Shares of US regional lenders notched their longest weekly streak of gains since March 2021, bolstered by a merger deal for PacWest Bancorp as the industry continues to recover from the regional bank failures earlier this year.

The KBW Regional Banking Index rose about 5% for its fifth-straight weekly gain in a row. The advance has helped the group pare its declines this year to roughly 10%, easing an earlier drop of as much as 33% following a string of regional bank collapses, including Silicon Valley Bank in March.

“The market is likely to view the PACW acquisition as a bit of a clearing event, as it takes the last bank of size that had been weakened since March off the chess board, which we view as healthy for the industry overall,” UBS analyst Brody Preston wrote in a note.

PacWest announced on Tuesday afternoon that it had agreed to a deal to combine with smaller rival Banc of California. Market watchers expect the transaction to alleviate concerns around the Beverly Hills-based firm, which got caught up in the sector selloff earlier this year, sending its stock down about 58% in 2023 through last week. Regional bank stocks rose on Wednesday in the wake of the announcement.

A closely watched factor for bank investors has been looming regulatory changes. A proposal unveiled on Thursday indicated large US banks may face higher capital mandates. But most small and midcap banks are below the threshold to be impacted by the new rules, and it’s “business as usual” for them, according to Phil Stone, managing partner of bank-focused investment management firm Fourthstone LLC.

(Updates shares throughout to market close.)