Banc of California set to merge with rival PacWest

PacWest Bancorp (PACW) is set to merge with Banc of California in a $400 million equity deal, according to a joint announcement the banks released Tuesday afternoon, ahead of their second-quarter earnings results.

Under the terms of the deal, both California-based banks will merge into one bank called Pacific Western Bank.

The move aims to restore confidence in the sector after the collapse of three regional banks earlier this year.

"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 Jared Wolff, president and CEO of Banc of California, in a statement. Wolff will continue to serve as president and CEO of the merged bank.

PacWest reported a $197.4 million loss in net income last quarter. The Beverly Hills-based bank also reported total deposits declined by $290 million last quarter to $27.9 billion. Banc of California reported a much smaller decline in net income of $2.4 million last quarter. Total deposits for the Santa Ana-based bank declined slightly from $7 billion to $6.9 billion last quarter.

PacWest has been under considerable pressure after Silicon Valley Bank failed in March, sending shock waves across regional banks in the United States. Most regional banks were able to regain their footing last quarter by paying higher interest rates on deposits at the expense of their profits in an effort to prevent depositors from transferring their funds to other banks, second-quarter earnings reports from various regional banks show.

Before collapsing in March, SVB was America's 16th-largest bank. But it collapsed suddenly, following a panicked, social media-fueled run on the bank.