Before I get into the first quarter earnings, let's take a look at PMC's business model. The Company that primarily originates first-lien, real estate-collateralized loans to small businesses, primarily in the limited service hospitality industry. PMC has two subsidiaries that act as non-bank Small Business Administration 7(a) Program lenders, which means that the Company is able to originate loans that are guaranteed up to 75% by the SBA. It also means that portions of 7(a) loans guaranteed by the agency can be transformed into AAA rated government bonds and sold on the secondary market.
Obviously, in the current economic environment, PMC's business would be expected to decline, so secular pressure on the stock is not surprising. PMC's fundamentals, however, are telling a different tale.
PMC is a small-cap stock and thinly traded, so buyers beware. For those with some money to play with, however, this stock could prove to be an untapped gold mine.