425: Hope Bancorp to Acquire Territorial Bancorp in $78.6 Million Stock Deal

Hope Bancorp and Territorial Bancorp have announced a definitive merger agreement, creating the largest regional bank catering to multi-ethnic customers across the continental United States and the Hawaiian Islands.

Summary

• Hope Bancorp and Territorial Bancorp have entered into a definitive merger agreement.
• The deal will create the largest regional bank catering to multi-ethnic customers across the continental United States and the Hawaiian Islands.
• As of December 31, 2023, Territorial had total assets of $2.24 billion, total loans of $1.31 billion and total deposits of $1.64 billion.
• Hope Bancorp intends to preserve the Territorial Savings Bank brand name, culture and commitment to local communities.
• Territorial shareholders will receive a fixed exchange ratio of 0.8048 shares of Hope Bancorp common stock for each share of Territorial common stock they own.
• The transaction is valued at approximately $78.6 million.
• Hope Bancorp shareholders are expected to own approximately 94.4% of the combined entity, and Territorial shareholders will own approximately 5.6%.
• The transaction is expected to close by year-end 2024.
• The proposed transaction is expected to be immediately accretive to Hope Bancorp's earnings.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the merger, highlighting strategic benefits and expected accretion. However, it also acknowledges potential risks and uncertainties associated with the integration process.

Positives

• The merger adds a stable, low-cost core deposit base to the combined company.
• It accelerates diversification of the combined company's loan mix through the addition of a residential mortgage portfolio with excellent asset quality.
• There is an opportunity to grow Territorial's market share and enhance the customer experience.
• The combined footprint expands to include the attractive Hawaii market with large Asian American and Pacific Islander communities.
• The combined company will have strong levels of capital to support growth.
• The proposed transaction is expected to be immediately accretive to Hope Bancorp's earnings.

Risks

• Difficulties and delays in integrating Hope Bancorp and Territorial Bancorp and achieving anticipated synergies, cost savings and other benefits from the transaction.
• Higher than anticipated transaction costs.
• Deposit attrition, operating costs, customer loss and business disruption following the merger may be greater than expected.
• Required governmental approvals of the merger may not be obtained on its proposed terms and schedule, or without regulatory constraints that may limit growth.
• Possible further deterioration in economic conditions in Hope Bancorp's or Territorial Bancorp's areas of operation or elsewhere.
• Interest rate risk associated with volatile interest rates and related asset-liability matching risk.
• Liquidity risks.
• Risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates.
• The failure of or changes to assumptions and estimates underlying Hope Bancorp's or Territorial Bancorp's allowances for credit losses.
• Potential increases in deposit insurance assessments and regulatory risks associated with current and future regulations.
• The outcome of any legal proceedings that may be instituted against Hope Bancorp or Territorial Bancorp.
• The risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of either or both parties to the proposed transaction.
• Diversion of management's attention from ongoing business operations and opportunities.

Future Outlook

The proposed transaction is expected to be immediately accretive to Hope Bancorp's earnings. The transaction is expected to close by year-end 2024, subject to regulatory approvals, the approval of Territorial shareholders, and the satisfaction of other customary closing conditions.

Management Comments

• Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc., stated, 'We believe this combination will strengthen our position as one of the leading Asian American banks in the country by expanding our footprint to the Hawaiian Islands.'
• Allan S. Kitagawa, Chairman, President and Chief Executive Officer of Territorial Bancorp Inc., said, 'Our merger with Hope Bancorp will bring together two companies that share long-standing commitments to our customers and the communities where we live and work.'

Industry Context

This merger reflects a trend of consolidation in the banking industry, particularly among regional banks seeking to expand their geographic footprint and diversify their customer base. The focus on serving multi-ethnic communities highlights a growing recognition of the importance of catering to diverse demographics.

Comparison to Industry Standards

• The merger aims to create a super-regional bank similar to East West Bancorp, which also focuses on serving Asian American communities.
• The deal's valuation and accretion estimates will likely be compared to recent bank mergers, such as the acquisition of Pacific City Financial Corporation by Hanmi Financial Corporation.
• The success of the integration will be benchmarked against other bank mergers, considering factors like cost savings, deposit retention, and customer satisfaction.

Stakeholder Impact

• Territorial shareholders will receive Hope Bancorp stock in exchange for their shares.
• Customers of Territorial Savings Bank are expected to experience a seamless transition and benefit from a wider range of products and services.
• Employees of both companies may experience changes as a result of the integration.
• The combined company aims to strengthen its commitment to the communities it serves.

Next Steps

• Hope Bancorp will file a Registration Statement on Form S-4 with the SEC, including a Proxy Statement of Territorial Bancorp Inc.
• Territorial Bancorp shareholders will vote on the proposed merger.
• The transaction is subject to regulatory approvals and other customary closing conditions.
• The companies will work towards closing the transaction by year-end 2024.

Key Dates