Mechanics Bank Announces 2010 Second Quarter Earnings
Bank significantly increases loan loss reserves while remaining profitable
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RICHMOND, CA, August 5, 2010 -- Mechanics Bank today announced 2010 second quarter net income of $2.2 million, an 8% increase over 1st quarter results, but a drop of $1.3 million compared to the same quarter in 2009. Provisions for loan losses--$10.5 million for the 2nd quarter and $21 million for the first 6 months—have taken a heavy toll on earnings, even as the bank’s net loan charge-offs of $10.4 million dropped $7 million compared to the same period last year.
“In a faltering economy and faced with significantly higher costs for FDIC insurance, it is notable that Mechanics Bank has remained continuously profitable during each of the past six quarters,” said CEO Steve Buster. “We believe we’ve taken the appropriate action to preserve our strong credit culture through our loan loss provisions and building up our reserves. It is currently enough, we believe, to cover all the credit losses inherent in the entire loan portfolio.”
The bank’s allowance for loan losses totaled $35.7 million at June 30th, 2010 ($13.9 million more than one year ago) and represented 2.00% of total loans. At June 30th non-performing loans totaled $47.1 million, which was 2.64% of total loans, but the majority of those non-performing loans are secured to some degree by real estate or other forms of collateral.
“From a comparative earnings standpoint, it has been somewhat painful to accelerate our loan loss provisions, as we have in 2010,” said Buster. “However, our philosophy is to look for the best, while preparing for the worst. It’s a philosophy that has served us well over our 105 years of operations.”
By several regulatory measures, Mechanics Bank's capitalization was strong. Its total capital to risk-weighted assets ratio was 14 %; 10 % is necessary to be considered "well capitalized." Using another measurement standard, the Bank's "Tier 1" leverage ratio was 10.5 %, more than double the amount necessary to be considered “well capitalized.”
"In one of the most challenging periods in recent banking history, we feel fortunate to have a loyal base of customers who are continuing to perform well," said Mechanics Bank Vice Chair Dianne Daiss Felton. "We are not experiencing the non-performing loans that have been plaguing most of our industry and our consistent focus on sound underwriting practices and compliance has been rewarded. We ended 2007 with an exceptionally high quality loan portfolio and superior liquidity."
The bank experienced significant year-over-year asset growth despite the economic downturn, with total assets up $177 million or 6.41% more than a year ago. Total deposits were $2.427 billion, an increase of $179 million or 7.95% over one year ago and the bank maintained a relatively high level of liquidity at 35.78% of assets. The bank remained “well capitalized” by regulatory standards.
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.
Mr. David Louis