Ray Davis, chief executive of Umpqua Holdings (UMPQ), saying size doesn't matter seems a bit ironic.

After all, Davis has spent the last 20 years taking the Portland, Ore., company from $160 million in assets to more than $22 billion after last week's purchase of Sterling Financial in Spokane, Wash.

An ability to gain scale through size was one of the things Davis highlighted as a hallmark of the transaction when it was announced in September. But Davis is hell-bent on keeping Umpqua's identity and reputation as a community bank intact.

"It is pretty common for the industry to pigeonhole everyone by size and type," he said in an interview, noting that some people take issue with larger institutions that use the term community bank. "What does size have to do with it? Being a community bank is a state of mind. It is how you operate your company."

Davis also seems eager to prove people wrong when they claim that an institution of Umpqua's size can't be a community bank.

"Most people don't believe we can pull this off, but here's our goal: to be a regional bank with geographic diversity that has all the products and services of the big guys," Davis says. "We want to be able to compete with them. Our culture is very well known and does differentiate us and we are going to continue to operate small. We are going to remain a community bank."

The cornerstones of a community bank involve things like integrity, transparency and community engagement, Davis says. He says maintaining those traits is a continuous exercise. For now, it includes things like keeping a flat management structure and promoting an environment where everyone is accessible and most decisions are made at a local level.

If successful, Umpqua would stand out in size class that often has difficulty finding an identity and, in turn, struggles to boost the bottom line, analysts say. Regional banks try to balance competing with bigger banks and staying close to their roots, says Brett Rabatin, an analyst at Sterne Agee. Rabatin, however, says he has trust in Davis.

"Either you reach this point and falter or you push through and succeed," Rabatin says. "Having known Ray [Davis] for many, many years, one of the things that has become obvious is that he is supremely focused on achieving results and he pushes to make sure it happens."

The combination of Umpqua and Sterling created the only large regional bank in the Pacific Northwest, but it may not be alone in that class for long. Several deals, including the Heritage Financial's (HFWA) agreement to buy Washington Banking (WBCO) and Cascade Bancorp's (CACB) agreement to buy Home Federal (HOME), will also create bigger institutions.

"Sterling-Umpqua was a pretty big transaction that basically started the music playing for the dance and could send a strong message to the rest of the banks there that have yet to find their partners," Rabatin says.

Davis agrees that his deal may have spurred more activity in his region.

"When you announce a deal that is transformational, it makes people sit back and say 'What are we going to do?'" Davis says. "If that is what has happened, I compliment those who are doing something."

The deal between Umpqua and Sterling was part of last year's resurgence of mergers involving similar-sized banks. In the 2000s, such deals gained a reputation as something that worked in theory but often failed during execution. The handful of recent such mergers will need more time to play out, but investors are enamored with them, Rabatin says, which will likely lead to more deals.

"This is another transaction that firmly gives credence to management teams' abilities to pull off quasi" mergers of equals, Rabatin says. "If you're thinking of pairing up like this, the market has been favorable to the ones that make strategic sense. If this was 2006 and an MOE was announced, the market would knock the stocks."

As of Monday, Umpqua's stock is up 7.5% since the eve of the Sterling deal's announcement.

Sterling shareholders received 49% ownership in Umpqua. Sterling was recapitalized in 2010 with $730 million that mostly came from private equity firms Warburg Pincus and Thomas H. Lee Partners, which each had a 23% stake.

As a condition of the Sterling deal, Umpqua registered the 43 million shares and additional warrants owned by the private-equity firms. Doing so allows Warburg and Thomas H. Lee to sell their stakes in Umpqua, but the company said in its filing that it is unaware of any plans by the private-equity firms to pare their holdings.

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