Mechanics Bank Accepts Capital Purchase Program Participation
RICHMOND, CA, January 6--The Board of Directors of Mechanics Bank yesterday voted to approve the bank's participation in the U.S. Treasury's Capital Purchase Program (CPP.) Under the program's terms, the bank will receive $60 million of additional capital in exchange for preferred stock paying a dividend rate of 5 percent per annum for the first five years of the program.
The Treasury granted preliminary approval for Mechanics Bank's application on December 11th. Management and the Board extensively analyzed and debated the decision to accept the funds, culminating in the January 5 Board of Directors meeting.
The CPP is part of the Troubled Assets Relief Program (TARP). It is intended to inject additional capital into the banking system to create more stability during these volatile times. Qualifying banks--and only strong banks were eligible--were invited to apply for up to 3% of risk-weighted assets in exchange for preferred stock. Capital given to participating banks must be paid back, along with a 5% dividend. For more information, go to the U.S. Treasury Press Release.
"The CPP is open only to healthy banks and our approval for participation is a confirmation of our strength and stability," said Steve Buster, Mechanics Bank CEO. "We are very well capitalized currently and did not need this additional capital, so we had to carefully consider whether accepting it made sense. In the end, we felt there were compelling reasons to go ahead. The additional capital will not only ensure our ability to help our valued customers with new credit through this period of economic uncertainty, but it could come in handy if a truly excellent growth opportunity arises."
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 $2.7 billion independent bank, headquartered in Richmond, California, offers personal banking, business banking, trust, brokerage and wealth management services through 33 offices across Northern California. For more information, please visit www.mechbank.com.
Ms. Hatti Hamlin
Mr. David Louis
Additional information provided in our CPP Q&A section.