Story updated at 11:30 a.m.:

In a deal that will once again shake up the ranks of top banks in the region, Pacific Premier Bancorp of Irvine will acquire Heritage Oaks Bancorp for $405.6 million or $11.68 per share based on current values.

The all-stock merger, announced before the markets opened on Dec. 13, will combine the region’s largest bank, with $2 billion in assets, with Pacific Premier, an expansion-minded $3.8 billion asset bank with 16 branches in California and several operations outside the state.

The combined organization will have 28 branches and around $6 billion in assets, extending the Pacific Premier franchise beyond its current footprint to the Central Coast.

“We bring a larger capital base and a healthy balance sheet to compete in the market for additional clients,” Pacific Premier Chairman and CEO Steven Gardner told the Business Times. “We also have a more robust product suite of cash management, online banking and the like.”

The price is a small premium over the $10.86 closing price of Heritage Oaks shares on the Nasdaq market on Dec. 12 and the merger is expected to close in the second quarter of 2017. After the merger, former Heritage Oaks shareholders will own about 30 percent of Pacific Premier’s stock and Heritage Oaks CEO Simone Lagomarsino, Chairman Michael Morris and board member Mike Pfau will join the Pacific Premier board.

“We believe the combination with Pacific Premier will create one of the most attractive commercial banks in California with a footprint that extends from Paso Robles to San Diego,” Lagomarsino said in a statement.

“We have known the executive management team at Heritage Oaks for many years and we believe their bank will be an excellent fit with our existing franchise,” Gardner said. “As the largest bank headquartered in California’s Central Coast, Heritage Oaks has built a leading market share and a high quality, low-cost core deposit base.”

The deal is the biggest since Union Bank’s acquisition of Pacific Capital Bancorp for $1.5 billion in December 2012 and it comes just a week after regulators lifted a regulatory order over Bank Secrecy Act issues at Heritage Oaks.

After the deal is completed, privately-owned Montecito Bank & Trust will become the largest independent bank in a region that has seen the ranks of its independent banks shrink dramatically since the Great Recession. In recent years, Santa Clara Valley Bank, Ventura County Business Bank, Coast National Bank, County Commerce and Founders Community Bank have been sold to larger organizations as low interest rates have narrowed net interest margins and smaller banks look to spread increasing regulatory costs over a wider asset base.

Pacific plans to make some layoffs, which is typical in many mergers and acquisitions, but does not expect to close any of Heritage Oaks’ 12 branches, the company said. It will retain the vast majority of its customer-facing employees as the bank looks to grow its deposit base, Gardner said.

“There has been quite a bit of disruption in that market where predominantly small banks or large national banks are left in the market. It’s challenging for smaller banks to survive in this environment,” he said. “For us, a community bank that is a little larger, it has presented a great opportunity because large banks don’t often have the ability to deliver good, effective and consistent customer service.”

Pacific Premier shares traded at $33.65 prior to the announcement and the company expects the deal to be accretive to tangible book value and add 5.2 percent to earnings per share in 2018 after consolidating expenses. The statement said that “key members” of Heritage Oaks staff, including Rob Osterbauer and Brooks Wise, would be retained.

Pacific stock prices fell about 1 percent following the announcement to $33.30 but ended the day down only 5 cents to $33.60 while Heritage shares increased by more than 6 percent to $11.54.

“Pacific’s stock is up 63 percent year-to-date and 31 percent since the election,” Gardner said. “It makes sense that some folks will sell and take the profits, but this is something that is based on a long-term investment that we think will pay off nicely for our shareholders.”

D.A. Davidson & Co. acted as financial adviser to Pacific Premier and Sandler O’Neill advised Heritage Oaks. Holland & Knight represented Pacific Premier and Manatt, Phelps & Phillips served as legal counsel to Heritage Oaks.

Pacific Premier is not related to Premier Valley Bank, based in Fresno, which has agreed to acquire Founders Community Bank in San Luis Obispo.

• Staff writer Alex Kacik contributed to this report. Contact Henry Dubroff at hdubroff@pacbiztimes.com.