Pacific Mercantile Bancorp (PMBC) in Costa Mesa, Calif., will exit the wholesale mortgage business.
The company said it will shift the focus of its mortgage operations entirely on the direct-to-consumer retail channel. The $1.1 billion-asset Pacific said it recently reviewed how to redeploy some of its capital committed to mortgage banking to its core commercial lending in preparation for an eventual increase in interest rates, the company said Monday when it announced second-quarter results. It was also looking to reduce costs and improve efficiency.
Based on its review, Pacific will stop taking mortgage submissions from mortgage brokers after Aug. 31. It will continue to process and fund all mortgage broker-originated loans being processed or originated before that date.
Even though this will reduce its mortgage loan originations and future mortgage banking revenues, Pacific said the move will help to improve profits, reduce and control operating costs and decrease interest rate and other risks inherent in the wholesale mortgage business.
Pacific also earned $5.8 million, almost five times higher than a year earlier. improvement was mostly due to mortgage banking revenue increasing more than six times from a year earlier, to $8.5 million, and a noncash income tax benefit of $4.1 million. Partially offsetting these gains were a decline in net interest income, an increase in the loan-loss provision and an increase in noninterest expense.
Pacific Mercantile started to "experience an increase in demand for commercial and industrial lending in manufacturing, wholesale, distribution and medical, with Small Business Administration … and Entertainment Financing leading the way," Raymond Dellerba, the company's president and chief executive, said in a press release.
