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Mechanics Bank Rescinds Its Capital Purchase Program Participation
RICHMOND, CA, January 23--The Board of Directors of Mechanics Bank today unanimously approved withdrawal of the bank's previously-announced participation in the U.S. Treasury's Capital Purchase Program (CPP.)
"New measures have been adopted or are under legislative consideration that materially alter the circumstances that existed at the time our Board approved a $60 million participation," said Steve Buster, Mechanics Bank CEO. "The momentum is toward provisions that create too much risk and could be too costly."
CPP is intended to inject additional capital into the banking system to create more stability. Only strong, healthy banks were invited to apply, and initially, there were relatively few restrictions placed upon their use of the funds. (For more information, go to http://treas.gov/press/releases/hp1207.htm.) Under the program's terms, Mechanics Bank received preliminary approval for $60 million of additional capital in exchange for preferred stock paying a dividend rate of 5 percent per annum for the first five years. However, the bank withdrew from the program before signing the Securities Purchase Agreement or issuing preferred stock to the Treasury.
"Since the initiation of the program, the financial industry's slide has continued and the nine largest banks that were first in line for CPP capital have largely been forced to make capital retention a priority. New loans have failed to materialize as rapidly as regulators and legislators may have hoped," said Buster. "The reaction has been toward increasingly restrictive rules for banks that accept TARP/CPP, including limiting shareholder dividends, marginalizing executive pay and--by far of most concern to us--telling banks how, what and to whom they must lend.
“Mechanics Bank is well capitalized by regulatory standards and does not need this additional capital, but we decided to participate to ensure greater flexibility in a deteriorating economy," Buster said. "Given that the Treasury can unilaterally alter the program terms at any time, at this point the risks outweigh the benefits, and we have decided to rescind our participation."
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