Pacific Mercantile Bancorp raised $20 million in its June 22 initial public stock offering, though it may not be enough for its founder.
“We would like to have raised more,” said Raymond Dellerba, the bank’s chief executive a longtime Orange County banker.
Pacific Mercantile Bancorp is the parent and holding company for Pacific Mercantile Bank, which is based in Newport Beach.
In the run-up to the offering, Dellerba took the company on a road show throughout the West Coast, Wall Street and even to Europe. Pacific Mercantile was hoping to raise as much as $45 million. But, with market conditions, the company scaled back the number of shares offered by 500,000 to 2.5 million. The offering price was cut to $8 from an expected range of $12 to $15.
Dellerba, who started his OC banking career at Imperial Bank in 1978 and has worked for Commerce Bank and Eldorado Bank, attributed the smaller IPO to a soft market for bank stocks and a sluggish market for IPOs in general.
“The market wasn’t ready for it,” he said.
Still, Dellerba plans to put the $20 million to work. The bank intends to use the cash to fund more loans, increase marketing efforts, improve online operations, add new products and services and expand its branch network.
Pacific Mercantile is focusing on online services. It already has gathered $130 million in deposits online and is betting that the public’s interest in banking online will grow.
The bank also is pulling in revenue from online transactions. The bank’s Internet operations are set up so customers can pay vendors with an electronic check. Dellerba said the bank is transacting more than 800,000 items per month and is growing at a rate of 41,000 items per month. For every transaction, Pacific Mercantile gets a fee.
“It is a major part of our earning assets at the bank,” Dellerba said.
But the bank also wants to expand its brick-and-mortar branches.
It already has its sights set on acquiring one financial institution in Southern California and will try to close the deal by the end of the year. It is also planning to open up a new branch by year’s end. It is first looking at expanding throughout Southern California, but also is looking to expand into other Western states.
Raising money wasn’t the only motive of the bank’s IPO, Dellerba said. The bank also may look to spin off units.
“We will start splitting companies out,” he said.
Dellerba’s goal is to create divisions under the bank’s main holding company. He wants to create a separate technology company that will continue to develop systems for the bank. From there, the technology unit will be able to offer products to other financial institutions, he said.
But Dellerba is tempered in his optimism.
“It’s a time of caution,” he said. “The increase in interest rates has taken effect in slowing down the economy. We’re moving very cautiously.”
The bank opened up its doors in Newport Beach in March of last year and opened a second branch in San Clemente in September.
So far, the bank has not seen a profitable quarter, losing $242,300 on total interest income of $1.8 million for the quarter ended March 31.
Dellerba said he is confident in the bank’s progress so far, though it won’t see a profit for a few more quarters, adding that banks starting up usually don’t see profits for the first few years. Pacific Mercantile has grown its total interest income 81%, 53% and 68% for the past three quarters. n
