425: Columbia Banking System and Pacific Premier Bancorp Address Merger Lawsuits with Supplemental Disclosures

Columbia Banking System and Pacific Premier Bancorp have filed a Form 425 to supplement their Joint Proxy Statement/Prospectus, providing additional disclosures in response to shareholder lawsuits and demand letters challenging their proposed merger.

Summary

• Columbia Banking System, Inc. (Columbia) and Pacific Premier Bancorp, Inc. (Pacific Premier) are engaged in a multi-step merger, initially announced on April 23, 2025, involving the merger of Pacific Premier into Columbia, followed by the merger of Pacific Premier Bank into Umpqua Bank.
• The filing serves to supplement the Joint Proxy Statement/Prospectus, which was declared effective on June 16, 2025, and mailed to shareholders around June 17, 2025.
• As of July 11, 2025, one Columbia shareholder (Siegel) and two Pacific Premier shareholders (Clark and Parshall) have filed complaints alleging breach of fiduciary duty, negligent misrepresentation, and concealment regarding material omissions in the Joint Proxy Statement/Prospectus.
• Both companies have also received demand letters from purported shareholders alleging similar material omissions in violation of Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934.
• The lawsuits generally seek injunctive relief to halt the merger or the shareholder vote, rescission if the transaction is consummated, damages, a corrected Joint Proxy Statement/Prospectus, and legal fees.
• Columbia and Pacific Premier deny the claims' merit and the necessity of supplemental disclosure but are voluntarily providing additional information to avoid nuisance, potential expense, and delay.
• Supplemental disclosures include detailed discussions from Columbia and Pacific Premier board meetings regarding the strategic rationale, financial assessments, due diligence updates, and consideration of alternative strategic partners.
• Financial analysis indicates the merger could be accretive to Columbia's estimated EPS by 13.5% in 2026E, 14.7% in 2027E, and 13.5% in 2028E, but dilutive to tangible book value per share by 7.6% at closing (estimated December 31, 2025), decreasing to 0.0% dilution by 2028E.
• For Pacific Premier, the merger could be accretive to estimated EPS by 84.1% in 2026E and 66.5% in 2027E, but dilutive to tangible book value per share by 23.2% at closing (estimated December 31, 2025).
• The discount rate for Columbia common stock was calculated at 11.07%, and for Pacific Premier common stock at 11.57%, based on risk-free rate, equity risk premium, size premium, and 2-year beta.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the emergence of multiple shareholder lawsuits challenging the merger, which introduces legal uncertainty, potential delays, and additional costs. While the merger itself has strategic benefits and projected EPS accretion, the significant tangible book value dilution for both companies and the need to file this supplement to address legal claims weigh down the overall sentiment.

Positives

• The Columbia board of directors unanimously supported continuing to explore the potential transaction with Pacific Premier, citing benefits such as accelerating Southern California expansion, complementary commercial banking strategy, and consumer banking growth opportunities.
• Columbia management noted the efficiency of expanding into Pacific Premier's footprint through the potential transaction compared to organic growth, highlighting the appeal of Pacific Premier's commercial banking franchise, HOA banking business, custodial trust operations, escrow and 1031 exchange business, and API banking platform.
• The merger is projected to be accretive to Columbia's estimated earnings per share (EPS) by 13.5% in 2026, 14.7% in 2027, and 13.5% in 2028.
• The merger is projected to be significantly accretive to Pacific Premier's estimated EPS by 84.1% in 2026 and 66.5% in 2027.
• Columbia and Pacific Premier are proactively providing additional disclosures to address shareholder concerns and avoid potential delays and expenses associated with the lawsuits, despite believing the claims are without merit.

Negatives

• Shareholder complaints have been filed against both Columbia and Pacific Premier, alleging material omissions and misrepresentations in the Joint Proxy Statement/Prospectus, seeking to enjoin or rescind the proposed transaction.
• The proposed transaction is expected to be dilutive to Columbia's tangible book value per share by 7.6% at closing (estimated December 31, 2025), though this dilution is projected to decrease to 0.0% by 2028.
• The proposed transaction is expected to be significantly dilutive to Pacific Premier's tangible book value per share by 23.2% at closing (estimated December 31, 2025).
• Other potential strategic partners for Pacific Premier cited reasons for not pursuing a transaction, including an uncertain economic and regulatory environment, timing of integration efforts from recent acquisitions, and prevailing market volatility affecting stock valuations for all-stock transactions.

Risks

• Changes in general economic, political, or industry conditions, and in conditions impacting the banking industry specifically.
• Uncertainty in U.S. fiscal, monetary, and trade policy, including Federal Reserve Board interest rate policies, and effects of declines in housing/commercial real estate prices, high unemployment, inflation, or recession.
• Volatility and disruptions in global capital and credit markets.
• Impact of bank failures or adverse developments at other banks on general investor sentiment regarding bank stability and liquidity.
• Changes in interest rates that could significantly reduce net interest income and negatively affect asset yields, valuations, and funding sources.
• Competitive pressures among financial institutions and nontraditional providers of financial services.
• Concentrations within loan portfolios (including commercial real estate loans), large loans to certain borrowers, and large deposits from certain clients.
• The success, impact, and timing of business strategies, including market acceptance of new products/services and ability to implement efficiency initiatives.
• The nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations.
• Changes in laws or regulations.
• Occurrence of any event, change, or circumstances that could give rise to the right of one or both parties to terminate the merger agreement.
• The outcome of any legal proceedings that may be instituted against Columbia or Pacific Premier.
• Delays in completing the Proposed Transaction.
• Failure to obtain necessary regulatory approvals, or imposition of adverse conditions by such approvals.
• Failure to obtain shareholder or stockholder approvals, or to satisfy any other closing conditions on a timely basis or at all.
• Changes in Columbia's or Pacific Premier's share price before closing, due to financial performance, broader market movements, or peer company performance.
• The possibility that anticipated benefits of the Proposed Transaction are not realized when expected or at all, including integration problems.
• Certain restrictions during the pendency of the Proposed Transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions.
• The possibility that the Proposed Transaction may be more expensive to complete than anticipated.
• Diversion of management's attention from ongoing business operations and opportunities.
• Potential adverse reactions or changes to business or employee relationships resulting from the announcement or completion of the Proposed Transaction.
• The dilution caused by Columbia's issuance of additional shares of its capital stock in connection with the Proposed Transaction.

Future Outlook

The companies anticipate completing the Proposed Transaction, with management focused on realizing strategic goals such as expanding Southern California presence and integrating operations. They project significant EPS accretion for both Columbia and Pacific Premier post-merger, despite initial tangible book value dilution for both. The outlook is subject to various risks, including economic conditions, regulatory approvals, and the outcome of ongoing legal proceedings, which could impact the timing and realization of anticipated benefits.

Management Comments

• Mr. Stein informed the Columbia board of directors about his January 30, 2025 and February 11, 2025 conversations with Mr. Gardner, noting Pacific Premier's board support for continuing dialogue.
• Columbia management discussed the strategic elements of the transaction, including the ability to significantly accelerate Columbia's strategic goal of expanding its Southern California presence, the complementary nature of Pacific Premier's commercial banking strategy, and the opportunity for consumer banking growth.
• Columbia management noted the expected efficiency of expanding into Pacific Premier's footprint through the potential transaction as compared to organic growth and discussed the appeal of Pacific Premier's commercial banking franchise as well as its HOA banking business, custodial trust operations, escrow and 1031 exchange business, and its API banking platform.
• Mr. Stein stated that based on the status of due diligence, it was Columbia management's recommendation to move forward with the negotiations toward the potential transaction, with the Columbia board of directors to subsequently approve any proposed final terms.
• Columbia and Pacific Premier believe that the claims asserted in the Siegel, Clark, and Parshall complaints, along with those asserted in the Demand Letters, are without merit and specifically deny that any supplemental disclosure was or is required under applicable law.
• Columbia and Pacific Premier have determined to voluntarily supplement the Joint Proxy Statement/Prospectus with certain disclosures to moot certain of the plaintiffs' disclosure claims, to avoid nuisance, potential expense and delay, and to provide additional information to shareholders and stockholders, and without admitting any liability or wrongdoing.

Industry Context

The proposed merger between Columbia Banking System and Pacific Premier Bancorp reflects a continuing trend of consolidation within the U.S. banking sector, particularly among regional banks seeking to achieve greater scale, expand geographic footprints, and enhance competitive positioning. The strategic rationale emphasizes complementary business lines, such as commercial banking and specialized services like HOA banking, which aligns with broader industry efforts to diversify revenue streams and deepen client relationships. The challenges faced by other potential strategic partners, citing uncertain economic and regulatory environments and market volatility, underscore the current cautious M&A landscape, making the progression of this specific transaction notable despite the legal hurdles.

Comparison to Industry Standards

• The Columbia Peer Group (e.g., Zions Bancorporation, Western Alliance Bancorporation, First Horizon Corporation) and Pacific Premier Peer Group (e.g., Banc of California, First Interstate BancSystem, Glacier Bancorp, Inc.) provide benchmarks for financial performance and valuation metrics as of December 31, 2024 (or March 31, 2025 for some financials).
• The analysis of precedent transactions, including deals like Old National Bancorp/Bremer Financial Corporation (11/25/24) and SouthState Corporation/Independent Bank Group, Inc. (05/20/24), offers a comparative framework for deal valuation metrics such as Price/Pay-To-Trade (0.55x-1.19x), Core Deposit Premium (0.0%-8.7%), and Price/LTM Core EPS (3.9x-20.3x).
• The projected EPS accretion for Columbia (13.5%-14.7%) and Pacific Premier (66.5%-84.1%) suggests a strong earnings rationale for the merger, which can be compared against typical accretion levels seen in other bank mergers.
• The tangible book value dilution for Columbia (-7.6% at closing) and Pacific Premier (-23.2% at closing) indicates a significant upfront hit to book value, which is a common but often scrutinized aspect of bank mergers, requiring a clear earn-back period to justify the transaction.
• The discount rates calculated for Columbia (11.07%) and Pacific Premier (11.57%) reflect their respective costs of capital, which are critical inputs for valuation models and can be compared to the cost of capital for other regional banks in the current market environment.

Corporate Governance

Legal Proceedings

• Siegel vs. Columbia Banking System, Inc. et al. No. 25-2-09604-7, filed June 24, 2025, in the Superior Court of Washington, County of Pierce, alleging state law claims of breach of fiduciary duty to disclose material facts, negligent misrepresentation, and concealment against Columbia and its directors.
• Clark v. Pacific Premier Bancorp, Inc. et al. No. 653808/2025, filed June 24, 2025, in the Supreme Court of the State of New York, County of New York, alleging state law claims of negligent representation and concealment with respect to allegedly materially incomplete and misleading claims in the Joint Proxy Statement/Prospectus against Pacific Premier and its directors.
• Parshall v. Pacific Premier Bancorp, Inc. et al. No. 653824/2025, filed June 25, 2025, in the Supreme Court of the State of New York, County of New York, alleging state law claims of negligent representation and concealment with respect to allegedly materially incomplete and misleading claims in the Joint Proxy Statement/Prospectus against Pacific Premier and its directors.
• Demand letters received by both Columbia and Pacific Premier from purported shareholders, generally alleging material omissions in violation of Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder.
• The complaints and demand letters generally seek injunctive relief enjoining the transaction or shareholder vote, rescission if consummated, damages, a corrected Joint Proxy Statement/Prospectus, and costs including attorneys' fees.

Stakeholder Impact

• Shareholders: Face potential dilution of tangible book value, are subject to a vote on the share issuance, and are involved in legal proceedings challenging the merger's disclosures.
• Employees: Will be impacted by the integration of the two companies, including systems conversion and potential changes in corporate culture and compensation practices.
• Customers: May experience changes in banking services, branch access, and digital platforms as Pacific Premier Bank merges into Umpqua Bank, potentially benefiting from expanded geographic presence and specialized services.
• Regulatory Authorities: Will continue to review and approve the Proposed Transaction, with the possibility of imposing conditions that could affect the combined company.

Next Steps

• Columbia and Pacific Premier will continue with the Proposed Transaction, including seeking necessary shareholder and regulatory approvals.
• The companies will continue to defend against the existing lawsuits and may face additional similar complaints.
• Shareholders of Columbia and stockholders of Pacific Premier will proceed with their respective votes on the Proposed Transaction and the Share Issuance.

Key Dates

Recommendation

Keywords

Merger, Acquisition, Banking, Financial Services, SEC Filing, Form 425, Proxy Statement, Shareholder Lawsuit, Fiduciary Duty, Disclosure, Financial Metrics, EPS Accretion, TBV Dilution, Corporate Governance, Risk Management, Strategic Expansion, Commercial Banking, Umpqua Bank, Pacific Premier Bank