Costa Mesa-based Pacific Mercantile Bancorp has posted strong growth since opening more than six years ago. The past three years have been good, too.
Pacific Mercantile posted revenue of $43.5 million for the 12 months ended June 30, up 146% from the period ended June 2002.
The commercial bank’s profit has soared 634% to $5.9 million during the same period.
The growth was good enough to put Pacific Mercantile at No. 16 on this year’s Business Journal list of fastest-growing companies, down from No. 11 last year.
When it launched as an Internet-based bank in the late 1990s, the U.S. was enjoying a technology boom. The bust was just a year or so away, and a recession came soon after.
Pacific Mercantile survived the tough times and has thrived since. And it’s confident it can do so again as an economic slowdown could be on the horizon.
Interest rates are rising, crude oil prices are hitting record levels and hurricanes in the Gulf of Mexico region have hit the economy. Concerns are growing over a housing bubble in some parts of the country that have seen huge price gains amid low interest rates.
Pacific Mercantile’s assets grew 16% to $913 million for the 12 months through June 30. Assets include cash, loans, real estate and securities held by a bank. Deposits, meanwhile, rose 9% to $615 million in the period.
It’s been a heady three-year period for the business bank. Assets are up 167% and deposits have grown 116%.
But Pacific Mercantile also has felt a tailwind from housing market concerns.
The bank cut close to 60 workers this summer when it announced plans to shutter its wholesale mortgage banking unit by the end of September. The problem: growing costs amid rising interest rates.
“The refinance (mortgage) market slowed down a lot,” said Nancy Gray, chief financial officer of Pacific Mercantile, after the cost-cutting announcement.
Regulatory compliance costs for the mortgage unit were rising and it was beginning to feel the brunt of a slowdown in refinancings during the past year, Gray said.
The bank is focusing on building its commercial banking business, according to Gray. In its third quarter, Pacific Mercantile hired four commercial loan officers with plans to recruit more.
Banks have been in a battle for deposits, boosting rates on certificates of deposits. The Federal Reserve’s upping of short-term interest rates in 11 quarter-point increments to 3.75% during the past year has provided fuel for higher CD rates.
Last week Pacific Mercantile was offering a 12-month CD that carried a 4.29% interest rate. The CD required a minimum deposit of $1,000.
Pacific Mercantile also has expanded its retail branch network in the region.
The bank operates four OC branches in Costa Mesa, Newport Beach, La Habra and San Clemente. It also has Los Angeles County branches in Beverly Hills and Long Beach, and one in San Diego County’s La Jolla.
In spring it opened an eighth branch in San Bernardino County near the Ontario International Airport.
“The Inland Empire is the fastest-growing market place in Southern California,” said Ray Dellerba, chief executive of Pacific Mercantile.
A year ago, the bank beefed up its money management unit by naming James Miller, Pacific Mercantile’s former head of its securities trading unit, to lead it.
Gary Cohee was tapped to run the securities unit, called PMB Securities Corp. Cohee was president of his own money management and corporate finance company for the past 12 years.
To fund the bank’s expansion, it sold $10 million of preferred stock to institutional investors in a private sale last year.
Pacific Mercantile said proceeds of the stock sale were to be used for “general corporate purposes” and to fund growth of its financial services.
Two years ago, Pacific Mercantile raised $31 million in a stock sale. Those funds helped the bank to open several branches and make bigger loans to business customers.
In July, Pacific Mercantile’s board OK’d a plan for the company to buy back up to 2%, or 200,000, of its shares.
The company’s stock recently traded at $18.88, near its 52-week high. Pacific Mercantile has a market value of $192 million.
It went public in 2000, raising $20 million in an initial public stock offering. The bank has 133 employees, including 104 in OC.
THE NUMBERS
Employees: 133
Market value: $192 million
3-year sales growth: 146%
Annual sales through June 30: $43.6 million
Annual net income: $5.9 million
Company: commercial bank
