The parent of Costa Mesa’s Pacific Mercantile Bank, the largest homegrown bank in the county by assets, took a major writedown in the second quarter as it concluded raising $12.6 million in cash.
Pacific Mercantile Bancorp opted to take a $9 million non-cash charge in the second quarter after some expected tax savings did not materialize, pushing its losses to the $12 million mark.
Before making some adjustments in the past few weeks, Pacific Mercantile Bank was set to lose $1.3 million in the quarter.
The bank set aside less money to guard against bad loans, lowering its loan loss provision to $4.6 million, down from $6.6 million a year earlier. The drop primarily was due to an 8.3% decrease in charge-offs, or loans written off the books.
Through the first half off the year, the bank has set aside $23.3 million for bad loans.
The bank’s interest income, which is gathered through fees and interest, was $12.9 million, up 4% from a year earlier.
Deposits increased by $41 million, or 4%, to $973 million.
Pacific Mercantile, which controls $1.1 billion in assets, is considered well capitalized with $91 million in capital.
The bank raised $12.6 million in the quarter by selling preferred shares.
Like other banks, it is working through some loan issues, according to an analysis for the Business Journal by Anaheim-based Findley Reports Inc.
Pacific Mercantile scored 66% on what’s known as a Texas ratio, a measurement of bank health that compares bad loans to how much shareholders would be owed if the bank failed.
The lower the score, the better, with a score higher than 100% indicating a bank could be teetering.
Pacific Mercantile has approximately $15.7 million in noncurrent loans, or those 90 days or more past due.
