Mechanics Bank of Richmond (MCHB)

[Enterprising Investor]

Mechanics Bank goes on hiring binge to become a more aggressive lender (10/27/15)

Mechanics Bank is hiring seasoned bankers to step up its lending in 2016.

Mechanics spent much of the summer strengthening its credit and finance groups to set the stage for expanding its commercial banking team. Business lending and commercial real estate lending are expected to be high on the bank's agenda in the year ahead.

The Walnut Creek-based bank plans to hire an additional 60 to 70 people in the months ahead, adding to its workforce of 420 people, said CEO Kenneth Russell, who has worked with the bank's new ownership since the late 1980s.

"Because of the legacy of the Ford Group, we have a trail of talent. We know where the people are," Russell said of his recent efforts to hire eight to 10 key people. "It was like the Blues Brothers putting the band back together."

A recent interview with Russell and Mechanics Bank Chairman Carl Webb was an opportunity to discuss the vision for the Bay Area's largest community bank since Ford Financial Fund bought a 70 percent stake in the bank last April.

"We're every bit as pleased five months post-close as we were ahead of the acquisition. But you always find things once you get the keys and look under the hood," Webb said. "To a large extent this acquisition has been surprise-free."

Webb and his team appear to be rebuilding Mechanics Bank after prior leadership made substantial job cuts and pulled back on lending and visibility in the community.

"This bank had cut too deeply. That was evident to us early on," Webb said. "I characterize it as the new Mechanics Bank."

(The hiring was readily apparent on a recent visit to headquarters, with a crowded parking lot and cubicles dotting what had been open floor space.)

"We're trying to re-engage the lending efforts here. That is job one," Webb said. "To get the bank back in the market, become more visible and I would even say more aggressive in our lending.

"We have a 50 percent loan-to-deposit ratio. That's too low," Webb added.

All those efforts are integral for the bank's new owners to realize their vision of building a strong community banking operation in California.

"What we are focused on right now is making Mechanics Bank the best it can be and retooling it for what we see as its vision going forward: to serve as a platform for other acquisitions.

"Acquisitions don't come with a calendar," Webb said, adding that his team is closely monitoring about 20 banks as potential purchases. Plus Webb says he's receiving calls from banks eager to talk with him about how the Mechanics Bank transaction was structured since Ford took a majority stake vs. most buyers traditionally wanting complete ownership.

"We have a big checkbook," Webb said. "I don't say that boastfully, but we do have the appetite, the expertise and the capital."

He was eager to reiterate Ford's vision to acquire more California banks, focusing on those with assets of at least $1 billion. "It takes just as much time and effort to deal with a $500 million bank acquisition as it does to buy a $5 billion bank," Webb said.

Webb, who has decades of experience in acquiring banks, is keeping his options open when it comes to M&A negotiations.

He says an acquired bank may not be reflagged Mechanics Bank, especially if it's located outside the Bay Area. He doesn't see why the newly acquired bank should necessarily walk away from the brand equity a Southern California bank has built up over many years.

Russell's role as CEO was initially billed as being on an "interim" basis, but that reflects his willingness to step aside when his successor is found, rather than the bank operating in a holding pattern as it conducts a CEO search.

After all, Webb — reflecting his years of negotiating bank deals — says Mechanics Bank's next bank purchase will come with its own CEO. (Webb declined to discuss details over the sudden departure of the bank's prior CEO, Christa Steele.)

Webb sees plenty of room for industry consolidation.

"Clearly, there's over-capacity in banking. There doesn't need to be a bank branch on every corner. Nothing makes more sense that pushing two banks together," Webb said, noting that over his three decades in banking the number of banks in America has declined from 18,000 to 6,400.

But Webb's not giving a timetable on when the bank will make its next purchase.

"One thing that makes you a better acquirer is patience," Webb said. "Patience has always served us well. Typically, the more patience we had, the better deal we got."

http://www.bizjournals.com/sanfrancisco/blog/2015/10/mechanics-bank-retools-ford-banking-acquisitions.html

Click on link for video to view interview of Carl Webb.