PacWest is merging with Banc of California, the latest shakeup in the U.S. banking sector after the collapse of three banks earlier this year.

After the all-stock deal is complete, the combined bank will have $36 billion worth of assets and operate more than 70 branches in California under the Banc of California name, according to a Tuesday statement.

“Out of the gate, the combined company will have the strength and market position to support the banking needs of small and medium-size businesses in California and to capitalize on the opportunities created for stronger financial institutions in the wake of the recent banking industry turmoil,” said Banc of California President and CEO Jared Wolff, who will retain the same roles at the combined company. 

Merger details

PacWest is the larger bank of the two with about $44 billion in total assets as of March 31, compared to Banc of California’s $10 billion, according to the Federal Financial Institutions Examination Council.  

Learn more: Best current CD rates

Once the merger closes, the bank is expected to have about $25.3 billion in total loans and $30.5 billion in total deposits. The combined company plans to repay about $13 billion of wholesale borrowings by selling assets.

John Eggemeyer, the current independent lead director on PacWest’s board, is set to become the chairman of the combined company's board, which will include eight directors from Banc of California's board and three from PacWest's board. 

Is there a US banking crisis?What troubles at Pacific Western, Silicon Valley banks mean

There will also be a director from private equity firm Warburg Pincus LLC. The private equity firm and private investment firm Centerbridge Partners have agreed to invest $400 million in equity into the combined bank. The funds will be used to reposition the bank’s balance sheet and generate savings.  

The merger is expected to close in late 2023 or early 2024, subject to shareholder and regulatory approvals.

“Due to the high degree of familiarity between our businesses, we anticipate a smooth integration,” Wolff said.  

The lead up to the merger

Shares of PacWest Bancorp plunged in May after investors learned the regional bank was considering a sale. 

While the bank at the time said it had not experienced a high number of customer withdrawals, the news still stoked fears of a potential surge in withdrawals among regional banks.  

PacWest, Banc of California shares

PacWest shares fell more than 27% Tuesday, while Banc of California shares saw an 11% boost. The Wall Street Journal reported that the banks were in advanced talks to merge during the trading day.