Mechanics Bank Reports 3rd Straight Quarter of Profit Gains

Bank continues aggressive provisions for loan loss reserves

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RICHMOND, CA, November 4, 2010 -- Mechanics Bank earnings improved for the 3rd straight quarter of 2010, but remained significantly below 2009 profits for the comparable periods. The bank’s $2.55 million of net income in the 3rd Quarter 2010 was $376,000 (17%) higher than 2nd Quarter 2010 earnings, but $1.3 million below the 3rd Quarter 2009 earnings. Net income for the first nine months of 2010 totaled $6.7 million, a drop of $5.7 million from earnings in the comparable period of 2009.

The bank’s 3rd Quarter 2010 expense for loan losses was $9 million, bringing the total loan loss provisions taken in 2010 to $30 million. As of September 30, 2010 the allowance for loan losses totaled $35.6 million, or 1.98% of gross loans, an increase of $10.1 million compared to September 30, 2009.

“Every dollar—and then some—of decreased profits from 2009 levels can be explained by our increased provisions for loan losses in 2010,” said Steve Buster, Mechanics Bank CEO. “For the first nine months of 2010 we added $12.5 million more to loan loss provisions than during the comparable period in 2009. We also have continued our historically aggressive approach to charge-offs. 2010 has been a year to focus on bolstering our balance sheet against future portfolio risk. We are entering the economic recovery as a much stronger bank.”

The balance sheet held $2.89 billion total assets at September 30, 2010, which was $65 million or 2.32% more assets than year ago levels. This was due primarily to increased customer deposits and investments. Total deposits at September 30, 2010 were $2.40 billion, $104 million or 4.54% more than reported a year earlier. The bank maintained strong liquidity (cash, federal funds and investment securities) of $982 million at September 30, 2010, equal to 34% of total assets. Total loans declined to a level of $1.8 billion at September 30, 2010, $54 million or 2.91% below the level of a year ago.

“We are ready and eager for opportunities to lend—the weakness is on the demand side, not the supply side, where loans are concerned,” said Buster. “However, our strong liquidity and capital positions us advantageously for possible acquisitions. The opportunities in the next two years should be prime to acquire smaller community banks faced with increased compliance costs and lingering loan exposures.”

Mechanics Bank remains among the best capitalized banks in California with total risk-based capital of 15.61%. The regulatory standard for “well capitalized” is 10%. The bank’s simple equity ratio was 10.29% of total assets on Sept. 30th, 2010, and its Tier 1 Leverage Capital Ratio was 9.92%.

“Mechanics Bank’s shareholders have encouraged us to take appropriate measures to prevent future, unanticipated losses,” said Buster. “By building up loan loss reserves to almost 2% of total loans—and with significant collateral securing most of our non-performing loans—we are confident that we can safely put our recessionary loan losses behind us. While we are not forecasting a double dip in the economy, we are prepared for a slow-growth recovery.”

More details may be found here.

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 $2.9 billion independent bank, headquartered in Richmond, California, offers personal banking, business banking, trust, brokerage and wealth management services through 33 offices across Northern California.

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