DEFA14A: Territorial Bancorp Reaffirms Support for Hope Bancorp Merger, Dismisses Blue Hill Advisors' Proposal

Territorial Bancorp's Board of Directors has reaffirmed its recommendation that shareholders vote in favor of the merger with Hope Bancorp, dismissing a preliminary indication of interest from Blue Hill Advisors.

Summary

• Territorial Bancorp's Board of Directors has reaffirmed its support for the merger with Hope Bancorp.
• The decision comes after reviewing additional information from Blue Hill Advisors regarding a preliminary indication of interest to acquire Territorial.
• The Board, with the assistance of legal and financial advisors, determined that Blue Hill's proposal was not reasonably likely to lead to a superior proposal.
• The Board cited concerns about the conditional nature of Blue Hill's financing, regulatory approval hurdles, transaction timing, and overall execution risk.
• The Board also noted Blue Hill's failure to address key management and director identification, limitations on termination fees, and substantiation of projected financial results.
• The Board continues to recommend that shareholders vote FOR the Hope Bancorp merger at the Special Meeting on November 6, 2024.
• Hope Bancorp filed a Registration Statement on Form S-4, containing the Proxy Prospectus, which has been mailed or otherwise delivered to Territorials stockholders on or about August 29, 2024, as supplemented September 12, 2024.

Sentiment

Score: 7

Explanation: The document conveys a confident tone regarding the Hope Bancorp merger, but also acknowledges potential risks. The rejection of Blue Hill's offer adds a slightly negative element, but the overall sentiment is moderately positive due to the reaffirmed commitment to the Hope Bancorp deal.

Positives

• The Board views the Hope Bancorp merger as a strategic move that will benefit shareholders.
• Hope Bancorp is well-known by bank regulators, and its approval process is well underway.
• The all-stock nature of the Hope Bancorp merger is seen as beneficial compared to a potential cash-out transaction with Blue Hill.

Negatives

• The Board has concerns about the conditional nature of the financing of the transaction by the Blue Hill investors.
• Blue Hill failed to address in a reasoned manner how the Blue Hill investor group would overcome the likely regulatory approval hurdles.
• Blue Hill failed to realistically address transaction timing considerations, particularly including timing related to the application and regulatory approval process, in contrast to the expected timing of the Hope Bancorp merger approvals and expected timing of the closing of the Hope Bancorp merger.

Risks

• The closing of the proposed transaction is subject to regulatory approvals, the approval of Territorial Bancorp stockholders, and other customary closing conditions.
• 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, including difficulties in maintaining relationships with employees and customers, 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.

Future Outlook

The document discusses the proposed merger with Hope Bancorp and the Board's recommendation for shareholders to vote in favor of it. It also mentions potential risks and uncertainties associated with the transaction.

Management Comments

• The Companys Board of Directors has reaffirmed its recommendation that Territorial shareholders vote FOR the merger with Hope Bancorp, Inc.

Industry Context

This announcement reflects ongoing consolidation trends in the banking industry, where smaller institutions are merging with larger ones to achieve economies of scale and improve competitiveness. The rejection of Blue Hill's offer highlights the importance of regulatory considerations and financial certainty in merger decisions.

Comparison to Industry Standards

• The decision-making process of Territorial's board, involving legal and financial advisors, aligns with industry best practices for evaluating merger proposals.
• The concerns raised about Blue Hill's financing and regulatory approval prospects are typical due diligence considerations in bank mergers, similar to those assessed in transactions involving institutions like PacWest Bancorp and Banc of California.
• The emphasis on shareholder value and the long-term benefits of the Hope Bancorp merger mirrors the rationale behind other recent bank mergers, such as the combination of Umpqua Holdings and Columbia Banking System.

Stakeholder Impact

• Shareholders are urged to vote FOR the Hope Bancorp merger.
• Employees of both Territorial Bancorp and Hope Bancorp may be affected by the integration process following the merger.
• Customers of Territorial Savings Bank will become customers of the combined entity if the merger is completed.

Next Steps

• Shareholders will vote on the proposed merger with Hope Bancorp at the Special Meeting on November 6, 2024.
• Regulatory approvals for the Hope Bancorp merger will continue to be processed.

Key Dates

Keywords

merger, Hope Bancorp, Territorial Bancorp, Blue Hill Advisors, shareholders, acquisition, regulatory approval