Mechanics Bank Announces Second Quarter Earnings
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WALNUT CREEK, CA, July 18, 2014 — Mechanics Bank announces strong second quarter 2014 earnings of $6.1 million. The current quarter earnings were well improved over the first quarter earnings of $1.8 million, bringing year to date net income to $7.9 million.
The second quarter earnings were achieved despite one time charges related to the Voluntary Separation Incentive Program (VSIP) of $5.6 million and additional provisioning to the Bank’s allowance for loan and lease loss (ALLL) of $4.4 million. Before the YTD one time VSIP expense, the tax adjusted net income is $11.1 million. The remaining VSIP charges during the second half of the year is estimated at $450,000.
Tremendous cost savings of $3.5 million (16%) YTD were achieved in the occupancy, equipment and other categories. When projected through year end, along with numerous personnel related cost savings, the expense savings will place the Bank on track to improve its efficiency ratio of 82% to a run rate of approximately 72%. Enhanced scrutiny of monthly expenditures will be on going, as will the evaluation of key business lines for profitability.
Significant strides occurred in the second quarter to preserve Mechanics Bank’s strong credit culture, resulting in an ALLL of $34 million (2.04% of total loans) at June 30, 2014; Non-performing loans at $28.4 million were reduced by $5.9 million YTD; Non-performing assets (including OREO) were reduced by $10.1 million YTD; and Past Due loans were reduced by 8% YTD and 27% year over year. The Bank will continue taking aggressive actions to facilitate problem loan resolution.
Total gross loans increased $22 million or 1.3% YTD, even after significant decreases to problem loans. This loan growth has resulted in the improved quality of blended earning assets. Streamlining of the Bank’s internal credit processes and the enhanced commercial and consumer credit product offerings are expected to accelerate the Bank’s loan growth through year end and beyond.
Net Interest Margin (NIM) compression precipitated by artificially low interest rates continues to warrant enhanced scrutiny. Loan retention, new loan volume, and additional fee generating products and services are the key focus to top line revenue growth.
“I am pleased with the enhanced depth of expertise and industry knowledge within the leadership team,” says Christa Steele, President and Chief Executive Officer at Mechanics Bank. “This will allow the Bank to position itself for growth organically or by acquisition as we broaden our footprint.”
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