Mechanics Bank 2009 Earnings Favorable in Challenging Economic Conditions

Richmond, CA, February 5, 2010 — Mechanics Bank today announced 2009 annual net income of $15.258 million, a 17% ($2.241 million) increase over 2008 net profit. The bank’s 4th Quarter net income of $2.899 million is in sharp contrast to the net loss of $4.755 million reported in the 4th Quarter of 2008.

“Although 2009 earnings were below average by historical comparison to more prosperous economic times, we were consistently profitable throughout all of 2009, and our overall performance marks an improving trend for Mechanics Bank,” said Steven K. Buster, CEO. “Especially in light of the economic stresses over the past two years, our results were quite respectable. Profits held up despite some unusual items such as increased provisions for loan losses and escalating FDIC premiums, which adversely impacted our earnings.”

By far the biggest factor affecting the Bank’s profits were loan loss provisions totaling $32.438 million during 2009, a 33% increase over the $24.425 million in loan loss provisions in 2008. “However, the strength of the Bank’s revenues, its low cost of funds and its control over discretionary expenses all helped to offset the Bank’s increased loan losses and bolster its profitability,” Buster said. “Virtually across the board, we’ve seen improvements in our performance, which compares favorably to our peer banks. Most importantly, we were profitable, while the majority of banks nationally in our size range were not.”

Buster said the Bank realized significant operating cost reductions in 2009. “However, there was one major increase over which we had no control: FDIC insurance premiums escalated 251%, from $1.426 million in 2008 to $5.008 million in 2009. Although we did not participate in the risky lending and investments that caused substantial insured losses within the financial sector, we are required to share the pain caused by others.”

Mechanics Bank’s balance sheet held $2.945 billion total assets at December 31, 2009, an increase of $75 million or 2.62% over 2008. That increase primarily resulted from strong deposit growth. Total deposits at December 31, 2009 were $2.396 billion, $181 million or 8.17% more than reported in 2008. The Bank maintains strong liquidity, with liquid assets totaling $1.018 billion at December 31, 2009, or 34.6% of total assets.

Asset quality remains strong. Collectively, the bank’s total allowance for all types of credit losses was $25.7 million at December 31, 2009, which was 1.4% of total loans. On that date, total non-performing loans were $42.1 million, which was 2.30% of total loans. Most of the Bank’s non-performing loans are secured to some degree by real estate or other forms of collateral. “Perhaps the most telling sign of improving credit conditions is that we have no 90-day past due loans on accrual status and we do not own any foreclosed real estate,” said Buster.

Total Stockholders’ Equity was $293.1 million at December 31, 2009 and the Bank’s simple equity ratio was 9.95% of total assets on that report date. The Bank remained “well capitalized” by all regulatory standards, with a Tier 1 Leverage Capital Ratio of 10.12%, a Tier 1 Risk Based Capital Ratio of 13.85%, and a Total Risk Based Capital Ratio of 15.08%.

“Our continued strong performance and solid capital levels throughout the year validate our decision in January 2009 to refuse the Government’s offer of $60 million in TARP money,” Buster said.

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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. For more information, please visit www.mechanicsbank.com.

Mr. David Louis
510.741.3328
David_Louis@mechanicsbank.com