2 California banks are merging into a new $36 billion bank. It's the latest in a string of consolidations after a crisis rocked the US banking world in March.

• Banc of California and PacWest Bancorp shares surged after announcing an all-stock merger.
• The new bank will have $36 billion in assets and $30.5 billion in total deposits.

Shares of Banc of California and PacWest Bancorp got a major boost from news Tuesday that the two lenders will merge in an all-stock deal to create a new bank.

PacWest shares surged 31.3% to $10.10 apiece in after-hours trade after news of the merger broke — more than erasing a 27% slump in the stock's price on Tuesday. Banc of California shares jumped 8.4% to $15.85 apiece in after-hours trade, extending gains from an 11% rise on Tuesday.

The all-stock deal will result in a new bank with $36 billion in combined assets, Banc of California and PacWest announced on Tuesday. The deal is expected to be completed latest by early 2024.

The new bank will have over 70 branches in California and will be led by Jared Wolff, the current CEO of the Banc of California. It will have $25.3 billion in total loans and $30.5 billion in total deposits.

Both lenders agreed to sell $400 million worth of new shares to private equity firms Warburg Pincus and Centerbridge Partner, to fund the merger.

"Over the past 18 months, the competitive environment in California has changed dramatically," Wolff told analysts on a Tuesday conference call, per Reuters. "We've seen many other banks either completely exit or significantly pull back from California. As a result, there's a sizable opportunity."

Timothy Coffey, an analyst at Janney Montgomery Scott, told Reuters ahead of the merger announcement that the deal is like a "marriage of convenience" as both banks operate in the same geographies and are focused on commercial assets.

The merger was announced more than two months after news broke that PacWest was weighing a sale. It also followed the US banking crisis in March that started when regional banks such as Silicon Valley Bank and Signature Bank, New York collapsed.

The US banking industry has been seeing major consolidation activity this year — JPMorgan bought First Republic Bank, First Citizens Bank bought Silicon Valley Bank, and New York Community Bancorp snapped up most of Signature Bank.