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Steven K. Buster – President & Chief Executive Officer Page 1 Report to Mechanics Bank Shareholders May 21, 2009 102 nd Annual Meeting of Shareholders.

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Presentation on theme: "Steven K. Buster – President & Chief Executive Officer Page 1 Report to Mechanics Bank Shareholders May 21, 2009 102 nd Annual Meeting of Shareholders."— Presentation transcript:

1 Steven K. Buster – President & Chief Executive Officer Page 1 Report to Mechanics Bank Shareholders May 21, nd Annual Meeting of Shareholders May 21 st, 2009

2 Steven K. Buster – President & Chief Executive Officer Page 2 Report to Mechanics Bank Shareholders May 21, Review Industry Highlights Financial Review / Mechanics Bank 3.Peer Group Analysis 4.Capital / Margins / Asset Quality 5.Home Equity Portfolio 6.Customer Satisfaction 7.Outlook for 2009 / Strategy A G E N D A

3 Steven K. Buster – President & Chief Executive Officer Page 3 Report to Mechanics Bank Shareholders May 21, 2009 It’s Great to be Mechanics Bank Banking Landscape  Large banks paralyzed with toxic assets  Small banks unable to tap growth capital and under regulatory pressure  Mark to market accounting undermining stability of industry  FDIC insurance fund being depleted

4 Steven K. Buster – President & Chief Executive Officer Page 4 Report to Mechanics Bank Shareholders May 21, Failures – 25 YTD 2009 Failures – 33 FDIC Takeover Source:US Department of Treasury Report to Congress – as at February 28, 2009

5 Steven K. Buster – President & Chief Executive Officer Page 5 Report to Mechanics Bank Shareholders May 21, 2009 FDIC Premiums  2008 Paid Premium$1.4 million  2009 Budget$3.0 million  2009 Forecast$5.5 million Sheila Bair – FDIC Chairman  2009 special 20bp$4.4 million  New expected special (10bp)$2.2 million  Now looks like 5 bp $1.2 million CONGRESS STILL IN SESSION

6 Steven K. Buster – President & Chief Executive Officer Page 6 Report to Mechanics Bank Shareholders May 21, 2009 TARP Update Troubled Asset Relief Program (TARP): $700B  Capital Purchase Program (CPP) 467 Financial Institutions (out of 8,280 FDIC Insured Institutions) $197 billion invested in Senior Preferred Shares  Other related programs tapping funds TLGP ~ Treasury Liquidity Guarantee Program TALF ~ Term Asset Backed Securities Loan Facility SSFI ~ Systemically Significant Failing Institutions AIFP ~ Automotive Industry Finance Program CAP ~ Capital Assistance Program PPIP ~ Public Private Investment Program Source:US Department of Treasury Report to Congress – as at February 28, 2009

7 Steven K. Buster – President & Chief Executive Officer Page 7 Report to Mechanics Bank Shareholders May 21, 2009 TARP / CPP  Oct 27, 2008 – First Public application program  Dec 3, 2008 – Amended Private application program  Dec 8, 2008 – Approval received  Jan 22, 2009 – MechBank says ‘no thanks’ to $60 million Treasury investment  Out of 467 Financial Institutions, only 14 banks were successful in returning disbursed CPP funds thus far

8 Steven K. Buster – President & Chief Executive Officer Page 8 Report to Mechanics Bank Shareholders May 21, 2009 March 17 : & February 1:00 pm January 29 on January 4:40 pm on Radio FM In the News

9 Steven K. Buster – President & Chief Executive Officer Page 9 Report to Mechanics Bank Shareholders May 21, 2009 ROE 10.52% 10.65% 10.67% 11.03% 4.65% Historical Financial Results NET INCOME

10 Steven K. Buster – President & Chief Executive Officer Page 10 Report to Mechanics Bank Shareholders May 21, 2009 AVERAGE DEPOSITS Historical Financial Results AVERAGE LOANS

11 Steven K. Buster – President & Chief Executive Officer Page 11 Report to Mechanics Bank Shareholders May 21, , , , , , , , , , , SHAREHOLDERS’ EQUITY Historical Financial Results

12 Steven K. Buster – President & Chief Executive Officer Page 12 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Return on Equity (Annual) %

13 Steven K. Buster – President & Chief Executive Officer Page 13 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Return on Assets (Annual) %

14 Steven K. Buster – President & Chief Executive Officer Page 14 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Operating Yield (Annual) %

15 Steven K. Buster – President & Chief Executive Officer Page 15 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Return on Equity %

16 Steven K. Buster – President & Chief Executive Officer Page 16 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Return on Asset %

17 Steven K. Buster – President & Chief Executive Officer Page 17 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Operating Yield %

18 Steven K. Buster – President & Chief Executive Officer Page 18 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review 1Q’082Q’083Q’084Q’081Q’09

19 Steven K. Buster – President & Chief Executive Officer Page 19 Report to Mechanics Bank Shareholders May 21, 2009 Return on Average Assets (ROAA) -0.02% -1.26% -0.02% 0.73% -0.70% 0.82%0.84% 1.01% 0.58%0.89% -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% ROAA %. Mechanics BankPeer Group Financial Review 1Q’082Q’083Q’084Q’081Q’09

20 Steven K. Buster – President & Chief Executive Officer Page 20 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Net Interest Margin 3.87% 3.91% 4.00% 3.94% 3.95% 3.05% 3.22% 3.41% 3.40% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% NIM % of Assets Mechanics BankPeer Group 1Q’082Q’083Q’084Q’081Q’09

21 Steven K. Buster – President & Chief Executive Officer Page 21 Report to Mechanics Bank Shareholders May 21, 2009 Interest Bearing Deposits Cost of Funds Benchmarking Our performance at the 13 th percentile as compared to our peer banks average performance at the 50 th percentile represents a savings of $9,760,00 over the last 4 quarters.

22 Steven K. Buster – President & Chief Executive Officer Page 22 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Past Due and Non Performing Assets 0.27% 2.76% 2.58% 3.92% 2.70% % 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% As % of Loans & ORE Mechanics BankPeer Group 1Q’082Q’083Q’084Q’081Q’09

23 Steven K. Buster – President & Chief Executive Officer Page 23 Report to Mechanics Bank Shareholders May 21, 2009 Financial Review Risk Based Capital Ratio 14.66% 14.60% 14.96%14.99% 14.75% 12.45% 12.24% 12.17% 12.08% 12.17% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% % Ratio RBC / RWA Mechanics BankPeer Group 1Q’082Q’083Q’084Q’081Q’09

24 Steven K. Buster – President & Chief Executive Officer Page 24 Report to Mechanics Bank Shareholders May 21, 2009 HELOC Portfolio Information  Home Equity Line of Credit (HELOC) is a line of credit secured by 1 st or 2 nd deed of trust on residential property.  Total Commitments are $248mm. Outstanding balances total $100mm for current advance rate of 40%.  There are 1,622 Notes in this portfolio with an average line of credit commitment of $153m. One third of the Notes have zero balance.  Portfolio Attributes  Minimal losses  Strong underwriting at inception  Current credit quality is excellent

25 Steven K. Buster – President & Chief Executive Officer Page 25 Report to Mechanics Bank Shareholders May 21, 2009 Geographic Distribution by County Commitments - $247,760,550 56% 5% 19% Contra Costa Alameda Placer, Sacramento & El Dorado other

26 Steven K. Buster – President & Chief Executive Officer Page 26 Report to Mechanics Bank Shareholders May 21, 2009 Geographic Distribution by County Outstandings - $100,194,848 16% 12% 22% 51% Contra Costa Alameda Placer, Sacramento & El Dorado other

27 Steven K. Buster – President & Chief Executive Officer Page 27 Report to Mechanics Bank Shareholders May 21, 2009 HELOC Portfolio Monitoring  Home Equity Line of Credit (HELOC) portfolio was scored with Experian – March 31 st, 2009  Portfolio scoring will be done quarterly, including internet appraisal values  Exception management of high-risk borrowers is coordinated between Loan Services and Collections Department  Watchlist reports are managed by Collections Department for loans identified with past due issues and by line officers for loans that are part of relationships  Under consideration : Stress testing with Banc Investment Group

28 Steven K. Buster – President & Chief Executive Officer Page 28 Report to Mechanics Bank Shareholders May 21, Client Research Suggests Opportunities

29 Steven K. Buster – President & Chief Executive Officer Page 29 Report to Mechanics Bank Shareholders May 21, Client Research Suggests Opportunities

30 Steven K. Buster – President & Chief Executive Officer Page 30 Report to Mechanics Bank Shareholders May 21, Client Research Suggests Opportunities  Online Banking Users: opportunity for improvement –72.3% very satisfied with overall service quality –95.7% –95.7% very satisfied or satisfied with overall service quality –40.1% very satisfied with online banking services –81.6% –81.6% very satisfied or satisfied with online banking services  Latino Market: opportunity for growth –Fastest growing minority group; 58% have a checking account –Four offices have populations 43% to 46% Latino within 1.5 mile San Pablo, Mira Vista, Point Richmond, Pittsburg  Nonprofit Sector: opportunity for expansion –Aligns with the Bank’s Corporate Social Responsibility commitment –Nonprofit clients describe us as a community partner, caring, cooperative, reliable, supportive, and trustworthy  Youth Market: opportunity for future –Gen X and Gen Y together outnumber Boomers –More educated, diverse, technology savvy  All four markets are High Priority Innovation Projects

31 Steven K. Buster – President & Chief Executive Officer Page 31 Report to Mechanics Bank Shareholders May 21, 2009  Currently reviewing 34 opportunities  Estimated savings for 2009 is between $1.5 and $2 million  Estimated on going annualized savings is between $2 and $2.5 million Expense Management Opportunities

32 Steven K. Buster – President & Chief Executive Officer Page 32 Report to Mechanics Bank Shareholders May 21, 2009  Current Facility Leases: “discount and extend”  Storage Area Network: DMX to Clarion  Consulting and Professional Fees  Travel and Entertainment  eDelivery  Retail Forecasting and Scheduling Software  Cash Recyclers  Money Service Business  ATM Surcharge Rebate Expense Management Opportunities

33 Steven K. Buster – President & Chief Executive Officer Page 33 Report to Mechanics Bank Shareholders May 21, 2009  Safety & Soundness  Retain & Support our Clients  Attract the Best Prospects  Manage Down Expenses  Look for Deposit Growth  Await Acquisition Opportunities Mechanics Bank Strategy


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