Columbia to expand in California through $5 billion deal

Columbia Banking System is on its way to becoming one of the largest banks on the West Coast.

The Tacoma, Washington-based company announced Wednesday it has inked an agreement to purchase Pacific Premier Bancorp in Irvine, California. The all-stock transaction, valued at roughly $2 billion, is slated to close in the second half of this year. It marks Columbia’s second bank deal in three years.

“It is a natural and strategic fit that strengthens our competitive position in Southern California, enhances our service offerings, and elevates our performance,” Clint Stein, Columbia’s president and CEO, said in a prepared statement.

The addition of Pacific Premier will accelerate Columbia’s expansion in Southern California by about a decade, putting the company in the top 10 for deposit market share across the vast region, Columbia said.

While Columbia already has a strong foothold in the Pacific Northwest, the transaction would give the company nearly $21 billion of deposits in California, in addition to $17 billion in Oregon and $16 billion in Washington.

The combined entity would have about $70 billion of assets — putting it close to the size of regional peers like East West Bancorp and Western Alliance Bancorp. 

Pacific Premier’s business in homeowners association banking and custodial trusts will also be a boost to Columbia’s existing product set, while Pacific Premier clients will gain access to Columbia’s treasury management and wealth management services, the companies said.

“We have worked tirelessly for more than two decades to build a strong franchise at Pacific Premier,” Pacific Premier CEO Steve Gardner said in a prepared statement. “The combination of these two companies operating in growing markets provides a great opportunity for our teams to continue to deliver high-quality, relationship-based banking products, services, and expertise to our clients, and to continue to generate long-term value for our stockholders.”

Pacific Premier stockholders will receive nine-tenths of a share of Columbia common stock for each share of Pacific Premier they own. The deal prices the California’s bank’s stock at $20.83, based on Columbia’s price of $22.77 at close on Tuesday. 

Columbia estimates it will earn back the tangible book value dilution within three years, along with mid-teens earnings per share accretion.

The buyer also projects to gain some $900 million of value creation “based on reasonable and highly achievable cost synergies,” such as expense savings, following some $146 million in transaction expenses.

Following the deal’s closing, Pacific Premier stockholders will own about 30% of Columbia’s outstanding shares. Gardner, along with two other Pacific Premier directors, will join Columbia’s board.

The announcement comes about two years after the close of Columbia’s last deal, when it acquired Umpqua Bank in a deal valued at $5 billion when it was struck. While the marriage of those two companies created a heavy hitter in the Pacific Northwest — then with $52 billion of assets — the post-close integration didn’t go as smoothly. 

The Umpqua addition was finalized just days before the failure of Silicon Valley Bank sparked a mini-crisis in the industry, especially for West Coast banks. The timing made major strategic jumps trickier, and Columbia stumbled in the following months as it digested its acquisition.

Columbia’s net interest margin teetered at the time, and the bank’s stock dove, putting investors on edge.

The bank made progress in 2024, moving faster on its expense plan, remixing its branch network and pushing into the Northern California winery banking business amid the disruption from the previous year’s bank failures. 

Meanwhile, Columbia’s credit quality has remained a strong spot.

Matthew Clark, an analyst at Piper Sandler, said in a research note last month that Columbia’s profitability profile was improving.

“Longer-term, we continue to believe it has an opportunity to recreate the relationship-oriented, higher quality legacy [Columbia] franchise that would drive more consistent, stronger profitability and restore a nice premium multiple,” Clark wrote.

Stein told American Banker last year that he was “laser-focused” on returning Columbia to the “consistent, repeatable, top-tier performance” it once enjoyed. 

“I have the benefit of knowing what we’re doing, knowing where we’ve made pivots, seeing what our pipelines are, knowing our bankers personally, where we’ve turned off things that are transactional and don’t add long-term value,” Stein said. “They don’t have that visibility, and that’s why I think we have to prove it out over time.”

Stein said when the Umpqua transaction closed that he was excited about taking the bank across the West Coast. It will try to do so using the Columbia name.

Columbia said Wednesday that it will change the name of its subsidiary bank from Umpqua Bank to Columbia Bank later this year.