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Coleman C-Suite Small Business Lending Report — Pacific Mercantile Bank Exits SBA Lending

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April 29, 2015

By Bob Coleman
Editor, C-Suite Small Business Lending Report

The Southern California-based lender approved 52 SBA 7(a) loans for $178 million last year.

They won’t be approving many more.

Rejecting the transactional nature of SBA loans, the bank fired 15 employees from their SBA department in March.

Says President & CEO Steve Buster, ‘During the first quarter of 2015, the Company made the strategic decision to discontinue its business of funding broker-originated SBA loans. The Bank employed a group, originally hired in May 2012, to focus on originating loans through the SBA 504 and 7(a) lending programs.

‘The SBA Group sourced loans through broker relationships, which generally did not result in the Bank having the borrower’s full banking relationship. We concluded that the transactional nature of the business model in the SBA Group was not in line with our strategy of transitioning to a relationship-oriented commercial banking model.

‘As a result of this decision, we terminated the 15 employees within the SBA Group and we incurred total personnel expense including severance pay of $611,000, which is recorded within noninterest expense for the three months ended March 31, 2015 and will be nonrecurring. We do not expect any additional expenses to be incurred as a result of this decision. The Bank continues to be in good standing with the SBA as a Preferred Lender and we will continue to originate 7(a) and SBA 504 loans through our core relationship banking strategy. We intend to sell the guaranteed portion of the 7(a) loans in the secondary market from time to time.’

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