Interview With The CEO And President : Mechanics Bank (MCHB) - Steven K. Buster
March 6, 2012 - The Wall Street Transcript has just published Pacific and Southwest Banks Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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STEVEN K. BUSTER is Ceo and President of Mechanics Bank. Previously, he was a Managing Director of U.S. Trust Company, responsible for all Western U.S. banking activities. Prior to joining U.S. Trust, Mr. Buster served as Chief Operating Officer for the District Attorney, County of Los Angeles. Before that, he served as Group Manager for commercial banking at Standard Chartered Bank, where he was based in Singapore for five years, directing the activities of 700 banking officers and 3,000 total staff throughout Asia Pacific. Like most Mechanics Bank employees, Mr. Buster maintains a demanding list of civic/nonprofit commitments, including serving on the board of directors and executive committee of the Bay Area Council as the local Founder and Chairman of Bay Area Crime Stoppers; Chairman of the California Bankers Association; and District V Chairman of the Advisory Board for the Conference of State Bank Supervisors. Mr. Buster is also a member of the Alameda County Sheriff's Air Squadron and a former Chairman of the California Independent Bankers.
TWST: Please provide a history and overview of Mechanics Bank.
Mr. Buster: Mechanics Bank (MCHB) was founded in 1905. Our headquarters has really been in the Richmond, Calif., area this entire time. Everyone wonders where the name "Mechanics" came from. Mechanics Bank was founded because Richmond was the railheads for the two major railroads that came into the West. They would unload there, and they would ship things by boat off to San Francisco. There were no bridges back then. A distribution network and a manufacturing network and all types of repairs and factories all developed around Richmond. So we became the bank for all this industrial activity in Richmond. And 100 years ago, industrial workers were called mechanics.
We are now very much a community bank with a footprint that spreads up to the Sacramento area with five offices - Napa Valley with a couple offices and San Francisco, Oakland, Walnut Creek and everything in between. We now have 33 offices, and we are a 3 billion bank. One of the things that makes us unusual is we have been owned by the same people in control since the beginning, the Downer family. The Downer family now is in its fourth generation. Our Chairman Dianne Daiss Felton is a part of the Downer lineage, and she has now been our Chairman for two years. Also, the Vice Chairman is Michael Downer, and Eddie Downer, his father, is the Chairman Emeritus. So you can see that we have great stewards of the bank. They have made it clear that they don't care about the quarter - they want me to do the right thing for the long term.
I think this is a luxury that other CEOs don't have. So this patient capital has allowed us to be conservative and thoughtful about the relationships we have, how we treat the relationships and about how we make sure we stick with quality and don't try to squeeze out a buck during bad times. If you look at our track record, during the great recession of the last four years, we've made profits every year, and probably 60% of the banks in the United States lost money in one or two years during that time. Additionally, we were consistent in our dividends, and we were also profitable the entire time. In fact, our profitability goes back to the Great Depression. We have always been profitable, and that's because we have a little more conservative approach to what we do, and we did the right thing for the long term.
TWST: What are your competitive advantages both over some of the smaller community banks and over the larger national banks?
Mr. Buster: OK, first of all, I really want to avoid bad-mouthing competition. We know the big banks are not particularly liked right now by the public. If you were to visit our offices around Berkeley right now, you would find out that we are opening new accounts at 10 times the normal rate that we would be doing prior to the Occupy Wall Street movement. We are definitely a beneficiary from people that want to live and bank local. Now how do we differentiate ourselves from other community banks? For starters, we are a 3 billion bank. That is a very large community bank. We view ourselves as in the sweet spot right now. I'm not sure how a community bank of 500 million is going to make it in the future, because of Dodd-Frank and other regulatory burdens that are being placed on banks. Most of them are having to exit certain businesses completely, such as mortgage lending. The compliance cost is killing them. You must have some economies of scale to survive.
Yet if you get too big, you are thought of as impersonal and a noncommunity bank. Now using our bank as an example, we are large enough to be able to afford to have a whole product-development group. So we have the state-of-the-art online banking - it's an Intuit product - that is available for our clients. We can afford to do all this because we are reasonably big. I like to say we have big bank toys, but a community bank culture. When clients walk into our offices, we know their names. And yet they can go home and move money or look at their statements or transfer between accounts online, get warnings if they're about to be overdrawn. Whatever it might be, we have those same sophisticated electronic tools, and yet we know their name when they walk in the door. So that is our competitive advantage right now.
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