As filed with the Securities and Exchange Commission on March 9, 2007

Registration No. 333-140759

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1

to

 

Form S-4

 

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

Umpqua Holdings Corporation

(Exact name of registrant as specified in its charter)

 

 

One SW Columbia Street, Suite 1200

Portland, Oregon 97258

(503) 727-4100

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Steven L. Philpott

Executive Vice President, General Counsel and Secretary

Umpqua Holdings Corporation

675 Oak Street, Suite 200

PO Box 1560

Eugene, Oregon 97440

(541) 434-2997

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copies to:

 

 

 

Approximate date of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

 

 

 

MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

 

The boards of directors of Umpqua Holdings Corporation (“Umpqua”) and North Bay Bancorp (“North Bay”) have approved an Agreement and Plan of Reorganization pursuant to which North Bay would merge with and into Umpqua. We are sending you this document to ask you to vote in favor of the merger proposal.

 

Upon completion of the merger, North Bay shareholders will be entitled to receive 1.217 shares of Umpqua common stock for each share of North Bay common stock that they own. Based on this exchange ratio, the implied value per share of North Bay common stock is equal to $32.25, based on the market value of Umpqua common stock on March 8, 2007.

 

Umpqua common stock is listed on the NASDAQ Global Select Market under the symbol “UMPQ” and North Bay common stock is listed on the NASDAQ Global Market under the symbol “NBAN”. On January 17, 2007, the date prior to announcement of the proposed merger, Umpqua common stock closed at $28.77 and North Bay common stock closed at $30.00.

 

The value of the merger consideration to North Bay shareholders will depend on the value of Umpqua common stock upon completion of the merger and will fluctuate with the market price of Umpqua common stock. If the transaction closed on January 17, 2007 you would have been entitled to receive 121 shares and approximately $20.63 in cash for fractional shares for each 100 shares of North Bay common stock held. This amount will vary with the price of Umpqua’s stock.

 

After careful consideration, each of the boards of directors of Umpqua and North Bay determined the merger to be fair to its shareholders and in its shareholders’ best interests, and unanimously approved the merger agreement. Umpqua’s and North Bay’s board of directors each received an opinion of its respective financial advisor as to the fairness of the consideration to be paid, in the case of Umpqua, and the exchange ratio, in the case of North Bay, to their respective shareholders from a financial point of view.

 

Your vote is very important.  We cannot complete the merger unless North Bay’s shareholders approve the merger proposal. North Bay’s board of directors is soliciting proxies from shareholders to vote at a special shareholder meeting. You do not need to attend the meeting to vote your shares, although you are invited to do so. Whether or not you choose to attend, please complete, sign, date and return the enclosed proxy or follow the instructions on the proxy for telephone or internet voting.

 

This proxy statement-prospectus gives you detailed information about the merger and the shareholder meeting. Before sending in your proxy or voting your shares, you should read this entire document, particularly the information under “RISK FACTORS” beginning on page 11.

 

You should rely only on the information in this document or in other documents to which we refer you, concerning Umpqua, North Bay and the proposed merger. We have not authorized anyone to provide you with information that is different.

 

This document is dated March 9, 2007 and was first mailed on or about March 16, 2007.

 

 

Neither the Securities and Exchange Commission nor any other state securities commission has approved or disapproved of the terms of the merger agreement or the Umpqua common stock to be issued in connection with the merger, or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offense.

 

The securities offered through this document are not savings accounts, deposits or other obligations of a bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

 

[Inside Front Cover]

 

WHERE YOU CAN FIND MORE INFORMATION

 

THIS PROXY STATEMENT-PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT UMPQUA AND NORTH BAY FROM DOCUMENTS THAT ARE NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. SEE “INCORPORATION OF DOCUMENTS BY REFERENCE” ON PAGE 62. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR ORAL REQUEST. IF YOU REQUEST ANY INCORPORATED DOCUMENTS, WE WILL MAIL THE DOCUMENTS AND ALL EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE IN THE REQUESTED DOCUMENTS TO YOU BY FIRST CLASS MAIL, OR OTHER EQUALLY PROMPT MEANS. EACH OF UMPQUA AND NORTH BAY ALSO POST THEIR SEC FILINGS ON THEIR RESPECTIVE WEB SITES AT WWW.UMPQUAHOLDINGSCORP.COM AND WWW.NORTHBAYBANCORP.COM.

 

For documents relating to Umpqua, direct requests to:

 

Umpqua Holdings Corporation
Legal Department
Steven Philpott, Executive Vice President, General Counsel and Secretary
675 Oak Street, Suite 200
P.O. Box 1560
Eugene, OR 97440
(541) 434-2997 (voice)
(541) 342-1425 (fax)
Email: stevenphilpott@umpquabank.com

 

For documents relating to North Bay, direct requests to:

 

North Bay Bancorp
1190 Airport Road, Suite 101
P.O. Box 2200
Napa, CA 94558
Attn:  Terry L. Robinson, President and Chief Executive Officer
(707) 252-5024 (voice)
(707) 252-5025 (fax)
Email: trobinson@vintagebank.com

 

To obtain timely delivery before the shareholder meeting, you must request the information no later than April 18, 2007. These documents can also be reviewed and copied from various free web sites including the Securities and Exchange Commission’s web site listed below.

 

Umpqua and North Bay file annual, quarterly and periodic reports, proxy statements and other information with the SEC. You may obtain copies of these documents by mail from the Public Reference Room of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the SEC at 1-800-732-0330 for information on the operation of the public reference room. In addition, Umpqua and North Bay file reports and other information with the SEC electronically, and the SEC maintains a web site located at http://www.sec.gov containing this information.

 

Umpqua has filed a registration statement on Form S-4 to register with the SEC up to 6,000,000 shares of Umpqua common stock. This document is a part of that registration statement. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits at the SEC’s address set forth above. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement.

 

P.O. Box 2200
1190 Airport Road, Suite 101
Napa, California 94558

 

 

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD APRIL 25, 2007

 

 

 

 

To North Bay Shareholders:

 

A special meeting of shareholders of North Bay Bancorp will be held at Silverado Resort, Grand Ballroom, 1600 Atlas Peak Road, Napa, California at 7:00 p.m., local time, on April 25, 2007, for the following purposes:

 

1. Approval of Merger.  To consider and vote on a proposal to approve the principal terms of an Agreement and Plan of Reorganization by and among Umpqua Holdings Corporation, Umpqua Bank, North Bay Bancorp and The Vintage Bank, dated as of January 17, 2007, and the accompanying Plan of Merger.

 

2. Adjournments.  To consider and act upon a proposal to adjourn or postpone, if necessary, the special meeting to solicit additional proxies.

 

No other business will be transacted at the special meeting.

 

If you were a shareholder of record of North Bay Bancorp common stock as of the close of business on March 8, 2007, you are entitled to receive this notice and vote at the special meeting, or any adjournments or postponements thereof.

 

Your vote is important. Holders of a majority of the shares of North Bay Bancorp common stock outstanding on March 8, 2007 must vote in favor of the principal terms of the merger agreement for the merger to be completed. Whether or not you expect to attend the special meeting in person, please mark, sign, date and promptly return your proxy in the enclosed envelope or follow the instructions for voting by phone or on the Internet.

 

AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF NORTH BAY AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE MERGER PROPOSAL.

 

In connection with the proposed merger, you may exercise dissenters’ rights as provided in the California General Corporation Law. If you meet all the requirements under California law, and follow all of its required procedures, you may receive cash in the amount equal to the fair market value (as determined by mutual agreement between you and North Bay Bancorp, or if there is no agreement, by a court) of your shares of North Bay Bancorp common stock as of the day before the first public announcement of the terms of the merger. The procedure for exercising your dissenters’ rights is summarized under the heading “DISSENTING SHAREHOLDERS’ RIGHTS” in the attached joint proxy statement-prospectus. The relevant provisions of the California General Corporation Law on dissenters’ rights are attached to this document as Appendix E. To properly exercise dissenters’ rights, you must make written demand upon North Bay on or before the date of the special meeting of shareholders.

 

By Order of the Board of Directors,

 

Wyman G. Smith,
Secretary

 

March 9, 2007

 

Table of Contents

 

 

 

 

 

 

 

Terry L. Robinson, President and
Chief Executive Officer
North Bay Bancorp
1190 Airport Road, Suite 101
P.O. Box 2200
Napa, CA 94558
(707) 252-5024 (voice)
(707) 252-5025 (fax)
trobinson@vintagebank.com

 

 

 

 

 

 

 

 

 

 

SUMMARY

	•	All unvested North Bay stock options and all North Bay restricted stock awards will become fully vested at the closing of the merger;
	•	Members of North Bay’s executive management are parties to agreements, which provide for, subject to their willingness to remain employed with Umpqua or Umpqua Bank for up to one year following the merger and compliance with confidentiality and non-solicitation covenants, an amount payable in monthly installments over a period of time of up to twenty-four months following termination. The aggregate amount of cash severance payable under all existing North Bay severance agreements and the amended agreements is estimated at $2.7 million;
	•	The merger agreement requires Umpqua to indemnify, following the effective time of the merger, the present and former directors and officers of North Bay to the fullest extent permitted under applicable law against costs and expenses related to matters existing at or prior to the effective time of the merger; and
	•	The merger agreement requires Umpqua to provide North Bay’s existing directors and officers with liability insurance for a period of three years after the effective time of the merger.

	•	you deliver to North Bay, before the special meeting, a written demand for payment of your shares;
	•	holders of at least 5% of the total number of shares (including you) of North Bay common stock timely make the required written demand;
	•	you vote against the merger; and
	•	you comply with California law governing dissenters’ rights.

	•	approval of the merger proposal by North Bay shareholders;
	•	receipt of required regulatory approvals and waivers;
	•	absence of an injunction or regulatory prohibition to completion of the merger;
	•	accuracy of the respective representations and warranties of Umpqua and North Bay, subject to violations of the representations and warranties that would not have a material adverse effect on Umpqua or North Bay, individually or in the aggregate;

	•	receipt by each party of an opinion of Umpqua’s tax counsel that the merger will qualify as a tax-free reorganization;
	•	the average daily balance of North Bay’s core deposits for the calendar month immediately preceding the projected effective date of the merger being not less than 94% of the average daily balance of core deposits for the month of November 2006;
	•	compliance in all material respects by Umpqua and North Bay with their respective covenants in the merger agreement; and
	•	amended and restated employment agreements with North Bay executives being in full force and effect.

	•	accept the termination;
	•	adjust the exchange ratio to 1.2365; or
	•	maintain the 1.217 exchange ratio and pay $0.508 per share to each North Bay shareholder.

	•	in lieu of fractional shares,
	•	in the event Umpqua’s stock price is less than $26.42 over the Umpqua measuring period and Umpqua elects to “fill” with cash instead of increasing the exchange ratio, or
	•	who have properly exercised dissenters’ rights.

 

SELECTED FINANCIAL DATA

 

		Year Ended December 31,
		2006				2005				2004				2003				2002
		(Dollars in thousands except share data)
Operating Results
Interest income		$	405,941			$	282,276			$	198,058			$	142,132			$	100,325
Interest expense			143,817				72,994				40,371				28,860				23,797
Net interest income			262,124				209,282				157,687				113,272				76,528
Provision for loan and lease losses			2,552				2,468				7,321				4,550				3,888
Noninterest income			53,597				47,782				41,373				38,001				27,657
Noninterest expense			177,176				146,794				119,582				93,187				63,962
Merger-related expense			4,773				262				5,597				2,082				2,752
Income before income taxes and discontinued operations			131,220				107,540				66,560				51,454				33,583
Provision for income taxes			46,773				37,805				23,270				17,970				12,032
Income from continuing operations			84,447				69,735				43,290				33,484				21,551
Income from discontinued operations, net of tax			—				—				3,876				635				417
Net income		$	84,447			$	69,735			$	47,166			$	34,119			$	21,968
Per Share Data
Earnings per common share (basic):
Continuing operations		$	1.61			$	1.57			$	1.21			$	1.18			$	1.02
Discountinued operations			—				—				0.11				0.03				0.02
Net income		$	1.61			$	1.57			$	1.32			$	1.21			$	1.04
Earnings per common share (diluted):
Continuing operations		$	1.59			$	1.55			$	1.19			$	1.17			$	1.01
Discountinued operations			—				—				0.11				0.02				0.02
Net income		$	1.59			$	1.55			$	1.30			$	1.19			$	1.03
Dividends declared per common share		$	0.60			$	0.32			$	0.22			$	0.16			$	0.16
Dividend payout ratio			37.27	%			20.38	%			16.67	%			13.22	%			15.38	%
Book Value per common share		$	19.91			$	16.57			$	15.55			$	11.23			$	10.30
Financial Ratios
Return on average equity			8.70	%			9.80	%			9.61	%			11.24	%			13.58	%
Return on average assets			1.31	%			1.38	%			1.20	%			1.26	%			1.36	%
Net interest margin (fully tax equivalent)			4.74	%			4.84	%			4.68	%			4.85	%			5.38	%
Balance Sheet Data at Period End
Loans and leases		$	5,361,862			$	3,921,631			$	3,467,904			$	2,003,587			$	1,778,315
Allowance for loan and lease losses		$	60,090			$	43,885			$	44,229			$	25,352			$	24,731
Allowance as percentage of loans and leases			1.12	%			1.12	%			1.28	%			1.27	%			1.39	%
Total assets		$	7,344,236			$	5,360,639			$	4,873,035			$	2,963,815			$	2,555,964
Total deposits		$	5,840,294			$	4,286,266			$	3,799,107			$	2,378,192			$	2,103,790
Notes payable for trust preferred securities		$	203,688			$	165,725			$	166,256			$	97,941			$	75,000
Long term debt		$	9,513			$	3,184			$	88,451			$	55,000			$	24,219
Total shareholders’ equity		$	1,156,211			$	738,261			$	687,613			$	318,969			$	288,159

		Year Ended December 31,
		2006				2005				2004				2003				2002
		(Dollars in thousands except share data)
Operating Results
Interest income			38,980			$	33,742			$	26,585			$	22,251			$	21,179
Interest expense			9,886				5,082				3,543				2,995				3,691
Net interest income			29,094				28,660				23,042				19,256				17,488
Provision for loan and lease losses			200				815				620				238				576
Noninterest income			4,547				4,064				4,198				3,847				3,111
Noninterest expense			22,461				21,171				18,536				16,315				14,316
Income before income taxes			10,980				10,738				8,084				6,550				5,707
Provision for income taxes			3,854				4,105				3,020				2,179				1,999
Net income		$	7,126			$	6,633			$	5,064			$	4,371			$	3,708
Per Share Data
Earnings per common share — basic		$	1.73			$	1.63			$	1.26			$	1.11			$	0.97
Earnings per common share — diluted		$	1.66			$	1.56			$	1.23			$	1.08			$	0.95
Cash dividends declared per common share		$	0.14			$	0.14			$	0.12			$	0.11			$	0.10
Dividend payout ratio			8.43	%			9.15	%			11.27	%			11.17	%			12.20	%
Book value per common share at end of period		$	13.94			$	12.82			$	12.12			$	11.50			$	10.53
Financial Ratios
Return on average equity			13.24	%			13.94	%			12.34	%			11.70	%			11.36	%
Return on average assets			1.13	%			1.11	%			0.97	%			1.00	%			0.99	%
Net interest margin*			5.19	%			5.35	%			5.00	%			4.99	%			5.31	%
Balance Sheet Data at Period End
Loans (net of deferred fees)		$	460,636			$	414,880			$	377,765			$	306,663			$	237,627
Allowance for loan losses		$	5,052			$	4,924			$	4,136			$	3,524			$	3,290
Allowance as percentage of loans (net of deferred fees)			1.10	%			1.19	%			1.09	%			1.15	%			1.38	%
Total assets		$	654,661			$	602,697			$	562,063			$	459,482			$	416,458
Total deposits		$	475,565			$	516,393			$	484,493			$	406,445			$	367,803
Junior subordinated debentures		$	10,310			$	10,310			$	10,310			$	10,000			$	10,000
Other borrowings		$	104,000			$	19,000			$	19,000			$	—			$	—
Total shareholders’ equity		$	58,121			$	50,053			$	44,134			$	39,441			$	35,343

*		Fully tax-equivalent basis

 

SELECTED UNAUDITED COMPARATIVE PER SHARE DATA

										Pro Forma
										Combined				Pro Forma per
										Umpqua				Equivalent
		Umpqua				North Bay				and North				North
		Historical				Historical				Bay				Bay Share
Net Income from Continuing Operations Per Common Share for the Year Ended December 31, 2006:
Basic		$	1.61			$	1.73			$	1.59			$	1.94
Diluted		$	1.59			$	1.66			$	1.56			$	1.90
Cash Dividends Declared:
Year ended December 31, 2006		$	0.60			$	0.14			$	0.60			$	0.73
Book Value Per Share At:
December 31, 2006		$	19.91			$	13.94			$	20.78			$	25.29

 

MARKET PRICE DATA AND DIVIDEND INFORMATION

		Closing Sales Price
										North Bay
		Umpqua				North Bay				Equivalent
Price per share:
January 17, 2007		$	28.77			$	30.00			$	35.01
March 8, 2007		$	26.50			$	31.87			$	32.25

		Umpqua Common Stock												North Bay Common Stock
		High				Low				Dividend				High				Low				Dividend
2005
1st quarter		$	25.41			$	22.99			$	0.06			$	31.30			$	24.88			$	0.14
2nd quarter		$	24.23			$	19.63			$	0.06			$	28.81			$	22.88			$	—
3rd quarter		$	25.30			$	23.10			$	0.08			$	29.98			$	23.81			$	—
4th quarter		$	29.25			$	22.58			$	0.12			$	28.76			$	24.86			$	—
2006
1st quarter		$	29.67			$	26.25			$	0.12			$	30.48			$	26.00			$	0.14
2nd quarter		$	28.67			$	24.50			$	0.12			$	31.75			$	28.00			$	—
3rd quarter		$	29.27			$	23.98			$	0.18			$	30.54			$	25.21			$	—
4th quarter		$	30.66			$	27.21			$	0.18			$	29.00			$	26.71			$	—
2007
1st quarter (through March 8, 2007)		$	30.00			$	26.11			$	—			$	34.98			$	28.00			$	0.14

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

	•	the inability to obtain required approvals on acceptable terms, on the anticipated schedule or at all;
	•	loss of customers and personnel during the integration process;
	•	costs in completing the merger exceeding estimates;
	•	revenues following the merger being lower than expected;
	•	Umpqua’s ability to successfully integrate acquired entities and achieve expected synergies, operating efficiencies or cost savings;
	•	the ability to attract new deposits and loans;
	•	increases in competitive pressure among financial institutions;

	•	deterioration in economic conditions that could result in greater than anticipated loan losses;
	•	inflation, interest rate, market and monetary fluctuations;
	•	changes in legal or regulatory requirements; and
	•	the ability to recruit and retain certain key management and staff.

 

Completion of the merger represents an investment by North Bay shareholders in Umpqua’s common stock and an investment by Umpqua in North Bay’s assets and liabilities, each of which will subject the respective investor to various risks. You should carefully consider the following risk factors, as well as the matters addressed in the “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION” section of this document and the information contained in Umpqua’s and North Bay’s filings with the SEC incorporated into this document by reference, before deciding how to vote on the merger proposal.

 

The market value of Umpqua common stock to be received by North Bay shareholders will fluctuate before and after the merger and will be influenced by the performance of both Umpqua and North Bay prior to closing.

 

As long as Umpqua’s average closing price for the fifteen consecutive trading day period ending on the fifth business day prior to the projected effective date of the merger is no less than $26.42 and no greater than $33.58 per share, each share of North Bay common stock will be exchanged for the right to receive 1.217 shares of Umpqua common stock. The exchange ratio will not be adjusted for changes in the market price of North Bay common stock. The exchange ratio will be automatically adjusted downward if Umpqua’s stock price is more than $33.58 over the measuring period. If Umpqua’s stock price is less than $26.42, North Bay exercises its right to terminate the merger and Umpqua elects to adjust the exchange ratio, the exchange ratio will be adjusted upward. See “THE MERGER — Merger Consideration.” The value of the consideration that North Bay shareholders receive upon completion of the merger will depend on the market value of Umpqua shares at that time and could vary significantly from the market value on the date of this document or the date of the North Bay special meeting. An unexpected change in the performance or prospects of either Umpqua or North Bay and other factors that are beyond our control such as general market and economic conditions will likely influence the market value of Umpqua’s common stock. The market value of Umpqua shares will continue to fluctuate after the merger is completed.

 

The combined company may fail to realize all of the anticipated benefits of the merger.

 

The merger is expected to generate expense reductions of budgeted North Bay non-interest expense and after-tax cost savings when the operations of Umpqua and North Bay are completely integrated, which is expected to be at least six months following closing. The expense reductions are intended to be achieved by eliminating duplicative technology, operations, outside services and redundant staff, and through facility consolidations and purchasing efficiencies. The anticipated cost savings may not be realized fully or at all and could take longer to realize than expected. Any failure to realize the potential benefits could have a material adverse effect on the value of Umpqua common stock.

 

The integration of banking operations may not be completed efficiently, which could result in the loss of customers and employees.

 

At the time of the merger, The Vintage Bank and its Solano Bank division will merge with and into Umpqua Bank and operate under the “Umpqua Bank” name and charter. The integration of Umpqua’s and North Bay’s banking operations will involve substantial resources and could be disruptive to the employees and customers of The Vintage Bank and Solano Bank.

 

The Vintage Bank and Solano Bank customers are accustomed to traditional community bank branch facilities and services under two distinct brands. Umpqua Bank’s facilities operate under a single brand. Customers may not react favorably to re-branding following the merger. Umpqua Bank has transformed itself from a traditional community bank into a community-oriented financial services retailer. In implementing this strategy, Umpqua has remodeled many of its banking branches to resemble retail stores that include distinct physical areas or boutiques such as a “serious about service center,” an “investment opportunity center” and “a computer café.” Over a period of months following the merger, Umpqua intends to remodel and convert some of The Vintage Bank’s and Solano Bank’s branches in a similar fashion. Conversion to the Umpqua model involves significant costs and disrupts banking activities during the remodeling period, and presents a new look and feel to the banking services and products being offered. There is a risk that existing customers and employees will not stay with Umpqua Bank during the remodeling period or after the conversion is completed. There is also a risk that some existing customers

and employees may not react favorably to Umpqua Bank’s retail delivery system. There may be delays in completing the conversion, which could cause confusion and disruption in the banking operations. The failure to integrate banking operations efficiently, on budget and in a timely manner could have an adverse effect on the combined company and could result in lower than expected revenues or higher than expected costs following completion of the merger.

 

Umpqua is pursuing an aggressive growth strategy, which may place heavy demands on its management and infrastructure resources.

 

Umpqua is one of the faster-growing community financial services organizations in the United States. Umpqua Bank merged with Valley of the Rogue Bank in December 2000 and, in a series of transactions effective December 2001, acquired IFN Bank/Security Bank, Pacific State Bank, Family Security Bank, Lincoln Security Bank, McKenzie State Bank, Oregon State Bank and Linn-Benton Bank. Umpqua completed the acquisition of Centennial Bancorp in November 2002. In July 2004, Umpqua expanded its footprint into California with the acquisition of Humboldt Bancorp. In June 2006, Umpqua acquired Western Sierra Bancorp and its subsidiary banks Western Sierra National Bank, Auburn Community Bank, Central California Bank and Lake Community Bank. From time to time, Umpqua has also explored other merger and acquisition opportunities and expects to continue to do so. Umpqua expects that a substantial amount of its management’s attention and effort will need to be directed at deriving the benefits and efficiencies expected from the merger with North Bay. Moreover, the combined company will be dependent on the efforts of key management personnel to achieve the integration of the merger and any other acquisitions Umpqua may undertake. The loss of one or more key persons could have a material adverse effect upon Umpqua’s ability to achieve the anticipated benefits of the merger.

 

Continued growth by Umpqua may present operating and other problems that could adversely affect our business, financial condition and results of operations. Our growth may place a strain on our administrative, operational, personnel and financial resources and increase demands on our systems and controls. We anticipate that our business growth may require continued enhancements to and expansion of our operating and financial systems and controls may significantly challenge them. Our inability to continue to upgrade or maintain effective operating and financial control systems and to recruit and hire necessary personnel or to successfully integrate new personnel into our operations could adversely impact our financial condition, results of operations and cash flows. We cannot assure you that our existing operating and financial control systems and infrastructure will be adequate to maintain and effectively monitor future growth.

 

We may not be successful in overcoming these risks or other problems encountered in connection with acquisitions. Our integration of operations of banks or branches that we acquire may not be successfully accomplished and may take a significant amount of time. Our inability to improve the operating performance of acquired banks and branches or to successfully integrate their operations could have a material adverse effect on our business, financial condition, results of operations and cash flows. We expect to hire additional employees and retain consultants to assist with integrating our operations, and we cannot assure you that those individuals or firms will perform as expected or be successful in addressing these issues.

 

Umpqua is involved in non-bank business, which may not perform well in the future.

 

Umpqua has a licensed retail broker-dealer subsidiary, Strand, Atkinson, Williams & York, Inc. Retail brokerage operations present special risks not generally borne by community banks. For example, the brokerage industry is subject to fluctuations in the stock market that may have a significant adverse impact on transaction fees and customer activity. A decline in fees and commissions could adversely affect the subsidiary’s contribution to Umpqua’s income, and might increase the subsidiary’s capital needs. In its continuing expansion, Umpqua may acquire other financial services companies whose successful integration is not assured and may present additional management challenges and new risks.

 

North Bay shareholders will own approximately 8.1% of the combined company after the merger and will have less influence over management.

 

After the merger’s completion, North Bay shareholders will own 8.1% of the combined company, a significantly smaller percentage of Umpqua than their 100% ownership of North Bay. In addition, the Umpqua board of directors will remain the same following the merger and none of the existing North Bay directors will join

Umpqua’s board of directors. Consequently, North Bay shareholders will not be able to exercise influence over the management and policies of Umpqua to the same level they currently influence management and policies of North Bay.

 

The merger agreement limits North Bay’s ability to pursue alternatives to the merger.

 

The merger agreement contains non-solicitation covenants that make it more difficult for North Bay to discuss or commit to third-party proposals to acquire North Bay. North Bay’s board of directors is permitted to take these actions in connection with receipt of a competing acquisition proposal if it determines that the failure to do so would violate its fiduciary duties, but taking such actions would entitle Umpqua to terminate the merger agreement. See “THE MERGER AGREEMENT — No Solicitation.” The merger agreement also requires North Bay to pay Umpqua a termination fee of $5 million if the merger agreement is terminated in specified circumstances relating to an alternative acquisition proposal. See “THE MERGER AGREEMENT — Termination — Effect of Termination.” These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of North Bay from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquiror proposing to pay a lower per share price to acquire North Bay than it might otherwise have proposed to pay.

 

North Bay directors have entered into agreements that could have the effect of limiting North Bay’s ability to pursue alternatives to the merger.

 

The merger agreement must be approved by the holders of a majority of the outstanding shares of North Bay common stock entitled to vote at the special meeting. The directors of North Bay, who in the aggregate have the power to vote approximately 10.1% of the outstanding shares of North Bay common stock, have each executed agreements with Umpqua pursuant to which they have agreed to vote their shares in favor of the merger. Each director has agreed, in his or her individual capacity as a shareholder and not in the capacity of a director, that he or she shall not, directly or indirectly, initiate contact with any person or entity in an effort to solicit any alternative acquisition transaction. As a result, only an additional 1,676,466 shares, or 39.9% of the shares outstanding and entitled to vote at the special meeting, are required to approve the merger proposal.

 

North Bay’s executive officers and directors have financial interests in the merger that are different from the interests of shareholders who are not employees or directors of North Bay.

 

North Bay’s executive officers and a special committee of the North Bay board of directors negotiated the terms of the merger agreement, and North Bay’s board of directors unanimously approved and recommended that North Bay’s shareholders vote to approve and adopt the merger agreement. In considering these facts and the other information contained in this document, you should be aware that North Bay’s executive officers and directors have financial interests in the merger that are different from and in addition to the interests they share with you as a North Bay shareholder. See “THE MERGER — Interests of North Bay Directors and Executive Officers in the Merger” for detailed information about these interests, including the accelerated vesting of stock options and restricted stock awards, payments pursuant to employment agreements and accelerated vesting of supplemental executive retirement benefits.

 

When and Where the Meeting Will Be Held

 

The special meeting of North Bay shareholders will be held on April 25, 2007 at 7:00 p.m., local time, at Silverado Resort, Grand Ballroom, 1600 Atlas Peak Road, Napa, California.

 

Proposals at the Meeting

 

At the special meeting, North Bay shareholders will be asked to consider and vote to:

 

 

No other matters may be brought before the special meeting.

 

Who May Vote?

 

North Bay’s board of directors has fixed the close of business on March 8, 2007 as the record date for determining North Bay shareholders entitled to receive notice of and vote at the special meeting. As of that date, there were 4,201,600 shares outstanding and eligible to vote at the meeting, held by approximately 887 holders of record.

 

Voting

 

North Bay shareholders may vote in person at the special meeting, but do not have to attend the meeting to vote their shares. North Bay shareholders may vote their shares by proxy. Even if you plan to attend the meeting, you should submit a properly executed proxy either by completing, signing, dating and returning the proxy card or by following the instructions on the proxy card for touch-tone telephone or Internet voting.

 

How Will Proxy Holders Vote My Shares?

 

A completed and properly executed proxy received by North Bay prior to the commencement of the meeting, and not revoked, will be voted as directed by you. A signed proxy that is submitted without voting instructions will be voted by the named proxy holders “FOR” the merger proposal and, if necessary, “FOR” adjournment or postponement of the meeting to solicit additional proxies. In addition, the named proxy holders will vote in their discretion on such other matters that may be considered at the special meeting or any adjournments or postponements thereof.

 

The board of directors has named Terry L. Robinson and Wyman G. Smith as proxy holders. Their names appear on the proxy form accompanying this document.

 

Revoking a Proxy

 

A proxy may be revoked by:

 

 

You may still attend the meeting even if you have submitted a proxy. Written notices of revocation and other communications regarding solicitation or revocation of proxies should be addressed to:

 

North Bay Bancorp

1190 Airport Road

P.O. Box 2200

Napa, CA 94558

Attn: Wyman Smith, Secretary

 

North Bay Shares Held in Street Name

 

If you hold your shares in “street name,” meaning in the name of a bank, broker or other record holder, you must either direct the record holder of your shares how to vote or obtain a legal proxy from the record holder to vote at the special meeting.

 

If you do not instruct your broker or other nominee how to vote, the broker may submit a proxy without a vote, which is referred to as a broker non-vote. Brokers holding shares of North Bay common stock as nominees will not have discretionary authority to vote in the absence of instructions from the beneficial owners on the merger proposal. The failure to provide voting instructions and the resulting broker non-vote will have the same effect as a vote against the merger proposal.

 

How We Determine a Quorum

 

North Bay must have a quorum to conduct any business at the special meeting. Shareholders holding at least a majority of the outstanding shares of North Bay’s common stock must attend the meeting in person or by proxy to have a quorum. If you attend the meeting or submit a proxy, but abstain from voting on a given matter, your shares will be counted as present for determining a quorum. Broker non-votes will also be counted as present for determining a quorum.

 

How We Count Votes

 

Each share is entitled to one vote. The named proxies will vote shares as instructed on the proxies. Abstentions or broker non-votes will not be counted for or against the merger proposal, but they will have the effect of a vote against the proposal.

 

Vote Required to Approve the Merger

 

The affirmative vote of the holders of a majority of all shares of North Bay common stock outstanding on the record date is required to approve the merger proposal. An abstention or a broker non-vote will therefore have the effect of a vote against the merger agreement. North Bay’s board of directors urges you to submit your proxy by mail, touch-tone telephone or the Internet. If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote in favor of the merger proposal.

 

Proxy Solicitation

 

The accompanying North Bay proxy is being solicited by the North Bay board of directors. North Bay will bear the cost of soliciting proxies from its shareholders. In addition to using the mail, proxies may be solicited by personal interview, telephone and electronic communication. Banks, brokerage houses, other institutions, nominees and fiduciaries will be requested to forward proxy soliciting materials to their principals and obtain authorization for the execution of proxies. Officers and other employees or agents of North Bay and its subsidiaries, acting on North Bay’s behalf, may solicit proxies personally. North Bay has also made arrangements with The Altman Group, Inc., to assist in soliciting proxies, and has agreed to pay The Altman Group $7,500 plus reasonable expenses estimated at approximately $5,000. North Bay will pay, upon request, the standard charges and expenses of banks, brokerage houses, other institutions, nominees, and fiduciaries for forwarding proxy materials to and obtaining proxies from their principals. However, no such payment will be made to any of the officers, directors or employees of North Bay or any of its subsidiary banks.

 

Ownership of North Bay by North Bay Management and Others

 

On March 8, 2007 North Bay directors and executive officers owned 464,535 shares entitled to vote at the special meeting, constituting approximately 11.1% of the total shares outstanding and entitled to vote at the meeting. Each North Bay director has agreed to vote his or her shares in favor of the merger proposal.

 

The following table sets forth information regarding the beneficial ownership of North Bay common stock, as of March 8, 2007 by each North Bay director and executive officer, all North Bay directors and executive officers as a group and shareholders who own 5% or more of North Bay’s common stock.

 

 

 

 

 

 

 

Ownership of Umpqua by Umpqua Management and Others

 

The following table sets forth the shares of common stock beneficially owned as of March 8, 2007, by each director and each named executive officer of Umpqua, the directors and named executive officers as a group and those persons known to beneficially own more than 5% of Umpqua’s common stock, no par value. The address of each of the directors and named executive officers is c/o Umpqua Holdings Corporation, Umpqua Bank Plaza, One SW Columbia Street, Portland, Oregon 97258.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following description of the merger is not complete and is qualified in its entirety by reference to the merger agreement attached as Appendix A and the plan of merger attached as Appendix B. We urge you to carefully read the merger agreement and the plan of merger.

 

General

 

Umpqua, Umpqua Bank, North Bay and The Vintage Bank have entered into an Agreement and Plan of Reorganization, dated as of January 17, 2007. The Agreement and Plan of Reorganization is generally referred to as the merger agreement in this document.

 

Subject to the terms and conditions of the merger agreement, and in accordance with Oregon law, when the merger becomes effective, North Bay will merge with and into Umpqua. Umpqua will be the surviving corporation, and the separate corporate existence of North Bay will cease upon completion of the merger. Umpqua’s articles of incorporation and bylaws will be the articles of incorporation and bylaws of the combined company. See “COMPARISON OF RIGHTS OF SHAREHOLDERS” for, among other things, a discussion of the differences between Umpqua’s and North Bay’s articles of incorporation and bylaws. Immediately after the merger of North Bay into Umpqua, The Vintage Bank will merge with and into Umpqua Bank, with Umpqua Bank surviving the merger.

 

In connection with the merger of North Bay into Umpqua, as long as the average closing price of Umpqua common stock over the fifteen consecutive trading day period ending on the fifth business day prior to the projected effective date of the merger is no less than $26.42 and no greater than $33.58, North Bay shareholders will receive 1.217 shares of Umpqua common stock in exchange for each share of North Bay common stock held. See “— Merger Consideration — Participation in Subsequent Transactions.” After completion of the merger, North Bay shareholders who receive Umpqua common stock in exchange for their North Bay common stock will own approximately 8.1% of the combined company, and continuing Umpqua shareholders will own approximately 91.9%.

 

Background of the Merger

 

In July 2004, Umpqua acquired Humboldt Bancorp, which operated a branch in Napa, California. The acquisition was Umpqua’s first step in its strategy of expanding into markets from Sacramento to Seattle. In May 2005, Umpqua opened its first “next generation” retail and commercial store in California at a Napa location replacing a former Humboldt Bancorp branch. In June 2006, Umpqua acquired Western Sierra Bancorp which significantly enhanced Umpqua’s presence in Northern California, particularly in and around Sacramento.

 

At the annual strategic planning retreat of North Bay’s board of directors held on October 21 and 22, 2006, the North Bay board received and discussed an annual situational and risk assessment presentation from management together with a presentation regarding the banking environment generally and North Bay’s valuation from Joseph Colmery, or Colmery, an industry consultant to the board with extensive experience in bank mergers and

acquisitions. After considering these presentations, pressure on interest margins, the ability of North Bay to continue to achieve its financial performance goals in the future, and consolidation in the banking industry, the North Bay board, among other alternatives discussed, considered the possibility of engaging in a strategic transaction with another financial institution. As a result, the board established a special committee to, with the assistance of Colmery, identify potential financial advisors, evaluate merger and acquisition options and assess the interest of selected strategic partners. At this meeting, Terry L. Robinson, President and Chief Executive Officer of North Bay, also updated the board on periodic unsolicited expressions of interest that had been received from representatives of other financial institutions, including Umpqua, regarding interest in a transaction with North Bay.

 

As part of Umpqua’s ongoing strategic expansion, Umpqua continuously develops and analyzes potential acquisition candidates. In California, Raymond P. Davis, President and Chief Executive Officer of Umpqua, and William T. Fike, President of Umpqua Bank — California Region, periodically meet with their counterparts at financial institutions in Umpqua’s market areas and surrounding communities. In May 2006, Messrs. Davis and Fike met with Mr. Robinson to discuss Umpqua’s and North Bay’s general strategic directions. On May 26, 2006, Mr. Davis reported to the Executive/Governance Committee of Umpqua’s board of directors that he and Mr. Fike had met with Mr. Robinson.

 

In early November 2006, the North Bay special committee and Colmery held discussions with representatives of Howe Barnes Hoefer & Arnett Investments, Inc., or Howe Barnes, and developed and ranked a list of potential strategic partners, including Umpqua. On November 8, 2006 the special committee determined that it would recommend the engagement of Howe Barnes as a financial advisor to North Bay. Thereafter, on November 14, 2006, the North Bay board, upon the recommendation of the special committee, approved the engagement of Howe Barnes as a financial advisor to North Bay and to solicit interest among potential strategic partners selected by the special committee.

 

At Umpqua’s annual board strategic planning retreat, held November 10-12, 2006, the board and senior management of Umpqua confirmed the strategy of continued growth in Northern California, including markets surrounding Sacramento, through strategic opportunities and de novo branching. In November 2006, Mr. Davis contacted Mr. Robinson to determine North Bay’s interest in a potential transaction. Using publicly available information, the potential transaction was analyzed by Umpqua and Milestone Advisors, its financial advisor, and discussions regarding price and structure of the potential transaction progressed.

 

On November 17, 2006, Umpqua sent an initial, non-binding term sheet and offer letter to North Bay proposing an all stock merger transaction with a proposed fixed exchange ratio, subject to completion of a due diligence review of North Bay’s business and assets.

 

On December 1, 2006, Howe Barnes reported to the North Bay special committee that indications of interest had been solicited from the top five potential strategic partners selected by the committee and that, after entering into confidentiality agreements in connection with the sharing of non-public information with each other, indications of interest had been received from Umpqua and two other companies. The Howe Barnes report included an analysis of the indications of interest received, an analysis of the potential strategic partners, and a report regarding comparable merger and acquisition transactions. The indications of interest from the two other companies were not as financially attractive as the then existing proposal of Umpqua. The special committee discussed each of the indications of interest received, considered the comments and recommendations of Howe Barnes and Colmery and considered the interests of North Bay’s customers and employees and the communities in which North Bay does business. The special committee requested that Howe Barnes develop a summary of the indications of interest for further review by the committee and presentation to the North Bay board.

 

On December 4, 2006, Howe Barnes presented a summary of the indications of interest to the North Bay special committee. In its discussion of this summary, the special committee also considered the information reported by Howe Barnes on December 1. This discussion concluded with the recommendation by the North Bay special committee to the board of directors that Howe Barnes be authorized to extend its talks with Umpqua to further gauge Umpqua’s interest and commence exclusive negotiations.

 

On December 4, 2006, Howe Barnes presented the summary of indications of interest to the North Bay board. After considering the presentation by Howe Barnes and the recommendations of Colmery and the special committee, the board authorized Howe Barnes to negotiate with Umpqua to improve its indication of interest. The board delegated to the special committee the authority to approve price protection terms.

On December 5, 2006, Howe Barnes reported to the special committee that Umpqua had increased its proposed fixed exchange ratio and proposed revised price protection terms. Following discussion the committee authorized Howe Barnes to seek an improvement of Umpqua’s proposed price protection terms.

 

On December 6, 2006, Umpqua provided North Bay with an updated non-binding term sheet that proposed an all stock merger with North Bay with a revised proposed fixed exchange ratio subject to completion of a due diligence review of North Bay. The non-binding term sheet was accompanied by a standstill letter agreement providing for mutual confidentiality of non-public information exchanged by Umpqua and North Bay in connection with conducting due diligence investigations and exclusive negotiation with Umpqua through January 12, 2007.

 

On December 8, 2006, Mr. Davis gave a presentation to the North Bay board regarding Umpqua, the prospects for the combined company should a potential transaction be consummated and the rationales for North Bay’s shareholders, including greater liquidity, cash dividend increase and positioning for additional growth. Following this presentation, a representative of Howe Barnes updated the North Bay board on the status of discussions with Umpqua. The North Bay board then authorized management and the special committee to conduct exclusive negotiations through Howe Barnes with Umpqua consistent with the December 6, 2006 non-binding term sheet and letter agreement for confidentiality and exclusive negotiations. On December 8, 2006, the standstill letter agreement was executed by North Bay that, among other things, obligated North Bay to cease negotiations with potential acquirers other than Umpqua through January 12, 2007.

 

From December 11 to December 15, 2006, Umpqua conducted off-site due diligence with respect to North Bay and its business. From December 20 to December 21, 2006, North Bay conducted on-site due diligence with respect to Umpqua and its businesses. Umpqua, North Bay and their respective financial and legal advisors continued to conduct due diligence with respect to each other and each other’s businesses throughout the remainder of December and into January 2007. During this period, North Bay’s special committee met numerous times to monitor the results of the due diligence investigations, receive due diligence reports from Howe Barnes, Gaw Van Male Smith Myers & Miroglio, PLC, or Gaw Van Male, North Bay’s general counsel, and Nixon Peabody LLP, North Bay’s legal counsel, and remain abreast of business issues requiring negotiation and approve resolution of those issues.

 

On December 20, 2006, Mr. Davis reported to Umpqua’s board of directors at its regularly scheduled meeting on the strategic opportunity with North Bay, including the status of due diligence of negotiations with North Bay regarding business terms. Mr. Davis also reported on the relative expense of de novo branching in the markets served by North Bay, and requested that the board delegate authority to the Executive/Governance Committee to approve matters related to the merger negotiations if necessary prior to Umpqua’s regularly scheduled January board of directors meeting.

 

In the afternoon on December 20, 2006, Foster Pepper LLP, Umpqua’s counsel, provided the first draft of the merger agreement to North Bay, Gaw Van Male and Nixon Peabody. Over the following week, Foster Pepper provided proposed amended and restated employment agreements for members of North Bay’s management, and voting, non-competition and non-solicitation agreements for members of North Bay’s board. North Bay and Umpqua and their respective financial and legal advisors continued to negotiate the terms of a transaction between the two parties, including the terms of the draft merger agreement, proposed amended and restated employment agreements, director voting, non-competition and non-solicitation agreements and proposed amendment and restatement of North Bay’s executive supplemental retirement plan. Between December 20, 2006 and January 15, 2007, North Bay’s special committee conducted eleven meetings, attended by representatives of management, Howe Barnes, Gaw Van Male, Nixon Peabody and Colmery, to update the committee on the status of negotiations between the parties and to seek the committee’s guidance with respect to various issues.

 

On January 8, 2007, a special meeting of North Bay’s board was held to apprise the board of the status of the proposed transaction, follow-on negotiations and the results of due diligence investigation of Umpqua. Also, in attendance at this meeting were Colmery and representatives of Howe Barnes, Gaw Van Male and Nixon Peabody. At this meeting the director voting, non-competition and non-solicitation agreements were reviewed and discussed, as well as Umpqua’s then current proposal with respect to the exchange ratio and other terms of the proposed transaction. The committee recommended no action until it was clear that there were no additional unresolved business issues. Subsequently, the committee authorized an extension of the exclusive negotiation period under the standstill letter agreement to allow additional time to reach agreement upon unresolved business issues. An updated

standstill agreement was executed on January 11, 2007 that extended the non-solicitation period contained therein through January 18, 2007.

 

On January 15, 2007, after considering the final business and pricing issues as well as employee related issues over the course of a series of meetings, North Bay’s special committee determined to recommend that North Bay’s board approve a fixed exchange ratio of 1.217. The North Bay special committee made its recommendation subject to approval of the definitive agreements, final reports of North Bay’s financial and legal advisors and receipt of an opinion from Howe Barnes that the proposed transaction is fair, from a financial point of view, to the holders of the outstanding shares of common stock of North Bay.

 

On January 16, 2007, North Bay’s special committee reviewed with North Bay’s financial and legal advisors the terms of the proposed transaction and the draft definitive agreements. Management and representatives of the advisors reported to the committee that the terms of the proposed merger and draft definitive agreements were in substantially final form. The Committee was presented with written due diligence reports from the financial and legal advisors and also with a documentation report from Howe Barnes relating to the fairness of the proposed merger. After a review of the terms of the proposed transaction and discussion, the committee unanimously agreed to recommend to the North Bay board of directors that they approve the transaction with Umpqua.

 

On January 16, 2007, North Bay’s board of directors held a special meeting to consider the proposed transaction with Umpqua. Also in attendance at this meeting were representatives of Howe Barnes, Gaw Van Male and Nixon Peabody. A representative of Nixon Peabody reviewed with the board its fiduciary duties, following which the representative of Nixon Peabody, a representative of Gaw Van Male and management reviewed with the board the proposed terms of the transaction with Umpqua and the definitive agreements, including the proposed amendments to the employment agreements, amendment and restatement of North Bay’s supplemental executive retirement plan, and director voting, non-competition and non-solicitation agreements. The representatives of Howe Barnes then made a presentation to the board regarding the proposed transaction with Umpqua which, based on the closing price for Umpqua of $29.14 per share on January 8, 2007, equated to an offering price of $35.46 per share for all of the outstanding North Bay common stock and stock equivalents, equating to an aggregate deal value of approximately $157.8 million. The representatives of Howe Barnes delivered to the North Bay board its written opinion, that, as of that date, and based upon and subject to the various factors, assumptions and limitations set forth in Howe Barnes’ opinion, the proposed fixed exchange ratio of 1.217 was fair, from a financial point of view to North Bay’s shareholders. The board of directors asked questions of, and received answers from, North Bay’s financial and legal advisors. Based on all relevant factors they considered material, including among other things, the opinion, competency and reliability of Howe Barnes and the recommendation of the special committee, the purchase price, the greater liquidity for shareholders, the cash dividend increase and prospects for additional growth, the board of directors of North Bay unanimously approved the merger and the definitive agreements and determined that the merger is fair to and in the best interests of North Bay and its shareholders and determined to recommend that the shareholders of North Bay approve the principal terms of the merger agreement.

 

On January 17, 2007, at Umpqua’s regularly scheduled board meeting, the board of directors considered the proposed merger with North Bay. Management summarized the results of their due diligence investigation and the projected financial results of the proposed merger. A representative from each of Foster Pepper and Milestone Advisors attended the meeting. The directors received and considered a detailed analysis and fairness opinion stating that the consideration to be paid by Umpqua to North Bay shareholders as provided in the merger agreement was fair, from a financial point of view, to Umpqua’s shareholders from Milestone Advisors. Mr. Davis and a representative of Foster Pepper reviewed the terms of the merger agreement with the board. Foster Pepper’s representative reviewed with the board its fiduciary duties. The board asked questions of, and received answers from, Umpqua’s financial and legal advisors and considered the factors they deemed relevant to the proposal before voting unanimously to approve the transaction.

 

After the close of business on January 17, 2007, the parties executed and delivered the merger agreement. On January 18, 2007, the parties issued a joint press release announcing the proposed merger.

 

Umpqua’s Reasons for the Merger

 

In the course of reaching its decision to approve the merger agreement, including the issuance of shares of Umpqua common stock to North Bay shareholders, Umpqua’s board of directors considered and reviewed with

senior management and outside financial and legal advisors a significant amount of information and factors relevant to the merger, including Umpqua’s strategic plan. Umpqua’s board of directors determined that the merger would advance Umpqua’s strategic plan and that the proposed merger is in the best interests of Umpqua and its shareholders. Umpqua’s board of directors carefully considered the following potentially positive factors in its deliberations:

 

 

The Umpqua board of directors did not assign any specific or relative weight to the information it reviewed in the course of its consideration.

 

North Bay’s Reasons for the Merger and Recommendation of North Bay’s Board of Directors

 

In reaching its determination to approve and adopt the merger agreement, the board of directors of North Bay consulted with North Bay’s management, its financial advisors and consultants, and legal advisors, and considered a number of favorable and unfavorable factors, including without limitation the following:

 

 

 

 

 

The foregoing discussion of the information and factors considered by North Bay’s board of directors is not intended to be exhaustive, but is believed to include the material factors considered by the board of directors. In reaching its determination to approve and recommend the merger agreement, North Bay’s board of directors did not assign any relative or specific weights to the factors considered, and individual directors may have given differing weights to different factors.

 

For the reasons set forth above, the North Bay board determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are in the best interests of North Bay and its shareholders. The North Bay board recommends that North Bay shareholders vote “FOR” the merger proposal.

 

Opinion of Umpqua’s Financial Advisor

 

At the request of Umpqua, Milestone Advisors has provided to the Umpqua board of directors a written opinion to the effect that, subject to the qualifications, limitations and assumptions set forth in the opinion, as of the date Umpqua entered into the merger agreement the consideration to be paid by Umpqua as provided in the Agreement was fair to the holders of Umpqua common stock from a financial point of view.

 

Milestone Advisors was retained by Umpqua as its financial advisor and to provide a fairness opinion to Umpqua. Umpqua selected Milestone Advisors on the basis of its reputation as a nationally recognized investment-banking firm with substantial experience in transactions similar to the merger and its familiarity with Umpqua and its business. Milestone Advisors is an investment banking firm that provides a broad range of financial services, and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and securities in connection with merger transactions and other types of acquisitions, private placements, secondary distributions and valuations for corporate, estate and other purposes. No limitations were imposed by the board of directors of Umpqua upon Milestone Advisors with respect to the investigation made or procedures followed by it in rendering its opinion.

 

The full text of Milestone Advisors’ written opinion to Umpqua’s board of directors, which sets forth the procedures followed, assumptions made, matters considered, and qualifications and limitations of the review undertaken by Milestone Advisors, is attached as Appendix C to this proxy statement-prospectus and is incorporated herein by reference. The following summary of Milestone Advisors’ opinion is qualified in its entirety by reference to the full text of the opinion, and we urge you to read the opinion in its entirety.

For purposes of Milestone Advisors’ opinion and in connection with its review of the merger and the merger agreement, Milestone Advisors, among other things:

 

 

In addition, Milestone Advisors held discussions with the managements of Umpqua and North Bay concerning their views as to the financial and other information described above and the potential cost savings, operating synergies, revenue enhancements and strategic benefits expected to result from the merger. Milestone Advisors also conducted such other analyses and examinations and considered such other financial, economic and market criteria as it deemed appropriate to arrive at its opinion. It did not, however, make or review any independent evaluations or appraisals of any of the assets, properties, liabilities or securities, or make any physical inspection of the properties or assets of Umpqua. It assumed the adequacy of allowances for losses in loan portfolios, and did not undertake to review any individual credit files of Umpqua or North Bay.

 

In delivering its opinion to the board of directors of Umpqua, Milestone Advisors prepared and delivered to Umpqua’s board of directors written materials containing various analyses and other information. Subject to the provisions of the merger agreement, each share of North Bay common stock issued and outstanding immediately prior to the effective time of the merger shall be converted into the right to receive consideration equal to 1.2170 shares of Umpqua, subject to a floor. The aggregate number of Umpqua shares to be issued in exchange for all of North Bay’s currently outstanding common stock is approximately 5.1 million. Options to purchase North Bay’s common stock that remain unexercised at the time the transaction closes will be converted into options to purchase Umpqua shares per customary conversion methodology as described in the merger agreement. The fully diluted per share purchase price as of the date of the fairness opinion was $35.83 and as of the date of the merger agreement was $35.01. For purposes of the fairness opinion, Milestone Advisors assumed 4,193,495 shares of North Bay common stock outstanding and 477,020 options to purchase North Bay common stock outstanding at a weighted average exercise price of $16.37 per share.

 

The following are summaries of the analyses contained in the materials delivered to Umpqua board of directors.

 

Market Trading Analysis of Umpqua

 

Milestone Advisors reviewed the stock trading history of Umpqua’s common stock. As of January 12, 2007, the market value of Umpqua’s common stock was $29.44 per share and ranged from $24.16 to $30.49 over the preceding 52-week period. The 30-, 60-, and 90-day trailing average prices were $29.57, $29.53 and $29.15, respectively, and the average daily trading volume was approximately 204,100 shares.

 

Market Trading Analysis of North Bay

 

The market trading price of North Bay as of January 12, 2007 was $28.50 and ranged from $25.24 to $31.50 over the preceding 52-week period. The 30-, 60-, and 90-day trailing average prices were $28.38, $28.27 and $28.19, respectively, and the average daily trading volume was approximately 5,200 shares. The transaction price

per fully diluted share as of the date of the Agreement of $35.01 represents a premium of $6.51, or 22.8% over North Bay’s market price as of the date of the Agreement, and premiums of $6.63, $6.74 and $6.82, or 23.3%, 23.6% and 23.9%, over the 30-, 60-, and 90-day trailing average prices, respectively, of North Bay.

 

Public Comparable Company Analysis

 

This method applies the comparative public market information of comparable companies to Umpqua and North Bay. The methodology assumes companies in the same industry share similar markets, and the potential for revenue and earnings growth is usually dependent upon the characteristics of the growth rates of these markets, and companies that operate within the same industry or line of business experience similar operating characteristics and business opportunities and risks. The underlying component in the comparable company analysis assumes the companies are ongoing concerns.

 

Using publicly available information, Milestone Advisors compared selected financial data of Umpqua with similar data of selected publicly-traded companies engaged in commercial banking considered by Milestone Advisors to be comparable to those of Umpqua. In this regard, Milestone Advisors noted that although such companies were considered similar, none of the companies has the same management, makeup, size or combination of business as Umpqua, as the case may be. Milestone Advisors reviewed and analyzed the following publicly-traded companies, which Milestone Advisors deemed to be comparable companies (collectively, the “Umpqua Comparison Companies”) — Banner Corporation, Capital Corp of the West, Cascade Bancorp, City National Corporation, Columbia Banking System Inc, CVB Financial Corp., First Community Bancorp, First Republic Bank, Frontier Financial Corporation, Glacier Bancorp Inc, Greater Bay Bancorp, Pacific Capital Bancorp, Sterling Financial Corporation, SVB Financial Group, TriCo Bancshares, West Coast Bancorp, Westamerica Bancorporation, and Western Alliance Bancorporation. This group was selected from companies that are commercial banks or bank holding companies which are headquartered and operate in the Western Region of the United States and have assets between $1 billion and $20 billion.

 

We analyzed the following financial data for each of the Umpqua Comparison Companies and then applied the average and median trading metrics of the Umpqua Comparison Companies to Umpqua: the closing price of the common stock on January 12, 2007 as a multiple or percent, as the case may be, of (i) net income for the latest twelve months (four most recent fiscal quarters) for which income has been publicly reported (“LTM”), (ii) tangible book value per share, and (iii) total assets.

 

UMPQ COMPARABLE COMPANY ANALYSIS — TRADING METRICS

 

 

Similarly, Milestone Advisors compared selected financial data of North Bay, using publicly available data, with similar data of selected publicly-traded companies engaged in commercial banking considered by Milestone Advisors to be comparable to those of North Bay. In this regard, Milestone Advisors noted that although such companies were considered similar, none of the companies has the same management, makeup, size or combination of business as North Bay, as the case may be. Milestone Advisors reviewed and analyzed the following publicly-traded companies, which Milestone Advisors deemed to be comparable companies (collectively, the “North Bay Comparison Companies”) — American River Bankshares, Bank of Commerce Holdings, Bank of Marin, Bridge Capital Holdings, Central Valley Community Bancorp, Community Valley Bancorp, Community West Bancshares, Desert Community Bank, Epic Bank, Heritage Commerce Corp, Heritage Oaks Bancorp, National Mercantile Bancorp, North Valley Bancorp, Northern Empire Bancshares, Pacific Mercantile Bancorp, Pacific State Bancorp, Plumas Bancorp, Sierra Bancorp, Summit State Bank, and Temecula Valley Bancorp Inc. This group was selected

from companies that are commercial banks or bank holding companies which are headquartered and operate in California and have assets between $250 million and $1.5 billion.

 

We analyzed the following financial data for each of the North Bay Comparison Companies and then applied the average and median trading metrics of the North Bay Comparison Companies to North Bay: the closing price of the common stock on January 12, 2007 as a multiple or percent, as the case may be, of (i) net income for the latest twelve months (four most recent fiscal quarters) for which income has been publicly reported (“LTM”) (ii) tangible book value per share, and (iii) total assets.

 

NBAN COMPARABLE COMPANY ANALYSIS — TRADING METRICS

 

 

Merger and Acquisition Transaction Analysis

 

Milestone Advisors reviewed certain publicly available information regarding 13 selected merger and acquisition transactions (the “Comparable Transactions”) from January 1, 2006 to January 12, 2007 involving commercial banks and bank holding companies, in which the sellers (i) were headquartered and operated their banking business in the United States, and (ii) in which the total assets of the target bank was between $250 million and $1.5 billion at transaction announcement. Those transactions were as follows:

 

 

For each transaction, Milestone Advisors analyzed data illustrating, among other things, the multiple of purchase price to LTM earnings, the multiple of purchase price to tangible book value, and the ratio of the premium (i.e., purchase price in excess of tangible book value) to core deposits.

 

A summary of the average and median multiples and ratios for the Comparable Transactions Group in the analysis follows:

 

CALIFORNIA COMPARABLE TRANSACTION GROUP ANALYSIS