DEFA14A: Territorial Bancorp Urges Shareholders to Approve Hope Bancorp Merger, Citing Superior Value and Stability

Territorial Bancorp is urging its shareholders to vote in favor of the proposed merger with Hope Bancorp, highlighting the significant value and upside opportunity it presents compared to an unsolicited preliminary indication of interest from Blue Hill.

Summary

• Territorial Bancorp is recommending shareholders vote for the proposed merger with Hope Bancorp at the upcoming Special Meeting on November 6, 2024.
• The merger is a 100% stock-for-stock transaction where Territorial shareholders will receive 0.8048 shares of Hope Bancorp for each Territorial share.
• This represents an approximate 25% premium to Territorial's stock price prior to the merger announcement.
• The combined company is expected to provide greater resources, expanded growth opportunities, and a more resilient business model.
• Hope Bancorp's dividend is significantly higher than Territorial's, offering an increased return for shareholders.
• The merger is expected to generate $10.5 million in annual cost savings and synergies.
• Territorial's Board has rejected a preliminary indication of interest from Blue Hill, deeming it not a superior proposal.
• Blue Hill's proposal is considered highly conditional, lacking committed financing and facing regulatory hurdles.
• The Board believes Blue Hill's proposal exposes shareholders to significant risk and uncertainty, potentially leaving them with an illiquid minority investment.
• The merger with Hope Bancorp is expected to close by the end of 2024.

Sentiment

Score: 8

Explanation: The document expresses a positive outlook on the proposed merger with Hope Bancorp, emphasizing the benefits for shareholders, customers, and employees. The tone is confident and persuasive, aiming to secure shareholder approval.

Positives

• The merger provides a 25% premium to Territorial's shareholders based on the stock price before the announcement.
• Shareholders will experience a significant increase in dividend income.
• The combined entity will have a larger and more diversified footprint.
• The merger is expected to generate $10.5 million in annual cost savings and synergies.
• Local leadership and operations in Hawaii will remain in place.
• The merger offers increased career opportunities for employees.
• Customers will have access to an expanded array of banking products and services.

Negatives

• The document focuses on the negatives of the Blue Hill proposal, suggesting potential risks if the Hope Bancorp merger does not proceed.
• If Blue Hill fails to acquire 100% of Territorial shares, remaining shareholders could be left with an illiquid minority investment.
• Blue Hill's proposal could have immediate tax consequences for Territorial shareholders.

Risks

• Failure to obtain regulatory approvals or meet customary closing conditions could prevent the merger with Hope Bancorp from being completed.
• Difficulties in integrating Hope Bancorp and Territorial could hinder the achievement of anticipated synergies and cost savings.
• There is a risk of deposit attrition, operating costs, customer loss, and business disruption following the merger.
• The Blue Hill proposal is subject to regulatory hurdles and lacks committed financing.
• If the Blue Hill transaction fails, Territorial could be significantly weakened.

Future Outlook

The document expresses optimism about the merger's potential to create a stronger, more diversified regional bank with expanded growth opportunities and enhanced value for shareholders. The merger is expected to close by the end of 2024.

Management Comments

• Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer, urges shareholders to vote FOR the Hope Bancorp merger.
• The Board unanimously recommends that Territorial shareholders vote FOR the Hope Bancorp merger and related proposals.
• The Board does not believe that the Blue Hill preliminary indication of interest is a superior proposal, or likely to lead to a superior proposal, as defined by the terms of the Hope Bancorp merger agreement.

Industry Context

The consolidation trend in the banking industry is driven by the need for increased scale, diversification, and efficiency to compete effectively and navigate market cycles. This merger aligns with that trend, creating a larger regional bank with greater resources.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards in terms of financial ratios or performance metrics.
• However, it highlights the benefits of increased scale and diversification, which are common goals in bank mergers.
• Hope Bancorp's existing dividend yield is used as a benchmark to demonstrate the potential increase in shareholder returns.

Stakeholder Impact

• Shareholders are expected to benefit from the premium, increased dividend, and participation in a larger, more diversified company.
• Employees will have access to new career advancement opportunities and competitive compensation and benefits.
• Customers will benefit from an expanded array of banking products and services and enhanced technology platforms.
• Local communities in Hawaii will continue to receive support and investment from the combined company.

Next Steps

• Shareholders are urged to vote on the proposed merger before the Special Meeting on November 6, 2024.
• The companies will continue to work towards obtaining regulatory approvals and satisfying other closing conditions.
• The integration of Hope Bancorp and Territorial will commence upon completion of the merger.

Key Dates

Keywords

merger, Hope Bancorp, Territorial Bancorp, shareholders, Blue Hill, transaction, Hawaii, dividend, regulatory approval, stock