Umpqua Holdings Corp. of Portland, Ore., is continuing to bulk up in California by acquiring North Bay Bancorp in Napa for $156 million in stock.
North Bay, with assets of $649 million, is the parent of Vintage Bank, which has 10 branches in California's wine country north of San Francisco and along Interstate 80. The $7.2 billion-asset Umpqua has 67 branches in northern California, most of which are in or near the Sacramento region, but only one branch in Napa.
"Napa is a high-growth market, and this deal moves us up quickly in the top three market share in that county," Raymond P. Davis, Umpqua's president and chief executive, said in an interview Thursday.
North Bay is ranked No. 3 in Napa County, with a 14.33% deposit share as of June 30, according to the Federal Deposit Insurance Corp. Umpqua has a 0.84% share.
Umpqua entered California in 2004 when it bought the $1.5 billion-asset Humboldt Bancorp in Roseville, which had branches in the Sacramento suburbs.
Last year Umpqua more than tripled its branch count in and around the state's fast-growing capital by buying the $1.3 billion-asset Western Sierra Bancorp of Cameron Park. That lifted its deposit share in the area from 0.87%, or No. 20, to 2.94%, or No. 7, as of June 30, according to the FDIC.
James Bradshaw, an analyst with D.A. Davidson & Co. in Portland, said that buying North Bay would help fill out Umpqua's footprint in northern California.
He called North Bay a "perfect fit" for the buyer's branch style. Umpqua's branches are referred to as stores, they serve Umpqua-branded coffee, and sales associates roam the floor. Customers can check out laptops to use in branches, download music produced by Umpqua, and attend poetry readings.
"The allure of the Umpqua brand fits well in a more upscale community like Napa and some parts of the San Francisco Bay Area that they are going to touch with this acquisition," Mr. Bradshaw said.
Joseph K. Morford 3rd, an analyst in the San Francisco office of Royal Bank of Canada's RBC Capital Markets, called the price of the deal reasonable. It works out to be 2.8 times tangible book value, 22 times trailing earnings, and a 21% premium on deposits.
"There should also be some synergies to be had both on the cost side and the revenue side, by cross-selling additional products and offering higher lending limits," Mr. Morford said. "The deal not only makes sense strategically, but the numbers pencil out well, too."
North Bay shareholders would receive 1.217 shares of Umpqua stock for each share of North Bay stock.
The deal is expected to be neutral to operating earnings in 2007 and accretive in 2008. Vintage Bank, which operates under the name Solano Bank in Solano County, is to be merged into Umpqua Bank. The holding company would have more than $8 billion of assets and about 140 branches in Washington, Oregon, and California.
After Thursday's announcement of the deal, North Bay's stock soared 12.5%, to close at $33.75. Umpqua's stock fell slightly, to $28.25.
Though Umpqua will entertain other acquisition opportunities, Mr. Davis said it is focused on opening branches. It opened seven in 2006 and plans to open seven to 10 this year.
The North Bay deal is expected to close next quarter.
