DEFA14A: Territorial Bancorp Responds to Blue Hill's Acquisition Proposal, Reaffirms Support for Hope Bancorp Merger

Territorial Bancorp criticizes Blue Hill Advisors' acquisition proposal, citing a lack of financial backing and regulatory understanding, while reiterating its recommendation for shareholders to approve the merger with Hope Bancorp.

Summary

• Territorial Bancorp has issued a statement addressing concerns regarding Blue Hill Advisors' preliminary indication of interest to acquire the company.
• Territorial questions Blue Hill's ability to finance the acquisition and obtain necessary regulatory approvals.
• The company highlights Blue Hill's failure to provide proof of financing or disclose the identity of its investors and proposed management team.
• Territorial emphasizes the risks associated with remaining a standalone entity, including operating at a loss, flat loan growth, and declining revenues.
• The Territorial Board continues to unanimously recommend that Territorial shareholders vote FOR the merger with Hope Bancorp and all related proposals.
• The merger with Hope Bancorp is structured as a 100% tax-free, stock-for-stock transaction, with Territorial shareholders receiving 0.8048 shares of Hope Bancorp common stock for each Territorial share.
• This represents an approximately 25% premium to Territorial's closing stock price prior to the merger announcement.
• Territorial shareholders will also realize a 1000% increase in their dividend.
• The companies expect to close the transaction by the end of 2024.
• A special meeting is scheduled for November 6, 2024, for shareholders to vote on the Hope Bancorp merger.

Sentiment

Score: 7

Explanation: The document conveys a positive outlook regarding the proposed merger with Hope Bancorp, emphasizing the benefits for shareholders and stakeholders. However, it also acknowledges the challenges faced by Territorial as a standalone entity and the risks associated with the merger process, resulting in a moderately positive sentiment score.

Positives

• The proposed merger with Hope Bancorp offers a 25% premium to Territorial's stock price prior to the merger announcement.
• Territorial shareholders are expected to experience a 1000% increase in their dividend upon completion of the Hope Bancorp merger.
• The merger is structured as a 100% tax-free, stock-for-stock transaction.
• The combined entity is expected to be a larger, more diversified, and more resilient business.
• Territorial will continue to operate under its name, with local teams leading branches and operations.

Negatives

• Territorial Bancorp is currently operating at a loss.
• The company faces challenges including flat loan growth and declining revenues.
• Blue Hill's acquisition proposal is considered non-credible due to a lack of financing and regulatory understanding.
• Territorial shareholders will not immediately receive any payment for their shares while any transaction with Blue Hill is sitting in regulatory limbo.

Risks

• The closing of the proposed transaction is subject to regulatory approvals and the approval of Territorial Bancorp stockholders.
• Difficulties and delays in integrating Hope Bancorp and Territorial Bancorp could hinder the achievement of anticipated synergies.
• Higher than anticipated transaction costs could negatively impact the financial benefits of the merger.
• Deposit attrition, operating costs, customer loss, and business disruption following the merger could 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 could impact performance.
• Interest rate risk associated with volatile interest rates and related asset-liability matching risk could affect profitability.
• Liquidity risks and the risk of significant non-earning assets could pose challenges.
• The outcome of any legal proceedings that may be instituted against Hope Bancorp or Territorial Bancorp could have adverse effects.
• Diversion of management's attention from ongoing business operations and opportunities could impact performance.

Future Outlook

Territorial and Hope Bancorp expect to close the transaction by the end of 2024, subject to regulatory and shareholder approvals. The combined company anticipates becoming a larger, more diversified, and more resilient business with increased resources to invest and grow.

Management Comments

• The Territorial Board continues to unanimously recommend that Territorial shareholders vote FOR the merger with Hope Bancorp and all related proposals.
• Territorial's management believes the combination with Hope Bancorp provides compelling value for Territorial shareholders.
• Territorial's management states that the merger will result in increased value for Territorial's shareholders.

Industry Context

The announcement reflects ongoing consolidation trends in the banking industry, where smaller institutions seek to gain scale and efficiency through mergers. Territorial's response to Blue Hill's unsolicited offer highlights the importance of financial backing and regulatory expertise in bank M&A transactions.

Comparison to Industry Standards

• The 25% premium offered to Territorial shareholders is within the typical range for bank mergers of this size.
• The 1000% dividend increase is a significant benefit for Territorial shareholders, exceeding the average dividend yield in the banking sector.
• Hope Bancorp, with its larger size and diversified operations, is likely to provide Territorial with access to more resources and expertise, similar to other successful bank mergers.
• Companies like First Hawaiian, Bank of Hawaii, and Central Pacific Bank are other banks operating in Hawaii.

Stakeholder Impact

• Territorial shareholders are expected to benefit from the merger through a premium on their shares and a significant increase in their dividend.
• Territorial customers can expect to benefit from additional choices and continued service from local teams.
• Territorial employees will continue to receive competitive compensation and benefits and will have additional career opportunities.
• Territorial's legacy of community support and investment will continue.

Next Steps

• Territorial shareholders are urged to vote FOR the Hope Bancorp merger prior to the Special Meeting on November 6, 2024.
• Territorial and Hope Bancorp will continue to pursue regulatory approvals for the merger.
• The companies will work towards closing the transaction by the end of 2024.

Key Dates

Keywords

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