Pacific Mercantile Bancorp said it has reached agreements with state and federal regulators to take actions to address loan performance and improve its operating results while raising capital levels.
The seven-branch Southern California bank said its agreements with the Federal Reserve Bank of San Francisco and the California Department of Financial Institutions are designed "to increase our capital to strengthen our ability to weather any further adverse conditions that might arise if the hoped-for improvement in the economy does not materialize," according to a company filing with the U.S. Securities and Exchange Commission.
Under the agreements, the company's board must submit plans to regulators addressing matters such as strengthening board oversight of bank operations, improving credit risk-management practices and policies and keeping adequate reserves for loan and lease losses, among others. It also must submit a capital plan to the San Francisco Fed and implement it after the Fed approves it.
If the bank doesn't follow through with the agreements, it could face further regulatory enforcements. Pacific Mercantile noted in the filing that it had already "made progress with respect to several of these requirements."
Last month, Pacific Mercantile said its second-quarter loss widened as it saw a significant income-tax provision, compared with a tax benefit a year earlier. Like many other banks in recent quarters, its loan-loss provisions fell and net interest and non-interest income improved.
Shares closed Friday at $3.80 and were inactive premarket. The stock has risen 26% so far this year.
