PacWest Bancorp will be acquired by its smaller competitor, Banc of California, in an effort to manage the problems that have hit several other U.S. banks this year. In order to finance the merger, the two banks have agreed to sell USD 400 million worth of new shares to private equity firms Warburg Pincus and Centerbridge Partners, which together will own approximately 20% of the merged company.

PacWest Bancorp, founded in 1999, is not among the largest banks and is outside the top 25 U.S. banks. It focuses primarily on serving small, mid-sized and venture-backed businesses. Over the years, PacWest has experienced growth through 31 acquisitions since 2000 and operates branches in California, Durham, North Carolina, and Denver, along with lending offices across the country. At the end of last year, the bank employed more than 2,400 people. Banc of California has assets of $9.37 billion and a network of 33 branches located throughout Southern California.

At Tuesday's market close, the combined market capitalization of the two banks was just under $1.8 billion. That amount is significantly lower than the $6 billion valuation that PacWest itself had at the beginning of 2022. That drop in value serves as another indicator of the impact that the Federal Reserve's efforts to fight the strongest rise in inflation in decades is having on PacWest and other regional lenders.

Once the transaction is completed, the combined firm will boast total loans of $25.3 billion and total deposits of $30.5 billion, along with a network of more than 70 branches in California. The deal represents another case of consolidation in the fragmented US banking sector, a trend that has gathered momentum following the collapse of SVB. Industry executives expect further transactions among the more than 4,000 US banks.