March 6 - Pacific Mercantile Bancorp, Costa, Mesa, Calif., (Nasdaq:PMBC) has entered into a stock purchase agreement to sell up to 2.22 million shares of its common stock at a price of $6.75 per share in cash to Carpenter Community BancFund LP and Carpenter Community BancFund-A LP. The price of $6.75 per share of common stock represents a 13 percent premium over the $5.95 closing price of the company's common stock on Feb. 26, 2013, the day before the effective date of the agreement. The net proceeds from the sale of those shares, which are expected to total approximately $14.8 million will be contributed by the company to a new wholly owned asset management subsidiary, which will use those proceeds to fund the purchase of nonperforming loans and foreclosed real properties from the company's wholly owned banking subsidiary, Pacific Mercantile Bank.
Following the purchase of those assets, the new asset management subsidiary will focus its efforts and resources principally on managing and disposing of those assets. The sale of those assets by the bank to that subsidiary is expected to result in improvements in the bank's financial condition and future financial performance and, at the same time, will provide the bank with additional financial resources that it plans to use to fund new loans and grow its business.
"One of the responsibilities of a bank holding company is to be a source of financial strength for its banking subsidiary and the sale of the shares to the Carpenter Funds and the use of the sales proceeds to purchase non-performing assets from the Bank are being undertaken in furtherance of that responsibility," stated Raymond E. Dellerba, president and CEO of the company. "Most of the nonperforming assets we will be purchasing from the bank are assets which have proven to be the most difficult to sell or resolve due to the poor condition of the properties or the financial difficulties of the borrowers," added Dellerba. "We are appreciative of the willingness of the Carpenter Funds to purchase our shares at a price above our recent market prices to enable us to purchase these assets," stated CEO Dellerba.
Consummation of the sale of the company's common stock to the Carpenter Funds pursuant to the stock purchase agreement and the use of the net proceeds from that sale of shares to purchase nonperforming assets from the bank are subject to the receipt by the company and the Carpenter Funds of federal bank regulatory approvals, and the satisfaction of conditions customary for transactions of this nature, in each case by no later than April 15, 2013, unless that date is extended by agreement of the company and the Carpenter Funds.
If the sale of the shares is consummated, the Carpenter Funds will own, beneficially, approximately 34 percent of the company's outstanding voting shares, compared to the 28 percent they currently own.
The sale of the shares of common stock to the Carpenter Funds also will strengthen the company's financial condition by increasing its capital and capital ratios. However, the bank's sale of nonperforming assets to the company's new asset management subsidiary will not result in changes in or improvements to the company's consolidated financial condition or operating results, because those nonperforming assets will remain on the company's consolidated balance sheet and the costs of managing and disposing of those assets, and any losses that may be recognized on their sale or other disposition, will continue to negatively affect the company's consolidated operating results and cash flows until the sales or dispositions of those assets are completed.
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 a 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 electronic banking services. The bank operates seven financial centers in Southern California: four in Orange County and one each in Los Angeles and San Diego Counties, and another in the Inland Empire in San Bernardino County. Find more information at www.pmbank.com.