Umpqua Holdings Corp. of Roseburg, Ore., and VRB Bancorp of Medford, Ore., plan to merge in a deal that would create the third-largest bank holding company in the state.

VRB's Valley of the Rogue Bank and South Umpqua Bank would be combined into Umpqua Bank, an Umpqua Holdings' subsidiary with nearly $750 million of assets and 27 branches stretching from Portland to Ashland. Billed as a merger of equals, the deal, announced Tuesday, would be valued at $54 million and is expected to close in the fourth quarter.

Valley of the Rogue is one of the region's best-performing banks, with net interest margins consistently in the 6% range. South Umpqua, meanwhile, has made a name for itself with its sales culture. Its branches - or "stores," as they are called - offer lounge areas where customers can drink the bank's special blend of coffee, read a newspaper, or check a stock quote on computer terminals.

"With their operational strength coupled with our sales approach, I think this is creating the financing powerhouse in the Northwest," said Raymond P. Davis, who would remain president and chief executive officer of Umpqua Holdings.

Umpqua is also expanding into additional services. Last month the company announced that it is acquiring Adams, Hess, Moore & Co., a Portland securities brokerage firm with $10 million of annual revenues. Umpqua earlier bought the brokerage firm Strand, Atkinson, Williams & York, and plans to expand into other types of services.

"We've got a long laundry list of companies we're looking at," Mr. Davis said. "We're considering acquiring technology companies, because it would be good to have a partner to help provide the technology we need."

William A. Haden, president and chief officer of VRB and Valley of the Rogue Bank, would assume the position of president and CEO of Umpqua Bank. The holding company's board of directors would include six directors from Umpqua Holdings and five from VRB.

Umpqua Holdings would issue approximately 6,753,000 new shares to VRB shareholders, bringing Umpqua's total shares outstanding to approximately 14,378,000. VRB shareholders would receive 0.8135 Umpqua Holdings shares for each VRB share.

James Bradshaw, a senior analyst with D.A. Davidson & Co. in Portland, said the new Umpqua would give the state's larger bank companies, West Coast Bancorp of Lake Oswego and Centennial Bank of Eugene, a run for their money.

"The combination makes a better growth story, and with their larger lending limits, they'll be better able to compete with some of the biggest banks in this market," he said.

The biggest question mark, Mr. Bradshaw said, is if Valley of the Rogue's customers and employees can adapt to Umpqua's more aggressive sales strategy.

"That's probably the biggest risk," he said. "But Umpqua has been the fastest growing bank [in Oregon] for three years, so I think most of VRB's customers and employees will embrace their style."

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