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Shareholder News

The Prospector

February 18, 2011 


Dear Shareholder:

With 2010 now behind us, I'd like to reflect on challenges we faced and successes we enjoyed during this pivotal year.


While the challenges of banking in general these days are many, your Board of Directors and management team have been primarily focused on compliance with the regulatory Consent Order (ORDER) issued in late 2009. The ORDER presented us with, among others, three primary challenges 1) Improve our capital position 2) Eliminate problem assets and 3) Achieve profitability.


As previously reported, with the support of our Directors, Shareholders and customers we were successful in raising $2.9 million in additional capital thanks to the faith our community has in Mother Lode Bank. At year end, our Tier 1 Capital (capital/average assets) fell slightly below our targeted minimum of 10%, primarily due to expected seasonal deposits. However, the two risk-based capital ratios significantly exceeded their targeted minimums of 11% and 13%, reflecting 13.93% and 15.18% respectively.


During 2010, we reduced problem assets significantly. For example, non-accruing loans declined 460% from $2.252 million to $485 thousand, loan delinquencies decrease 180% from $947 thousand to $517 thousand of which $425 thousand is 100% SBA-guaranteed.


Our real estate assets (resulting from foreclosures) increased with the addition of a $1.2 million foreclosure. Although the expenses associated with this property were significant, including a $255 thousand loss in value realized in the fourth quarter, I am pleased to report that it has since been sold and escrow closed in January, 2011.


Additional problem assets have been removed by way of charge-off. Although our loss provision for 2010 was notably higher than in "normal" economic times, we realized a 61% reduction - $612 thousand in 2010 as compared to $1.57 million in 2009.


Although providing for asset losses resulted in a disappointing net loss of $953 thousand for 2010, we are pleased with the improvement over the loss of $2.87 million in 2009.


Asset quality also continues to improve as a result of our highly successful Silver Mortgage Program. To date, the bank has originated just over $6 million in local owner occupied single family home loans. Not only does this contribute favorably to asset quality, it also moves us closer to sustained profitability.


Our deposit base remains sound. Total deposits as of December 31, 2010 are $55.6 million compared to $59.6 million for the same time period in 2009, a decline of 6.1%. With reduced loan demand in 2010 and continued strong liquidity, the bank decreased its reliance on certificates of deposit, which totaled $14.3 million as of December 31, 2010 compared to $19 million as of December 31, 2009, a decline of 25%. This also contributes to the achievement of sustained profitability. We're not quite there; however, we believe we are positioned well for continued improvement and success in 2011.


As always, thank you all for your continued support and business!




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