Pacific Mercantile Bank

Pacific Mercantile Bank is owned by the holding company Pacific Mercantile Bancorp.  Pacific Mercantile Bank is a state chartered commercial bank and member of the Federal Reserve System.  The bank began operations on March 1, 1999.  The bank, headquartered in Costa Mesa, California, operates eight financial centers in Orange, Los Angeles, San Bernardino and San Diego Counties, located in Newport Beach, Costa Mesa, San Juan Capistrano, Beverly Hills, La Habra, Long Beach, Ontario and La Jolla, California.

The bank provides a full range of banking services to small and medium-size businesses, professionals and the general public in Orange, Los Angeles, San Bernardino and San Diego Counties of California.  In addition to the bank’s physical locations, it offers comprehensive banking services over its Internet Bank, which is accessible 24/7 worldwide at www.pmbank.com.  The bank adds flexibility and convenience for business and consumers by conducting an increasing number of banking and other financial transactions via reliable and secure methods over the Internet website at the banks website.  The Pacific Mercantile Bank considers itself as a “click and mortar” financial institution making it adept at servicing business remotely by making the most of the Internet as a fully accessible interactive medium to service the business customers’ needs.

The company offers a range of deposit products, including noninterest and interest-bearing checking accounts, demand deposits, savings and money market deposits, and certificates of deposit. Its loan portfolio comprises commercial loans, including equipment and automobile loans and leases, accounts receivable and inventory financing, and SBA guaranteed business loans; commercial real estate loans; residential mortgage loans; construction loans; land development loans; and consumer loans, including personal installment loans, lines of credit, and credit cards.  The company also offers financial management tools and services that include multiple account control, account analysis, transaction security and verification, wire transfers, bill payment, payrolls, and lock box services; automated clearinghouse origination services; and convenience banking services, such as Internet banking, automated teller machines, night drop, and courier and armored car services.

On November 6, 2008 Pacific Mercantile Bancorp reported its results of operations for the third quarter and nine months ended September 30, 2008.

The company recorded net income of $354,000 for the third quarter ended September 30, 2008, as compared to net income of $1.4 million in the same quarter of 2007.  For the nine months ended September 30, 2008, net income totaled $525,000 as compared to net income of $4.6 million for the same nine months of 2007.  The decline in income was primarily attributed to decreases of $1.1 million and $3.3 million in net interest income, and increases of $1.3 million and $4.5 million in the provisions made for loan losses, in the three and nine month periods ended September 30, 2008, respectively, as compared to the same corresponding periods of 2007.

The decrease in the net interest income was mainly attributed to reductions in the interest income that was earned on loans and other interest-earning assets.  This was partially offset by reductions in interest expense, which consists principally of interest paid on deposits.  The report states that, “Those reductions in both interest income and interest expense were primarily the result of reductions by the Federal Reserve Board in the federal funds rate in response to the economic downturn.  Those reductions, in turn, led to declines in prevailing market rates of interest which directly affect the interest rates we are able to charge on loans and the yields we realize on other interest-earning assets and the interest rates we pay on deposits.”

The decrease in interest rates on overall deposit accounts was to a degree compensated by increases in the volume of time deposits as a share of total deposits.  The time deposit levels were increased to make up for declines in demand deposits and lower cost savings and money market deposits.

Total deposits increased by $13 million, or 2%, to $791 million at September 30, 2008, from $777 million at September 30, 2007.  Time deposits increased by $95 million, or 24%, to $493 million at September 30, 2008, from $398 million at September 30, 2007. Time deposits were increased primarily to fund increases in loans and to offset those declines in lower cost deposits, principally interest-bearing transaction accounts and non-interest bearing deposits, which declined, respectively, by $46 million, or 26%, to $128 million and by $35 million, or 17%, to $170 million, at September 30, 2008.

Gross loans at the end of the third quarter totaled nearly $840 million, an increase of $95 million, or 13%, as compared to nearly $745 million at September 30, 2007.  During the year ended September 30, 2008, the bank reduced the volume of residential real estate mortgage loans and real estate construction loans in our loan portfolio, while increasing commercial business and commercial real estate loans.

The bank increased the provisions for loan losses, in both the three and nine months ended September 30, 2008.  The loan loss provisions were increased in order to increase the loan loss reserve to $8.4 million, or 1.00% of the total loans then outstanding.  This was an increase of loan loss reserves from $5.6 million, or 0.75% of total loans outstanding at September 30, 2007.  The loan loss provisions and reserves were increased principally due to an increase in non-performing assets to $26.2 million at September 30, 2008 from $6.2 million at September 30, 2007.  The bank attributed the increase in non-performing assets which we attribute to the worsening of economic conditions.

Despite the decreases in earnings and the increases in non-performing loans, at September 30, 2008, Pacific Mercantile Bank had total capital of $100 million, which represented 11.2% of the bank’s total risk-based assets (total assets risk weighted between 0% and 100% pursuant to the regulatory classifications of assets).  As a result, the Bank continues to qualify as a “well-capitalized” financial institution under Federal regulatory guidelines, which is the highest capital rating that a banking institution can earn under those guidelines.

This entry was posted on Friday, December 5th, 2008 at 12:38 am and is filed under Bank Profiles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.