Columbia Banking System - Earnings Call - Q1 2025 & Merger

Executive Summary

• Q1 2025 delivered stable core trends but headline EPS declined on a one-time legal settlement; GAAP revenue rose to $491.4M while diluted EPS fell to $0.41 (operating EPS $0.67). Net interest margin ticked down 4 bps to 3.60% as lower earning-asset yields outpaced funding cost relief.
• Deposits grew $497M (customer deposits +$440M) despite typical seasonal outflows, supported by small business campaigns; loans contracted slightly (-$65M) on payoffs and slower origination volume.
• Non-interest expense jumped $74M QoQ on a $55M legal settlement and $15M severance; operating non-interest expense rose modestly (+$7M QoQ), consistent with seasonal payroll taxes and elevated legal costs.
• Columbia announced an all-stock acquisition of Pacific Premier (PPBI), targeting ~$127M pretax cost saves, mid-teens EPS accretion by 2026–2027, and accelerated Southern California density; management highlighted low integration risk and no need for external capital. This is a key near- and medium-term catalyst for the stock narrative.
• Guidance (operating opex and tax rate) was maintained; estimate comparisons for Q1 2025 EPS and revenue were unavailable via S&P Global, limiting beat/miss assessment (target price consensus $25.5)*.

What Went Well and What Went Wrong

• What Went Well

  • Strong deposit growth against seasonality: “Customer deposits increased notably during the first quarter…highlighting the success of small business campaigns” — Clint Stein, CEO.
  • Strategic acceleration in SoCal via PPBI: “This combination truly establishes the leading banking franchise in the Western region…accelerates Columbia’s expansion in Southern California by approximately a decade”.
  • Operating cost discipline intact ex one-offs: Operating non-interest expense rose only ~$7M QoQ to $270.1M amid seasonal payroll taxes and elevated legal costs, showcasing underlying expense control.

• What Went Wrong

  • Headline profitability pressure: Net income fell to $86.6M and diluted EPS to $0.41 on the $55M legal settlement and severance charges; efficiency ratio worsened to 69.1% on GAAP.
  • NIM compression: Net interest margin declined 4 bps QoQ to 3.60% as lower earning-asset yields outweighed reductions in funding costs; lower accretion income contributed to securities yield decline.
  • Slight loan contraction: Gross loans decreased $65M QoQ on payoffs and slower originations; management continues to allow transactional real estate balances to decline, prioritizing relationship-driven lending.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Columbia Banking System First Quarter 2025 Earnings and Pacific Premier Bancorp Acquisition Announcement Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star one one again. Please be advised that today's conference is being recorded. At this time, I'd like to introduce Clint Stein, President and CEO of Columbia, to begin the conference call. Please go ahead.

Clint Stein (President and CEO)

Thank you, Dilim. Good afternoon, everyone. Thank you for joining us as we review Columbia's first quarter results and the announced acquisition of Pacific Premier Bancorp. The news releases and corresponding presentations are available on our website at columbiabankingsystem.com. During today's call, we will make forward-looking statements, which are subject to risk and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures, and I encourage you to review the non-GAAP reconciliations provided in our earnings materials. I want to thank each of you again for joining us on short notice.

I'm eager to get to our discussion of Pacific Premier, an acquisition which I'm excited to talk about, but we also have another solid quarter of results to share with you. Our consistent, repeatable performance in 2024 carried through to the first quarter of 2025. Our results reflect our disciplined focus on relationship banking as our teams work toward long-term balanced growth in deposits, loans, and core fee income. Our net interest margin contracted modestly, as anticipated in the first quarter, given customer cash usage in December that carried through into January. The positive effects of our retail and small business deposit campaigns, as well as growing commercial balances, offset these impacts, defying seasonal norms with $440 million in net customer deposit growth for the quarter.

Loan origination volume was up 17% from the first-quarter of 2024, as momentum from the fourth-quarter carried through into the new year. Our banking teams continue to win new business with new and existing customers. However, total loan balances were relatively flat as of quarter end due to higher prepayment and payoff activity. Period-end totals were also muted by our continued focus on pushing the transactional real estate loans discussed in previous quarters off our balance sheet. Beyond the non-recurring items that impacted our expenses in the first quarter, Columbia maintained its disciplined cost culture while continuing to reinvest in our growing franchise. We opened our first retail branch in Colorado in March and supported the banking teams that have already been offering our full suite of products and services in the market since 2022.

We'll continue to fine-tune our branch footprint and expand in geographies where we see opportunities. On that point, today we announced our partnership with Pacific Premier. With this acquisition, Columbia will become a $70 billion in assets franchise and pick up a complementary set of products and services to support our growing customer base. Our eight-state western footprint remains intact, but as Pacific Premier's footprint is heavily weighted in Southern California, we accelerate our strategic goals in this market by a decade or more. I'm not going to take you through a page-turn presentation of the deal deck, but I will reference certain key slides during my remarks. Slide four in the deck highlights the highly complementary footprints of Columbia and Pacific Premier. I've previously discussed Columbia's expansion plans in Arizona, Colorado, Utah, and Southern California.

The de nova branching strategy accomplishes our coverage goals in the first three states, but Southern California is different. There are 13 million people in the Los Angeles market alone, which is more than Washington and Oregon combined, and there are over 20 million people in the broader Southern California market. Pacific Premier's Southern California footprint builds in our western reach from Canada to Mexico, and it enhances our presence in other growth markets like Las Vegas and Phoenix. This acquisition provides the physical footprint to support our Southern California banking teams, who have done a phenomenal job with limited infrastructure. It also provides expanded capabilities to the PPBI team through broader product offerings and the benefits of a much larger balance sheet. Columbia's deposit market share position in Southern California moves from 51st to number 10 on a pro-forma basis, as outlined on slide eight.

Ron will cover the numbers behind this financially attractive acquisition in greater detail, but as part of the all-stock transaction, Pacific Premier shareholders will receive a fixed exchange ratio of 0.915 of a share of Columbia stock for each Pacific Premier share. Following the deal's closing, Pacific Premier shareholders will own 30% of the combined company, and Columbia shareholders will own 70%. Notably, we expect the transaction to have minimal impact on Columbia's capital ratios, and we do not need to raise additional capital to support the deal. Columbia's executive leadership team remains intact, and three Pacific Premier directors will join Columbia's board, including Steve Gardner, Pacific Premier's chairman and CEO. The combined organization will operate under the unified brand of Columbia Bank, as Umpqua Bank will change its name to Columbia Bank later this year.

The Columbia Bank name aligns with our holding company name and other brands the bank operates today, simplifying our family of brands and ensuring brand clarity as we deepen our presence throughout the West. Beyond double-digit EPS accretion and a short earnback period, this transaction represents a strategically compelling partnership, as slide five outlines. Columbia and Pacific Premier are like-minded business banks that share a relationship-based operating philosophy. The banks have nearly identical low-cost deposit compositions, including a top quartile percentage of non-interest-bearing deposits. Pacific Premier's products and service offerings are additive to Columbia's as we strive toward a larger contribution of fee income to our revenue stream. Pacific Premier's custodial trust business complements our existing wealth management platform, adding new capabilities and revenue-enhancing opportunities.

We'll also add Pacific Premier's attractive HOA banking, escrow, and 1031 exchange businesses, driving additional fee income and adding low-cost core deposits, as detailed on slide 10. Execution risk for this transaction is low. It is predominantly an expansion in existing markets with limited overlap, and we expect very little disruption to depositors, borrowers, and our banking teams. Companies have similar credit cultures founded on conservative underwriting, robust review processes, and relationship-centric banking. Our thorough due diligence process confirms significant alignment in our credit approach, go-to-market strategy, operating philosophies, and cultures. In addition, both companies have significant acquisition experience and integration talent, so we expect a smooth combination in every respect. I want to take a moment to address heightened macro uncertainty and the recent market volatility. Columbia's consistent approach to banking is a key contributor to our success through business and credit-cycles.

Our conservative and disciplined approach to building a diversified and granular balance sheet anchored by enduring customer relationships has historically allowed us to thrive during volatile periods. Our company has grown stronger as we have gained scale, talent, and process improvement through the mergers and acquisitions that have shaped Columbia over the years. Through it all, we have maintained our culture, supporting our growing customer base, maintaining our strong credit profile, and building a superior core deposit franchise. I want to thank our associates for their hard work in delivering another solid quarter of operational results. Their accomplishments contribute to my enthusiasm for our future. Our pending acquisition of Pacific Premier accelerates the organic opportunities in front of us as we continue to grow our customer base throughout our eight-state western footprint. Together, we continue to strive toward consistent, repeatable top quartile performance in support of long-term shareholder value.

I'll now turn the call over to Ron.

Ron Farnsworth (EVP and CFO)

Okay, thank you, Clint. I'll begin with a review of the first quarter's results. We reported first quarter EPS of $0.41 per share and operating EPS of $0.67, which excludes a previously disclosed legal settlement of $55 million, $15 million in severance expense, and other fair value and hedging items detailed in our non-GAAP disclosures, which I encourage you to review. Our operating return on tangible equity was 15%, while operating PP&R was $212 million. As Clint noted, our bankers' activity helped offset typical seasonal deposit contraction as customer cash usage in December carried through into January. Balance generation from our small business and retail campaign and other growth in commercial deposits drove $440 million in customer deposit growth during the first quarter.

Growth in relationship-based accounts enabled us to repay $590 million of wholesale funding, inclusive of broker deposits, and the favorable mix shift benefited our net interest margin later in the quarter. As we discussed on last quarter's call, seasonal deposit flows led to four basis points of NIM contraction to 3.60% in the first quarter. Wholesale repayments were largely executed in March. Our provision for credit loss was $27 million for the quarter, and our overall allowance for credit losses remains robust at 1.17% of total loans or 1.32% when including the remaining credit discount. Non-interest income was $66 million for the quarter, with the change from Q4 mostly related to fair value swings given interest rate changes. On page 16 of our earnings release, we detail the non-operating fair value changes.

Excluding those items, our operating non-interest income of $56.9 million for Q1 was up $2 million, as last quarter's loss on sale of loans did not repeat. Total GAAP expense for the quarter was $340 million, while operating expenses were $270 million, with the variance detailed on page 16 of the earnings release. Seasonally higher payroll taxes and elevated legal expense, separate from the legal settlement, drove the $7 million increase from the prior quarter. Before taking today's merger announcement into consideration, we continue to expect our operating expense, excluding CDI amortization, to be in the $1 billion-$1.01 billion range for 2025. Lastly, our tax rate was impacted by non-deductible expenses during the quarter. We expect it to remain in the mid-25% range on an operating basis for the remainder of 2025.

Turning now to the proposed transaction with Pacific Premier, slides 21 and 22 in the deal deck detail a diversified pro-forma loan portfolio and the similar deposit profiles Clint discussed. Slide 18 lays out key deal-related financial assumptions. We begin with consensus estimates for Columbia and Pacific Premier, and we expect to realize approximately $127 million in pre-tax cost savings, which represents 30% of Pacific Premier's non-interest expense base. We expect 75% of savings to be phased in during 2026 and 100% thereafter. As Clint outlined, we expect to realize revenue synergies given opportunities across our combined customer base, though none are included in our announced financial projections. We expect one-time after-tax deal-related costs of $146 million.

Fair value and interest rate marks, which will be accreted over the remaining life of the assets, include rate-related write-downs of $449 million on Pacific Premier's gross loan portfolio, $327 million on held and maturity securities, and $91 million related to available for sale security. We also anticipate a $25 million reversal of existing marks on Pacific Premier's acquired loans, a $12 million write-up to fixed assets, and a-million dollar write-up of time deposits, which will be amortized over approximately one year. The $96 million credit mark, which is equivalent to 0.8% of Pacific Premier's gross loan portfolio, is allocated 50% to purchase credit-determined or PCD loans and 50% to non-PCD loans. As with interest rate marks, the non-PCD mark will accrete into interest income over the remaining life of the loans.

We expect to realize an initial provision expense of $48 million on non-PCD loans immediately following the transaction's closing. The core deposit intangible is estimated at 3.3% of Pacific Premier's core deposits, and it will be amortized over 10 years using a sum of the year's digits calculation. Lastly, Pacific Premier intends to call its outstanding subordinated debt prior to the transaction closing. These assumptions drive our expectations for 14% EPS accretion in 2026 and 15% in 2027, based on consensus estimates. We project 7.6% of tangible book value dilution and a three-year earnback period. Please refer to the appendix for reconciliation of the metrics I just discussed. Slides 14 and 15 outline the significant value creation and implied equity value upside this transaction offers.

Given Pacific Premier's excess capital position, we expect limited impact to our capital ratios at closing, and as Clint noted, we will not need to raise additional capital. I will now turn the call back over to Clint.

Clint Stein (President and CEO)

Okay, thanks, Ron. As you've heard me say many times before, the criteria Columbia considers in any transaction are that it makes financial sense for our shareholders, it is complementary or additive to our business model, and it needs to be culturally compatible. Our partnership with Pacific Premier is consistent with all of those criteria. Our focus remains on optimizing our financial performance to drive long-term shareholder value. Our capital position continues to build, and our regulatory ratios are expanding in line with our expectations. Our CET1 and total capital ratios were 10.6% and 12.8% at quarter-end, well above our long-term targets. Our operational performance continues to demonstrate our ability to organically generate capital well above what is required to support prudent organic growth and our regular dividend. We expect our acquisition of Pacific Premier to enhance our capital generation capabilities and drive additional flexibility for future return to shareholders.

This concludes our prepared comments. Chris, Tori, Ron, Frank, and I are happy to take your questions on our first quarter results, and Steve Gardner is with us for acquisition-related questions. Bill M., please open the call for Q&A.

Operator (participant)

Thank you, sir. As a reminder, to ask a question, you would need to press star one one on your telephone. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Chris McGratty from KBW. Please go ahead.

Chris McGratty (Managing Director and Head of U.S. Bank Research)

Oh, great. Good afternoon. Clint, I got a, I guess, an opening question for you. You're roughly two years removed from the close of the Umpqua deal. I guess I'm interested in what experience you can bring from that deal to this deal. I know you talked about this being a little bit of a market extension, but maybe the upside potential and then maybe the risks that you're monitoring. Thanks.

Clint Stein (President and CEO)

Yeah, hi, Chris. You know, we have a slide in the deal deck that highlights our M&A experience. And when I say our, it's specifically Steve's M&A experience and my M&A experience, but also that of our teams. And since 2010, each organization has done 10, individually done 10 acquisitions. And so with each one of those, you learn something and you have a playbook. What's unusual here is to have a counterparty that is as seasoned or more seasoned than what we are. You know, 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. More specific to the merger integration that we wrapped up, you know, I started talking last summer that the integration aspects, the social aspects of the Columbia-Umpqua integration were largely behind us.

Conventional thinking is it's a two-year process for that to happen. I feel like we accomplished it about six months ahead of time. You look at the consistent operating performance that we drove throughout 2024, carried that into the first quarter here of 2025. Everything that we've experienced and what we've been communicating over the past several quarters is that we're in a business-as-usual operating mode, that the integration was fully behind us. It was a much heavier lift because if you think about every single individual in both companies was impacted by the Columbia-Umpqua merger. Here, there's still an impact, but it doesn't impact and distract or have the potential to distract every single person doing every single job in both companies. I don't want to make light of that any integration is challenging.

Steve and I have spent a lot of time talking about and speaking with key members of his team about how to make sure that we execute flawlessly on this. We have a great plan. I am just very confident in our ability to do this. I think the environment is also conducive to doing that as well.

Chris McGratty (Managing Director and Head of U.S. Bank Research)

Great. Thanks for that. I guess my follow-up would be a little bit of a regulatory angle, right? You're going to be $70 billion in assets pro-forma. I guess two-part question is, is there any expenses, either gross or net, that you're allocating to preparing for $100 billion? Secondarily, what's the CRE concentration going to be pro-forma? I know that's a bigger issue once you get closer to $100 billion, and Steve was right around 300. I'm interested in that kind of pro-forma number. Thanks.

Clint Stein (President and CEO)

Yeah. We have a roadmap in terms of preparing as we skate towards $100 billion. That roadmap was put in place really as we crossed $50 billion. It does not mean that we have significantly ramped up expense or that we will need to significantly ramp up at $70 billion. There is not an expense cliff that comes with this. What it does mean is that we have to start skating to where the puck is going because there is no phase-in period for the regulatory aspect of crossing $100 billion. At $70 billion, my argument would be we are only 70% of the way there. I do think that we will accelerate some of the components on our roadmap, but it is nothing that will be a meaningful adjustment to your expense models or anything like that at this point in time. We just have to wait and see.

There's a lot of moving pieces right now in the regulatory framework. And $100 used to be $250. I don't know if that happens again, but I think that there's just, we're in pretty consistent conversations and constant contact with our regulators at the regional office as well as nationally. I think that in the time period that we're going through waiting to close this, thresholds could be different, but we're not counting on that, just so you know.

Chris McGratty (Managing Director and Head of U.S. Bank Research)

Great. Then the pro-forma CRE, if you have it. Thank you.

Clint Stein (President and CEO)

Oh, yeah. I think it's 330, 325. If you take out the multifamily, which both companies' multifamily books are pretty much the same: workforce housing, rock-solid credit. I think that then that number drops down to 168 or somewhere in that level.

Chris McGratty (Managing Director and Head of U.S. Bank Research)

Okay. Thank you.

Operator (participant)

Thank you. I show our next question comes from the line of David Feaster from Raymond James. Please go ahead.

David Feaster (Analyst)

Hi. Good afternoon, everybody.

Clint Stein (President and CEO)

Hey, David.

David Feaster (Analyst)

Obviously, this is a very complementary deal. It brings some nice fee income lines, which you alluded to, some new lending verticals, expands into some markets that you were already going to. You touched on a few of those things that Pacific Premier brings. I was hoping you could elaborate maybe on where you see the most opportunity to add value, utilizing some of their core competencies across the combined franchise or leveraging Columbia's expertise across their footprint. Just kind of curious where you see, where are you most excited about?

Clint Stein (President and CEO)

I'll start and then see if Chris and Tori want to actually give you more details. The thing that excites me the most, and I said it in my prepared remarks, is this accelerates what we had hoped to be able to achieve in Southern California, in particular, by over a decade. That is not just, that is just not something we're saying just because it is impactful, but it's been about a year and a half that we've been trying to solve for how do we get more infrastructure for the bankers that we already have in that market. I said in my comments that they've done a phenomenal job. They have with very little, very, very limited infrastructure south of the grapevine.

For 18 months of work and trying to find the right places and figure out where our existing customers are and good prospective customers, we identified less than half-a-dozen sites at that point in time. If you just roll that forward and think about how you get and build a footprint that's not only the sheer number of locations, but the size and scale of what Steve and his team have built in that market, it's easily a 10-year push to do that. When you combine that with some of their businesses where they're just ahead of us in things, HOA banking is one area that Chris and some of his team have been trying to unlock the secret sauce to that. Of course, Steve and the Pacific Premier team have a very robust platform there.

There are other things. Also, we think about some of the things that we are doing on the small business side that have been impactful on our current operations over the past five quarters and how we can leverage that and have that as an accelerator of growth. I have kind of given you the appetizer now. I am going to step back and let Tori and Chris serve up the main course on what the specifics are.

Tori Nixon (Senior EVP and Co-president)

Yeah. Thanks, Clint, Tori. I'll jump in real quick. I mean, I've been honestly salivating over the Southern California market for a decade. Just the sheer number of companies of all sizes, the density of it, 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. I mean, specifically, you think about some of the product capabilities that we combined will be able to expand. You've got the leasing business. I think a little different offering on the commercial card front. You've got international banking front, just a little bit different as we come together. You've got the growth from the scale of our balance sheet.

Similar to Umpqua and Columbia coming together, we've got the capability to grow with those customers as they grow. We're not going to pass on $20 million-$30 million deals as companies grow and need that from a lending standpoint. We have the capabilities to serve the customers as they grow, so we grow with them. I think those things combined with inheriting a great group of bankers at Pacific Premier, I think it's just going to be a wonderful opportunity for us.

Chris Merrywell (Senior EVP and Co-president)

Yeah. David, this is Chris. The acceleration of the HOA program, that's a huge one. Light years ahead of where we are today. The complementary nature of the custodial trust business and being able to look at how our fiduciary business there and the investment aspects that we put into that as well. We've been expanding into the market down there, and this just accelerates that. Clint started touching on retail small business. I think what we've shown in the last four campaigns of what we can do with our approach to the market. Really looking forward to the opportunity of getting in there, training up the team and the relationship strategy, and then seeing what we can do when we turn that loose. We've talked about the market and the potential. I think there's a lot of tremendous opportunity there.

We will be full service, and we'll bring the mortgage business into play as well.

David Feaster (Analyst)

That's great. Columbia, you guys have had that slide in your deck talking about longer-term balance sheet optimization opportunities. Obviously, we're going to have the Pacific Premier balance sheet marked. Are you considering any asset sales or optimization efforts to help improve profitability and maybe accelerate that optimization that you've already identified? Is that just some conservatism in these numbers and optionality that you guys have? I don't think that's in those programming numbers.

Clint Stein (President and CEO)

Yeah. No, no, it's not. David, as usual, you've zeroed in on some of the key aspects of it. It provides flexibility. Not only does it act as a balance sheet restructure on the Pacific Premier balance sheet that then gets secreted back through earnings as opposed to being a hard-coded loss, it also creates flexibility for us to do some of the things that we've been talking about for the past year or 15 months on optimizing our balance sheet. Just the expanded earnings capability of a pro-forma company also gives us the potential to look at things a little bit differently in that regard. As we've mentioned, the deal doesn't require any additional capital. We've already been growing capital fairly substantially over the last two years, and that growth should accelerate as well.

David Feaster (Analyst)

Okay. That's great. Maybe just last one for me, a higher level one. We've got an extremely volatile backdrop today. You got the trade wars and all that going on. Just kind of high-level question for you, Clint, is how do you get comfortable underwriting credit today? I mean, the good news is I've always looked at Pacific Premier as a very low-risk balance sheet, very conservatively underwritten. Obviously, there's a healthy credit mark here too through the marks. I'm just curious, how did you get comfortable around the credit side of this deal?

Clint Stein (President and CEO)

Frank could hardly wait to unmute his mic. He's sitting next to me. What I'll start with is by saying I think you hit the nail on the head that Steve and his team have demonstrated a long-demonstrated track record of superb credit performance. That was something that we dug very, very deeply into. Because Frank likes to be bored and he likes to sleep well at night, and he's also very conservative and has a strong track record in credit performance. I don't want to steal his thunder, so I'll go on mute here and let Frank give you some details in terms of the extent of diligence that we conducted.

Frank Namdar (EVP and Chief Credit Officer)

Thanks, Clint. I mean, there's no thunder to be stolen here. I was really excited to see the results of the diligence that we conducted. We looked at over 61% of their loans and was pleased to find out. I mean, they really had a really similar underwriting and credit philosophy to us here. Their policies were very much aligned with ours. Their application of credit policy was very close to how we apply our credit policy. Probably the most important thing in underwriting through any credit cycle and the ability to continue to underwrite through any credit cycle is to have a leverage, a burst credit culture within the portfolio and underwriting. It's not P&Ls that get companies through credit cycles. It's the strength of the balance sheet. Time after time, we saw within the credits evaluated a low-leverage posturing of these companies similar to ours.

It gave me great comfort to see all of that and not a lot of existing issues within the portfolio either. Clearly, both companies stay ahead of potential credit problems by staying close to their customer base. That's really the best way to do it, is to stay in close contact with them. I noticed a very active portfolio management and monitoring philosophy similar to ours. I do not see any surprises with Pacific Premier's portfolio, nor do I with ours. I think both companies are very much on top of their portfolios and that will enable us to win through any cycle.

David Feaster (Analyst)

That's great. Thanks, everybody, for all the color. Congrats on the deal.

Frank Namdar (EVP and Chief Credit Officer)

Bye.

David Feaster (Analyst)

Thanks, David.

Operator (participant)

Thank you. I show our next question comes from the line of Matthew Clark from Piper Sandler. Please go ahead.

Matthew Clark (Managing Director and Senior Research Analyst)

Hey, good afternoon, everyone.

Clint Stein (President and CEO)

Hey, Matt.

Matthew Clark (Managing Director and Senior Research Analyst)

This is my first question around your financial targets on a pro-forma basis and maybe the lessons learned from the Umpqua deal. I know this is only about a 30-year size relative to Umpqua, a lot larger. Anything you might do differently this time around to ensure that you hit these targets because they look fairly strong?

Clint Stein (President and CEO)

We start with all of your estimates, not yours specifically, but consensus estimates. I guess as we look at the environment changes, we had, what, 550 basis points of rate increases from when we announced the Umpqua-Columbia merger. Hopefully, one, I expect that we won't have a 17-month waiting period. Two, I would hope that we wouldn't see that kind of rate volatility. I guess that's the thing that I want to make sure people are aware of, is that consensus estimates have come down, I mean, for the industry. When we build these models and everybody does it, they use consensus estimates. There is always going to be some variability. In a stable environment, our forecasts are probably not terribly different, maybe a little better, maybe a little worse from period to period than what consensus is.

There was a whole seismic shift in the operating or the rate environment. That is what really, I think, led to the differences. Even despite the volatility in the markets right now, what we are seeing from customers, if you do not watch the news and you are not on social media, life is still pretty good. We are not seeing any type of major pullback causing us to rethink what our current forecasts are. I know our advisors went through our forecasts, and I am pretty certain that Steve's advisors went through his forecasts and our forecasts. We feel pretty good about that we are going to execute and deliver top-tier performance. As the market moves, maybe those ratios move around just because that is how it works. On a relative basis, I think this is going to make a lot of money for a lot of people.

Matthew Clark (Managing Director and Senior Research Analyst)

That's great. How about the buyback? I know we were kind of warming up to one sometime this year. Does this deal put that on pause? I mean, PPBI has a ton of excess capital. You use all that capital to deliver the marks. Given that your capital kind of on a pro-forma basis isn't going to change materially, would you still consider a buyback this year?

Clint Stein (President and CEO)

What I said during our first quarter conversations was that I was pretty confident that there would be capital actions during 2025. I consider M&A a capital action. Without this, yeah, it would have been extremely likely that we would have started initiating a buyback. Right now, our biggest focus is get the deal closed, see where the capital ratios are, and then from there, relative to our long-term targets, make an assessment on a buyback. I guess short answer is, yeah, it probably does push it out. It's probably not a 2025 event, but there's still some variables in terms of, is this a year-end close or is it a sooner-than-that type of close? Where do the final ratios shake out? Right now, we expect a modest decline of 20-30 basis points from our current levels.

Our current levels are modestly above where our long-term targets are. We still would expect that we'd be above those targets. I'd hate to go initiate a $300 million-$400 million buyback and then find out that, oh, rates moving around and we needed to go out and raise $200 million of capital and dilute our shareholders. That would not do us any good.

Matthew Clark (Managing Director and Senior Research Analyst)

Yep, fair enough. My last question just around any potential divestitures on PPBI's balance sheet. I know Steve has scrubbed that portfolio quite a bit over the years. Is there anything within there, maybe franchise lending or maybe even multifamily you might want to de-emphasize, or do you feel good about the whole portfolio?

Clint Stein (President and CEO)

We feel pretty good. I mean, Steve and team have done a good job at de-emphasizing some of the things. I think that's the other piece of it, is we've talked about that we've run our company and we've built our company to perform three cycles. We've been waiting for a recession for many years. I don't consider 2020 a recession because of all the stimulus that was pushed into the system. I think Steve also kind of built a fortress balance sheet and a tremendous amount of capital in anticipation of some form of economic slowdown. As part of that, it wasn't just building capital, but it was also kind of pulling back from different areas of their portfolio. It is super clean.

Yeah, on the multifamily side, we could reduce CRE exposures by selling some of those that are marked, but they're going to be at current market rates through purchase accounting. There's absolutely zero credit concerns on those. I don't know that we would necessarily do that. There are some things in the bond portfolio that I think we're looking at that could provide some opportunities for us. Like I said, I think on one of my earlier responses, I think this gives us some flexibility with our existing balance sheet to maybe look at some things as well.

Matthew Clark (Managing Director and Senior Research Analyst)

Great. Thank you.

Operator (participant)

Thank you. I show our next question comes from the line of Tim Braziler from Wells Fargo. Please go ahead.

Tim Braziler (Director of Mid-cap Bank Equity Research)

Hi, good afternoon. I'm wondering how long was the courting process for this transaction? It's pretty impressive to get a deal announced in the midst of some of this volatility in the broader market. I'm just wondering, more recently, did you have to update any deal terms, considerations, marks? Did you have to recalibrate any parts of the transaction just given some of the market turbulence here to date?

Clint Stein (President and CEO)

We'll have all of that in the S4. What I'll give you is that Steve and I started getting to know each other a couple of years ago. Just trying to assess, my mindset at that time was executing on the task at hand, which was the integration of Columbia and Umpqua. I think if you ask Steve, and you can because he's here in the room as a reminder, his thought process was probably around seeing if we could execute on the task at hand. Once we both were at a point of where I said, "Yeah, we've executed," and he was able to witness it from an external viewpoint, we started talking about the possibility and when timing might be right. I would say as a kind of a full-on approach and endeavor really started at the first of the year.

Here we are in the fourth month. I'll lean back into both of our experience in M&A. I think both teams and boards were able to see through the short-term market noise and volatility and really focus on where the long-term shareholder value could be created. I think we ended up remarkably close to where we originally started. Yeah, it was a wild ride with some of the market swings.

Steve Gardner (Chairman and CEO)

I guess in that same light.

Clint Stein (President and CEO)

I'm sorry. Go ahead, Steve.

Steve Gardner (Chairman and CEO)

Sure. It was a very disciplined process. I think importantly here that as a 100% stock deal, this is a reinvestment opportunity for Pacific Premier shareholders and an extremely attractive one because we firmly believe the upside here is significant. When you get two companies that have very similar cultures, operational areas, it really makes for a relatively low risk, low execution risk in our minds. Yes, there were certainly a lot of volatility, both in the equity markets, also the debt markets, and that had an impact. Given that we have a long-term view here and this is a reinvestment, we thought the process throughout was very collaborative and really pleased where we ended up.

Tim Braziler (Director of Mid-cap Bank Equity Research)

Okay, great. Obviously, a very different transaction from the Umpqua-Columbia deal, but that took longer than expected. Here, you guys are expecting to close this in the second half of this year. I guess just can you preview us to some of the conversations that maybe have been had with regulators and framing that closing timeframe?

Clint Stein (President and CEO)

Yeah, there's a body of evidence that continues to build on deals getting approved quicker and for banks either our size or to create banks that are our size. That gives us a lot of optimism. The other thing is that we had fairly robust pre-flight conversations with the regulators, both at the regional office level as well as in D.C. I'll say I left those meetings very encouraged that it would be a much more efficient and more transparent process than what we went through last time.

The other aspect of it is we do not expect a DOJ review. The DOJ review cost us 11 months with the Columbia-Umpqua one. That right there is, I think, another data point that leads us to believe that getting this as close as a 2025 event is very likely.

Tim Braziler (Director of Mid-cap Bank Equity Research)

Okay. Just last for me, maybe for Frank, just looking at the credit mark, it looks well below PPBI's allowance level. Can you just talk to kind of the methodology in coming up with that 80 basis point mark relative to what looks like almost a 1.5% reserve for PPBI?

Ron Farnsworth (EVP and CFO)

Yeah, this is Ron. As Frank mentioned earlier, obviously, quite a bit of a significant amount of credit diligence and reviewing ACL modeling, economic forecasts, etc. Given the weight of the multifamily portfolio, the losses just are not there to support a higher level. That is how we weighted into that 80 basis points. In essence, 55% of the portfolio being multifamily is sitting at just under 60 basis points. Even that is probably overstated just given the long-term lack of credit issues expected in that portfolio we are seeing over the history.

Tim Braziler (Director of Mid-cap Bank Equity Research)

Got it.

Clint Stein (President and CEO)

That also jived with the due diligence activity as well, looking out three months, six months, that also factored into that number.

Tim Braziler (Director of Mid-cap Bank Equity Research)

Great. Thanks.

Operator (participant)

Thank you. I show our next question comes from the line of John Arfstrom from RBC Capital Markets. Please go ahead.

John Arfstrom (Associate Director of U.S. Research)

Hey, thanks. Good evening, everyone.

Clint Stein (President and CEO)

Hey, John.

John Arfstrom (Associate Director of U.S. Research)

Usually, we'd be neck-deep in the nuances of your earnings, I guess. What would you call out in your earnings for the quarter that you think went well and what you need to work on further? Just curious your level of confidence in that 26 consensus estimate. I know it's our estimate, but what are some of the puts and takes to hitting that?

Clint Stein (President and CEO)

I think the thing that I really looked at is the deposit growth that we had and what we were expecting, as Ron said, guiding into the first quarter, that our seasonality could be up to $500,000,000 of additional wholesale funding. To have the growth that we had and still see the seasonal activity, we could still see the patterns that we historically would because, I mean, literally by month and by the point in time in the month, if it is bonus payments or tax payments or distributions, you can see the flows. Those flows are still there. It was not like we did not experience the seasonality, but the results of our bankers, both on the retail small business side, but also on the commercial side, made a difference for us.

I think that as we look at, and as we've said, really around the margin, which then drives a big portion of earnings, it's deposit flows that are going to determine our level of performance in that regard. That's really encouraging. From my perspective, I would have liked to have seen some more C&I loan growth, but I'm encouraged by the year-over-year origination activity was up 17%. Unlike in the fourth quarter, where the activity translated into some really strong annualized growth, first quarter, it didn't. Tori and I and Chris are really watching closely. There's still a lot of optimism in terms of second quarter, third quarter from our bankers and things they have in their pipelines. That's the area where I'm really looking. Of course, we'd always love to have more corporate income. I kind of hit the major ones.

I'll look down the table and see if Tori or Chris want to add anything.

Tori Nixon (Senior EVP and Co-president)

I think the only thing I'd add to it is, as Clint talked about, the pipelines are pretty strong. Actually, there's a lot of momentum. We had some C&I growth, as Clint talked about, that didn't book in the first quarter. They kind of got pushed last minute into the second quarter. Pipelines are strong. They're up about 10% from end of Q4. A lot of good momentum. I like to see that. I think the fee income side same. We've got some really good pipelines, both loans, deposits, and in-court fee income. I think things are looking pretty good for us going forward.

John Arfstrom (Associate Director of U.S. Research)

Okay. Good. Fair enough. Clint, a follow-up on Chris McGratty's question. Just some of the feedback tonight has been that there's still more opportunity from the Umpqua merger. This could be a little bit too early. I know that might be unfair, but curious where you think you're going to push your people just to make sure you are ready for the merger.

Clint Stein (President and CEO)

The opportunity, the unharvested opportunity from the Umpqua merger is really around process improvement. We have a get better every day type of mindset, not change for the sake of change, but that do things better, simplify, more efficient. That work will never be done. I would say some of the things that we would have done maybe over a longer time horizon was the expense initiative and reorg that we did in the second quarter of last year. Rather than pacing that out, we did that over a 90-day time period. That lift was done. Really, that's the it's kind of operate our business, make it the best that it can be. We're never satisfied. We always think we can do something better.

In terms of having our bankers on their front foot, out winning new business, competing in the marketplace, continuing to invest in the growth of our franchise, whether it's products and services or technology or our people, we're doing all of those things. It really is business as usual. There's not a laundry list of things that we have to do and that any of those get delayed by this partnership with Pac Premier. The one other element that's there is just the balance sheet remix. That's just a matter of when rates cooperate or these things hit their maturities, hit the bid and get it done. That's not anything that's a distraction or requiring a heavy lift on the part of any of our team members that would then inhibit our ability to execute on this deal that we're talking about today.

Steve Gardner (Chairman and CEO)

Hey, John, this is Steve Gardner. You bring up an important point. This was very early on with one of the primary questions that we, as a management team and a board, had and something that we did a lot of due diligence around was exactly where was the combined entity and were they ready to take this next step. I can tell you we have a high level of confidence in the organization. Otherwise, we wouldn't be here today.

John Arfstrom (Associate Director of U.S. Research)

Okay. Very helpful. I would just say for the record, I'm happy about the name change. I think that's smart just to be under one brand for what it's worth. Thanks.

Frank Namdar (EVP and Chief Credit Officer)

Yeah. Thanks, John.

Operator (participant)

Thank you. I show our next question comes from the line of Jared Shaw from Barclays. Please go ahead.

David Feaster (Analyst)

Hey, good evening. Thanks. Congratulations on the deal. I guess as we look at the CRE and the work that Clint and you all have done to bring that concentration level down, should we think that going forward, you're just more comfortable sitting at a higher level of CRE with this combination? Or as sort of time progresses, should we expect to see that come back down to where you are now?

Clint Stein (President and CEO)

You're going to see a similar trend line that you've seen over the last couple of years post-Columbia-Umpqua merger. You're going to, if you go back further in time and you look at deals that Columbia did, there was always a downward slope in the CRE ratio just because the banks that joined us typically had a higher level. Steve has a great slide in his IR deck that shows their history of doing the same thing of walking down those ratios over time. I think we're in alignment. Really, what's got the ratio above 300 is the multifamily book. We're not opposed to multifamily. We've talked about stability in the quality of the credit. What I'm not a fan of is transactional multifamily. That's where we still have on our balance sheet today about $3.7 billion of transactional multifamily.

I think Steve is still working through some on his balance sheet as well. You move that down and we're comfortably below 300. That's why I say you're going to see that number come down. Now, we're still going to do relationship-based multifamily for customers where we have a meaningful relationship. That activity won't keep pace with the runoff that you'll see in those other portfolios.

Jared Shaw (Managing Director)

Okay. All right. Thanks. Can you speak a little bit about the cultural integration that you anticipate going forward and what the alignment looks like with the way the two banks do business and maybe especially around some of the incentive structures for RMs? Is that similar to what you have at Columbia?

Clint Stein (President and CEO)

Yeah. I'm excited about some of the components that Pac Premier has in their incentive structure because I think it can enhance ours and not enhance from a standpoint of just pay people more money, but align closer to actual desired outcomes and results. I do think there's a value that's placed on performance and execution at Pac Premier. Those are the same things that we value. From a cultural standpoint, I think there's really good alignment. One of the things that we did, we gathered our senior leadership teams, what was that, end of February, and we kind of talked through some major components of each operation and each entity. One of the things that Steve walked through was a deck on their culture. The words are different, but the principles and the values are identical.

When you start from a place like that, I think that the nuanced differences are very minor.

Tori Nixon (Senior EVP and Co-president)

This is Tori. I just want to add one piece to this because I think one of the things that I'm most excited about from a cultural standpoint is I've been doing this business for a long time. If you think about commercial bankers in particular, you kind of get two camps. One is somebody who just likes to make loans, and that's it. The other is somebody who really understands full relationship banking. Culturally, both companies are completely aligned in the relationship banking aspect of that. They're kind of simple words, but it's a much more difficult process from a sales standpoint.

The fact that we're both so aligned, I think, is a very, very nice fit and will allow us to grow the combined company much faster and much better than if it wasn't that way.

Chris Merrywell (Senior EVP and Co-president)

Yeah. This is Chris. I'll add to that, Tori, that when you look at the cost of funds, you can tell a lot about how bankers go to market. Very similar to the way that we've done it, it's not leading with rate. It's leading with value. It's leading with relationship. Like I said, that comes through in the total cost of funds that you see on Pacific Premier's books.

Clint Stein (President and CEO)

Yeah. It inspired Chris to sharpen the pencil on deposit pricing when he saw Pac Premier's cost was lower than ours by a few basis points.

Jared Shaw (Managing Director)

Yeah. Just finally for me, when you look at L.A. and Southern California, is this the platform you sort of need to get to where you want to be? Do you think that there will be additional hiring? Is there an opportunity to take advantage of some of that market disruption from the last few years to grow the team beyond what it will be now?

Clint Stein (President and CEO)

I think I can answer that that it's a little bit of both. A $70 billion franchise that has coverage from the Canadian border to the Mexican border has the density that we will have in what's the world's fifth largest economy, top 10 pro-forma deposit market share. Our position just broadly in the eight western states of there's a before of us that are $70 billion-$80 billion. The way that we go to the market as a down the middle of the fairway commercially oriented bank, I think that creates a tremendous amount of opportunity. We've seen it even with limited infrastructure in that market that we've seen the power of that market. We've seen the power of being a $50 billion bank in that market. I think it just acts as an accelerant for what we've done.

You take the talent and the experience in the market of Steve's people. I think that it also kind of supercharges what they've been able to do. I don't know that it's going to be a pretty dynamic company. It's going to, I mean, it's tremendous scarcity value. We're going to be able to drive additional value in that, particularly in Southern California, but also throughout the eight states that we have. When we look at what's been really kind of interesting, and even when we were going through the merger and why we're in the waiting period for the Columbia-Umpqua merger, the level of talent that sought us out that wanted to come and be a part of what we were going to create.

All we had at that point was a promise to create the premier business bank throughout the west. This solidifies that. I think then, again, we become the employer of choice in all of our markets. This is Tori. I'm just going to add one other thing here. There is so much disruption in the Southern California market. We will continue. We're going to get 40+ new RMs. They're going to be great teammates. We'll keep looking for talent. When we find talent that we think is creative to the company and helps take market share and grow, we're going to bring them into the bank. We just recently hired a couple of folks in Arizona. I think they're going to be fantastic for the bank. To Clint's point, we just keep looking for people that want a really good home to have careers.

I think that's going to help us even further in Southern California.

David Feaster (Analyst)

Thanks.

Operator (participant)

Thank you. I show our next question comes from the line of Jeff Rulis from D.A. Davidson. Please go ahead.

Frank Namdar (EVP and Chief Credit Officer)

Thanks. Good afternoon. I guess checking in on kind of the plan to open more branches. I guess the first part of that question is, is that somewhat on hold with this deal? Do you see that through? You've got too much to juggle or not? Maybe the second question, and I know Clint, you're fairly conservative and you're going to take care of one thing before the next, but I guess it begs the question, some of these states in the Rocky Mountain swath, you say you're accelerating Southern California expansion by 10 years with this transaction. Does that open up the discussion to look for M&A to accelerate the Utah, Colorado, Arizona expansion through M&A? That's part two. Thanks.

Clint Stein (President and CEO)

Yeah. Hi, Jeff. It doesn't put our de nova branch expansion strategy on hold.

We have two locations in the Phoenix area right now that are under construction. We have one in L.A. that I think also it's a nice fit with Steve's existing footprint, and that will move forward. We just opened Denver last month. We have Colorado Springs coming online. Those things will continue to move forward. That is really mostly a different group and a different part of our company that executes on those de nova branch openings. What this does is it allows us to pivot our focus from a de nova strategy in Southern California to the Intermountain states and looking at some opportunities there. Because again, we see some disruption, and we've seen what our bankers have been able to achieve with limited infrastructure in those newer markets for us.

As I always say, they're earning the right for us to reinvest in them and help them grow their franchise. I do not want to give the keys to the strategic roadmap out across the conference call. What I will say is your line of questioning aligns with our way of thinking in that it allows us to pivot those other resources that are not necessarily involved in M&A type stuff towards those newer markets and figure out some opportunities there to capitalize on what we're already seeing.

Okay. Thanks, Clint.

Operator (participant)

Thank you. I show our next question comes from the line of Anthony Elian from JPMorgan. Please go ahead.

Anthony Elian (Equity Research Analyst)

Hi everyone. Clint, I'm curious what type of balance sheet growth you expect from the combined franchise, right? If I look at Columbia standalone, it's been pretty much a low single-digit score the past couple of years. But you're adding Pacific Premier now, which is in higher growth markets. So what level of balance sheet growth do you envision the combined company to eventually generate?

Clint Stein (President and CEO)

I think one of the things we'll have to work through is this rundown in those transactional real estate portfolios. That is both the multifamily as well as the single-family Resi book. I've said publicly that single-family Resi was too big of a portion of our portfolio. By virtue of being a bigger bank, that helps us kind of start to right-size that. It gets us about halfway to where we want to be, which is 10% or less of the book. Bottom line, loan growth will be muted some as those portfolios run off. I would say that if we're not on, I would zero in on the C&I and the owner-occupied real estate portfolios. If we're not growing at at least the rate of double of GDP, then I'll be disappointed.

I guess if you have your crystal ball and you can tell me what GDP is, then I can tell you in two years and three years what I would expect for loan growth. Right now, GDP is expected to be pretty muted. I'd say that translates into kind of low to mid-single digits.

Anthony Elian (Equity Research Analyst)

Okay. My follow-up for Steve, I'm curious why Pac Premier is not going at this alone, right? I mean, Clint outlined the attractiveness of Southern California in his prepared remarks. I would just think that there's already a ton of growth opportunities for you available given the number of banks that have exited that market in recent years. Thank you.

Steve Gardner (Chairman and CEO)

It's a good question. I mean, it's certainly one of the important areas that the board has been considering for some time is that what is the best use of the excess capital that we have in looking at organic growth, potentially doing some tactical things around the balance sheet and the like. 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. I'll maybe fall back on one of Clint's comments earlier. Certainly get a hold of the S4 proxy registration statement and read through it. Really, it's the reinvestment that we have here is very attractive.

Anthony Elian (Equity Research Analyst)

That's great. Thank you.

Operator (participant)

Thank you. I show our next question comes from the line of Andrew Terrell from Stephens. Please go ahead.

Andrew Terrell (Managing Director)

Hey, good afternoon. If I could just ask maybe for Ron on the margin, just from an organic standpoint, you had a big drop in the securities purchase accounting this quarter. I would assume that's mostly due to rate volatility that we saw interquarter. If I step that back up from here, it seems like you could pretty easily get above your kind of margin guidance over the near term. Just maybe wanted to get a sense of where the purchase accounting is going to go or where you're expecting it to go, and then just your thoughts on the organic margin going forward.

Jeff Rulis (Managing Director and Senior Research Analyst)

Yeah. Thanks. Great question on the bond portfolio. It is interesting when you get a CPR that potentially is at zero, if not below. It was just a complete slowdown in prepays, could be related to the overall volatility in the markets. That in essence pushed out the discount accretion. It did not go away. It just delayed the recognition over time. All else being equal, if there is stability, then yeah, we would see potentially some additional discount accretion back between the last couple of quarters levels, which would help on that front. If it continues, I would expect that to continue to be set at this depressed level for at least a couple of quarters. Overall, though, back to the NIM question, I was really pleased with the results in Q1.

Like I said, we did pay down the $590 million of wholesale later in the quarter. We will see the benefit of that on NIM in Q2. All else being equal, seasonally, historically, we are usually weaker in the first half of Q2, tax time, etc. It starts to build back up late in the second quarter. Third quarter is always the best month. Overall, in terms of the NIM and the last couple of quarters levels, it is going to be subject to how deposits flow over that time period. Are we able to continue to reduce wholesale?

Andrew Terrell (Managing Director)

Any change to, I think you guys, last quarter, I think we were talking about a margin in the range of 355-365, kind of trying to that level. Any refresh to that?

Ron Farnsworth (EVP and CFO)

That's what I discovered. Yeah. Subject to deposit flows over the coming couple of quarters, if those are better and we're able to reduce wholesale seasonally, as would show maybe in Q3, then that's definitely potentially been in the upper end of that range.

Andrew Terrell (Managing Director)

Understood. Okay. The rest of mine were addressed, and congrats to both parties on the deal.

Ron Farnsworth (EVP and CFO)

Thank you.

Operator (participant)

Thank you. I show our last question in the queue comes from the line of Nichola from UBS. Please go ahead.

Hi. Thanks for taking my question. Clint, just thinking about the CRE concentration conversation and the tendency for that to drip lower on the other side of deals that you've done in the past, along with your increased focus on growing relationship type C&I lending. As you were thinking about potential M&A activity, how did you weigh a deal of this nature versus potentially something that might have been more C&I focused that could accelerate your growth efforts there?

Clint Stein (President and CEO)

I think Pac Premier is C&I focused. I think it gets back to if you look at, zero back in on a comment that Chris Merrywell said earlier about the deposit composition and the pricing and the similarities. You look at the activities that the Pac Premier teams are engaged in today, and they very much align with a lot of what we do across our footprint today. The multifamily is a work lockdown position for Steve, and I'm sure he'll chime in on what their focus has been. I think that it's similar to the multi-year kind of process I've talked about with what we'll do with some of the legacy on-call portfolio in multifamily and single-family Resi, it takes time to burn that stuff off your balance sheet.

I think a lot of this that Steve has came through the prior acquisition that he did. That is why I referenced the chart in his investor presentation where it shows over the years how they've walked that down. I don't know that maybe there's one or two other franchises that would be similar in terms of what Pac Premier brings from a C&I perspective, but there's nobody that brings the density and the core density in the L.A. and Southern California markets.

I mean, this is like such a natural fit that I hate to index too much on the dots on the map, but when you go and you look at the slide deck and you see the complementary nature of our footprints and where Steve has a little bit here in the Northwest and we have a little bit in Southern California, together it just fits. Probably not the answer you're looking for, but to me, I think this was the deal to do. I think it creates the most value long term for both sets of shareholders. I'm not worried about the activities. What I want to do is make sure that we keep the great customers that Pacific Premier has and keep their talent. As we say, our focus is keep our people, keep our customers, and drive value for the shareholders.

That's what we're going to be zeroing in on for the next 24 months.

Steve Gardner (Chairman and CEO)

Yeah, Nick, this is Steve Gardner. You may not be familiar with our institution, but similar to Columbia over the years, when we do acquisitions, it typically does take our CRE ratio above 300%. It was well below that prior to the Opus acquisition that we did in 2020 and took us up to 385%. We've been working that down. Probably just given the nature of what had occurred through the pandemic and in the subsequent years, it's come down a bit more slowly than we have anticipated, but we are historically a C&I focused bank. You can really see that in spades through the deposit franchise.

Understood. Thank you both very much for that. Maybe just one final question on the regulatory front. Just thinking from the perspective of the Umpqua deal not having been that far in the distant past, did you feel any sense of urgency to get a deal done in this more favorable regulatory backdrop that we are in? Did the stars just really align for the deal to come to fruition? Thank you both for your questions, for your answers again.

Clint Stein (President and CEO)

Yeah. I'm going to say it's the latter. The stars just aligned. I’ll go back to Steve and I are very experienced in M&A, and we know and understand the importance of developing a relationship with your counterparts at these different institutions so that when the stars appear, that they may be aligning, that there's already a familiarity, and you can have good, candid, honest dialogue and determine if the timing is right. As I said earlier in the call, it's been a couple of years that we've been talking and developing that relationship. If it would have been 2026 that the stars aligned, I think we would have done this in 2026. If it was 2027, we would have done it in 2027. The fact is that everything just kind of aligned, and now it's as good of a time as any.

We believe that whether you want, however you want to think about it, where we ended up from a go-forward pro-forma ownership standpoint is kind of where we would have ended up regardless of when we did the deal.

Understood. Thank you. Congrats on the deal.

Thank you.

Operator (participant)

Thank you. I show no further questions in the queue. At this time, I'd like to turn the conference back to Jacque Bohlen, Investor Relations Director, for closing remarks.

Jacque Bohlen (Director of Investor Relations)

Thank you, Dilem. Thank you for joining this afternoon's call. Since we will not be hosting our traditional earnings call originally scheduled for tomorrow, please contact me if you have any questions or would like to schedule a follow-up discussion with members of management. Have a good rest of the day.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now disconnect.