,328	$	1,327
Income tax benefit	268		299		533		612

Shares of our common stock issued under the 2010 Equity Incentive Plan shall be authorized but unissued shares.  The maximum number of shares that will be awarded under the plan will be 1,712,637 shares.

Stock Options

The table below presents the stock option activity for the six months ended June 30, 2015 and 2014:

	Options	Weighted Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2014	832,954	$	17.38	5.68	$	3,471
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Options outstanding at June 30, 2015	832,954	$	17.38	5.18	$	5,728
Options outstanding at December 31, 2013	832,954	$	17.38	6.68	$	4,845
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Options outstanding at June 30, 2014	832,954	$	17.38	6.18	$	2,913
Options vested and exercisable at June 30, 2015	555,097	$	17.38	5.18	$	3,818

There were no stock options exercised or vested during the three and six months ended June 30, 2015 and 2014.

As of June 30, 2015, the Company had $831,000 of unrecognized compensation costs related to the stock options. The cost of the stock options is being amortized over the five- to six-year vesting period.

There were no options granted in the three or six months ended June 30, 2015 and 2014.

Restricted Stock Awards

Restricted stock awards are accounted for as fixed grants using the fair value of the Company’s stock at the time of grant.  Unvested restricted stock awards may not be disposed of or transferred during the vesting period.  Restricted stock awards carry with them the right to receive dividends.

The table below presents the restricted stock award activity:

	Restricted Stock Awards	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2014	226,733	$	17.39
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at June 30, 2015	226,733	$	17.39
Nonvested at December 31, 2013	340,065	$	17.39
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at June 30, 2014	340,065	$	17.39

As of June 30, 2015, the Company had $2.3 million of unrecognized compensation costs related to restricted stock awards.  The cost of the restricted stock awards is being amortized over the five- or six-year vesting period.

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Cash and Cash Equivalents (Tables)

6 Months Ended

Jun. 30, 2015

Cash and Cash Equivalents

Schedule of balances cash and cash equivalents

	June 30,		December 31,
(Dollars in thousands)	2015		2014
Cash and due from banks	$	11,020	$	10,803
Interest-earning deposits in other banks	25,230		64,257
Cash and cash equivalents	$	36,250	$	75,060

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Loans Receivable and Allowance for Loan Losses (Details 3) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Allowance for loan losses:
Collectively evaluated for impairment	$ 1,994		$ 1,691
Total ending allowance balance	1,994	$ 1,872	1,691	$ 1,510	$ 1,485	$ 1,486
Loans:
Individually evaluated for impairment	6,423		6,458
Collectively evaluated for impairment	1,106,394		963,445
Total ending loan balance	1,112,817		969,903
Residential Mortgage
Allowance for loan losses:
Collectively evaluated for impairment	1,243		413
Total ending allowance balance	1,243	1,111	413	344	434	376
Loans:
Individually evaluated for impairment	6,294		6,158
Collectively evaluated for impairment	1,068,734		924,732
Total ending loan balance	1,075,028		930,890
Construction, Commercial and Other Mortgage Loans
Allowance for loan losses:
Collectively evaluated for impairment	407		977
Total ending allowance balance	407	543	977	932	823	799
Loans:
Collectively evaluated for impairment	17,086		18,399
Total ending loan balance	17,086		18,399
Home Equity Loans and Lines of Credit
Allowance for loan losses:
Collectively evaluated for impairment	3		5
Total ending allowance balance	3	4	5	7	7	10
Loans:
Individually evaluated for impairment	129		296
Collectively evaluated for impairment	16,077		15,702
Total ending loan balance	16,206		15,998
Consumer and Other
Allowance for loan losses:
Collectively evaluated for impairment	101		263
Total ending allowance balance	101	149	263	159	153	229
Loans:
Individually evaluated for impairment			4
Collectively evaluated for impairment	4,497		4,612
Total ending loan balance	4,497		4,616
Unallocated
Allowance for loan losses:
Collectively evaluated for impairment	240		33
Total ending allowance balance	$ 240	$ 65	$ 33	$ 68	$ 68	$ 72

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Investment Securities (Details 2) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Held to maturity, Amortized Cost
Due within 5 years	$ 41
Due after 5 years through 10 years	8
Due after 10 years	525,659
Total	525,708	$ 572,922
Held to maturity, Estimated Fair Value
Due within 5 years	43
Due after 5 years through 10 years	9
Due after 10 years	530,084
Estimated Fair Value	$ 530,136	$ 586,710

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Consolidated Statements of Comprehensive Income
Net income	$ 3,837	$ 3,719	$ 7,363	$ 7,181
Change in unfunded pension liability	(64)		(64)
Change in unrealized loss on securities	7	1	16	4
Change in noncredit related loss on trust preferred securities	77		108	72
Other comprehensive income, net of tax	20	1	60	76
Comprehensive income	$ 3,857	$ 3,720	$ 7,423	$ 7,257

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Organization

6 Months Ended

Jun. 30, 2015

Organization

Organization

(2)Organization

On November 4, 2008, the Board of Directors of Territorial Mutual Holding Company (MHC) approved a plan of conversion and reorganization under which the MHC would convert from a mutual holding company to a stock holding company.  The conversion to a stock holding company was approved by the depositors and borrowers of Territorial Savings Bank and the Office of Thrift Supervision (OTS) and included the filing of a registration statement with the U.S. Securities and Exchange Commission.  Upon the completion of the conversion and reorganization on July 10, 2009, Territorial Mutual Holding Company and Territorial Savings Group, Inc. ceased to exist as separate legal entities and Territorial Bancorp Inc. became the holding company for Territorial Savings Bank.

Upon completion of the conversion and reorganization, a special “liquidation account” was established in an amount equal to the total equity of Territorial Mutual Holding Company as of December 31, 2008.  The liquidation account is to provide eligible account holders and supplemental eligible account holders who maintain their deposit accounts with Territorial Savings Bank after the conversion with a liquidation interest in the unlikely event of the complete liquidation of Territorial Savings Bank after the conversion.  The balance of the liquidation account at December 31, 2014 was $15.2 million.

On June 25, 2014, Territorial Savings Bank converted from a federal savings bank to a Hawaii state-chartered savings bank.  On July 10, 2014, Territorial Savings Bank became a member of the Federal Reserve System.

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Securities Sold Under Agreements to Repurchase (Details 2) - Jun. 30, 2015 - Maturing Over 90 days - USD ($) $ in Thousands	Total
Securities sold under agreements to repurchase
Carrying Value of Securities	$ 73,743
Fair Value of Securities	73,780
Repurchase Liability	60,000
Amount at Risk	$ 13,780
Weighted Average Months to Maturity	35 months

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Other Comprehensive Loss (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Accumulated other comprehensive loss
Pretax amount	$ (34)	$ (3)	$ (100)	$ (126)
Tax	14	2	40	50
Net current period other comprehensive income	(20)	(1)	(60)	(76)
Unfunded Pension Liability
Accumulated other comprehensive loss
Pretax amount	106		106
Tax	(42)		(42)
Net current period other comprehensive income	64		64
Noncredit Related Loss | Trust preferred securities
Accumulated other comprehensive loss
Pretax amount	(128)	(1)	(179)	(119)
Tax	51	1	71	47
Net current period other comprehensive income	(77)		(108)	(72)
Unrealized Loss on Securities
Accumulated other comprehensive loss
Pretax amount	(12)	(2)	(27)	(7)
Tax	5	1	11	3
Net current period other comprehensive income	$ (7)	$ (1)	$ (16)	$ (4)

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2015

Investment Securities

Schedule of amortized cost and fair values of investment securities

	Amortized		Gross Unrealized					Estimated
(Dollars in thousands)	Cost		Gains		Losses			Fair Value
June 30, 2015:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	524,840	$	12,061	$	(7,633	)	$	529,268
Trust preferred securities	868		—		—			868
Total	$	525,708	$	12,061	$	(7,633	)	$	530,136
December 31, 2014:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	572,232	$	18,078	$	(4,290	)	$	586,020
Trust preferred securities	690		—		—			690
Total	$	572,922	$	18,078	$	(4,290	)	$	586,710

Schedule of carrying and estimated fair value of investment securities by contractual maturity

	Amortized		Estimated
(Dollars in thousands)	Cost		Fair Value
Held to maturity:
Due within 5 years	$	41	$	43
Due after 5 years through 10 years	8		9
Due after 10 years	525,659		530,084
Total	$	525,708	$	530,136

Schedule of realized gains and losses and proceeds from sales of securities available for sale, held to maturity and trading

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2015		2014		2015		2014
Proceeds from sales	$	2,503	$	3,475	$	5,083	$	12,270
Gross gains	240		309		476		655
Gross losses	—		—		—		—

Summary of investment securities which were in unrealized loss position

	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized		Number of			Unrealized
Description of Securities	Fair Value		Losses		Fair Value		Losses		Securities	Fair Value		Losses
(Dollars in thousands)
June 30, 2015:
Mortgage-backed securities	$	166,679	$	5,022	$	54,835	$	2,611	45	$	221,514	$	7,633
December 31, 2014:
Mortgage-backed securities	$	12,717	$	65	$	183,349	$	4,225	37	$	196,066	$	4,290

Cumulative roll forward of credit losses recognized in earnings for debt securities held and not intended to be sold

(Dollars in thousands)	2015			2014
Balance at January 1,	$	5,885		$	5,885
Credit losses on debt securities for which other-than-temporary impairment was not previously recognized	—			—
Credit losses on debt securities which were sold	(3,482		)	—
Balance at June 30,	$	2,403		$	5,885

Comprehensive loss

Schedule of components of accumulated other comprehensive loss, net of taxes

(Dollars in thousands)	Unfunded Pension Liability		Noncredit Related Loss on Trust Preferred Securities			Unrealized Loss on Securities			Total
Three months ended June 30, 2015
Balances at beginning of period	$	5,032	$	253		$	63		$	5,348
Other comprehensive income, net of taxes	64		(77		)	(7		)	(20		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(77		)	(7		)	(20		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Three months ended June 30, 2014
Balances at beginning of period	$	3,338	$	304		$	70		$	3,712
Other comprehensive income, net of taxes	—		—			(1		)	(1		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		—			(1		)	(1		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711
Six months ended June 30, 2015
Balances at beginning of period	$	5,032	$	284		$	72		$	5,388
Other comprehensive income, net of taxes	64		(108		)	(16		)	(60		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	64		(108		)	(16		)	(60		)
Balances at end of period	$	5,096	$	176		$	56		$	5,328
Six months ended June 30, 2014
Balances at beginning of period	$	3,338	$	376		$	73		$	3,787
Other comprehensive income, net of taxes	—		(72		)	(4		)	(76		)
Amounts reclassified from accumulated other comprehensive loss	—		—			—			—
Net current period other comprehensive income	—		(72		)	(4		)	(76		)
Balances at end of period	$	3,338	$	304		$	69		$	3,711

Noncredit Related Loss

Comprehensive loss

Schedule of components of accumulated other comprehensive loss, net of taxes

	June 30,
(Dollars in thousands)	2015		2014
Noncredit losses on other-than-temporarily impaired securities, net of taxes	$	176	$	304

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Fair Value of Financial Instruments (Details 5) - Fair Value, Measurements, Nonrecurring - Level 3 $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($) $ / loan
Impaired loans - non-collateral dependent
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Fair Value		$ 327
Trust preferred securities
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Fair Value	$ 868	690
Mortgage servicing assets
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Fair Value		$ 505
Discounted cash flow model | Impaired loans - non-collateral dependent
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Discount rate (as a percent)		6.10%
Discounted cash flow model | Trust preferred securities | LIBOR
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Discount rate variable rate basis	Three-month LIBOR	Three-month LIBOR
Discount rate, margin added to variable rate (as a percent)	20.00%	20.00%
Discounted cash flow model | Mortgage servicing assets
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Discount rate (as a percent)		10.50%
Annual cost to service (in dollars per loan) | $ / loan		55
Discounted cash flow model | Mortgage servicing assets | Minimum
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Prepayment speed (PSA) (as percent)		164.80%
Discounted cash flow model | Mortgage servicing assets | Maximum
Significant Unobservable Inputs for Level Three Nonrecurring Fair Value Measurements
Prepayment speed (PSA) (as percent)		262.50%

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Label	Element	Value
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Credit Losses on Debt Securities Held	us-gaap_OtherThanTemporaryImpairmentCreditLossesRecognizedInEarningsCreditLossesOnDebtSecuritiesHeld	$ 5,885
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Credit Losses on Debt Securities Held	us-gaap_OtherThanTemporaryImpairmentCreditLossesRecognizedInEarningsCreditLossesOnDebtSecuritiesHeld	$ 5,885
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsNonvestedWeightedAverageGrantDateFairValue	$ 17.39
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsNonvestedWeightedAverageGrantDateFairValue	$ 17.39
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsNonvestedNumber	340,065
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsNonvestedNumber	340,065

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Organization (Details) $ in Millions	Dec. 31, 2014 USD ($)
Plan of Conversion and Reorganization and Registration of Shares
Plan of conversion and reorganization
Liquidation account balance	$ 15.2

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Employee Stock Ownership Plan

6 Months Ended

Jun. 30, 2015

Employee Stock Ownership Plan

Employee Stock Ownership Plan

Employee Stock Ownership Plan

(12)Employee Stock Ownership Plan

Effective January 1, 2009, Territorial Savings Bank adopted an Employee Stock Ownership Plan (ESOP) for eligible employees.  The ESOP borrowed $9.8 million from the Company and used those funds to acquire 978,650 shares, or 8%, of the total number of shares issued by the Company in its initial public offering.  The shares were acquired at a price of $10.00 per share.

The loan is secured by the shares purchased with the loan proceeds and will be repaid by the ESOP over the 20-year term of the loan with funds from Territorial Savings Bank’s contributions to the ESOP and dividends payable on the shares.  The interest rate on the ESOP loan is an adjustable rate equal to the prime rate, as published in The Wall Street Journal.  The interest rate adjusts annually and will be the prime rate on the first business day of the calendar year.

Shares purchased by the ESOP are held by a trustee in an unallocated suspense account, and shares are released annually from the suspense account on a pro-rata basis as principal and interest payments are made by the ESOP to the Company.  The trustee allocates the shares released among participants on the basis of each participant’s proportional share of compensation relative to all participants.  As shares are committed to be released from the suspense account, Territorial Savings Bank reports compensation expense based on the average fair value of shares released with a corresponding credit to stockholders’ equity.  The shares committed to be released are considered outstanding for earnings per share computations.  Compensation expense recognized for the three months ended June 30, 2015 and 2014 amounted to $241,000 and $217,000, respectively.  Compensation expense recognized for the six months ended June 30, 2015 and 2014 amounted to $463,000 and $458,000, respectively.

Shares held by the ESOP trust were as follows:

	June 30,		December 31,
	2015		2014
Allocated shares	303,036		283,381
Unearned shares	660,591		685,057
Total ESOP shares	963,627		968,438
Fair value of unearned shares, in thousands	$	16,026	$	14,763

The ESOP restoration plan is a nonqualified plan that provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the ESOP’s benefit formula.  The supplemental cash payments consist of payments representing shares that cannot be allocated to the participants under the ESOP due to IRS limitations imposed on tax-qualified plans.  We accrue for these benefits over the period during which employees provide services to earn these benefits.  For the three months ended June 30, 2015 and 2014, we accrued $40,000 and $19,000, respectively, for the ESOP restoration plan.  For the six months ended June 30, 2015 and 2014, we accrued $104,000 and $93,000, respectively, for the ESOP restoration plan.