Paul Taylor can lay claim to being a billion-dollar turnaround specialist.
He boosted the profit at Denver-based Guaranty Bancorp, his last job, and helped it get sold for $1 billion in late 2018.
Then in only nine months, he managed to turn around the once problem-plagued Opus Bank (Nasdaq: OPB) enough that it was snapped up for a billion dollars by Irvine cross-town rival Pacific Premier Bancorp (Nasdaq: PPBI).
“We look forward to the opportunities and benefits this combination will bring to our shareholders,” Taylor said in a Feb. 3 statement about the deal.
Pacific Premier’s acquisition, which is scheduled to be completed in the second quarter, will create the sixth-largest bank on the West Coast with $19.8 billion in assets. It will allow Orange County’s largest locally based bank to expand its presence in markets such as Seattle and Portland.
The loan portfolio of Pacific Premier will nearly double to about $14.6 billion, including close to $5 billion of loans in the multifamily sector. It will also be able to expand into trust and escrow services.
Pacific Premier Chief Executive Steven Gardner said the acquisition will give his firm the scale needed to compete nowadays.
“The reality is we are in a consolidating industry and scale matters,” Gardner told analysts on a call to discuss the acquisition. “It provides greater capacity to invest in technology, to innovate and to create the operating efficiencies that lead to strong profitability.
“The combination of Pacific Premier and Opus provides one of the premier banks in the western U.S.”
Job Cuts?
It also means uncertain times for the estimated 1,700 employees of the two banks, including the approximately 750 who are based in Orange County. Taylor himself will not be joining the board or the management team.
Once the banks are combined, the Opus brand name will be dropped.
The bank estimated the combination will result in $41 million in cost savings in 2021. Gardner made clear that the combined bank will be shutting some of its 88 branches.
“We anticipate there will be some duplicative positions and branch overlap from both organizations, which will result in modest staff reductions,” Gardner told the Business Journal in an email. “Pacific Premier’s approach is to assess both its staff and that of Opus to select the most capable and talented combined team when the transaction closes.”
The deal elevates further the trajectory of Gardner, who led Pacific Premier as the fourth-best performing stock of an Orange County based company in the last decade when it rose 891% (see the Feb. 3 print edition of the Business Journal).
In 2000, Gardner became CEO of a then-failing Riverside-based bank and eventually moved it to Irvine.
He astutely avoided calamities like the 2008 financial crisis. He grew the bank, which had less than $1 billion in assets in 2010, both organically and through acquisitions, which he made annually, except for last year.
“After a quiet 2019 on the M&A front, PPBI re-enters the M&A arena with a splash,” Raymond James analyst David Feaster wrote in a note to investors.
“Management has not been shy about its M&A intentions, and OPB checks all the boxes it has previously laid out,” he added.
“The transaction also brings new business lines that generate inexpensive funding and scalable fee income, along with a $1.2 billion deposit beachhead in the Seattle MSA,” D.A. Davidson analyst Gary Tenner wrote in a note to investors.
Pacific Premier now has a market cap of $1.8 billion, almost twice the size of Opus Bank’s valuation. After the all-stock deal is completed, Pacific Premier will own 63% of the combined company with Opus shareholders holding the remaining 37%.
Opus Over
The acquisition caps a decade-long run for Opus, one of the county’s most colorful banks.
Opus was put together in 2010 by Stephen Gordon, a longtime OC banking executive previously known for successfully leading Irvine-based Commercial Capital Bancorp., which was sold in 2006 for $1 billion.
Opus was backed by Wall Street hedge funds who owned more than a third of the bank’s shares.
After going public in 2014, its shares at one point topped $40 each with a market cap topping $1 billion.
However, cracks began to appear in 2016 when it ran into problems with commercial loans. The bank was regaining traction when it missed investors’ expectations in the third quarter of 2018 that caused its shares to fall 22% in one day. Gordon departed a month later and the stock fell to almost $18.
“I’m incredibly proud of the team’s passionate efforts to build this great company, thereby enabling this critically important milestone,” Gordon told the Business Journal. “As the founder and largest individual shareholder of Opus, I look forward to the successful completion of the announced transaction.”
Risk Down
Taylor, who arrived last May, went about cutting costs and improving metrics like return on average assets. The bank topped analysts’ profit estimates in both the third and fourth quarters.
During Taylor’s nine-month reign, the bank’s shares rose about 24% to about $26.78.
Opus has exited its riskier businesses, which has raised the quality of its loan portfolio, Gardner said.
“The timing of this acquisition aligned strongly with our growth objectives,” Gardner said. “As a result, we are well positioned to build the leading commercial bank headquartered in Southern California.”
