Pacific Mercantile Bancorp Reports on Capital Augmentation Initiatives
GlobeNewswirePacific Mercantile Bancorp (Nasdaq:PMBC) today reported on the status of its efforts to increase the shareholders equity and improve the financial condition of its wholly-owned banking subsidiary, Pacific Mercantile Bank (the "Bank").
As previously reported, on August 31, 2010, the Bank consented to the issuance of a Final Order (the "Order") by the California Department of Financial Institutions (the "DFI"). Among other things, that Order required the Bank to reduce its non-performing assets and increase the ratio of the Bank's tangible equity-to-tangible assets to 9.0% by January 31, 2011 by raising additional capital, generating earnings or reducing the Bank's tangible assets, or a combination thereof.
Although we were not be able to meet those capital requirements by January 31, 2011, the DFI has notified us that it will not take action against the Bank at this time in order to enable us to continue our efforts to achieve the capital requirements of the Order. We understand that this decision is based on improvements made to date in the financial condition of the Bank that are attributable to reductions in non-performing assets and improvements in the Bank's capital ratio.
Improvement in the Bank's Financial Condition.
Decreases in Non-Performing Assets. Between September 30, 2010 and December 31, 2010, the Bank reduced the volume of its non-performing loans by approximately $22 million or 50%, and its total non-performing assets by approximately $9.8 million or 15%.
Improvement in Tangible Equity-to-Tangible Assets Ratio. Moreover, based on data contained in the Bank's Call Report filed with the FDIC, its ratio of tangible equity-to-tangible assets had increased to 7.4% at December 31, 2010 from 6.0% at August 31, 2010, the date of the DFI Order.
Well-Capitalized Banking Institution. Additionally, as of December 31, 2010 the Bank's capital ratios continued to exceed the federal regulatory capital ratios that are required to be met for a bank to be rated as a "well-capitalized" banking institution under the FDIC's prompt corrective action regulations:
At December 31, 2010 Capital Ratios to be Rated Bank's Actual as Well Pacific Mercantile Bank Capital Ratios(1) Capitalized Total capital to risk based assets 10.94% 10.0% Tier 1 capital ratio to risk asset 9.68% 6.0% Leverage ratio (Tier 1 capital to average asset) 7.41% 5.0% (1) Unaudited; taken from the Bank's December 31, 2010 Call Report as filed with the FDIC.
Substantial Liquidity. The Bank continues to have substantial liquidity, which totaled approximately $210 million, or 18% of the Bank's total assets, at December 31, 2010, including approximately $32 million of cash and cash equivalents and $165 million of securities available for sale.
Capital Augmentation Efforts
With the assistance of a nationally recognized investment banking firm, we have been exploring alternatives for meeting the capital requirements of the DFI Order. While we believe that we will be able to meet those capital requirements, we cannot provide assurances as to when or even if we will succeed in doing so. Moreover, the DFI is not precluded from taking enforcement action against the Bank if its financial condition were to worsen or if we are do not succeed in meeting the capital requirements of the DFI Order in the near term.
