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Steven Gardner, a hockey-loving MBA dropout, in 2000 took over a small bank on the brink of failure that was for a long time considered an underdog.
He renamed it Pacific Premier Bank, moved it to Irvine, acquired other banks and built it to the biggest bank with headquarters in Orange County with more than $18 billion in assets. From 2001 to 2021, the bank’s stock became a mystical 50-bagger.
Last week, Gardner decided to sell the bank for $2 billion to Columbia Banking System Inc., the parent company of Umpqua Bank, in an all-stock transaction (Nasdaq: PPBI). The combined company will have approximately $70 billion in assets and become one of the biggest banks within the Western U.S. (Nasdaq: COLB).
“We have worked tirelessly for more than two decades to build a strong franchise at Pacific Premier,” Gardner said in a 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.”
The sale is the latest trend to consolidation in the banking industry. The Business Journal’s most recent list in November reported 12 banks with headquarters in Orange County, down from 26 in 2015. The OC headquarters of several well-known banks have disappeared from Orange County, either through acquisitions like Pacific Mercantile and Opus Bank, or moves out of state like First Foundation.
Investors and analysts took the acquisition in stride as there has been some talk on Wall Street that Pacific Premier, whose share price has fallen in half in recent years, was up for sale.
“We see this deal as a huge win for PPBI shareholders, with significant value unlocked almost immediately from the deal that we believe would have taken years to unlock had management chosen to remain on its own,” Raymond James analyst David Feaster said in a report.
“The combination creates a company with a profitability profile that is unmatched on the West Coast and provides significant capacity for market share gains going forward,” Feaster added.
Pacific Premier’s climbed 5.6% to $21.24 and a $2.05 billion market cap in the trading session after the announced.
Shares of Columbia Banking fell less than 1% to $23.32 after the news; the Tacoma, Washington-based bank had a $4.9 billion market cap after the announcement.
New Brand Name
Pacific Premier will operate under the brand of Columbia Bank as will Umpqua Bank, which was bought in 2023 by Columbia Banking.
Three Pacific Premier directors will join Columbia Banking’s board, including Gardner.
“There are 13 million people in the Los Angeles market alone, which is more than Washington and Oregon combined,” Columbia Banking CEO Clint Stein told investors on a conference call.
“And there are over 20 million people in the broader Southern California market. Pacific Premier’s Southern California footprint fills in our Western reach from Canada to Mexico, and it enhances our presence in other growth markets like Las Vegas and Phoenix.”
In recent years, Pacific Premier’s fortunes have taken a hit on Wall Street. Since topping $47 each in 2021, the shares have steadily tumbled on Wall Street worries about rising interest rates dampening loan demand, the fallout from regional bank failures like Silicon Valley Bank and fears about banks taking haircuts from loans for office buildings. Its assets fell from $22 billion to $18.1 billion.
Umpqua Bank has long struggled to expand into Orange County, where it first set up an office in 2007. Its deposits of $792 million as of June 30, 2024, ranked it No. 25 on the Business Journal annual list of banks with operations in Orange County. By contrast, Pacific Premier ranked No. 7 with $7.4 billion.
“Most notably, the transaction accelerates Columbia’s expansion in Southern California by approximately a decade, moving its deposit market share to a top 10 position,” Columbia Banking said in its statement.
Columbia Banking said the acquisition will boost its deposits to $57 billion, including nearly $21 billion in California, $17 billion in Oregon, and $16 billion in Washington. It will have about $51 billion in loans.
HOA Benefits
Columbia Banking said its product offering will be enhanced by Pacific Premier’s strength in banking verticals such as homeowners associations and custodial trusts. By contrast, Pacific Premier clients will gain access to Columbia’s treasury management products and wealth management services.
The transaction is projected to deliver about 14% accretion per share.
The executives didn’t reveal on the conference call whether there would be a headcount reduction at Pacific Premier, which has 1,325 employees, including 461 in Orange County. Columbia Banking has 4,721 employees.
They did say the transaction is expected to deliver approximately $900 million of “value creation based on reasonable and highly achievable cost synergies.”
Pacific Premier shareholders will receive a fixed exchange ratio of 0.915 of share of Columbia stock for each Pacific Premier share. Following the deals closing, Pacific Premier shareholders will own 30% of the combined company, and Columbia shareholders will own 70%. Columbia Banking executives said they don’t need to raise additional capital to support the deal.
The transaction, which require regulatory and shareholder approvals, is anticipated to close in the second half of 2025.
Piper Sandler & Co. acted as financial advisor to Columbia and Sullivan & Cromwell LLP acted as legal counsel. Keefe, Bruyette & Woods, a Stifel Company, acted as financial advisor to Pacific Premier and Holland & Knight LLP acted as legal counsel.
Salivating about Southern California
Columbia Banking’s conference call on April 23 to discuss its pending acquisition of Irvine-based Pacific Premier Bancorp had some revealing moments.
“I’ve been honestly salivating over the Southern California market for a decade and just the sheer number of companies of all sizes, the density of it,” Torran Nixon, president of Commercial Banking at Columbia’s Umpqua Bank, told analysts on the call.
“It’s just such a wonderful market to be able to be a part of and to be able to grow into. We will immediately get brand awareness and strength and just share in the market, which is just going to support both of us as we kind of come together to grow.”
Columbia Banking Chief Executive Clint Stein praised the acumen of Pacific Premier’s Steven Gardner for making acquisitions, noting that the two have been talking for a couple years.
“What’s unusual here is to have a counterparty that is as seasoned or more seasoned than what we are,” Stein said. “And so, when you look at that track record, it gives you a lot of confidence in your ability to adapt to whatever comes at you that’s a surprise, because there’s always something.
“Steve and his team have demonstrated a long track record of superb credit performance. And that was something that we dug very, very deeply into.”
Gardner revealed that his board of directors “has been considering for some time” the best use of its capital.
“We have been looking at organic growth, potentially doing some tactical things around the balance sheet,” Gardner said on the call. “Ultimately, when we looked at it, and in particular, this opportunity, it was readily apparent that this would accelerate the returns that we generate for our shareholders in a very significant fashion.”
—Peter J. Brennan
A Stock with Hockey Stick Growth
Steven Gardner, who grew up in Hacienda Heights, earned a bachelor’s degree from California State University, Fullerton. He attended California State University, Long Beach for a master’s in business but said he had to drop out to support his family. His background included a stint as an executive at Hawthorne Financial, where he was responsible for credit administration and portfolio management.
In 2000, he became chief executive of Riverside-based Life Financial Corp., which owned Life Bank. That same year, his wife, Carol, gave birth to quadruplets.
Life Financial, which began in 1983, became a highflier in the late 1990s by focusing on subprime mortgages. Its stock reached as high as $130 before crashing to under $3 in 2000. During Gardner’s first year on the job, the bank reported a loss of $20.8 million.
“When I came in, we were lacking capital; we were hemorrhaging substantial losses. There were substantial problem loans,” he told the Business Journal in a 2017 interview.
He put into place “a plan to get control of the company” that included layoffs, the selling of branch offices, a name change and a move to Irvine. At the time, regulators said the bank needed capital, but it was in such poor condition during a recession that it couldn’t find any investors, Gardner said. He eventually was able to get a $12 million loan from the owner of a real estate investment company.
The shares climbed from lower than $1 each in 2001 to more than $47 in 2021, becoming a mystical 50-bagger.
Gardner became known as an astute judge of risks, as exemplified when the bank didn’t need government funding during the 2008 financial crisis. In 2024, about 0.16% of Pacific Premier’s assets were nonperforming, an astonishingly low amount by banking standards.
Pacific Premier is a “classic bank” that’s a spread lender, generating interest off its loans and to a smaller degree fees, Gardner said. Its specialty is small and middle-market businesses “of every variety,” he said. When asked what his bank’s reputation is, he replied, “We’re straight shooters.”
“We don’t do anything exotic,” he said. “We operate with a sense of urgency. The pace of business is so fast. Many business owners operate in a mindset of 24/7. We need to have that mindset, as well.”
In 2017, the bank’s assets were $6.4 billion, and Gardner said his goal was to boost assets beyond $10 billion.
Since 2011, he grew both organically and through 11 acquisitions, such as Heritage Oaks Bancorp for $482 million in 2017. It completed its largest acquisition ever in 2020 — the $744M purchase of crosstown rival Opus Bank.
The bank’s assets grew to $22 billion by 2022 before falling as did it share price, which dropped in half in the past three years.
—Peter J. Brennan