Mechanics Bank in Richmond, Calif., recently was trying to poach a small-business customer from a competing bank. The firm's original bank then counteroffered with a loan that had more favorable terms.

"We just had to stop the bidding at that point," said Bob Leet, executive vice president at $1 billion-asset Mechanics. "The other bank lowered its price to a point that we just couldn't afford to do business."

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