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The parent of Costa Mesa’s Pacific Mercantile Bank saw a big jump in profits for the first quarter as it didn’t have to set aside any more money to guard against loans going bad.

Pacific Mercantile, the largest bank based in the county, reported a profit of $1.7 million for the quarter, versus a profit of $126,000 a year earlier.

Factoring in accrued dividends allocated to preferred shareholders, Pacific Mercantile reversed an $82,000 loss from a year earlier.

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The bank set aside no money in the quarter to offset loans going bad, driving the profit.

Pacific Mercantile was able to do that by recovering $265,000 in previously charged-off loans and by seeing fewer non-performing loans where borrowers are late on payments.

In all, Pacific Mercantile has $18.4 million set aside for loans going bad as of March 31.

The results are a shift for the bank, which has wrestled with bad loans and regulatory scrutiny.

"The last two years have indeed been difficult ones,” Chief Executive Ray Dellerba said.

Pacific Mercantile saw first-quarter net interest income—the equivalent of revenue for banks—rise 2% from a year earlier to $8.6 million.

Assets fell from 17% from a year earlier to $996.5 million as Pacific Mercantile shed loans to shore up its finances.

The bank also is “making progress in our efforts toward raising the additional capital,” Dellerba said, without elaborating.

Last year, the California Department of Financial Institutions ordered Pacific Mercantile to raise money and take other steps.