Mechanics Bank 2011 Earnings Rise
Significant improvements in loan portfolio, reductions in OREO
View Earnings Announcement
Richmond, CA, February 2, 2012 -- Mechanics Bank today reported 2011 net income of $17.2 million, up 56% over 2010 earnings. The Bank also saw significant improvement in asset quality with significant reductions in classified assets and strong growth in core deposits.
“Mechanics Bank has been fortunate to remain profitable throughout this prolonged economic downturn. In retrospect, 2011 was the most encouraging year since the great recession and economic downturn began several years ago,” said Steve Buster, Mechanics Bank CEO. “Recovery is still slow, but there’s no doubt it is taking place.”
Buster cited several positive trends that are driving both earnings and longer term optimism. “Non-accruing loans on our balance sheet have dropped by nearly $24 million,” he said. “We also were able to significantly reduce OREO (foreclosed properties owned by the bank) from $20.1 million at the end of 2010 to just $5.5 million at the end of 2011.”
Mechanics Bank’s nonperforming loans stood at 4.32% of total loans. Most of those loans continue to be secured to some degree by real estate or other collateral. The bank’s allowance for loan losses stands at 2.07% of total loans at December 31, 2011.
Both the bank’s asset and deposit growth outpaced prior years significantly. Assets grew by $100 million, bringing the total to just under $3 billion ($2.99 billion) and deposits grew by $129 million. Deposit growth was primarily in noninterest bearing demand deposit accounts. These low cost deposits also bolstered the Bank’s profits.
Buster pointed to the bank’s restructuring of its Municipal investment portfolio as a significant contributor to profits. “Given the low interest rate environment, we were able to sell a portion of our portfolio for high market prices and free up more of our balance sheet,” he said. “This has provided us with greater liquidity and the ability to compete more aggressively for long term loans as the recovery advances.”
This 4th quarter 2011 reflects a great improvement over last year’s fourth quarter with profits of $6.7 million, also up 56% from the same quarter in 2010. Mechanics Bank has not reported an annual loss throughout this great recession. The Bank has been consistently profitable and its string of annual profits goes all the way back to the Great Depression.
“Overall, it was a good year for Mechanics Bank,” said Buster. “From an operational standpoint, we achieved several important benchmarks, from trimming expense to upgrading our online banking platform. Loan and deposit acquisition in 2011 exceeded expectations and we continue to benefit from strong, stable customer relationships.”
Mechanics Bank’s total risk-based capital ratio of 16.2% continued to surpass the regulatory standard of 10% for being considered “well capitalized.” The bank’s liquidity ratio stood at 39%, with $1.2 billion held in liquid assets at December 31, 2011.
“There’s reason for optimism that our performance will continue to improve in 2012,” said Buster. “While in some ways the recession in Northern California cut deeper than in many other parts of the country, the rebound also appears to be stronger.”
Pointing to a host of regulatory changes that have affected the financial industry in the last 12 months, Buster said, “Compliance will be a major challenge for everyone, and especially for community banks that don’t have the ability to spread infrastructure costs across a larger base of business. But it also offers some unique opportunities. For example, as many California banks exit the mortgage business, we see an opportunity to better serve our clients by expanding this product with our own offerings. In short, we’re choosing to see the glass as half full.”
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About Mechanics Bank
For more than a century, Mechanics Bank has been committed to helping people build prosperous communities as a trusted financial partner, forging lasting relationships through teamwork, respect and integrity. The $3 billion independent bank, headquartered in Richmond, California, offers personal banking, business banking, trust, brokerage and wealth management services across Northern California. For more information, please visit www.mechanicsbank.com.
Mr. David Louis