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PMBC Amends Existing Equity Financing Agreements With Carpenter

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PMBC Amends Existing Equity Financing Agreements With Carpenter Funds (2/29/12)

Costa Mesa, Calif., Feb. 29, 2012 (GLOBE NEWSWIRE) -- Pacific Mercantile Bancorp (Nasdaq:PMBC) announced today that the agreements entered into on August 26, 2011 with Carpenter Community BancFund LP and Carpenter Community BancFund-A LP (collectively, the "Carpenter Funds") for the second round of its previously reported equity financing have been amended to terminate the sale of $10.8 million of additional shares of preferred stock and, correspondingly, increase by $10.8 million the amount of common stock that the Carpenter Funds will be purchasing from the Company. As a result of these changes, the Company expects to save approximately $907,200 annually in preferred stock dividends and increase its Tier 1 capital.

As previously reported, on August 26, 2011, the Company sold $11.2 million of a newly created class of preferred stock, designated as the Series B Convertible 8.4% Preferred Stock (the "Series B Shares"), including $3.7 million to the Carpenter Funds. On that same date, the Company and the Carpenter Funds entered into two additional stock purchase agreements: (i) an Additional Series B Preferred Stock Purchase Agreement (the "Additional Series B Purchase Agreement") which provided for the sale to the Carpenter Funds of an additional $10.8 million of Series B Preferred Stock (the "Additional Series B Shares"), at a purchase price of $100 per share, and (ii) a Common Stock Purchase Agreement, which provided for a sale to the Carpenter Funds of $15.5 million of shares of Company common stock ("Common Shares"), at a purchase price equal to $5.31 per share or, if greater, the per share book value of the Company's common stock last reported prior to the closing of that sale of Common Shares, in each case subject to the satisfaction of certain conditions. Among other things, as holders of the Additional Series B Shares, the Carpenter Funds would have been entitled to receive dividends, as and when declared, totaling approximately $907,200 each year in cash or, if not so declared and paid, in additional shares of preferred stock, and to convert, at their option, their Additional Series B Shares, at a conversion price of $5.32 per share, into a total of 2,030,075 shares of Company common stock.

Today, the Company and the Carpenter Funds entered into agreements which terminate the sale of the $10.8 million of Additional Series B Shares and, correspondingly, increase the amount of Common Shares to be purchased by the Carpenter Funds by an additional $10.8 million, from $15.5 million to a total of $26.3 million of Common Shares, pursuant to an Amended & Restated Common Stock Purchase Agreement (the "Amended Stock Purchase Agreement").

The Company also announced that Raymond E. Dellerba will remain President and Chief Executive Officer of the Company and the Bank. Mr. Dellerba stated, "I firmly believe that the agreements we have entered into today with the Carpenter Funds are a positive development for the Company and the Bank and especially for our long-term shareholders. These agreements will save the Company approximately $907,200 annually in preferred stock dividends that would otherwise have become payable on the Additional Series B Shares. Moreover, we believe that these agreements increase the likelihood that the conditions to the consummation of this sale of the $26.3 million of Common Shares to the Carpenter Funds will be satisfied. Also, the sale of the additional Common Shares to the Carpenter Funds will further increase our Tier 1 capital, which will strengthen even further our financial condition and provide us with additional financial and capital resources that we believe will enable us to resume our growth strategy and enhance our competitive position in the Southern California marketplace. I very much appreciate the efforts made by and the cooperation we received from the Carpenter Funds in connection with these changes in our agreements." Mr. Dellerba added, "Also, I am very pleased to continue leading the organization as President and CEO of the Company and the Bank."

"We have been friends and admirers of Pacific Mercantile for over a decade," said Edward Carpenter, Chairman of the Carpenter Funds. "We are delighted by this joint agreement that will increase our investment in the Company to $30 million."

The Additional Series B Purchase Agreement had provided for the sale of $1.0 million of Additional Series B Shares to SBAV LP ("SBAV"), which had purchased $7.5 million of Series B Preferred Stock on August 26, 2011. Due to the termination of that Agreement, the sale of the $1.0 million of Additional Series B Shares to SBAV will not occur.

As a result of the termination of the Additional Series B Purchase Agreement, it became necessary to amend certain of the ancillary agreements that either were entered into on August 26, 2011 or were appended as Exhibits to the Additional Series B Purchase Agreement (the "Ancillary Agreements"), including an Amended Investor Rights Agreement between the Company and the Carpenter Funds.

The Ancillary Agreements provide for the Carpenter Funds, for a purchase price of $51,105, and SBAV, for a purchase price of $44,056, to retain their rights to purchase common stock warrants from the Company that, subject to certain conditions, will entitle the Carpenter Funds and SBAV to purchase up to 408,834 shares and 352,444 shares, respectively, of the Company's common stock ("Warrant Shares"), at an exercise price of $6.26 per Warrant Share. The Carpenter Funds and SBAV also will retain their registration rights with respect to, in the case of the Carpenter Funds, the Common Shares and Warrant Shares, and in the case of SBAV, the Warrant Shares, as contemplated by the Additional Series B Purchase Agreement.

Consummation of the sale of the Common Shares pursuant to the Amended Common Stock Purchase Agreement is subject to the satisfaction of certain conditions, including the receipt by the Carpenter Funds of federal bank regulatory approvals for its purchase of the Common Shares by no later than April 27, 2012. There is no assurance that those conditions will be satisfied.The foregoing summaries of the Amended Common Stock Purchase Agreement and the above referenced Ancillary Agreements are not intended to be complete and are qualified in their entirety by reference to those Agreements, copies of which will be appended as exhibits to a Current Report on Form 8-K which the Company will be filing with the SEC to report the changes to the terms of the secondary equity financing summarized in this news release.

The summaries of the Additional Series B Purchase Agreement and the Common Stock Purchase Agreement, entered into on August 26, 2011 are not intended to be complete and are qualified in their entirety by reference to those Agreements, copies of which are appended as Exhibits 10.5 and 10.6 to the Company's Current Report on Form 8-K dated August 26, 2011.

About Pacific Mercantile Bancorp

Pacific Mercantile Bancorp is the parent holding company of Pacific Mercantile Bank, which opened for business March 1, 1999. The Bank, which is an FDIC insured, California state-chartered bank and a member of the Federal Reserve System, provides a wide range of commercial banking services to businesses, business professionals and individual clients through its combination of traditional banking financial centers and comprehensive, sophisticated electronic banking services.

The Bank operates a total of seven financial centers in Southern California, four of which are located in Orange County, one of which is located in Los Angeles County, one of which is located in San Diego County and the other of which is located in the Inland Empire in San Bernardino County. The four Orange County financial centers are located, respectively, in the cities of Newport Beach, Costa Mesa (which is visible from the 405 and 73 Freeways), La Habra and San Juan Capistrano (which is our South County financial center that is visible from the Interstate 5 Freeway). Our financial center in Los Angeles County is located in the city of Beverly Hills. Our San Diego financial center is located in La Jolla and our Inland Empire financial center is located in the city of Ontario (visible from the Interstate 10 Freeway). In addition to the Bank's physical locations, it offers comprehensive banking services over its Internet Bank, which is accessible 24/7 worldwide at www.pmbank.com.

The Pacific Mercantile Bancorp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7241

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