Territorial Bancorp Inc.’s net income fell by more than half in the first quarter partly due to a nonrecurring item, and deposits and loans were virtually flat, as the company dealt with higher interest rates and customers moving their money into higher-yielding certificates of deposit.

The state’s fifth- largest bank reported Thursday that earnings declined 50.8% to $2.3 million, or 26 cents a share, to fall short of analysts’ consensus estimate of 30 cents. Territorial earned $4.7 million, or 52 cents a share, in the year-earlier quarter, which included $1.03 million of nontaxable proceeds it received on bank-owned life insurance.

Territorial’s results last quarter also included $100,000 it released from its loan-loss reserve, compared with $168,000 it added to its income in the year-earlier period.

“While the current interest rate cycle and recent market events have made it very challenging for all banks, we expect our strong capital, solid asset quality and liquidity to sustain us through this cycle,” Territorial Chairman and CEO Allan Kitagawa said in a statement. “We remain well-positioned to serve our community in the future.”

Deposits slipped 0.8% to $1.66 billion from the year-earlier quarter and fell 3.2% from the fourth quarter. The drop-off in deposits last quarter from the previous three months included a planned decrease of $32.7 million in public deposits, which are from state and local city and county entities. The remaining $21.5 million decrease in retail deposits from the preceding three months occurred as customers sought higher interest rates on their funds than what the company pays.

Loans receivable dipped 0.3% to $1.29 billion from the year-earlier quarter and slipped a similar 0.3% from the fourth quarter. The decrease in loans receivable occurred as loan repayments and sales exceeded new loan originations.

The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, fell 12.4% to $12.1 million from the year-earlier quarter. Its net interest margin fell 42 basis points to 2.30% from 2.72% a year earlier.

Noninterest income, which includes service charges and fees, declined 64.4% to $589,000 primarily due to the proceeds from the bank-owned life insurance in the year-earlier quarter.

Territorial said it will keep its quarterly dividend at 23 cents a share, payable May 25 to stockholders of record as of May 11.

Territorial’s stock closed down 24 cents at $16.90 before the earnings were announced.

FIRST-QUARTER NET

$2.3 million

YEAR-EARLIER NET

$4.7 million