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                                                                    EXHIBIT 10.7

                                   SUBLEASE
                                   --------

          This Sublease, dated this 16th day of September, 1998, is entered into
by and between WASHINGTON MUTUAL BANK, FA, successor in interest to GREAT
WESTERN SAVINGS AND LOAN ASSOCIATION, ("Sublandlord"), and PACIFIC MERCANTILE
BANK("Subtenant") as a Sublease under a lease dated April 25, 1991, entered into
by and between The Irvine Company, as landlord (the "Landlord"), and Great
Western Savings and Loan Association, as Tenant, as amended by that certain
First Amendment to Lease dated February 20, 1996 (as amended, the "Master
Lease"). A copy of the Master Lease is attached hereto as Exhibit "A". All terms
not defined herein shall have the same meaning as in the Master Lease.


          1.  Premises.  Sublandlord hereby leases to Subtenant, and Subtenant
              --------
hereby leases from Sublandlord, the Premises leased by Sublandlord from Landlord
under the Master Lease, as shown on Exhibit "A" attached thereto.


          2.  Term.  The term of this Sublease shall commence on the date upon
              ----
which Tenant receives regulatory approval to open for business at the Premises
(the "Commencement Date"), provided, however, if the term has not commenced on
or before September 15, 1998, either party hereto may terminate this Sublease by
written notice to the other.  Tenant may take possession of the Premises as of
the date hereof for the purpose of installing tenant improvements
("Improvements").  Unless sooner terminated under any provision of the Master
Lease or this Sublease, the term shall continue until June 30, 2001 (the
"Term"). Sublandlord

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shall assist Subtenant in negotiating with Landlord to lease the premises
following expiration of this Sublease.

          3.  Rent.  From the Commencement Date though and including the last
              ----
day of the 4th month following the Commencement Date, no Rent shall be due but
Tenant shall perform all covenants contained herein; from the first day of the
5th month following the Commencement Date through and including the last day of
the 10th month following the Commencement Date, Base Rent shall be $15,286.25
per month; from the first day of the 11th month following the Commencement Date
until the end of the Term, Base Rent shall be 17,033.25 per month.  Such amount
shall be payable in advance on or before the first day of each calendar month
during the Term hereof.  In addition to the Base Rent, Subtenant shall pay as
additional rent Tenant's Allocable Share of Building Operating Expenses as
provided by Subsection 4.2 of the Master Lease ("Additional Rent" and together
with the Base Rent, the "Rent").  The Rent payable for any portion of a calendar
month shall be a pro rata portion of the Rent payable for a full calendar month.
Such Rent shall be paid without deduction or offset, in lawful money of the
United States of America to Sublandlord at Sublandlord's address set forth in
Section 6 hereof, or at such other place as Sublandlord may designate in
writing.

          4.  Security Deposit. On execution of this Sublease, Subtenant shall
              ----------------
deposit with Sublandlord the sum of $15,286.25 as a security deposit (the
"Security Deposit") for the performance by Subtenant of the provisions of this
Sublease. If Subtenant is

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in default, Sublandlord may use the Security Deposit, or any portion of it, to
cure the default or to compensate the Sublandlord for all damage sustained by
Sublandlord resulting from Subtenant's default.  Subtenant shall immediately on
demand pay to Sublandlord a sum equal to the portion of the Security Deposit
expended or applied by Sublandlord as provided in this Section 4 so as to
maintain the Security Deposit in the sum initially deposited with the
Sublandlord.  If Subtenant is not in default at the expiration or termination of
this Sublease, Sublandlord shall return the Security Deposit to Subtenant.
Sublandlord's obligations with respect to the Security Deposit are those of a
debtor and not a trustee.  Sublandlord may maintain the Security Deposit
separate and apart from Sublandlord's general and other funds or may commingle
the Security Deposit with Sublandlord's general and other funds.  Sublandlord
shall not be required to pay Subtenant any interest on the Security Deposit.

          5.  Condition of Premises. Subtenant understands that it will accept
              ---------------------
the Premises in its current condition and that Subtenant will have full
responsibility for making any Improvements to the premises.  Any such
Improvements to be installed by Subtenant, including, without limitation, any
automatic teller machines, shall be subject to the approval of Landlord and
Sublandlord and shall be constructed in accordance with the terms of the Master
Lease and applicable laws, ordinances, rules and regulations, of any government
body or board of fire underwriters having jurisdiction over the Premises.

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At the expiration of the Term of this Sublease, Subtenant may (and, at
Landlord's option shall) remove from the Premises all Improvements and
Subtenant's personal property and shall repair any damage and perform any
restoration work caused by such removal.

          6.  Incorporation by reference.  The following sections of the Master
              --------------------------
Lease are incorporated herein by reference as terms and conditions of this
Sublease as though each reference therein to "Tenant" were a reference to
Subtenant, each reference therein to "Landlord" were a reference to Sublandlord,
and each reference therein to "Lease" were a reference to this Sublease:

          (a)  Article II.

          (b)  Section 4.2.

          (c)  Article V.

          (d)  Article VI (except that the term "Landlord" in Article VI shall
               mean the Landlord under the Master Lease, and not the
               Sublandlord).

          (e)  Article VII (except that the term "Landlord" as used in Article
               VII shall mean the Landlord under the Master Lease and not the
               Sublandlord).

          (f)  Articles VIII, IX and X.

          (g)  Articles XI and XII (except that the term "Landlord" in Articles
               XI and XII shall mean the Landlord under the Master Lease, and
               not the Sublandlord).

          (h)  Articles XIII, XIV, XV and XVII.

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          (i)  Article XIX (except that the term "Landlord" as used in XIX shall
               mean the Landlord under the Master Lease, and not the
               Sublandlord).
          (j)  Articles XX, XXI and XXII.

          7.  Signage.  Subject to the Landlord's prior written consent,
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Subtenant shall have the right to eyebrow building signage in addition to the
same right to signage as the Sublandlord as provided by Section 5.2 of the
Master Lease.

          8.  Approval.  Prior to taking any such action with respect to the
              --------
Premises that would require the Sublandlord to obtain the Landlord's approval
under the Master Lease, Subtenant must first obtain approval from both the
Sublandlord and the Landlord.

          9.  Rights of Landlord.  In consideration of Landlord's consent to
              ------------------
this Sublease, Sublandlord and Subtenant hereby agree as follows:

              (a)  Sublandlord hereby irrevocably assigns to Landlord all of
     Sublandlord's interest in all Rent and income arising from this Sublease,
     and Landlord may collect such rent and income and apply same toward
     Sublandlord's obligations under the Master Lease; provided, however, until
     a default occurs in the performance of Sublandlord's obligations under the
     Master Lease, Sublandlord shall have the right to receive and collect the
     Rent under this Sublease.  Landlord shall not, by reason of this assignment
     or the collection of sublease rentals, be deemed liable to

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     Subtenant for the performance of any of Sublandlord's obligations under
     this Sublease. Sublandlord hereby irrevocably authorizes and directs
     Subtenant, upon receipt of a written notice from Landlord stating that an
     uncured default exists in the performance of Sublandlord's obligations
     under the Master Lease, to pay to Landlord all sums then and thereafter due
     under this Sublease. Sublandlord agrees that Subtenant may rely on that
     notice without any duty of further inquiry and notwithstanding any notice
     or claim by Sublandlord to the contrary. Sublandlord shall have no right or
     claim against Subtenant or Landlord for any rentals so paid to Landlord.

              (b)  In the event of the termination of the Master Lease, Landlord
     may, at its sole option, take over Sublandlord's entire interest in this
     Sublease and, upon notice from Landlord, Subtenant shall attorn to
     Landlord.  In no event, however, shall Landlord be liable for any previous
     act or omission by Sublandlord under this Sublease or for the return of any
     advance rental payments or deposits under this Sublease that have not been
     actually delivered to Landlord, nor shall Landlord be bound by any sublease
     modification executed without Landlord's consent or for any advance rental
     payment by Subtenant in excess of one month's rent.

          10. Notices.  Whenever Sublandlord or Subtenant shall desire to give
              -------
or serve upon the other any notice, demand, request or other communication with
respect to this Sublease or

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the Premises, such notice, demand, request or other communication shall be in
writing and shall be given to the other party by United States registered or
certified mail, postage prepaid, return receipt requested,


if to Sublandlord:

                    Washington Mutual Bank, FA
                    Corporate Property Servicer
                    9301 Corbin Ave.
                    M/S N030101
                    Northridge, CA  91324
                    Attention: H. Arthur West

if to Subtenant:

                    Pacific Mercantile Bank
                    _________________________________
                    _________________________________

or at such other address or addresses as Sublandlord, or Subtenant may from time
to time designate by notice, demand, request or other communication hereunder.

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     Attached hereto and made a part hereof is Addendum I.

     IN WITNESS WHEREOF, the undersigned have executed this Sublease as of the
day and date first written above.

                                         SUBLANDLORD:

                                         WASHINGTON MUTUAL BANK, FA


                                         By /s/ KENDALL BATEMAN
                                            __________________________________
                                            Name: Kendall Bateman
                                            Title: First Vice President



                                         SUBTENANT:

                                         PACIFIC MERCANTILE BANK (PROPOSED)


                                         By /s/ RAYMOND E. DELLERBA
                                            __________________________________
                                            Name: Raymond E. Dellerba
                                            Title: President & CEO (PROPOSED)

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                      ADDENDUM I TO SUBLEASE DATED 9-16-98

Notwithstanding any other provisions contained in this Sublease, in the event
(a) Sublessee or its successors or assignees shall become insolvent or bankrupt,
or if it or their interests under this Sublease shall be levied upon or sold
under execution or other legal process, or (b) the depository institution then
operating on the Premises is closed, or is taken over by any depository
institution supervisory authority ("Authority"), Sub-Lessor may, in either such
event terminate this Sublease only with the concurrence of any Receiver of
Liquidator appointed by such Authority; provided, that in the event this
Sublease is terminated by the Receiver of Liquidator, the maximum claim of Sub-
lessor for rent, damages, or indemnity for injury resulting from the
termination, rejection, or abandonment of the unexpired Sublease shall be law,
and in no event be an amount equal to all accrued and unpaid rent to the date of
termination.