• EPS: Reported first quarter EPS of $0.41 per share and operating EPS of $0.67.
• Net Interest Margin (NIM): Contracted by 4 basis points to 3.60% in the first quarter.
• Customer Deposit Growth: $440 million in net customer deposit growth for the quarter.
• Loan Origination Volume: Increased by 17% from the first quarter of 2024.
• Allowance for Credit Losses: 1.17% of total loans, or 1.32% including the remaining credit discount.
• Non-Interest Income: $66 million for the quarter; operating non-interest income was $56.9 million.
• Operating Expenses: $270 million for the quarter.
• Provision for Credit Loss: $27 million for the quarter.
• Operating Return on Tangible Equity: 15%.
• Capital Ratios: CET1 at 10.6% and total capital ratio at 12.8% at quarter end.

• Warning! GuruFocus has detected 3 Warning Sign with PPBI.

Release Date: April 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pacific Premier Bancorp Inc (NASDAQ:PPBI) acquisition accelerates Columbia's strategic goals in Southern California by a decade.
• The acquisition will create a $70 billion asset franchise, enhancing Columbia's market presence.
• The deal is expected to result in double-digit EPS accretion and a short earn-back period.
• Columbia's deposit market share in Southern California will improve significantly, moving from 51st to 10th position.
• The acquisition provides expanded capabilities and product offerings, including HOA banking and custodial trust business, enhancing fee income opportunities.

Negative Points

• Net interest margin contracted by 4 basis points to 3.60% due to seasonal deposit flows.
• Total loan balances remained flat due to higher prepayment and payoff activity.
• The acquisition involves a significant credit mark of $96 million, impacting Pacific Premier's gross loan portfolio.
• The transaction will result in a 7.6% tangible book value dilution with a three-year earn-back period.
• There is potential for regulatory challenges, although pre-flight conversations with regulators have been positive.

Q & A Highlights

Q: Clint, you're two years removed from the Banquo deal. What experience can you bring from that deal to this one, and what are the potential risks? A: Clint Stein, President and CEO, highlighted the extensive M&A experience of both Columbia and Pacific Premier, noting that each organization has completed 10 acquisitions since 2010. He emphasized the importance of having a seasoned counterparty like Pacific Premier, which reduces integration risks. Stein expressed confidence in the integration process, citing the successful integration of Columbia and Umpqua, which was completed ahead of schedule.

Q: Are there any expenses allocated to preparing for a $100 billion asset size, and what's the pro forma CRE concentration? A: Clint Stein stated that while they have a roadmap for reaching $100 billion, there is no significant expense ramp-up required at $70 billion. He mentioned ongoing discussions with regulators and noted that the CRE concentration would be around $330 billion, dropping to $168 billion when excluding multifamily.

Q: Could you elaborate on where you see the most opportunity to add value with Pacific Premier's core competencies? A: Clint Stein and other executives highlighted the acceleration of growth in Southern California, which would have taken over a decade without this acquisition. They noted Pacific Premier's strengths in HOA banking and custodial trust business, which complement Columbia's offerings. The combined capabilities in leasing, commercial cards, and international banking were also emphasized as areas of growth.

Q: How do you get comfortable underwriting credit in today's volatile environment? A: Clint Stein and Frank Namdar, Chief Credit Officer, expressed confidence in Pacific Premier's conservative credit culture, which aligns with Columbia's. They conducted thorough due diligence, reviewing over 61% of Pacific Premier's loans, and found similar underwriting philosophies. The low leverage posturing of the portfolio was highlighted as a key factor in managing credit risk.

Q: What are the financial targets on a pro forma basis, and how do you ensure you meet them? A: Clint Stein acknowledged the challenges of rate volatility experienced during the Umpqua merger but expressed confidence in meeting financial targets based on consensus estimates. He emphasized the importance of deposit growth and C&I loan growth as key drivers of performance, noting strong pipelines and optimism for future quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.