Mechanics Bancorp Reports Third Quarter 2025 Results Following Completion of Merger with HomeStreet Bank

Mechanics Bancorp (NASDAQ:MCHB):

Mechanics Bancorp (NASDAQ:MCHB) ("Mechanics"), the financial holding company of Mechanics Bank, today announced its financial results for the quarter ended September 30, 2025. Mechanics reported net income to common shareholders of $55.2 million, or $0.25 per diluted share, for the third quarter of 2025, compared to $42.5 million, or $0.20 per diluted share, for the second quarter of 2025. Mechanics' financial results for the third quarter were materially impacted by its merger with HomeStreet, Inc. ("HomeStreet"), which was completed on September 2, 2025. Refer to "Presentation of Results – HomeStreet Bank Merger" below for additional information about the presentation of the financial statements following the merger.

C.J. Johnson, President and CEO of Mechanics, said, "We are pleased to close our acquisition of HomeStreet and create the premier West Coast community bank. This transaction was financially and strategically compelling and we are excited to add the attractive markets of Washington, Oregon and Hawaii to our unique California franchise. Mechanics Bank has been a pillar of financial strength since 1905 and I'm excited for what the future has in store for our Company."

Third Quarter 2025 Highlights:

• Total assets increased $6.1 billion to $22.7 billion and total loans increased $5.3 billion from the prior quarter, resulting in a loans-to-deposits ratio of 75%.
• Total deposits increased $5.5 billion to $19.5 billion, an increase of 39% from the prior quarter, and noninterest-bearing deposits increased $1.3 billion to $6.7 billion, an increase of 24% from the prior quarter.
• Total cost of deposits was 1.45% for the quarter and 1.53% for the month of September 30, 2025.
• Strong capital ratios⁽¹⁾, including an estimated 15.59% Total risk-based capital ratio, 13.42% Tier 1 capital ratio, 13.42% CET1 capital ratio and 10.33% Tier 1 leverage ratio.
• Allowance for credit losses ("ACL") to total loans of 1.16%, up from 0.74% at the prior quarter-end after a provision for credit losses on loans of $46.1 million, which includes a $20.2 million initial provision related to non-purchased credit deteriorated ("non-PCD") loan balances.

• No wholesale funding, as all HomeStreet FHLB borrowings and brokered deposits have been paid off.
• Preliminary bargain purchase gain recognized of $90.4 million on the HomeStreet merger.
• Non-recurring acquisition and integration costs of $63.9 million.

Presentation of Results – HomeStreet Bank Merger

On September 2, 2025, the merger of HomeStreet Bank, the wholly owned subsidiary of Mechanics Bancorp (formerly known as HomeStreet, Inc.) with and into Mechanics Bank, was completed. Mechanics Bank is the accounting acquirer (legal acquiree), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp is the legal acquirer. Mechanics' financial results for all periods ended prior to September 2, 2025 reflect Mechanics Bank's historical financial results on a standalone basis. In addition, Mechanics' reported financial results for the quarter and nine months ended September 30, 2025 reflect Mechanics Bank's financial results on a standalone basis until the closing of the merger on September 2, 2025 and results of the combined company for September 2, 2025 through September 30, 2025. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Mechanics have been retrospectively restated to reflect the equivalent number of shares issued in the merger since the merger was accounted for as a reverse acquisition. As the accounting acquirer, Mechanics Bank remeasured the identifiable assets acquired and liabilities assumed in the merger as of September 2, 2025 at their acquisition date fair values. The estimates of fair value were recorded based on initial valuations at the merger date. These estimates are considered preliminary as of September 30, 2025, are subject to change for up to one year after the merger date, and any changes could be material.

Net Interest Income

Net interest income in the third quarter of 2025 was $15.5 million higher than the second quarter of 2025 primarily as a result of the merger with HomeStreet Bank in September 2025. Mechanics' net interest margin decreased from 3.44% to 3.36%. The decrease in the net interest margin was primarily due to the deposits and long-term debt acquired from HomeStreet and non-recurring interest recoveries recognized in the second quarter.

Nathan Duda, EVP and Chief Financial Officer of Mechanics, commented, "The legacy HomeStreet assets and liabilities have been fully marked to current market rates as of the merger date, which will provide accretion in interest income in addition to the contractual rates on the loans acquired."

Provision for Credit Losses

The provision for credit losses in the third quarter of 2025, which consists of the provision for credit losses on loans and provision for unfunded commitments, was $47.0 million. The increase in provision for the third quarter of 2025 was primarily driven by reserves established on non-PCD acquired loans from HomeStreet and updates to ACL factors that were driven by a re-evaluation of future economic conditions and interest rate repricing risk.

Noninterest Income

Noninterest income in the third quarter of 2025 increased from the second quarter of 2025 primarily due to the bargain purchase gain of $90.4 million recognized on the HomeStreet merger.

Nathan Duda added, "Bargain purchase gains are rare and only occur in unique circumstances. The bargain purchase gain reflects the fair value of the net assets acquired less the consideration paid."

Noninterest Expense

Noninterest expense increased $72.2 million in the third quarter of 2025 compared to the second quarter of 2025, primarily due to non-recurring acquisition and integration related costs of $63.9 million and increases in salaries and employee benefits expense.

C.J. Johnson said, "Mechanics has already incurred a significant amount of our estimated restructuring charges related to the merger and these one-time expenses will decrease materially moving forward."

Income Taxes

Our effective tax rate during the third quarter of 2025 was (22.3)% as compared to 28.0% in the second quarter of 2025. The $90.4 million bargain purchase gain from the merger with HomeStreet was an after-tax item. Excluding the bargain purchase gain,we would have recorded a pre-tax loss of $45.3 million, which was the primary reason for the negative effective tax rate.

Investment Securities

Trading securities totaled $50.4 million at September 30, 2025 and were acquired in the HomeStreet merger. Securities held-to-maturity decreased by $27.6 million in the third quarter and totaled $1.4 billion at September 30, 2025. Securities available-for-sale increased by $928.0 million during the third quarter to $3.5 billion at September 30, 2025. The net increase in investment securities was primarily due to securities acquired in the HomeStreet merger.

Loans

Total loans and leases at September 30, 2025 were $14.6 billion, up $5.3 billion from $9.2 billion at June 30, 2025, due primarily to the addition of $5.6 billion of legacy HomeStreet Bank loans recorded at fair value.

Deposits

Total deposits increased by $5.5 billion during the third quarter of 2025 to $19.5 billion at September 30, 2025, due primarily to balances acquired in the merger.

Noninterest-bearing accounts totaled $6.7 billion and represented 35% of total deposits at September 30, 2025, compared to $5.5 billion, or 39% of total deposits, at June 30, 2025. Noninterest-bearing deposit balances increased in the quarter primarily due to balances acquired in the merger.

Insured deposits of $12.8 billion represented 66% of total deposits at September 30, 2025, compared to insured deposits of $7.6 billion, or 55% of total deposits at June 30, 2025.

Borrowings

Total borrowings were $190.1 million at September 30, 2025, representing subordinated notes, senior notes and trust preferred debt acquired in the merger.

Equity

During the third quarter 2025, total shareholders' equity increased by $357.5 million to $2.8 billion and tangible common equity ⁽¹⁾ increased by $247.6 million to $1.8 billion at September 30, 2025. The increase in total shareholders' equity for the third quarter resulted from Mechanics Bancorp shares issued as merger consideration, and net income in the third quarter of 2025.

At September 30, 2025, book value per common share increased to $12.54, compared to $11.96 at June 30, 2025. The linked-quarter change in book value per share reflects Mechanics Bancorp shares issued as merger consideration. Tangible book value per common share ⁽¹⁾ increased to $7.73, compared to $7.26 at June 30, 2025, mainly as a result of Mechanics Bancorp shares issued as merger consideration, combined with $108.3 million of intangibles added as part of the merger.

CAPITAL AND LIQUIDITY

Capital ratios remain strong with Total risk-based capital at 15.59% and a Tier 1 leverage ratio of 10.33% at September 30, 2025. The following table presents our regulatory capital ratios as of the dates indicated:

At September 30, 2025, Mechanics had available borrowing capacity of $3.8 billion from the FHLB, $4.0 billion from the FRBSF and $5.3 billion under borrowing lines established with other financial institutions.

Nathan Duda commented, "Mechanics Bank's deposit base permits the Bank to be core funded without wholesale funding. We have already paid down the acquired HomeStreet FHLB advances, and our borrowing capacity with the FHLB will increase in the fourth quarter when the legacy HomeStreet loans are pledged."

At September 30, 2025, total delinquent loans and leases were $94.2 million, compared to $117.4 million at June 30, 2025. The decrease was primarily due to decreases in the auto loan portfolio and loans that improved to current status during the third quarter. Total delinquent loans and leases as a percentage of total loans and leases declined to 0.65% at September 30, 2025, as compared to 1.27% at June 30, 2025.

At September 30, 2025, nonperforming assets were $64.9 million, compared to $19.3 million at June 30, 2025. The increase was mostly due to nonperforming loans and leases and foreclosed assets acquired from legacy HomeStreet Bank. Nonperforming assets as a percentage of total assets increased to 0.29% at September 30, 2025 as compared to 0.12% at June 30, 2025.

The allowance for credit losses on loans totaled $169.0 million, or 1.16% of total loans at September 30, 2025, compared to $68.3 million, or 0.74% of total loans at June 30, 2025. The increase in the allowance includes the addition of $63.5 million related to legacy HomeStreet Bank's PCD loans booked at the merger's close, which did not flow through the income statement. The ACL provision for the third quarter was $46.1 million, which includes an initial provision of $20.2 million for the acquired HomeStreet Bank's non-PCD loans.

Conference Call

The Company will host a conference call and webcast to discuss its third quarter 2025 financial results at 11:00 a.m. Eastern Time (ET) on Friday, October 31, 2025. Investors and analysts interested in participating in the call are invited to dial 1-833-470-1428 (international callers please dial 1-646-844-6383) and use access code 320554 approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available on the Company's website at https://ir.mechanicsbank.com. The earnings presentation for the call will also be available on the Company's Investor Relations website prior to the call.

A replay of the conference call will be available within two hours of the conclusion of the call and can be accessed through the News & Events tab of the Company's website as well as by dialing 1-866-813-9403 (international callers please dial 1-929-458-6194). The pin to access the telephone replay is 352137. The replay will be available until 11:59 p.m. (Eastern Time) on November 7, 2025.

About Mechanics Bancorp

Mechanics Bancorp (NASDAQ:MCHB) is headquartered in Walnut Creek, Calif., and is the financial holding company of Mechanics Bank, a full-service bank with $22.7 billion in assets and 166 branches across California, Oregon, Washington and Hawaii. Founded in 1905 to help families, businesses and communities prosper, Mechanics Bank offers a wide range of products and services in consumer and business banking, commercial lending, cash management services, private banking, and comprehensive wealth management and trust services.

Learn more at www.MechanicsBank.com.

Cautionary Note

The information contained herein is preliminary and based on Company data available at the time of this earnings release. It speaks only as of the particular date or dates included in the earnings release. Except as required by law, Mechanics does not undertake an obligation to, and disclaims any duty to, update any of the information herein.

Forward-Looking Statements

This earnings release, including information incorporated by reference herein, contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, contained or incorporated by reference in this earnings release, including statements regarding our plans, objectives, expectations, strategies, beliefs, or future performance or events, are forward-looking statements. Generally, forward-looking statements include the words "anticipate," "believe," "could," "estimate," "expect," "intend," "look," "may," "optimistic," "plan," "potential," "projection," "should," "will," and "would" and similar expressions (or the negative of these terms), although not all forward-looking statements contain these identifying words. These statements are subject to known and unknown risks, uncertainties, assumptions, estimates, and other important factors that change over time, many of which may be beyond our control. Our future performance and actual results may differ materially from those expressed or implied in such forward-looking statements. Forward-looking statements should not be relied upon as a prediction of actual results.

We caution readers that actual results may differ materially from those expressed in or implied by the Company's forward-looking statements. Other important factors could affect the Company's future results from those expressed or implied in any forward-looking statements include, but are not limited to:

• the ability to achieve expected cost savings, synergies and other financial benefits from the merger within the expected time frames and costs or difficulties relating to integration matters being greater than expected;
• the diversion of management time from core banking functions due to integration-related matters;
• changes in the interest rate environment and in expectation of reduction in short-term interest rates;
• changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers, and global trade disputes, including the imposition of tariffs by the U.S. and countermeasures by foreign governments;
• our ability to control operating costs and expenses;
• our ability to attract and retain key members of our senior management team;
• changes in deposit flows, loan demand or real estate values may adversely affect our business;
• increases in competitive pressure among financial institutions or from non-financial institutions;
• our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank;
• our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses and impact the adequacy of our allowance for credit losses;
• changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently;
• legislative or regulatory changes that may adversely affect our business or financial condition, including, without limitation, changes in corporate and/or individual income tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;
• general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or banking industry;
• technological changes may be more difficult or more expensive than what we anticipate;
• a failure in or breach of our operational or security systems or information technology infrastructure, or those of our third-party providers and vendors, including due to cyber-attacks;
• success or consummation of new business initiatives may be more difficult or expensive than what we anticipate;
• staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; and
• the potential for litigation, investigations or other matters before regulatory agencies.

A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives is also contained in the Risk Factors included on Exhibit 99.2 to the Company's Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission (the "SEC") on September 2, 2025. We strongly recommend readers review those disclosures in conjunction with the discussions herein. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events.

Forward-looking statements in this earnings release are based on management's expectations at the time such statements are made and speak only as of the date made. The Company does not assume any obligation or undertake to update any forward-looking statements after the date of this earnings release as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time. All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.