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When completed, the merger of Mercantile Capital Corp., Altamonte Springs, Fla., with Orlando’s Old Florida National Bank, will allow the commercial real estate lender to expand its services for small business owners in a number of ways.

First off, the deal means MCC will be able to use bank deposits to fuel its growth instead of lines of credit as it has for the past seven years, explained Christopher Hurn, chief executive at MCC.

This means the Small Business Administration 504 loan specialist can expand its reach even further and help a lot more of those small businesses around the country. So far, MCC has lent in 30 states and Puerto Rico. He declared the company would remain SBA 504 specialists after the deal closes. John Burden, president of Old Florida, said this is the reason the bank thinks there are a lot of mutual benefits from the transaction. It is the bank’s focus and goal, too. It looks to enable Mercantile to use its liquidity and capital to expand. “We think they have a tremendous business plan and the last thing we want to do is doing anything to hinder it,” he continued.

Terms of the deal were not disclosed. After the transaction closes later this year or early next, MCC will operate as a wholly owned subsidiary of Old Florida.

It had always been part of Hurn and MCC chairman Geof Longstaff’s plan to be affiliated with a depository, which Hurn termed as “the ideal strategy for us.” In the fall of 2008, the company’s management had applied for a national bank charter. While the Office of the Comptroller of the Currency approved the application, there was a moratorium on approvals at the Federal Deposit Insurance Corp., and MCC ended up withdrawing its application in February 2009.

Since then MCC had been approached by a number of possible partners, including Old Florida. “We felt like this would be a deal that would make us more valuable combined as opposed to separately,” he continued.

Old Florida was chartered in 1982, but last year, a group of investors led by the father-son team of Randy Burden, now chairman, and John Burden, now president, recapitalized and renamed the bank. It has $400 million in assets and nine branches in central Florida. The reason the deal makes sense for Old Florida, said John Burden, is that it positions the bank in front of the small business market. It has focused on the owner-occupied commercial real estate market, the niche that MCC occupies, he noted. This is what MCC has done well and what attracted Old Florida. Both companies look to help small business owners grow their infrastructure and create jobs.

“We’ve had that focus just providing commercial loan financing over the past seven years at Mercantile. These guys have [had] that focus since recapitalizing the bank. Putting all of us together makes a tremendous amount of sense. We all share the same vision of what we want to do and I think, candidly, this is exactly what is needed for the economy,” Hurn said.

MCC will relocate above an Old Florida branch in Winter Park, most likely in December. There are plans to open additional branches in central Florida in conjunction with Old Florida branches, but not on a nationwide basis. One of the reasons Old Florida raised capital was to take advantage of opportunities in its market, John Burden said. It is being selective, but looking to grow from the state’s west coast to its east coast along the I-4 corridor.

Mercantile’s business model is to sell a substantial portion of its SBA 504 first-lien loans to the secondary market, although it does portfolio a few loans. It also provides interim second mortgages for other lenders.

It will continue to do that, Hurn said, noting that MCC does not want the lenders and banks it works with to feel it is a threat to their business now that it will be a wholly owned subsidiary of a bank.

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