Columbia Banking System CEO Clint Stein has "no doubts" that his company is ready to take on the $2 billion acquisition of Pacific Premier Bancorp it announced last week.
Some investors have been skittish about how smoothly the transaction will go, following the Tacoma, Washington-based bank's 2023 merger with Umpqua Holdings, which
The acquisition of Pacific Premier is "a very different deal," Stein said.
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"Pacific Premier is very, very similar to what Columbia Bank was pre-Umpqua merger," Stein said in an interview. Now that his bank has spent the last few years getting used to its bigger size, it can bring on the $18 billion-asset, Irvine-based Pacific Premier, he added.
Combining with Umpqua made Columbia a heavy hitter in the Pacific Northwest, at more than $50 billion of assets. But the merger also resulted in more overlap across lines of business, employees and branch locations. The deal impacted everybody at both companies, Stein said.
Columbia still sees "unharvested opportunity" from the Umpqua merger, Stein said, even though the banks integrated their systems in 2023 and executed a cost-cutting initiative in the second quarter of last year.
The company, which has operated as Umpqua Bank since the merger, announced last week that it will now do all business as Columbia Bank.
"Whenever you take two large organizations, and you push them together, and you have systems from one organization, and maybe some processes and products from another one, the way I think about it — the wires get crossed," Stein said. "Things just aren't as efficient or streamlined as what they could possibly be."
While there isn't a "laundry list" of things to do, Columbia is constantly tweaking processes and workflows to become more efficient, he said. The hiccups have given the bank more to answer for.
"We wonder if a deal of this scale comes too soon on the heels of [the Umpqua deal], given the potential disruption to Columbia's operational, growth and optimization efforts," said Nicholas Holowko, an analyst at UBS.
In contrast with its last merger, the Pacific Premier deal is more of a market expansion with limited overlap, Stein said.
Columbia estimates that the transaction will accelerate its growth in Southern California by a decade, freeing up resources to expand in other regions. The deal also gives Columbia access to new banking verticals, like homeowners' association banking, and increases its balance sheet flexibility. Stein and Pacific Premier CEO Steve Gardner also told analysts that they have similar underwriting philosophies and company cultures.
"When you get two companies that have very similar cultures, operational areas, it really — it makes for a relatively low execution risk in our minds," Gardner said. "And so yes, there was certainly a lot of volatility — both in the equity markets, also the debt markets, and that had an impact. But given that we had a long-term view here, and this is a reinvestment, we thought the process throughout was very collaborative. Very pleased where we ended up."
Stein told American Banker that after closing, the company will also have some wiggle room to remix its balance sheet, potentially through shifting its bond portfolio or offloading certain "transactional" loans.
The acquisition also frees up resources that Columbia had been planning to invest in an organic growth strategy in Southern California, enabling the company to use that money to fund expansions in other markets.
The bank has added a few branches in Colorado, which Stein said have been performing strongly enough to warrant additional investment. Columbia is also finalizing a plan to "allocate significant resources" to Utah growth, Stein added.
But the focus, for now, will be on organic growth, as the company works on digesting its latest addition.
"There's nothing as compelling as what this deal with Pacific Premier is," Stein said.
The companies project cost savings of 30%, about 14% earnings per share accretion in 2026 and a three-year earn-back on tangible book value per share.
Anthony Elian, an analyst at JPMorgan Securities, wrote in a note that he thinks it will take at least a year before Columbia starts showing above-peer balance sheet growth from the Southern California expansion.
Since the Umpqua merger closed, Columbia has only grown its balance sheet in the low-single-digits range, he added.
He wrote that while he has an "appreciation for banks that have a desire to expand their footprints into faster growing markets" such as Southern California, he is more focused on the "ability of the combined company" to eventually become "an above peer grower" with respect to lending, revenue, tangible book value and net income.
Stein said the current economic environment is more conducive for a deal now than it was when Columbia merged with Umpqua, despite today's abundant market volatility and uncertainty due to President Donald Trump's tariff policies. Between the time when Columbia announced the Umpqua deal in 2021 and when it closed 17 months later, interest rates skyrocketed from their near-zero level, putting pressure on certain targets the company had set for the deal.
The CEOs of Columbia and Pacific Premier started having conversations a couple of years ago, when Columbia was still in the thick of its last integration.
Stein said he felt that Columbia turned over a new leaf at the end of last summer — about 18 months after the Umpqua deal closed. The bank had finished cutting costs and reorganizing its workforce. At that point, he thought the bank was on stable footing and could handle another deal, he said.
Then "the stars aligned" with Pacific Premier, he said.
The companies started hatching a deal at the start of the year. The market roller coaster in recent months didn't cast a huge pall on the all-stock deal, the two CEOs said, in part because the company didn't need to raise additional capital.
Termination of the deal comes with a $75 million fee, to be paid by whichever company pulls out.
Even though the price tag is less than half the cost of the Umpqua deal, it marks the largest U.S. bank merger since SouthState Corp. bought Independent Bank Group in a transaction valued at $2 billion when it was announced last spring. That purchase closed in January.
The Umpqua acquisition, which was hatched and finalized during the less-merger-friendly Biden administration, took nearly a year and a half to cross the finish line. Columbia expects to close on Pacific Premier in the next eight months, and to combine systems in the first quarter of 2026.
Stein predicted the integration will go "flawlessly."
