If you have a bunch of standard output in the terminology window and then make terminology smaller then it will truncate the text on the screen to the size of the window - both horizontally and vertically (reprinting the prompt on whatever the new bottom line is), even if you resize back to the original size.
It does preserve the size of the saved scrollback lines (even if they are on the window at the time of the resizing), it is just the lines that pertain to the current screen that get truncated.