Pacific Mercantile Bancorp Reports Operating Results (10-Q)
Pacific Mercantile Bancorp is the parent holding company of Pacific Mercantile Bank that provides commercial banking services in Orange Los Angeles San Bernardino and San Diego counties of California. It primarily engages in generating deposits and originating loans. The Bank is an FDIC insured California state-chartered bank and a member of the Federal Reserve System and provides a wide range of commercial banking services and financial products which includes mortgage financing to businesses business professionals and individual clients through its combination of traditional banking financial centers and comprehensive sophisticated electronic banking services. Pacific Mercantile Bancorp provides its services to small and moderate size businesses professional firms and individuals. The company is headquartered in Costa Mesa California. Pacific Mercantile Bancorp has a market cap of $36.94 million; its shares were traded at around $3.54 . Highlight of Business Operations: Those decreases in interest income in the three and six months ended June 30, 2009 were due primarily to (i) declines of 500 basis points in prevailing market rates of interest primarily as a result of reductions, commenced in September 2007, in the federal funds rate implemented by the Federal Reserve Board in response initially to a slowing in economic growth and, then, to the economic recession and credit crisis, as a result of which the federal funds rate declined to 0.25% at June 30, 2009 from 5.25% on September 17, 2007, and (ii) the increases, described above, in non-performing loans, on which we ceased accruing interest income. Those decreases were only partially offset by the effects on interest income of increases, in the three and six months ended June 30, 2009, of $53 million and $58 million, respectively, in average loans outstanding, which generate higher yields than other earning assets.
Due primarily to the decline in prevailing market rates of interest, our net interest margin decreased to 1.50% in the three months ended June 30, 2009, from 2.41% in the same period of 2008, and to 1.70% in the six months ended June 30, 2009, from 2.49% in the same six months of 2008. In the three months ended June 30, 2009, the yield on interest-earning assets declined to 4.21% from 5.60% in the same period of 2008, which more than offset a decline in the average interest rate paid on interest bearing liabilities to 3.33%, from 4.09% in the same three month period of 2008. Similarly, in the six months ended June 30, 2009, the average rate of interest earned on average earning assets declined to 4.50%, from 5.79% in the same six months of 2008, and was only partially offset by a decrease in the average interest rate paid on interest bearing liabilities to 3.39%, from 4.24% in the same period of 2008. The decreases in net interest margin also reflect timing differences in the impact that the declines in market rates of interest have on our interest income and interest expense. Those declines resulted in automatic decreases in the interest rates on our adjustable rate loans, whereas the impact of those declines on the interest we paid on deposits has been more gradual primarily as a result of the maturity schedule of our time certificates of deposit.
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