Safe and Sound

Mechanics Bank

Walnut Creek, CA
4
Star Rating
Founded in 1905, Mechanics Bank is an FDIC-insured bank based in Walnut Creek, CA. Regulatory filings show the bank having equity of $804.7 million on $5.64 billion in assets, as of December 31, 2017.

With 975 full-time employees in 35 offices in CA, the bank holds loans and leases worth $4.22 billion, including real estate loans of $2.30 billion. U.S. bank customers currently have $4.18 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Mechanics Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during times of economic instability for the bank. It follows then that a bank's level of capital is a valuable measurement of a bank's financial resilience. When it comes to safety and soundness, the more capital, the better.

Mechanics Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Mechanics Bank's Tier 1 capital ratio was 11.77 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Mechanics Bank held equity amounting to 14.27 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

A bank with lots of these types of assets may eventually be forced to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

Mechanics Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.29 percent of Mechanics Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Mechanics Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Mechanics Bank received below-average marks on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Mechanics Bank's most recent annualized quarterly return on equity was 4.02 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $31.8 million on total equity of $804.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.57 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.