Pacific Mercantile Bancorp (NASDAQ:PMBC) (the “Company”) announced today that, based on a finding in a recent regulatory examination of Pacific Mercantile Bank, the Company’s wholly owned subsidiary (the “Bank”), the Company has determined that it will restate its unaudited consolidated financial statements as of and for the quarter and nine months ended September 30, 2009 that were contained in its Quarterly Report on Form 10-Q for its third quarter ended September 30, 2009. The restatement involves an increase of approximately $3.3 million in the Bank’s allowance for loan losses as of September 30, 2009, resulting from our decision, made on the basis of that regulatory examination, to give greater weight to qualitative factors in the determination of the amount of the allowance for loan losses.
“On a positive note, we are seeing a recent trend that leads us to believe that the condition of the Bank’s loan portfolio is improving,” stated Raymond E. Dellerba, the Company’s President and CEO.
- Loan delinquencies (loans past due from 1-89 days), which totaled $7.6 million, or 0.90% of total loans, at September 30, 2009, declined by approximately $5.0 million, or 65%, to approximately $2.6 million, or 0.31% of total loans, at December 31, 2009; and
- Non-accrual loans (consisting mostly of loans greater than 90 days past due), which totaled approximately $60.0 million at September 30, 2009, declined by approximately $8.0 million, or 13.3%, to approximately $52 million at December 31, 2009.
“We are encouraged by this trend, which reflects not only a gradual improvement in economic conditions, but also our decision, in 2007, to reduce real estate interim construction lending, our concerted loan collection efforts and our implementation of more stringent loan underwriting standards,” added Mr. Dellerba. "However, there is no assurance that this trend will continue, as the future direction of the economy and the speed of the recovery remain uncertain. Moreover, we are not yet able to determine the extent of the impact that this trend will have on our future operating results and we expect that the provision for loan losses will continue to represent a substantial expense, as non-performing loans will continue for some time to remain high relative to pre-recession levels.”