Material weakness forces Hope Bancorp to scuttle U&I acquisition

Hope Bancorp in Los Angeles and U&I Financial in Lynnwood, Wash., have agreed to terminate their merger.

The $14 billion-asset Hope said in a press release Friday that the deal was called off after it was unable to get regulatory approval.

The hang-up is tied to a “material weaknesses” Hope found in its financial reporting. The company had disclosed earlier this year that an issue arose with the audit of its 2016 financial statements.

Hope said it had made “significant progress” fixing its internal controls, but the merger would not get regulatory approval before the Sept. 23 termination deadline.

Hope agreed in January to buy the $234 million-asset U & I Financial for $48.8 million in stock.

“While we are disappointed not to be proceeding with this merger, we believe that a mutual termination is in the best interests of our company and shareholders at this time,” Kevin Kim, Hope’s president and CEO, said in Friday’s release.

The mutual termination agreement requires that each party cover its own costs for ending the transaction without penalties or fees.

Hope was formed after BBCN Bancorp bought Wilshire Bancorp in Los Angeles in 2016.