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Mechanics Bancorp
MCHB
#4006
Rank
ยฃ2.33 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
ยฃ10.53
Share price
-5.41%
Change (1 day)
18.33%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Mechanics Bancorp
  2. Quarterly Reports (10-Q)
  3. Submitted on 2026-05-08

Mechanics Bancorp - 10-Q quarterly report FY


Text size:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________ 
FORM 10-Q
____________________________
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-35424
________________________________ 
MECHANICS BANCORP
________________________________
(Exact Name of Registrant as Specified in its Charter)
Washington91-0186600
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1111 Civic Drive, Suite 390
Walnut Creek, California
94596
(Address of principal executive offices)(Zip Code)
(925) 482-8000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common StockMCHBNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  ☒
As of May 4, 2026, there were 220,286,632 shares of Class A common stock outstanding and 1,114,448 shares of Class B common stock outstanding.


Table of Contents
Page
4
ITEM 1.
5
Consolidated Balance Sheets at March 31, 2026 and December 31, 2025 (Unaudited)
5
Consolidated Income Statements for the Quarters Ended March 31, 2026 and 2025 (Unaudited)
6
Consolidated Statements of Comprehensive Income (Loss) for the Quarters Ended March 31, 2026 and 2025 (Unaudited)
7
Consolidated Statements of Changes in Shareholders’ Equity for the Quarters Ended March 31, 2026 and 2025 (Unaudited)
8
Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2026 and 2025 (Unaudited)
9
Notes to Consolidated Financial Statements (Unaudited)
11
ITEM 2.
51
ITEM 3.
72
ITEM 4.
75
75
ITEM 1.
75
ITEM 1A.
75
ITEM 2.
75
ITEM 3.
75
ITEM 4.
75
ITEM 5.
76
ITEM 6.
76
SIGNATURES
77

2

Introductory Note
Presentation of Results - HomeStreet Bank Merger
On September 2, 2025, we completed the Merger of HomeStreet Bank, the wholly-owned subsidiary of Mechanics Bancorp (formerly known as “HomeStreet, Inc.”) with and into Mechanics Bank, with Mechanics Bank as the surviving bank. Mechanics Bank is the accounting acquirer (“legal acquiree”), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp is the legal acquirer. In this Quarterly Report on Form 10-Q, our financial results for all periods ended prior to September 2, 2025 reflect Mechanics Bank’s results on a standalone basis. In addition, our reported financial results 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 beginning September 2, 2025. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Mechanics Bancorp 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 March 31, 2026, are subject to change for up to one year after the Merger date, and any changes could be material.
Unless we state otherwise or the content otherwise requires, references in this Quarterly Report on Form 10-Q to “Mechanics,” “we,” “our,” “us” or the “Company” refer collectively to Mechanics Bancorp, Mechanics Bank (the “Bank”) and other direct and indirect subsidiaries of Mechanics Bancorp, following completion of the Merger. In some instances, we refer to Mechanics Bank prior to the effective time of the Merger as “legacy Mechanics Bank,” HomeStreet Bank prior to the effective time of the Merger as “legacy HomeStreet Bank,” and HomeStreet, Inc. prior to the effective time of the Merger as “legacy HomeStreet, Inc.”
3

PART I - FINANCIAL INFORMATION
Glossary of Acronyms, Abbreviations, and Terms
The acronyms, abbreviations, and terms listed below are used in various sections of this Quarterly Report on Form 10-Q, including “Item 1. Financial Statements” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

2025 Equity PlanMechanics Bancorp 2025 Equity Incentive PlanFreddie Mac (FHLMC)Federal Home Loan Mortgage Corporation
ACLAllowance for credit lossesGAAPU.S. Generally Accepted Accounting Principles
AFSAvailable-for-saleGinnie Mae (GNMA)Government National Mortgage Association
AOCIAccumulated other comprehensive income (loss)HTMHeld-to-maturity
ASCAccounting Standards CodificationIRLCInterest rate lock commitment
ASUAccounting Standards UpdateLHFILoans held for investment
AUMAssets under managementLHFSLoans held for sale
BOLIBank owned life insuranceLIHTCLow income housing tax credit
C&ICommercial and industrial loansMBSMortgage-backed securities
CDFPICalifornia Department of Financial Protection and InnovationMergerMerger on September 2, 2025 in which HomeStreet Bank merged with and into Mechanics Bank, and Mechanics Bank became a wholly-owned subsidiary of Mechanics Bancorp (formerly HomeStreet, Inc.)
CECLCurrent expected credit lossMSRMortgage servicing right
CPRConditional Prepayment RateOREOOther real estate owned
CRACommunity Reinvestment Act of 1977PCDPurchased credit deteriorated
CRECommercial real estatePSLPurchased seasoned loans
DUS®
Fannie Mae Multifamily Delegated Underwriting and Servicing ProgramPSUPerformance stock unit
EPSEarnings per shareROURight-of-use
Fannie Mae (FNMA)Federal National Mortgage AssociationRSURestricted stock unit
FASBFinancial Accounting Standards BoardSBASmall Business Administration
Federal ReserveFederal Reserve BankSECSecurities and Exchange Commission
FDICFederal Deposit Insurance CorporationSFRSingle family residential
FHLBFederal Home Loan BankSOFRSecured Overnight Financing Rate
Fifth ThirdFifth Third Bank, National Association, a wholly-owned, indirect subsidiary of Fifth Third BancorpTRUPsTrust preferred securities
Ford Financial FundsFord Financial Fund II, LP. and Ford Financial Fund III, L.P.
4

ITEM 1.    FINANCIAL STATEMENTS

MECHANICS BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)March 31, 2026December 31, 2025
ASSETS
Cash and cash equivalents $483,513 $1,029,983 
Trading securities49,463 49,518 
Securities available-for-sale, at fair value 3,933,705 3,993,385 
Securities held-to-maturity, at amortized cost (fair value of $1,149,969 and $1,170,818 at March 31, 2026 and December 31, 2025, respectively)
1,313,520 1,336,632 
Loans held for sale (includes $4,692 and $5,967 carried at fair value at March 31, 2026 and December 31, 2025, respectively)
4,692 5,967 
Loan receivables13,852,209 14,176,936 
Allowance for credit losses on loans(156,796)(153,319)
Net loan receivables13,695,413 14,023,617 
Mortgage servicing rights (includes $57,630 and $58,095 carried at fair value at March 31, 2026 and December 31, 2025, respectively)
84,000 85,832 
Other real estate owned4,658 4,990 
Federal Home Loan Bank stock, at cost17,289 17,292 
Premises and equipment, net143,157 143,895 
Bank owned life insurance171,674 170,339 
Goodwill843,305 843,305 
Other intangible assets, net205,269 212,491 
Right-of-use asset78,046 82,076 
Interest receivable and other assets361,251 352,153 
TOTAL ASSETS$21,388,955 $22,351,475 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Noninterest-bearing demand deposits$6,511,998 $6,744,082 
Interest-bearing transaction accounts8,222,964 8,128,832 
Savings and time deposits3,507,807 4,152,083 
Total deposits18,242,769 19,024,997 
Long-term debt128,815 192,014 
Operating lease liability82,403 86,794 
Interest payable and other liabilities143,576 185,295 
TOTAL LIABILITIES18,597,563 19,489,100 
SHAREHOLDERS’ EQUITY
Common stock, Class A, no par value, Authorized —1,897,500,000 shares, Issued and outstanding, 220,286,142 shares and 220,190,561 shares at March 31, 2026 and December 31, 2025, respectively; Class B, no par value, Authorized — 2,500,000 shares, Issued and outstanding, 1,114,448 shares at March 31, 2026 and December 31, 2025
2,402,968 2,402,193 
Retained earnings407,908 456,695 
Accumulated other comprehensive income (loss), net of tax(19,484)3,487 
TOTAL SHAREHOLDERS’ EQUITY2,791,392 2,862,375 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$21,388,955 $22,351,475 

See accompanying notes to consolidated financial statements
5

MECHANICS BANCORP AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Quarter Ended March 31,
(dollars in thousands, except per share amounts)20262025
INTEREST INCOME
Loans interest and fees $181,190 $117,792 
Investment securities53,074 47,585 
Interest-bearing cash and other7,672 8,208 
Total interest income241,936 173,585 
INTEREST EXPENSE
Deposits58,323 45,131 
Borrowed funds228 — 
Long-term debt4,340 — 
Total interest expense62,891 45,131 
Net interest income179,045 128,454 
Provision (reversal of provision) for credit losses on loans 7,593 (3,752)
Provision for credit losses on unfunded lending commitments174 94 
Net interest income after provision for credit losses171,278 132,112 
NONINTEREST INCOME
Service charges on deposit accounts6,043 5,494 
Trust fees and commissions3,070 3,119 
ATM network fee income3,904 2,888 
Loan servicing income1,927 177 
Net gain on sales and calls of investment securities52 — 
Income from bank owned life insurance1,165 527 
Other 4,859 2,776 
Total noninterest income 21,020 14,981 
NONINTEREST EXPENSE
Salaries and employee benefits68,550 48,851 
Occupancy12,429 7,972 
Equipment9,615 5,869 
Professional services6,071 4,916 
FDIC assessments and regulatory fees2,990 2,213 
Amortization of intangible assets7,222 2,738 
Data processing3,873 1,350 
Loan related3,506 1,577 
Marketing and advertising907 584 
Other real estate owned related384 2,684 
Acquisition and integration costs4,794 350 
Other10,086 6,534 
Total noninterest expense130,427 85,638 
Income before income tax expense61,871 61,455 
INCOME TAX EXPENSE17,781 17,664 
NET INCOME $44,090 $43,791 
Basic earnings per share
Class A common stock$0.19 $0.21 
Class B common stock$1.91 $2.07 
Diluted earnings per share
Class A common stock$0.19 $0.21 
Class B common stock$1.91 $2.07 
Basic weighted-average shares outstanding
Class A common stock221,047,803200,884,880
Class B common stock1,114,4481,114,448
Diluted weighted-average shares outstanding
Class A common stock221,203,293200,944,300
Class B common stock1,114,4481,114,448
See accompanying notes to consolidated financial statements
6

MECHANICS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

Quarter Ended March 31,
(in thousands)20262025
NET INCOME$44,090 $43,791 
Other comprehensive income (loss)
Net change in unrealized gain (loss) on investment securities available-for-sale(32,231)39,243 
Reclassification adjustment for accretion of unrealized holding loss from the transfer of securities from available-for-sale to held-to-maturity debt securities605 627 
Reclassification adjustment for net realized (gain) loss on securities available-for-sale included in net income(52)— 
Change in defined benefit pension liability obligations(37)72 
Other comprehensive income (loss) before tax(31,715)39,942 
Less: income tax impact of:
Net change in unrealized gain (loss) on investment securities available-for-sale(8,885)11,310 
Reclassification adjustment for accretion of unrealized holding loss from the transfer of securities from available-for-sale to held-to-maturity debt securities165 181 
Reclassification adjustment for net realized (gain) loss on securities available-for-sale included in net income(14)— 
Change in defined benefit pension liability obligations(10)20 
Total(8,744)11,511 
Other comprehensive income (loss)(22,971)28,431 
Total comprehensive income $21,119 $72,222 

See accompanying notes to consolidated financial statements
7

MECHANICS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)

Class A and Class B
Common Stock		Accumulated Other Comprehensive Income (Loss), Net
(dollars in thousands, except per share amounts)SharesAmountRetained
Earnings		SecuritiesDefined Benefit Obligations
Total Shareholders’ Equity
Balance, December 31, 2024201,999,328 $2,122,117 $239,517 $(64,058)$4,292 $2,301,868 
Net income— — 43,791 — — 43,791 
Other comprehensive income, net of tax— — — 28,379 52 28,431 
Balance, March 31, 2025201,999,328 $2,122,117 $283,308 $(35,679)$4,344 $2,374,090 
Balance, December 31, 2025221,305,009 $2,402,193 $456,695 $378 $3,109 $2,862,375 
Net income — — 44,090 — — 44,090 
Other comprehensive loss, net of tax— — — (22,944)(27)(22,971)
Share-based compensation expense— 1,338 — — — 1,338 
Common stock issued from stock awards, net95,581 (872)— — — (872)
Reinvested dividends on vested stock awards— 309 (309)— — — 
Cash dividends declared Class A common stock ($0.40 per share)
— — (88,110)— — (88,110)
Cash dividends declared Class B common stock ($4.00 per share)
— — (4,458)— — (4,458)
Balance, March 31, 2026
221,400,590 $2,402,968 $407,908 $(22,566)$3,082 $2,791,392 

See accompanying notes to consolidated financial statements
8

MECHANICS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
(in thousands)20262025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$44,090 $43,791 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (reversal of provision) for credit losses on loans7,593 (3,752)
Originations of loans held for sale and principal collections, net(52,583)(1,313)
Proceeds from sales of loans held for sale55,063 1,644 
Net fair value adjustment and gain on sale of loans held for sale(1,143)(7)
Provision for credit losses on unfunded lending commitments174 94 
Amortization (accretion) of premiums and discounts on investment securities(2,008)743 
Depreciation of premises and equipment3,378 2,350 
Amortization of intangible assets7,222 2,738 
Amortization of premiums and discounts on debt and deposits1,674 — 
Share-based compensation expense1,338 2,571 
Increase in cash surrender value of bank-owned life insurance(1,336)(559)
Net gain on sales and calls of investment securities(52)— 
Net loss on sale, disposal and write-down of other real estate owned332 2,200 
Deferred income tax expense8,672 7,537 
Amortization of deferred loan fees and costs2,125 3,584 
Amortization (accretion) of premiums and discounts on purchased loans(12,836)(503)
Origination, amortization and change in fair value of MSRs, net 1,832 — 
Net increase in trading securities(724)— 
Changes in:
Interest receivable and other assets(6,789)— 
Interest payable and other liabilities(44,620)(62,556)
Net cash provided by (used in) operating activities11,402 (1,438)
CASH FLOWS FROM INVESTING ACTIVITIES:
Securities available-for-sale:
Purchases(141,552)(561,139)
Maturities, calls and paydowns172,032 79,037 
Securities held-to-maturity:
Maturities, calls and paydowns22,694 23,112 
Loan originations and principal collections, net324,111 241,404 
Purchases of loans(3,478)(29,229)
Recoveries of loans charged-off3,089 2,926 
Proceeds from sales of loans 7,538 — 
Purchases of premises and equipment(2,640)(497)
Redemptions of Federal Home Loan Bank stock3 — 
Net cash provided by (used in) investing activities381,797 (244,386)
9

Quarter Ended March 31,
(in thousands)20262025
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits(782,101)44,422 
Repayment of Senior Notes(65,000)— 
Cash dividends paid (92,568)— 
Net cash provided by (used in) financing activities(939,669)44,422 
Net decrease in cash and cash equivalents(546,470)(201,402)
Cash and cash equivalents at beginning of period1,029,983 999,711 
Cash and cash equivalents at end of period$483,513 $798,309 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid$64,947 $46,933 
Income taxes paid (refunded), net(3,355)11 
Non-cash activities:
ROU assets obtained in exchange for operating lease obligations1,618 5,836 
See accompanying notes to consolidated financial statements
10

Mechanics Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1–SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Mechanics Bancorp, a Washington corporation (the “Company”), is a financial holding company and primarily operates through 121-year-old Mechanics Bank, its wholly-owned subsidiary. Mechanics Bank is a full-service community bank with 166 branches throughout California, Washington, Oregon and Hawaii. Following the strategic Merger of HomeStreet Bank with and into Mechanics Bank on September 2, 2025, with Mechanics Bank surviving the Merger as a wholly-owned subsidiary of the Company, the assets, liabilities and operations of HomeStreet Bank became the assets, liabilities and operations of Mechanics Bank. Headquartered in Walnut Creek, California, Mechanics Bank provides 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.
Prior to merging with and into Mechanics Bank on September 2, 2025, HomeStreet Bank was principally engaged in commercial banking, consumer banking, and real estate lending, including construction and permanent loans on commercial real estate and single-family residences. It also sold insurance products for consumer clients. It provided these financial products and services to its customers through bank branches, loan production offices and ATMs, and through online, mobile and telephone banking channels.
The Company’s business is conducted primarily through its wholly-owned subsidiaries, Mechanics Bank and HomeStreet Statutory Trusts (I, II, III and IV), as well as Mechanics Bank’s subsidiaries: MacDonald Auxiliary Corporation, Mechanics Real Estate Holdings Inc., 3190 Klose Way, LLC, Hydrox Properties XXVI, LLC, Continental Escrow Company, HS Properties Inc., HS Evergreen Corporate Center LLC, Union Street Holdings LLC, and 16389 Redmond Way LLC.
Ceasing the origination of auto loans in February 2023, Mechanics Bank continued to service its existing auto loan portfolio until May 1, 2025, when it entered into a servicing agreement with a third-party servicer to oversee and manage Mechanics Bank’s active portfolio of auto loans. The portfolio consisted of new and pre-owned retail automobile sales contracts purchased from both franchised and independent automobile dealerships in the United States.
Basis of Presentation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its wholly-owned subsidiaries. The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the financial services industry.
The Merger is considered a reverse acquisition in accordance with ASC 805-40, “Business Combinations-Reverse Acquisitions.” Mechanics Bank is the accounting acquirer (“legal acquiree”), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp, formerly HomeStreet, Inc., is the legal acquirer. Mechanics Bancorp’s financial results for all periods ended prior to September 2, 2025 reflect legacy Mechanics Bank’s results only on a standalone basis. In addition, Mechanics Bancorp’s reported financial results reflect legacy Mechanics Bank’s financial results only on a standalone basis until the closing of the Merger on September 2, 2025 and results of the combined company beginning September 2, 2025. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Mechanics Bancorp 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. Refer to Note 2, “Business Combination,” for additional information on the transaction.
Certain prior period amounts have been reclassified to conform to the current presentation. These reclassifications had no impact on the Company’s prior year net income or shareholders’ equity.
These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in these accompanying notes to the financial statements. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. Certain disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted in the interim financial statements, as permitted under GAAP. The unaudited interim financial statements should be read in conjunction
11

with the Company’s audited Consolidated Financial Statements and Notes to Consolidated Financial Statements for the years ended December 31, 2025 and 2024 included in our 2025 Annual Report on Form 10-K.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for credit losses. Other significant estimates that may be subject to change include fair value determinations and disclosures, evaluation of goodwill and other intangible assets for impairment, and the realization of deferred tax assets. These estimates may be adjusted as more current information becomes available, and any adjustments may be significant.
Business Combinations: Purchase accounting requires that the assets purchased, the liabilities assumed, and non-controlling interests all be reported on the acquirer’s financial statements at their fair value, with any excess of purchase consideration over the net assets being reported as goodwill. A bargain purchase gain is realized when the excess of the fair value of identifiable net assets acquired is greater than the consideration paid and it is recognized in earnings on the acquisition date.
Merger with HomeStreet: On September 2, 2025, Mechanics Bancorp (formerly known as “HomeStreet, Inc.”), consummated the Merger by and among the Company, HomeStreet Bank, a Washington state-chartered commercial bank and a wholly-owned subsidiary of the Company, and Mechanics Bank. In connection with the Merger, HomeStreet Bank merged with and into Mechanics Bank, with Mechanics Bank surviving the Merger and becoming a wholly-owned subsidiary of the Company. As a result of the Merger, the Company’s business became primarily the business conducted by Mechanics Bank. Immediately following the Merger, (1) legacy Mechanics Bank shareholders owned approximately 91.7% of the Company on an economic basis and 91.3% of the voting power of the Company and (2) legacy Company shareholders owned approximately 8.3% of the Company on an economic basis and 8.7% of the voting power of the Company. See Note 16, “Shareholders’ Equity and Dividend Limitations” for details of the Company’s Class A and Class B common stock, including further information on the economic rights of the Class B shares.
The Merger is considered a reverse acquisition. Mechanics Bank is the accounting acquirer (“legal acquiree”), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp is the legal acquirer. As the accounting acquirer, Mechanics Bank remeasured the identifiable assets acquired and liabilities assumed in the Merger at their acquisition date fair values. These estimates are considered preliminary as of March 31, 2026, are subject to change for up to one year after the Merger date, and any changes could be material.
Asset Sale: As discussed in Note 17, “Subsequent Events—Asset Sale,” on May 1, 2026, Mechanics Bank completed the previously announced sale of its Fannie Mae Multifamily Delegated Underwriting and Servicing (“DUS®”) business line to Fifth Third for aggregate cash consideration of approximately $126 million.
Adoption of Purchased Seasoned Loans Accounting Standard: The Company early adopted Accounting Standards Update (“ASU”) 2025-08, “Financial Instruments–Credit Losses (Topic 326): Purchased Loans,” during the fourth quarter of 2025. This new standard, which the Company elected to early adopt as of January 1, 2025, requires acquired loans that meet certain criteria at acquisition (purchased seasoned loans) to be recognized at their purchase price plus the amount of the allowance for expected credit losses (gross-up approach). As a result, for purchased seasoned loans acquired in the Merger, the Company established an allowance for credit losses of $20.3 million at the date of acquisition for these loans and reversed the provision for credit losses recorded in the third quarter of 2025, and recorded it as part of the acquired loans initial amortized cost basis. Required disclosures regarding the impact of the adoption were presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. In addition, third quarter 2025 results will be retrospectively adjusted when the Company files its Quarterly Report on Form 10-Q for the quarter ended September 30, 2026.
Recent Accounting Developments
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is
12

effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. In January 2025, the FASB also issued ASU 2025-01, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures-Clarifying the Effective Date,” which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The enhanced income statement expense disclosure requirements apply on a prospective basis. However, retrospective application in all prior periods presented is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures. The adoption of ASU 2024-03 and ASU 2025-01 will not have an impact on the Company’s financial position or results of operations as it impacts disclosures only. We are assessing the impact on our disclosures.
NOTE 2-BUSINESS COMBINATION
As discussed in Note 1, “Summary of Significant Accounting Policies,” on September 2, 2025, the Merger by and among Mechanics Bancorp (formerly known as HomeStreet, Inc.), HomeStreet Bank and Mechanics Bank was consummated. 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.
In connection with the Merger, each share of common stock, par value $50 per share, of Mechanics Bank voting common stock issued and outstanding was converted into 3,301.0920 shares of the Company’s Class A common stock, no par value, and existing shares of the Company common stock held by legacy Company shareholders were redesignated as the Company’s Class A common stock. In addition, each share of common stock, par value $50 per share, of Mechanics Bank non-voting common stock was converted into 330.1092 shares of the Company’s Class B common stock, no par value. Class A common stock, which was previously known as Company common stock and was previously listed on Nasdaq and traded under the symbol “HMST” through the close of business on August 29, 2025, commenced trading on Nasdaq under the ticker symbol “MCHB” on September 2, 2025.
Immediately following the Merger, (1) legacy Mechanics Bank shareholders owned approximately 91.7% of the Company on an economic basis and 91.3% of the voting power of the Company and (2) legacy Company shareholders owned approximately 8.3% of the Company on an economic basis and 8.7% of the voting power of the Company.
The Merger was accounted for as a reverse acquisition, with the purchase price determined based on the number of equity interests the legal acquiree would have had to issue to give the owners of the legal acquirer the same percentage equity interest in the combined entity that results from the reverse acquisition.
The following table provides the preliminary purchase price allocation and the assets acquired and liabilities assumed at their estimated fair values as of the Merger date, resulting in a preliminary bargain purchase gain of $145.5 million. The estimates of fair value were recorded based on initial valuations at the Merger date and these estimates are considered preliminary as of March 31, 2026, and are subject to adjustment for up to one year after the Merger date, and any changes could be material. In many cases, the determination of fair value required management to make estimates about discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Additional information may be obtained during the measurement period that could result in changes to the estimated fair value amounts, and that could result in adjustments to the valuation amounts presented herein. The Company’s taxes are provisional along with the DUS valuation and review of certain contracts assumed in the Merger. The measurement period ends on the earlier of one year after the Merger date or the date the Company concludes that all necessary information about the facts and circumstances that existed as of the Merger date have been obtained.
13

(in thousands)September 2, 2025
Net assets identified
Purchase price consideration$265,803 
Fair value of assets acquired:
Cash and cash equivalents$156,890 
Total investment securities1,028,627 
Loans held for sale39,489 
Loans held for investment (1)
5,645,715 
Allowance for credit losses(83,746)
Mortgage servicing rights89,533 
Premises and equipment31,979 
Other intangible assets (2)
190,913 
Deferred tax assets59,960 
Other assets (1)
283,526 
Total assets acquired (1)
$7,442,886 
Fair value of liabilities assumed:
Deposits$5,743,725 
FHLB advances1,005,370 
Long-term debt193,466 
Accrued interest payable and other liabilities89,062 
Total liabilities assumed$7,031,623 
Net assets acquired411,263 
Bargain purchase gain$145,460 
(1)Reflects the adoption of ASU 2025-08. See Note 1, “Summary of Significant Accounting Policies—Adoption of Purchased Seasoned Loans Accounting Standard” for discussion of the adoption of this guidance.
(2)Consists of $100.2 million of a DUS license and business line intangible and $90.8 million of core deposit intangible assets.

The following table shows the amount of the expenses related to the Merger for the periods indicated:
Quarter Ended March 31,
(in thousands)20262025
Severance and employee related$1,628 $— 
Legal and professional2,865 350 
System conversion, integration and other301 — 
Total$4,794 $350 
14

Pro-Forma Financial Information
The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the quarter ended March 31, 2025, as if the Merger had been completed on January 1, 2024, after giving effect to certain purchase accounting adjustments, primarily related to the preliminary bargain purchase gain, amortization of intangible assets and non-recurring transaction costs. These pro forma results have been prepared for comparative purposes only and are based on estimates and assumptions that have been made solely for purposes of developing such pro forma information and are not necessarily indicative of what the Company’s operating results would have been, had the acquisition actually taken place at the beginning of the annual period prior to the Merger.
Quarter Ended March 31,
(in thousands)2025
Net interest income$174,399 
Noninterest income26,784 
Net income before income taxes63,883 
NOTE 3–DEBT SECURITIES
The following table presents the amortized cost and fair value of the debt securities portfolio as of the dates indicated:
March 31, 2026
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Securities available-for-sale
Obligations of states and political subdivisions$454,978 $6,612 $(1,721)$459,869 
Mortgage-backed securities - residential2,818,727 20,363 (31,371)2,807,719 
Mortgage-backed securities - commercial369,056 1,210 (12,285)357,981 
Collateralized loan obligations230,500 — (792)229,708 
Corporate bonds52,028 985 (1,878)51,135 
U.S. Treasury securities20,648 — (112)20,536 
Agency debentures6,816 — (59)6,757 
Total securities available-for-sale$3,952,753 $29,170 $(48,218)$3,933,705 
(in thousands)Amortized CostGross Unrecognized GainsGross Unrecognized LossesFair Value
Securities held-to-maturity
Obligations of states and political subdivisions$12,967 $401 $(9)$13,359 
Mortgage-backed securities - residential989,514 — (132,144)857,370 
Mortgage-backed securities - commercial311,039 — (31,799)279,240 
Total securities held-to-maturity$1,313,520 $401 $(163,952)$1,149,969 
15

December 31, 2025
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Securities available-for-sale
Obligations of states and political subdivisions$458,290 $13,518 $(649)$471,159 
Mortgage-backed securities - residential2,871,733 36,881 (24,325)2,884,289 
Mortgage-backed securities - commercial381,934 1,622 (11,750)371,806 
Collateralized loan obligations188,500 1 (185)188,316 
Corporate bonds51,828 527 (2,440)49,915 
U.S. Treasury securities20,623 46 — 20,669 
Agency debentures7,243 9 (21)7,231 
Total securities available-for-sale$3,980,151 $52,604 $(39,370)$3,993,385 
(in thousands)Amortized CostGross Unrecognized GainsGross Unrecognized LossesFair Value
Securities held-to-maturity
Obligations of states and political subdivisions$12,902 $545 $(6)$13,441 
Mortgage-backed securities - residential1,012,716 — (134,994)877,722 
Mortgage-backed securities - commercial311,014 — (31,359)279,655 
Total securities held-to-maturity$1,336,632 $545 $(166,359)$1,170,818 
In addition to the reported fair values of the debt securities reflected above, the Company is entitled to receive accrued interest and dividends from its securities. Included in interest receivable and other assets on the consolidated balance sheets as of March 31, 2026 and December 31, 2025 was $19.1 million and $20.2 million, respectively, of interest and dividends receivable from the Company’s debt securities. Accrued interest receivable from securities available-for-sale totaled $16.7 million and $17.8 million at March 31, 2026 and December 31, 2025, respectively. Accrued interest receivable from securities held-to-maturity totaled $2.1 million and $2.2 million at March 31, 2026 and December 31, 2025, respectively.
Substantially all the mortgage-backed securities represent securities issued or guaranteed by government sponsored enterprises and government entities. Municipal bonds are comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by either collateral or revenues from the specific project being financed) issued by various municipal and corporate entities. As of March 31, 2026 and December 31, 2025, substantially all securities held, including municipal bonds, corporate debt securities, and collateralized loan obligations were rated investment grade based upon nationally recognized statistical rating organizations where available.
At March 31, 2026 and December 31, 2025, the Company held $49.5 million of trading securities, consisting of U.S. Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at fair value and reported as trading securities on the consolidated balance sheets. For the quarter ended March 31, 2026, net losses of $533 thousand on trading securities were recorded in loan servicing income. There were no net gains or losses on trading securities for the quarter ended March 31, 2025. The trading securities were acquired in the Merger.
The following table presents proceeds, gross realized gains and gross realized losses from sales and calls of available-for-sale investments:
Quarter Ended March 31,
(in thousands)20262025
Proceeds$1,372 $— 
Gross gains52 — 
Gross losses— — 
Tax-exempt interest income on investment securities was $4.3 million and $770 thousand for the quarter ended March 31, 2026 and 2025, respectively.
16

The Company reassessed classification of certain investments and effective January 1, 2022, transferred $1.7 billion in residential and commercial mortgage-backed securities from available-for-sale to held-to-maturity securities. The transfer occurred at fair value. The related net unrealized loss of $23.5 million, or $16.7 million net of deferred taxes, included in accumulated other comprehensive income remained in accumulated other comprehensive income. For the quarter ended March 31, 2026 and 2025, $605 thousand and $627 thousand, respectively, of the unrealized loss was accreted to interest income as a yield adjustment through earnings and will be accreted over the remaining term of the securities. No gain or loss was recorded at the time of transfer.
The following table summarizes available-for-sale securities with unrealized losses at March 31, 2026 and December 31, 2025 aggregated by major security type and length of time in a continuous unrealized loss position:
March 31, 2026
 Less than 12 months12 months or moreTotal
(dollars in thousands)Fair ValueGross Unrealized LossesFair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses
Obligations of states and political subdivisions$124,671 $1,214 $22,600 $507 $147,271 $1,721 
Mortgage-backed securities - residential769,984 5,785 375,934 25,586 1,145,918 31,371 
Mortgage-backed securities - commercial96,247 675 153,402 11,610 249,649 12,285 
Collateralized loan obligations179,708 792 — — 179,708 792 
Corporate bonds1,072 13 28,135 1,865 29,207 1,878 
U.S. Treasury securities20,536 112 — — 20,536 112 
Agency debentures6,757 59 — — 6,757 59 
Total $1,198,975 $8,650 $580,071 $39,568 $1,779,046 $48,218 
Number of securities with unrealized losses261228489
December 31, 2025
 Less than 12 months12 months or moreTotal
(dollars in thousands)Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses
Obligations of states and political subdivisions$27,015 $151 $30,244 $498 $57,259 $649 
Mortgage-backed securities - residential72,234 384 393,915 23,941 466,149 24,325 
Mortgage-backed securities - commercial106,225 405 156,600 11,345 262,825 11,750 
Collateralized loan obligations138,315 185 — — 138,315 185 
Corporate bonds3,543 101 27,661 2,339 31,204 2,440 
Agency debentures4,877 21 — — 4,877 21 
Total$352,209 $1,247 $608,420 $38,123 $960,629 $39,370 
Number of securities with unrealized losses83240323
The Company did not record an ACL on the debt securities portfolio at March 31, 2026 and December 31, 2025. As of both dates, the Company considers any unrealized or unrecognized loss across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit quality. The Company maintains that it has the intent and ability to hold these securities until the amortized cost basis of each security is recovered, which may be at maturity, and likewise concluded as of March 31, 2026, that it was not more likely than not that any of the securities in an unrealized loss position would be required to be sold. The factors that were considered in determining that an ACL was not required at March 31, 2026 and December 31, 2025 are discussed below.
Obligations of States and Political Subdivisions: The unrealized losses on the Company’s investments in obligations of states and political subdivisions are primarily due to changes in interest rates and not due to credit losses. Management monitors these securities on an ongoing basis and performs an internal analysis which takes into account the impact from market rates movements, severity and duration of the unrealized loss position, viability of the issuer, recent downgrades in
17

ratings, and external credit rating assessments. As a result, management expects to recover the entire amortized cost basis of these securities.
Mortgage-Backed Securities - Residential and Commercial: The unrealized losses on the Company’s investments in residential and commercial MBS are primarily due to changes in interest rates. These securities are either implicitly or explicitly guaranteed by the U.S. government. As a result, management expects to recover the entire amortized cost basis of these securities.
Collateralized Loan Obligations: The unrealized losses on the Company’s collateralized loan obligations are primarily due to slightly wider spreads. Management conducts ongoing monitoring of these securities including analysis of credit enhancement and performance of the underlying collateral. Management expects to recover the entire amortized cost basis of these securities.
Corporate Bonds: The unrealized losses on the Company’s investments in corporate bonds are due to slight discount margin variances related to changes in market rates and not due to credit losses. Management monitors these securities on an ongoing basis and performs an internal analysis which includes a review of credit quality, changes in ratings, assessment of regulatory and financial ratios, and general standing versus peer group. Management expects to recover the entire amortized cost basis of these securities.
U.S. Treasury Securities: The unrealized losses on the Company’s investments in U.S. Treasury securities are primarily due to changes in interest rates. These securities are backed by the full faith and credit of the U.S. government. As a result, management expects to recover the entire amortized cost basis of these securities.
Agency Debentures: The unrealized losses on the Company’s investments in agency debentures are primarily due to changes in interest rates. These securities are either implicitly or explicitly guaranteed by the U.S. government. As a result, management expects to recover the entire amortized cost basis of these securities.
At March 31, 2026, investment securities with a carrying value of $3.3 billion were pledged to secure borrowings from the Federal Reserve, and investment securities with a carrying value of $1.6 billion were pledged to secure the Company’s obligations to collateralize certain public, trust and bankruptcy deposits as required by law.
As of March 31, 2026, there were no past due or nonaccrual available-for-sale or held-to-maturity securities.
The fair value of available-for-sale securities and the amortized cost and fair value of held-to-maturity debt securities are shown by contractual maturity in the following tables. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Contractual maturities of securities as of March 31, 2026, were as follows:
18

March 31, 2026
(in thousands)Within One YearAfter One Through Five YearsAfter Five Through Ten YearsAfter Ten YearsTotal
Securities available-for-sale
Obligations of states and political subdivisions$342 $44,871 $125,131 $289,525 $459,869 
Mortgage-backed securities - residential376 12,295 23,170 2,771,878 2,807,719 
Mortgage-backed securities - commercial2,600 196,499 143,676 15,206 357,981 
Collateralized loan obligations— — — 229,708 229,708 
Corporate bonds— 4,302 46,833 — 51,135 
U.S. Treasury securities— 20,536 — — 20,536 
Agency debentures— 1,109 3,501 2,147 6,757 
Total $3,318 $279,612 $342,311 $3,308,464 $3,933,705 
March 31, 2026
(in thousands)Within One YearAfter One Through Five YearsAfter Five Through Ten YearsAfter Ten YearsTotal
Securities held-to-maturityAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
Obligations of states and political subdivisions$3,500 $3,500 $3,106 $3,129 $4,708 $4,958 $1,653 $1,772 $12,967 $13,359 
Mortgage-backed securities - residential— — 53 51 — — 989,461 857,319 989,514 857,370 
Mortgage-backed securities - commercial— — 179,638 162,829 131,401 116,411 — — 311,039 279,240 
Total$3,500 $3,500 $182,797 $166,009 $136,109 $121,369 $991,114 $859,091 $1,313,520 $1,149,969 
NOTE 4-LOANS AND CREDIT QUALITY
The loan receivables portfolio consisted of the following as of the dates indicated:
(in thousands)March 31, 2026December 31, 2025
Commercial and industrial$460,081 $482,170 
Commercial real estate
Multifamily5,291,597 5,355,252 
Non-owner occupied1,711,611 1,740,277 
Owner occupied586,698 689,079 
Construction and land development399,546 493,992 
Residential real estate4,017,120 3,970,803 
Auto639,825 791,012 
Other consumer745,731 654,351 
Total loan receivables before allowance for credit losses
13,852,209 14,176,936 
Allowance for credit losses on loans (156,796)(153,319)
Net loan receivables$13,695,413 $14,023,617 
At March 31, 2026, $10.3 billion of loans were pledged to secure borrowings from the FHLB, and $1.3 billion of loans were pledged to secure borrowings from the Federal Reserve.
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Credit Risk Concentrations
The Company’s portfolio of non-owner occupied and owner occupied commercial real estate, multifamily and residential real estate loans are primarily to borrowers in California, or are secured by real estate collateral located in California. Such loans represented 76% of total loans in these segments as of March 31, 2026 and December 31, 2025. In addition, substantial portions of the Company’s loans are multifamily and residential real estate. At March 31, 2026, multifamily loans represented 38% of the loan portfolio and residential real estate loans represented 29% of the loan portfolio. At December 31, 2025, multifamily loans represented 38% of the loan portfolio and residential real estate loans represented 28% of the loan portfolio.
Allowance for Credit Losses
The following tables present the activity in the allowance for credit losses on loans by portfolio segment:
(in thousands)Commercial and IndustrialCommercial Real EstateResidential Real EstateAutoOther ConsumerTotal
Quarter Ended March 31, 2026
Allowance for credit losses on loans
Beginning balance$8,417 $114,326 $13,294 $15,003 $2,279 $153,319 
Provision (reversal of provision) for credit losses408 6,321 (26)565 325 7,593 
Loans charged off(131)— (1)(6,420)(653)(7,205)
Recoveries166 111 354 2,298 160 3,089 
Ending balance$8,860 $120,758 $13,621 $11,446 $2,111 $156,796 
(in thousands)Commercial and IndustrialCommercial Real EstateResidential Real EstateAutoOther ConsumerTotal
Quarter Ended March 31, 2025
Allowance for credit losses on loans
Beginning balance$4,869 $35,097 $4,656 $41,282 $2,654 $88,558 
Provision (reversal of provision) for credit losses(458)(102)107 (3,629)330 (3,752)
Loans charged off(117)— — (11,506)(594)(12,217)
Recoveries3 — — 2,788 135 2,926 
Ending balance$4,297 $34,995 $4,763 $28,935 $2,525 $75,515 
In addition to the ACL for LHFI, the Company maintains a separate allowance for unfunded loan commitments, which is included in interest payable and other liabilities on the consolidated balance sheets. The following table presents changes in the allowance for credit losses on unfunded lending commitments:
Quarter Ended March 31,
(in thousands)20262025
Allowance for credit losses on unfunded lending commitments
Beginning balance$7,115 $4,366 
Provision (reversal of provision) for credit losses174 94 
Ending balance
$7,289 $4,460 
Management considers the level of ACL to be appropriate to cover credit losses expected over the life of the loans for the LHFI portfolio. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s quantitative and qualitative expected losses for current and forecasted periods.
As of March 31, 2026, the quantitative rates increased when compared to December 31, 2025 due to higher forecasted product risk metrics in certain geographically concentrated areas, partially offset by runoff of the auto, non-owner occupied commercial real estate, and construction and land development portfolios. During 2026, the qualitative factors increased
20

due to economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East.
There were no material changes to the methodologies for estimating credit losses for the periods presented.
Disclosures related to the amortized cost of loans excludes accrued interest receivable. The Company has elected to exclude accrued interest receivable from the evaluation of the allowance for credit losses. Accrued interest receivable on loans held for investment was $51.7 million and $53.1 million at March 31, 2026 and December 31, 2025, respectively, and is included in interest receivable and other assets on the consolidated balance sheets.
Credit Quality
Nonaccrual loans include both individually evaluated loans and smaller balance homogeneous loans that are collectively evaluated. Loans whose repayments are insured by the Federal Housing Administration, or guaranteed by the Department of Veterans’ Affairs or Ginnie Mae, are maintained on accrual status even if 90 days or more past due.
The following table presents the amortized cost of nonaccrual loans and loans past due 90 days or more and still accruing by class of loans as of March 31, 2026 and December 31, 2025:
March 31, 2026
(in thousands)Nonaccrual With No Allowance for Credit LossTotal NonaccrualLoans Past Due 90 Days or More Still Accruing
Commercial and industrial$5,490 $11,698 $— 
Commercial real estate
Multifamily— — — 
Non-owner occupied5,438 17,024 — 
Owner occupied722 722 — 
Construction and land development428 3,225 — 
Residential real estate4,397 8,177 4,098 
Auto— 3,529 — 
Other consumer— 4 — 
Total
$16,475 $44,379 $4,098 
December 31, 2025
(in thousands)Nonaccrual With No Allowance for Credit LossTotal NonaccrualLoans Past Due 90 Days or More Still Accruing
Commercial and industrial$5,310 $11,196 $— 
Commercial real estate
Multifamily3,387 3,387 — 
Non-owner occupied953 12,539 — 
Owner occupied1,644 1,870 — 
Construction and land development140 2,962 — 
Residential real estate3,766 6,765 3,943 
Auto— 4,143 — 
Other consumer— 1 — 
Total
$15,200 $42,863 $3,943 
21

The following tables present the amortized cost of collateral-dependent loans by class and collateral type as of March 31, 2026 and December 31, 2025:
March 31, 2026
(in thousands)AutoEquipmentLandMultifamilyRetail BuildingSingle Family ResidentialOther non-real estateTotal Loans
Commercial and industrial$— $5,001 $— $3,790 $958 $373 $— $10,122 
Commercial real estate
Multifamily— — — 14,493 — — — 14,493 
Non-owner occupied— — — — 17,024 — — 17,024 
Owner occupied— — — — 722 — — 722 
Construction and land development— — 3,225 — — — — 3,225 
Residential real estate— — — — — 4,397 — 4,397 
Total
$— $5,001 $3,225 $18,283 $18,704 $4,770 $— $49,983 
December 31, 2025
(in thousands)AutoEquipmentLandMultifamilyRetail BuildingSingle Family ResidentialOther non-real estateTotal Loans
Commercial and industrial$— $— $— $— $3,819 $— $4,674 $8,493 
Commercial real estate
Multifamily— — — 17,869 — — — 17,869 
Non-owner occupied— — — — 12,539 — — 12,539 
Owner occupied— — — — 742 — 1,128 1,870 
Construction and land development— — 2,962 — — — — 2,962 
Residential real estate— — — 157 — 4,121 — 4,278 
Total
$— $— $2,962 $18,026 $17,100 $4,121 $5,802 $48,011 
22

The following tables present the aging of the amortized cost in past due loans as of March 31, 2026 and December 31, 2025 by class of loans:
March 31, 2026
(in thousands)30-59 Days Past Due60-89 Days Past DueGreater than 89 Days Past DueTotal Past DueLoans Not Past DueTotal
Loans
Commercial and industrial$1,861 $1,011 $8,490 $11,362 $448,719$460,081
Commercial real estate
Multifamily— — — — 5,291,5975,291,597
Non-owner occupied— — 11,586 11,586 1,700,0251,711,611
Owner occupied— — 272 272 586,426586,698
Construction and land development— — 3,225 3,225 396,321399,546
Residential real estate13,955 2,828 7,459 24,242 3,992,8784,017,120
Auto19,122 4,356 2,412 25,890 613,935639,825
Other consumer271 152 3 426 745,305745,731
Total$35,209 $8,347 $33,447 $77,003 $13,775,206 $13,852,209 
December 31, 2025
(in thousands)30-59 Days Past Due60-89 Days Past DueGreater than 89 Days Past DueTotal Past DueLoans Not Past DueTotal
Loans
Commercial and industrial$3,277 $1,066 $8,024 $12,367 $469,803$482,170 
Commercial real estate
Multifamily— — 1,614 1,614 5,353,6385,355,252 
Non-owner occupied50 — 11,586 11,636 1,728,6411,740,277 
Owner occupied— 1,349 226 1,575 687,504689,079 
Construction and land development— — 2,962 2,962 491,030493,992 
Residential real estate14,274 4,944 7,187 26,405 3,944,3983,970,803 
Auto25,984 7,078 3,086 36,148 754,864791,012 
Other consumer288 149 1 438 653,913654,351 
Total$43,873 $14,586 $34,686 $93,145 $14,083,791 $14,176,936 
23

The following tables present the amortized cost of loans at March 31, 2026 and 2025 that were both experiencing financial difficulty and modified during the quarter ended March 31, 2026 and 2025, by class and by type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to the amortized cost of each class of financing receivable is also presented below.
Quarter Ended March 31, 2026
(in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionCombined Term Extension and Principal ForgivenessCombined Term Extension and Interest Rate ReductionCombined Payment Delay and Term ExtensionTotal Class of Financing Receivable
Commercial and industrial
$— $— $14 $— $— $— $5,677 1.24 %
Commercial real estate
Construction and land development— — — — — — 2,797 0.70 %
Residential real estate— 242 — — — — 2,154 0.06 %
Total
$— $242 $14 $— $— $— $10,628 0.08 %
Quarter Ended March 31, 2025
(in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionCombined Term Extension and Principal ForgivenessCombined Term Extension and Interest Rate ReductionCombined Payment Delay and Term ExtensionTotal Class of Financing Receivable
Commercial and industrial
$— $— $117 $— $— $— $— 0.03 %
Total
$— $— $117 $— $— $— $— 0.00 %
The Company has committed to lend no additional amounts to the borrowers included in the previous tables.
The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the quarter ended March 31, 2026 and 2025:
Quarter Ended March 31, 2026
(dollars in thousands)Principal ForgivenessWeighted-Average Payment Delay <months>Weighted-Average Interest Rate ReductionWeighted-Average Term Extension <months>
Commercial and industrial$— 27— %27
Commercial real estate
Construction and land development— 18— %18
Residential real estate— 58— %55
Total$— 32— %30
Quarter Ended March 31, 2025
(dollars in thousands)Principal ForgivenessWeighted-Average Payment DelayWeighted-Average Interest Rate ReductionWeighted-Average Term Extension <months>
Commercial and industrial$— —— %60
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.
24

For loan modifications to borrowers experiencing financial difficulty for the quarter ended March 31, 2026 and 2025, the following tables present the payment status of loans that were modified in the last 12 months, with related amortized cost balances, as of the dates indicated:
Payment Status (Amortized Cost)
March 31, 2026
(in thousands)Current30-59 Days Past Due60-89 Days Past DueGreater than 89 Days Past DueTotal
Commercial and industrial$1,493 $— $— $4,198 $5,691 
Commercial real estate
Construction and land development— — — 2,797 2,797 
Residential real estate1,240 405 — 751 2,396 
Total$2,733 $405 $— $7,746 $10,884 
Payment Status (Amortized Cost)
March 31, 2025
(in thousands)Current30-59 Days Past Due60-89 Days Past DueGreater than 89 Days Past DueTotal
Commercial and industrial$117 $— $— $— $117 
The following table presents the amortized cost of loans that had a payment default (e.g., borrower missed a regularly scheduled payment) and were past due for the quarter ended March 31, 2026 and that were modified in the last 12 months:
Quarter Ended March 31, 2026
(in thousands)Payment DelayTerm ExtensionCombined Payment Delay and Term ExtensionTotal
Commercial and industrial$— $— $4,199 $4,199 
Commercial real estate
Construction and land development— — 2,797 2,797 
Residential real estate— — 1,156 1,156 
Total$— $— $8,152 $8,152 
There were no loans that had a payment default and were past due for quarter ended March 31, 2025 and that were modified in the last 12 months.
Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
25

Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, current economic trends and other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all loans regardless of balances. This analysis is performed on a quarterly basis.
The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans not meeting the criteria above are considered to be pass rated loans.
26

The following table presents the amortized cost by loan risk category and origination year for commercial and industrial and commercial real estate loan classes at March 31, 2026 and December 31, 2025. In addition, year-to-date charge-offs for 2026 and 2025 are presented by origination year.
(in thousands)20262025202420232022Prior Revolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
March 31, 2026
Commercial and industrial
Risk rating
Pass$3,767 $22,096 $56,294 $51,301 $22,308 $105,591 $157,335 $661 $419,353 
Special mention— — 94 — 450 1,459 — — 2,003 
Substandard— 152 634 74 22,517 11,439 3,893 16 38,725 
Doubtful— — — — — — — — — 
Total$3,767 $22,248 $57,022 $51,375 $45,275 $118,489 $161,228 $677 $460,081 
Year-to-date gross charge-offs$— $— $— $— $— $6 $125 $— $131 
Commercial real estate - multifamily
Risk rating
Pass$18,046 $59,406 $171,314 $457,394 $2,199,195 $2,179,991 $20,151 $— $5,105,497 
Special mention— — — — 18,312 45,657 — — 63,969 
Substandard— — — 6,561 77,981 37,589 — — 122,131 
Doubtful— — — — — — — — — 
Total$18,046 $59,406 $171,314 $463,955 $2,295,488 $2,263,237 $20,151 $— $5,291,597 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate - non-owner occupied
Risk rating
Pass$— $11,036 $13,692 $32,879 $370,195 $1,149,482 $9,300 $— $1,586,584 
Special mention— — — — — 37,148 — — 37,148 
Substandard— — — — — 87,879 — — 87,879 
Doubtful— — — — — — — — — 
Total$— $11,036 $13,692 $32,879 $370,195 $1,274,509 $9,300 $— $1,711,611 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate - owner occupied
Risk rating
Pass$1,279 $26,298 $12,330 $23,062 $97,984 $357,118 $11,493 $— $529,564 
Special mention— — — — 7,362 34,267 — — 41,629 
Substandard— — — — 8,798 6,707 — — 15,505 
Doubtful— — — — — — — — — 
Total$1,279 $26,298 $12,330 $23,062 $114,144 $398,092 $11,493 $— $586,698 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate - construction and land development
Risk rating
Pass$20,992 $209,571 $86,476 $55,705 $8,724 $14,483 $370 $— $396,321 
Special mention— — — — — — — — — 
Substandard— — — — — 3,225 — — 3,225 
Doubtful— — — — — — — — — 
Total$20,992 $209,571 $86,476 $55,705 $8,724 $17,708 $370 $— $399,546 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
27

(in thousands)
20252024202320222021PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
December 31, 2025
Commercial and industrial
Risk rating
Pass$22,961 $40,427 $52,574 $24,657 $19,914 $78,344 $200,344 $225 $439,446 
Special mention— 104 — 472 162 2,828 — — 3,566 
Substandard64 634 65 23,257 400 14,487 251 — 39,158 
Doubtful— — — — — — — — — 
Total$23,025 $41,165 $52,639 $48,386 $20,476 $95,659 $200,595 $225 $482,170 
Year-to-date gross charge-offs$40 $75 $47 $6,772 $230 $19 $1,215 $— $8,398 
Commercial real estate - multifamily
Risk rating
Pass$59,536 $177,297 $458,411 $2,224,002 $1,177,242 $1,031,448 $18,160 $211 $5,146,307 
Special mention— — — 32,156 22,062 35,772 — — 89,990 
Substandard— — 6,558 68,486 24,403 19,508 — — 118,955 
Doubtful— — — — — — — — — 
Total$59,536 $177,297 $464,969 $2,324,644 $1,223,707 $1,086,728 $18,160 $211 $5,355,252 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate -non-owner occupied
Risk rating
Pass$7,032 $13,753 $31,688 $371,096 $138,150 $1,057,437 $6,659 $257 $1,626,072 
Special mention— — — — — 32,308 — — 32,308 
Substandard— — — — — 81,897 — — 81,897 
Doubtful— — — — — — — — — 
Total$7,032 $13,753 $31,688 $371,096 $138,150 $1,171,642 $6,659 $257 $1,740,277 
Year-to-date gross charge-offs$— $— $— $— $— $428 $— $— $428 
Commercial real estate - owner-occupied
Risk rating
Pass$30,541 $12,420 $27,707 $108,047 $73,141 $371,660 $9,045 $243 $632,804 
Special mention— — — 1,660 6,954 28,003 — — 36,617 
Substandard— — — 8,836 3,752 7,070 — — 19,658 
Doubtful— — — — — — — — — 
Total$30,541 $12,420 $27,707 $118,543 $83,847 $406,733 $9,045 $243 $689,079 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate - construction and land development
Risk rating
Pass$272,783 $128,650 $59,371 $13,377 $3,112 $12,937 $200 $600 $491,030 
Special mention— — — — — — — — — 
Substandard— — — — — 2,962 — — 2,962 
Doubtful— — — — — — — — — 
Total$272,783 $128,650 $59,371 $13,377 $3,112 $15,899 $200 $600 $493,992 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
28

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the amortized cost in residential and consumer loans based upon year of origination at March 31, 2026 and December 31, 2025. In addition, year-to-date charge-offs for 2026 and 2025 are presented by origination year.
(in thousands)
20262025202420232022PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
March 31, 2026
Residential real estate
Payment performance
Performing$130,475 $521,652 $145,956 $103,345 $760,796 $1,801,763 $510,414 $30,443 $4,004,844 
Nonperforming— — — 409 745 7,207 3,343 572 12,276 
Total $130,475 $521,652 $145,956 $103,754 $761,541 $1,808,970 $513,757 $31,015 $4,017,120 
Year-to-date gross charge-offs$— $— $— $— $— $1 $— $— $1 
Auto
Payment performance
Performing$— $149 $203 $42,327 $392,402 $201,215 $— $— $636,296 
Nonperforming— — — 133 2,309 1,087 — — 3,529 
Total$— $149 $203 $42,460 $394,711 $202,302 $— $— $639,825 
Year-to-date gross charge-offs$— $— $— $283 $3,728 $2,409 $— $— $6,420 
Other consumer
Payment performance
Performing$116,388 $209,287 $166,456 $141,679 $68,528 $39,331 $4,058 $— $745,727 
Nonperforming— — — — — — 4 — 4 
Total$116,388 $209,287 $166,456 $141,679 $68,528 $39,331 $4,062 $— $745,731 
Year-to-date gross charge-offs$154 $6 $6 $150 $— $328 $9 $— $653 
(in thousands)
20252024202320222021PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
December 31, 2025
Residential real estate
Payment performance
Performing$552,620 $155,815 $110,989 $767,915 $828,395 $1,041,378 $499,312 $3,671 $3,960,095 
Nonperforming— — — — — 7,651 3,057 — 10,708 
Total$552,620 $155,815 $110,989 $767,915 $828,395 $1,049,029 $502,369 $3,671 $3,970,803 
Year-to-date gross charge-offs$— $— $— $— $— $9 $96 $— $105 
Auto
Payment performance
Performing$157 $218 $49,109 $467,560 $227,342 $41,638 $— $845 $786,869 
Nonperforming— — 311 2,451 1,107 274 — — 4,143 
Total$157 $218 $49,420 $470,011 $228,449 $41,912 $— $845 $791,012 
Year-to-date gross charge-offs$— $— $1,690 $23,927 $12,077 $2,985 $— $— $40,679 
Other consumer
Payment performance
Performing$216,135 $171,060 $145,091 $73,178 $15,624 $27,294 $5,825 $143 $654,350 
Nonperforming— 1 — — — — — — 1 
Total$216,135 $171,061 $145,091 $73,178 $15,624 $27,294 $5,825 $143 $654,351 
Year-to-date gross charge-offs$619 $1 $— $— $607 $1,106 $78 $— $2,411 
29

Loan Purchases
The following table presents loan receivables purchased by portfolio segment, excluding loans acquired in business combinations:
Quarter Ended March 31,
20262025
(in thousands)
Residential real estate$3,478 $29,230 
The Company purchased the above loan receivables at a premium of $20 thousand and $42 thousand for the quarter ended March 31, 2026 and 2025, respectively. For the purchased loan receivables disclosed above, the Company did not incur any specific allowances for credit losses during the periods indicated.
NOTE 5–LOW INCOME HOUSING TAX CREDIT AND COMMUNITY REINVESTMENT ACT INVESTMENTS
The Company has LIHTC investments that are designed to promote qualified affordable housing programs and generate a return primarily through the realization of federal tax credits. The Company accounts for these investments by amortizing the cost of tax credit investments over the life of the investment using the proportional amortization method. Under the proportional amortization method, the amortization is recorded as a component of income tax expense. At March 31, 2026 and December 31, 2025, the balance of LIHTC investments, which is included in interest receivable and other assets on the consolidated balance sheets, was $41.2 million and $43.3 million, respectively. Remaining unfunded commitments related to the investments in qualified affordable housing projects totaled $6.2 million and $7.9 million as of March 31, 2026 and December 31, 2025. The Company expects to fulfill these commitments through 2039.
The following table presents other information related to the Company’s LIHTC investments for the periods indicated:
Quarter Ended March 31,
(in thousands)20262025
Tax credits and other tax benefits recognized$2,047 $828 
LIHTC amortization expense2,146 825 
The Company also has a portfolio of CRA investments. The majority of the CRA investments represent investments in small to mid-sized businesses throughout California. At March 31, 2026 and December 31, 2025, the balance of CRA investments, which is included in interest receivable and other assets on the consolidated balance sheets, was $78.9 million and $79.1 million, respectively. The Company recognized dividend income on CRA investments of $2.4 million and $362 thousand for the quarter ended March 31, 2026 and 2025, respectively, which is included within other interest income in the consolidated income statements.

30

NOTE 6–DEPOSITS
The aggregate amount of time certificates of deposits that meet or exceed the FDIC insurance limit of $250 thousand at March 31, 2026 and December 31, 2025 was $494.3 million and $565.6 million, respectively. At March 31, 2026, certificates of deposit outstanding mature as follows: 
(in thousands)March 31, 2026
Within one year$2,093,418 
One to two years34,968 
Two to three years7,628 
Three to four years4,798 
Four to five years2,883 
Thereafter975 
Total$2,144,670 
The Company accepts public deposits from various state, city and municipal agencies. Public deposits totaling $1.2 billion and $1.3 billion are included in demand deposits, interest bearing transaction accounts, savings accounts and time certificates of deposit at March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026, the Company had investment securities with a carrying value of $1.6 billion pledged as collateral for public deposits.
The Company accepts deposits from its Investment Management and Trust Department for the benefit of certain trust customers. In accordance with state trust regulations, the Company is required to secure any trust deposits that are in excess of the $250 thousand FDIC insurance limits by pledging marketable securities equal to those excess deposit balances. As of March 31, 2026 and December 31, 2025, the Company held trust deposits of $888 thousand and $683 thousand, respectively, that were in excess of $250 thousand and which required securities collateralization.
NOTE 7–BORROWINGS AND LONG-TERM DEBT
Federal Home Loan Bank (FHLB) Advances
The Company did not have any outstanding FHLB advances as of March 31, 2026 and December 31, 2025.
As of March 31, 2026 and December 31, 2025, the Company’s investment in capital stock of the FHLB totaled $17.3 million. The Company had $10.3 billion of loans pledged to the FHLB, which permits up to $6.1 billion of available borrowing capacity as of March 31, 2026.
Federal Reserve Bank Discount Window
The Company had no outstanding Discount Window borrowings as of March 31, 2026 and December 31, 2025.
The Company had pledged $1.3 billion of consumer loans through the Borrower-In-Custody Program and investment securities with a carrying value of $3.3 billion to the Federal Reserve Bank Discount Window, which permits $4.2 billion of additional borrowing capacity as of March 31, 2026.
Brokered and Other Wholesale Funding
The Company had no brokered or other wholesale funding outstanding as of March 31, 2026 and December 31, 2025.
The Company had $5.1 billion of available borrowing capacity under borrowing lines established with other financial institutions as of March 31, 2026.
Long-Term Debt
As a result of the Merger, the Company assumed Subordinated Notes, Senior Notes and TRUPs debt. These balances are reported beginning on the Merger date of September 2, 2025.
31

The trust preferred securities were issued by legacy HomeStreet, Inc. during the period from 2005 through 2007. In connection with the issuance of trust preferred securities, legacy HomeStreet, Inc. issued to HomeStreet Statutory Trust, Junior Subordinated Deferrable Interest Debentures. The sole assets of the HomeStreet Statutory Trust are the Subordinated Debt Securities I, II, III, and IV.
The following table presents the Company’s long-term debt:
March 31, 2026December 31, 2025
(dollars in thousands)Par Value
Carrying Value (1)
Par Value
Carrying Value (1)
RateMaturity Date
Senior Notes (2)
$— $— $65,000 $64,835 
6.5% per annum
June 1, 2026
Subordinated Notes96,000 80,774 96,000 79,626 
3.5% per annum (3)
January 30, 2032
TRUPs:
HomeStreet Statutory Trust I (5)
5,155 4,132 5,155 4,090 
3-month Term SOFR + 1.96% (4)
June 15, 2035
HomeStreet Statutory Trust II (5)
20,619 16,113 20,619 15,943 
3-month Term SOFR + 1.76% (4)
December 15, 2035
HomeStreet Statutory Trust III (5)
20,619 15,855 20,619 15,686 
3-month Term SOFR + 1.63% (4)
March 15, 2036
HomeStreet Statutory Trust IV (5)
15,464 11,941 15,464 11,834 
3-month Term SOFR + 1.94% (4)
June 15, 2037
Total$157,857 $128,815 $222,857 $192,014 
(1)Includes discounts from purchase accounting adjustments as a result of the Merger on September 2, 2025.
(2)On March 1, 2026, the Company redeemed at par, its $65 million of Senior Notes.
(3)The Subordinated Notes bear interest at a rate of 3.5% per annum until January 30, 2027. From January 30, 2027, until the maturity date or the date of earlier redemption, the notes will bear interest equal to the three-month Term SOFR plus 215 basis points.
(4)These rates reflect the floating rates as of March 31, 2026.
(5)Call options are exercisable at par and are callable, without penalty, on a quarterly basis.

NOTE 8–DERIVATIVES AND HEDGING ACTIVITIES
To reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as single family mortgage LHFS and MSRs, the Company utilizes derivatives as economic hedges.
As a part of its mortgage origination process, the Company enters into contracts that qualify as derivatives, including forward sale commitments and interest rate lock commitments. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into to economically hedge the effect of changes in the interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships.
The Company enters into interest rate swaps with loan customers. The specific terms of the interest rate swap agreements are tied to the terms of the underlying loan agreements. To avoid increasing internal interest rate risk as a result of these business activities, the Company enters into offsetting swap agreements. The Company enters into interest rate swaps executed with commercial banking customers and broker dealer counterparties. The Company’s customer-related interest rate swaps provide an economic hedge but do not qualify for hedge accounting treatment. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.
Cooperative Rabobank, U.A. and a subsidiary of Rabobank International Holding B.V.’s parent also provided various interest rate swap services to the Company. The applicable Rabobank International Holding B.V. counterparties deposited $3.2 million and $3.7 million in cash collateral with the Company to secure underlying derivative contracts as of March 31, 2026 and December 31, 2025, respectively. B&F Capital Markets, LLC (a Stifel Company) has provided interest rate swap services to the Company since 2023.
32

The following table presents the notional amounts and fair values for derivatives which are economic hedges. The fair values for derivatives are included in interest receivable and other assets or interest payable and other liabilities on the consolidated balance sheets.
March 31, 2026December 31, 2025
(in thousands)Notional amountFair ValueNotional amountFair Value
Included in interest receivable and other assets:
Interest rate lock commitments$11,493 $130 $4,929 $75 
Forward sale commitments40,792 241 32,217 148 
Interest rate swaps359,106 8,927 398,536 9,406 
Futures6,100 2 — — 
Total derivatives before netting$417,491 $9,300 $435,682 $9,629 
Netting adjustment/cash collateral (1)
(5,424)(5,438)
Carrying value on consolidated balance sheets$3,876 $4,191 
Included in interest payable and other liabilities:
Interest rate lock commitments$1,767 $10 $— $— 
Forward sale commitments53,115 482 10,363 28 
Interest rate swaps359,106 8,279 398,536 8,543 
Futures— — 2,200 2 
Total derivatives before netting$413,988 $8,771 $411,099 $8,573 
Netting adjustment/cash collateral (1)
(359)38 
Carrying value on consolidated balance sheets$8,412 $8,611 
(1)Includes net cash collateral received of $5.1 million and $5.5 million at March 31, 2026 and December 31, 2025, respectively.
The collateral used under the Company’s master netting agreements is typically cash, but securities may be used under agreements with certain counterparties. Receivables related to cash collateral that has been paid to counterparties are included in interest receivable and other assets. Payables related to cash collateral that has been received from counterparties are included in interest payable and other liabilities. Interest is owed on amounts received from counterparties and we earn interest on cash paid to counterparties. Any securities pledged to counterparties as collateral remain on the consolidated balance sheets. At March 31, 2026 and December 31, 2025, the Company had liabilities of $5.4 million and $5.6 million, respectively, in cash collateral received from counterparties and receivables of $322 thousand and $122 thousand, respectively, in cash collateral paid to counterparties.
The following table presents the net gain (loss) recognized on economic hedge derivatives, within the respective line items in the consolidated income statements for the periods indicated:
 Quarter Ended March 31,
(in thousands)20262025
Recognized in noninterest income:
Net gain on loan origination and sale activities (1)
$178 $— 
Loan servicing income (loss) (2)
(354)— 
Other (3)
(3)54 
(1)Comprised of forward contracts used as an economic hedge of loans held for sale and IRLCs to customers. Included in other noninterest income in the consolidated income statements.
(2)Comprised of futures, U.S. Treasury options and forward contracts used as economic hedges of single family MSRs.
(3)Impact of interest rate swap agreements executed with commercial banking customers and broker dealer counterparties.
The interest income from U.S. Treasury notes trading securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $473 thousand and zero for the quarter ended March 31, 2026 and 2025, respectively.
33

NOTE 9–MORTGAGE BANKING OPERATIONS
LHFS consisted of the following:
(in thousands)March 31, 2026December 31, 2025
Single family$4,692 $5,967 
Total$4,692 $5,967 
Loans sold consisted of the following for the periods indicated:
Quarter Ended March 31,
(in thousands)20262025
Single family$32,230 $1,637 
Multifamily and other29,228 — 
Total$61,458 $1,637 
For the quarter ended March 31, 2026 and 2025, there were no loans sold as part of securitizations.
Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following: 
Quarter Ended March 31,
(in thousands)20262025
Single family (1)
$827 $7 
Multifamily and other (1)
316 — 
Total$1,143 $7 
(1)Gain on loan origination and sale activities is included in other noninterest income in the consolidated income statements.
The Company’s portfolio of loans serviced for others is primarily comprised of loans held in U.S. government and agency MBS issued by Fannie Mae and Freddie Mac. The unpaid principal balance of loans serviced for others is as follows:
(in thousands)March 31, 2026December 31, 2025
Single family$4,288,185 $4,370,577 
CRE, multifamily and SBA1,892,012 1,866,799 
Total$6,180,197 $6,237,376 
The following is a summary of changes in the Company’s liability for estimated single-family mortgage repurchase losses:
 Quarter Ended March 31,
(in thousands)20262025
Balance, beginning of period$708 $— 
Additions, net of adjustments (1)
(32)— 
Realized (losses) recoveries, net (2)
(2)— 
Balance, end of period$674 $— 
(1)Includes additions for new loan sales and changes in estimated probable future repurchase losses on previously sold loans.
(2)Includes principal losses and accrued interest on repurchased loans, “make-whole” settlements, settlements with claimants and certain related expenses.
34

The Company has agreements with certain investors to advance scheduled principal and interest amounts on delinquent loans. Advances are also made to fund the foreclosure and collection costs of delinquent loans prior to the recovery of reimbursable amounts from investors or borrowers. Advances of $1.1 million and $1.2 million were recorded in interest receivable and other assets as of March 31, 2026 and December 31, 2025, respectively.
When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company records the balance of the loans within assets as interest receivable and other assets and within liabilities as interest payable and other liabilities. At March 31, 2026 and December 31, 2025, there were no delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets.
Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following:
Quarter Ended March 31,
(in thousands)20262025
Servicing income, net:
Servicing fees and other$5,191 $177 
Changes in fair value of single family MSRs - other (1)
(1,442)— 
Amortization of multifamily and SBA MSRs(1,638)— 
Total2,111 177 
Risk management, single family MSRs:
Changes in fair value of MSRs due to assumptions (2)
702 — 
Net gain from economic hedging (3)
(886)— 
Total(184)— 
Loan servicing income$1,927 $177 
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
(3)Comprised of net gains on derivatives used as economic hedges of single family MSRs, and net gains on U.S. Treasury notes trading securities used for hedging purposes.
Single Family MSRs
Balances and activity for single family MSRs are reported beginning on the Merger date of September 2, 2025, therefore there were no balances or activity for the quarter ended March 31, 2025.
The changes in single family MSRs measured at fair value are as follows:
Quarter Ended March 31,
(in thousands)20262025
Beginning balance$58,095 $— 
Additions:
Originations275 — 
Changes in fair value:
Changes in fair value assumptions (1)
702 — 
Other (2)
(1,442)— 
Ending balance$57,630 $— 
(1)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
(2)Represents changes due to collection/realization of expected cash flows and curtailments.
35

Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows:
Quarter Ended March 31,
(rates per annum) (1)
20262025
Constant prepayment rate (CPR) (2)
12.13 %n/a
Discount rate (3)
8.81 %n/a
(1)Based on a weighted average.
(2)Represents an expected lifetime average CPR used in the model.
(3)Based on market observations.
For the fair value of single family MSRs as of March 31, 2026 and December 31, 2025, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below:
March 31, 2026December 31, 2025
(rates per annum)
Range of Inputs
Average (1)
Range of Inputs
Average (1)
CPRs (2)
5.05% - 12.50%
6.66 %
5.07% - 12.14%
6.96 %
Discount Rates (3)
8.77% - 16.56%
9.11 %
8.65% - 16.05%
8.97 %
(1) Weighted average rates for sales during the period for sales of loans with similar characteristics.
(2) Represents the expected lifetime average CPR used in the model.
(3) Based on market observations.
To compute hypothetical sensitivities of the fair value of our single family MSRs to immediate adverse changes in key assumptions, we computed the impact of changes to CPRs and in discount rates as outlined below:
(dollars in thousands)March 31, 2026
Fair value of single family MSRs$57,630 
Expected weighted-average life (in years) 8.15
CPR shock
    Impact on fair value of 10% increase in CPR$(1,521)
    Impact on fair value of 20% increase in CPR$(2,999)
Discount rate shock
Impact on fair value of 100 basis points increase$(2,479)
Impact on fair value of 200 basis points increase$(4,848)
Multifamily and SBA MSRs
Balances and activity for multifamily and SBA MSRs are reported beginning on the Merger date of September 2, 2025, therefore there were no balances or activity for the quarter ended March 31, 2025.
36

The changes in multifamily and SBA MSRs measured at the lower of amortized cost or fair value were as follows: 
Quarter Ended March 31,
(in thousands)20262025
Beginning balance$27,737 $— 
Originations271 — 
Amortization(1,638)— 
Ending balance$26,370 $— 
The fair value of multifamily and SBA MSRs was $27.3 million and $28.3 million at March 31, 2026 and December 31, 2025, respectively.
Key economic assumptions used in measuring the initial fair value of capitalized multifamily MSRs were as follows:
Quarter Ended March 31,
(rates per annum) (1)
20262025
Discount rate13.00 %n/a
(1) Weighted averages of all the inputs within the range.
For multifamily MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below. Multifamily DUS loans typically contain yield maintenance features that significantly reduce loan prepayments, resulting in a CPR of zero for valuation purposes.
March 31, 2026December 31, 2025
Range of Inputs
Average (1)
Range of Inputs
Average (1)
Discount rates
13.00% - 15.00%
13.07 %
13.00% - 15.00%
13.07 %
(1) Weighted averages of all the inputs within the range.

NOTE 10–GUARANTEES AND MORTGAGE REPURCHASE LIABILITY
In the ordinary course of business, the Company has sold loans through the DUS program that are subject to a credit loss sharing arrangement. The Company has serviced the loans for Fannie Mae and shared in the risk of loss with Fannie Mae under the terms of the DUS contracts. Under the DUS program, the Company and Fannie Mae shared losses on a pro rata basis, where the Company was responsible for losses incurred up to one-third of the principal balance on each loan with two-thirds of the loss covered by Fannie Mae. For loans that have been sold through this program, a liability is recorded for this loss sharing arrangement under the accounting guidance for guarantees. At March 31, 2026 and December 31, 2025, the total unpaid principal balance of loans sold under this program was $1.8 billion. The Company’s reserve liability related to this arrangement totaled $557 thousand and $554 thousand at March 31, 2026 and December 31, 2025, respectively. There was a provision of $3 thousand and no actual losses were incurred for the quarter ended March 31, 2026. Balances and activity from the DUS program are reported beginning on the Merger date of September 2, 2025. Therefore, there were no balances or activity for the quarter ended March 31, 2025. On May 1, 2026, Mechanics Bank completed the previously announced sale of its DUS business line. See Note 17, “Subsequent Events—Asset Sale” for further details.
In the ordinary course of business, the Company sells residential mortgage loans to government sponsored enterprises and other entities. Under the terms of these sales agreements, the Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, early payment defaults and fraud. The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $4.3 billion and $4.4 billion as of March 31, 2026 and December 31, 2025, respectively.
37

At March 31, 2026 and December 31, 2025, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and servicing-released basis, which is included in accounts payable and other liabilities on the consolidated balance sheets of $674 thousand and $708 thousand, respectively. There was a net reversal of provision of $32 thousand and $2 thousand actual losses were incurred for the quarter ended March 31, 2026. Balances from loans sold on a servicing retained basis and the mortgage repurchase liability are reported beginning on the Merger date of September 2, 2025. Therefore, there were no balances or activity for the quarter ended March 31, 2025.
NOTE 11–CONTINGENCIES
Legal Contingencies
In the normal course of business, the Company may have various legal claims and other similar contingent matters outstanding for which a loss may be realized. For these claims, the Company establishes a liability for contingent losses when it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. For claims determined to be reasonably possible but not probable of resulting in a loss, there may be a range of possible losses in excess of the established liability. As of March 31, 2026 and December 31, 2025, the Company recorded an accrued contingent liability of $3.9 million and $4.2 million, respectively.
McClain Feed Yard Litigation. Mechanics Bank is currently a defendant in (i) actions filed in the U.S. Bankruptcy Court for the Northern District of Texas, captioned AgTexas Farm Credit Services, et al. v. Rabo AgriFinance, LLC, et al. and 2B Farms, et al. v. Rabo AgriFinance, LLC, et al., which were consolidated in the bankruptcy case captioned In re McClain Feed Yard, Inc., et al. (jointly administered with In re 2B Farms), (ii) a related adversary proceeding filed by a court-appointed Chapter 7 Trustee captioned Kent Ries, et al. v. Community Financial Services Bank et al. (In re McClain Feed Yard, Inc.), and (iii) a Kentucky putative class action captioned Tindal and Rogers v. Community Financial Services Bank, et al., brought on behalf of investors in that state. These cases allege that the defendants knowingly or negligently aided and abetted a Ponzi scheme orchestrated by Kentucky farmer Brian McClain, who was accused of defrauding investors of millions of dollars through a fictitious “ghost” cattle scheme. On May 30, 2025, Mechanics Bank filed a motion to dismiss the Chapter 7 Trustee’s complaint. On March 27, 2026, the bankruptcy court issued an order dismissing all of the Chapter 7 Trustee's claims against Mechanics Bank with prejudice, with the exception of the alleged fraudulent and preferential transfer claims (which the court will address by separate order). We analyze loss contingencies in accordance with the guidance provided in ASC 450, “Contingencies.” Although we do not consider the potential for an insurance recovery in making the determination of the reasonably estimable amount of loss, we do maintain insurance, with significant policy limits, that could provide coverage for the liabilities that may arise from this matter. Additionally, we believe that Rabo AgriFinance LLC and certain third parties are contractually obligated to indemnify us in these cases. We intend to vigorously defend these cases and pursue our indemnification rights. However, based on the information currently available and uncertainty around these pending unresolved issues, we cannot reasonably estimate a range of potential exposures at this time. Therefore, we have not recorded an accrual for these cases under ASC 450-20. However, it is reasonably possible that the ultimate resolution of these cases could result in future charges that may be material in our results of operations. We will continue to monitor and evaluate the status of these cases each quarter to determine the need for additional disclosure pursuant to ASC 450. See Item 1A, “Risk Factors,” in the Company’s 2025 Annual Report on Form 10-K.
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NOTE 12–FAIR VALUE MEASUREMENTS
The term “fair value” is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The Company’s approach is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.
Fair Value Hierarchy
A three-level valuation hierarchy has been established under ASC 820 for disclosure of fair value measurements. The valuation hierarchy is based on the observability of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels are defined as follows:
•Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
•Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This includes quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability for substantially the full term of the financial instrument.
•Level 3 – Unobservable inputs for the asset or liability. These inputs reflect the Company’s assumptions of what market participants would use in pricing the asset or liability.
The Company’s policy regarding transfers between levels of the fair value hierarchy is that all transfers are assumed to occur at the end of the reporting period.
Estimation of Fair Value
Fair value is based on quoted market prices, when available. In cases where a quoted price for an asset or liability is not available, the Company uses valuation models to estimate fair value. These models incorporate inputs such as forward yield curves, loan prepayment assumptions, expected loss assumptions, market volatilities and pricing spreads utilizing market-based inputs where readily available. The Company believes its valuation methods are appropriate and consistent with those that would be used by other market participants. However, imprecision in estimating unobservable inputs and other factors may result in these fair value measurements not reflecting the amount realized in an actual sale or transfer of the asset or liability in a current market exchange.
39

The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions and classification of the Company’s assets and liabilities valued at fair value on a recurring basis.
Asset/Liability classValuation methodology, inputs and assumptionsClassification
Investment securities
U.S Treasury securities (Trading securities and Investment securities AFS)Fair Value is based on quoted prices in an active market.Level 1 recurring fair value measurement.
Investment securities AFS (level 2)Observable market prices of identical or similar securities are used where available.Level 2 recurring fair value measurement.
Investment securities AFS (level 3)
If market prices are not readily available, value is based on discounted cash flows using the following significant inputs:
•Expected prepayment speeds 
•Estimated credit losses 
•Market liquidity adjustments
Level 3 recurring fair value measurement.
LHFS
Single family loans
Fair value is based on observable market data, including:
•Quoted market prices, where available 
•Dealer quotes for similar loans 
•Forward sale commitments
Level 2 recurring fair value measurement.
Equity securitiesObservable market prices of identical or similar securities are used where available.Level 2 recurring fair value measurement.
Mortgage servicing rights
Single family MSRsFor information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 9, “Mortgage Banking Operations.”Level 3 recurring fair value measurement.
Derivatives
Futures and OptionsFair value is based on closing exchange prices.Level 1 recurring fair value measurement.
Forward sale commitments and interest rate swaps
Fair value is based on quoted prices for identical or similar instruments, when available. When quoted prices are not available, fair value is based on internally developed modeling techniques, which require the use of multiple observable market inputs including:
•Forward interest rates 
•Interest rate volatilities
Level 2 recurring fair value measurement.
IRLC
The fair value considers several factors including:
•Fair value of the underlying loan based on quoted prices in the secondary market, when available. 
•Value of servicing
•Fall-out factor
Level 3 recurring fair value measurement.
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The following tables present the levels of the fair value hierarchy for the Company’s assets and liabilities measured at fair value on a recurring basis:
March 31, 2026
(in thousands)Fair ValueLevel 1Level 2Level 3
Assets:
Trading securities - U.S. Treasury securities$49,463 $49,463 $— $— 
Securities available-for-sale:
Obligations of states and political subdivisions459,869 — 459,869 — 
Mortgage backed securities - residential2,807,719 — 2,806,170 1,549 
Mortgage backed securities - commercial357,981 — 357,981 — 
Collateralized loan obligations229,708 — 229,708 — 
Corporate bonds51,135 — 51,090 45 
U.S. Treasury securities20,536 20,536 — — 
Agency debentures6,757 — 6,757 — 
Total securities available-for-sale3,933,705 20,536 3,911,575 1,594 
Single family LHFS4,692 — 4,692 — 
Single family mortgage servicing rights57,630 — — 57,630 
Equity securities15,012 — 15,012 — 
Derivatives:
Forward loan sale commitments241 — 241 — 
Interest rate lock commitments130 — — 130 
Interest rate swaps8,927 — 8,927 — 
Futures2 2 — — 
Total assets$4,069,802 $70,001 $3,940,447 $59,354 
Liabilities:
Derivatives:
Forward loan sale commitments$482 $— $482 $— 
Interest rate lock commitments10 — — 10 
Interest rate swaps8,279 — 8,279 — 
Total liabilities$8,771 $— $8,761 $10 
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December 31, 2025
(in thousands)Fair ValueLevel 1Level 2Level 3
Assets:
Trading securities - U.S. Treasury securities$49,518 $49,518 $— $— 
Securities available-for-sale:
Obligations of states and political subdivisions471,159 — 471,159 — 
Mortgage backed securities - residential2,884,289 — 2,882,704 1,585 
Mortgage backed securities - commercial371,806 — 371,806 — 
Collateralized loan obligations188,316 — 188,316 — 
Corporate bonds49,915 — 49,870 45 
U.S. Treasury securities20,669 20,669 — — 
Agency debentures7,231 — 7,231 — 
Total securities available-for-sale3,993,385 20,669 3,971,086 1,630 
Single family LHFS5,967 — 5,967 — 
Single family mortgage servicing rights58,095 — — 58,095 
Equity securities15,567 — 15,567 — 
Derivatives:
Forward loan sale commitments148 — 148 — 
Interest rate lock commitments75 — — 75 
Interest rate swaps9,406 — 9,406 — 
Total assets$4,132,161 $70,187 $4,002,174 $59,800 
Liabilities:
Derivatives:
Forward loan sale commitments$28 $— $28 $— 
Interest rate swaps8,543 — 8,543 — 
Futures2 2 — — 
Total liabilities $8,573 $2 $8,571 $— 
There were no transfers between levels of the fair value hierarchy for the quarter ended March 31, 2026 and 2025.
Level 3 Recurring Fair Value Measurements
The Company’s Level 3 recurring fair value measurements consist of investment securities AFS, single family MSRs, and interest rate lock commitments, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs for the quarter ended March 31, 2026, see Note 9, “Mortgage Banking Operations.”
The fair value of IRLCs considers several factors, including the fair value in the secondary market of the underlying loan resulting from the exercise of the commitment, the expected net future cash flows related to the associated servicing of the loan (referred to as the value of servicing) and the probability that the commitment will not be converted into a funded loan (referred to as a fall-out factor). The fair value of IRLCs on LHFS, while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. The significance of the fall-out factor to the fair value measurement of an individual IRLC is generally highest at the time that the rate lock is initiated and declines as closing procedures are performed and the underlying loan gets closer to funding. The fall-out factor applied is based on historical experience. The value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs and underlying portfolio characteristics. Because these inputs are not observable in market trades, the fall-out factor and value of servicing are considered to be Level 3 inputs. The fair value of IRLCs decreases in value upon an increase in the fall-out factor and increases in value upon an increase in the value of servicing. Changes in the fall-out factor and value of servicing do not increase or decrease based on movements in other significant unobservable inputs.
The Company recognizes unrealized gains and losses from the time that an IRLC is initiated until the gain or loss is realized at the time the loan closes, which generally occurs within 30-90 days. For IRLCs that fall out, any unrealized gain or loss is reversed, which generally occurs at the end of the commitment period. The gains and losses recognized on IRLC
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derivatives generally correlates to volume of single family interest rate lock commitments made during the reporting period (after adjusting for estimated fallout) while the amount of unrealized gains and losses realized at settlement generally correlates to the volume of single family closed loans during the reporting period.
The following information presents significant Level 3 unobservable inputs used to measure fair value of certain assets as of March 31, 2026 and December 31, 2025. Balances and activity from these Level 3 assets are reported beginning on the Merger date of September 2, 2025. Therefore, there were no balances or activity for the quarter ended March 31, 2025.
At March 31, 2026
(dollars in thousands)Fair ValueValuation
Technique		Significant Unobservable
Inputs		LowHighWeighted Average
March 31, 2026
Investment securities AFS$1,594 Income approachImplied spread to benchmark interest rate curve2.25%2.25%2.25%
Interest rate lock commitments, net120 Income approachFall-out factor1.10%20.60%11.94%
Value of servicing0.93%1.56%1.25%
December 31, 2025
Investment securities AFS$1,630 Income approachImplied spread to benchmark interest rate curve2.25%2.25%2.25%
Interest rate lock commitments, net75 Income approachFall-out factor0.60%20.65%10.11%
Value of servicing1.04%1.43%1.15%
The following table presents fair value changes and activity for Level 3 investment securities AFS:
Quarter Ended March 31,
(in thousands)20262025
Beginning balance$1,630 $— 
Additions— — 
Transfers — — 
Payoffs/sales6 — 
Change in mark to market(42)— 
Ending balance$1,594 $— 
The following table presents fair value changes and activity for Level 3 interest rate lock commitments:
Quarter Ended March 31,
(in thousands)20262025
Beginning balance, net$75 $— 
Total realized/unrealized gains433 — 
Settlements(388)— 
Ending balance, net$120 $— 
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Assets and Liabilities Measured on a Nonrecurring Basis
Collateral Dependent Loan Receivables: The fair value of collateral dependent loan receivables with specific allocations of the allowance for credit losses based on collateral values is generally based on recent appraisals or evaluations. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Loss exposure for collateral dependent loans is typically determined by the “practical expedient” which allows these loans to be assessed using the fair value of collateral method, which compares the net realizable value of the collateral (fair value less costs of sale) to the amortized cost basis of the loan (carrying value).
The following tables present collateral dependent loans that were measured at fair value on a nonrecurring basis, and still held on the consolidated balance sheets, as well as the valuation methodology and unobservable inputs, and the net gains or losses resulting from those fair value adjustments for the periods indicated.
March 31, 2026
(in thousands)Fair ValueValuation TechniqueUnobservable InputInput or Range Weighted Average
Commercial and industrial loans$3,290 Third party appraisalDiscount for market conditions
10% - 20%
17%
Estimated selling costs
7% - 10%
10%
Third party evaluationEstimated selling costs7%7%
Commercial real estate loans$23,015 Third party appraisalDiscount for market conditions
10% - 52%
40%
Estimated selling costs
8% - 10%
10%
Income approachVacancy, collection loss, concessions15%15%
Capitalization rate7%7%
December 31, 2025
(in thousands)Fair ValueValuation TechniqueUnobservable InputInput or Range Weighted Average
Commercial and industrial loans$2,955 Third party appraisalDiscount for market conditions
10% - 20%
18%
Estimated selling costs10%10%
Third party evaluationEstimated selling costs7%7%
Commercial real estate loans$23,006 Third party appraisalDiscount for market conditions
6% - 36%
24%
Estimated selling costs
8% - 10%
10%
Income approachVacancy, collection loss, concessions15%15%
Capitalization rate6%6%
Quarter Ended March 31,
(in thousands)20262025
Net (gain) loss: (1)
Commercial and industrial loans$(79)$— 
Commercial real estate loans(77)— 
Total$(156)$— 
(1)The net (gain) loss represents re-measurements of collateral-dependent impaired loans with specific allowance for credit loss allocations.
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Other real estate owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of the carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property or internal evaluations based on comparable sales, resulting in a Level 3 classification. Appraisals for both collateral-dependent impaired loans and real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. In cases where the carrying amount exceeds the fair value, less cost to sell, an impairment loss is recognized. Management also considers inputs regarding market trends or other relevant factors and selling and commission costs.
Other real estate owned assets fall under a Level 3 fair value measurement methodology. The following tables present other real estate owned that were measured at fair value on a nonrecurring basis and still held on the consolidated balance sheets, as well as the valuation methodology, unobservable inputs and losses resulting from those fair value adjustments for the periods indicated.
March 31, 2026
(in thousands)Fair ValueValuation TechniqueUnobservable InputsInput or RangeWeighted Average
Other real estate owned-commercial real estate$3,535 Third party appraisalEstimated selling costs6%6%
Purchase and sale agreementEstimated selling costs7%7%
December 31, 2025
(in thousands)Fair ValueValuation TechniqueUnobservable InputsInputWeighted Average
Other real estate owned-commercial real estate$1,675 Income approachEstimated selling costs10%10%
Quarter Ended March 31,
(in thousands)20262025
Losses due to write downs:
Other real estate owned-commercial real estate (1)
$332 $— 
(1)Losses are included in other real estate owned related expense within noninterest expense on the consolidated income statements.
The following is a summary of the estimated fair value and carrying value of the Company’s financial instruments not recorded at fair value in the consolidated financial statements as of March 31, 2026 and December 31, 2025:
 March 31, 2026
Fair Value
(in thousands)Carrying
Value		TotalLevel 1Level 2Level 3
Assets:
Cash and cash equivalents$483,513 $483,513 $483,513 $— $— 
Securities held-to-maturity1,313,520 1,149,969 — 1,146,969 3,000 
Loan receivables, net13,695,413 13,193,078 — 13,193,078 
Mortgage servicing rights – multifamily and SBA26,370 27,282 — 27,282 — 
Liabilities:
Time deposits$2,144,670 $2,132,552 $— $2,132,552 $— 
Long-term debt128,815 140,594 — 140,594 — 
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 December 31, 2025
Carrying
Value		Fair Value
(in thousands)TotalLevel 1Level 2Level 3
Assets:
Cash and cash equivalents$1,029,983 $1,029,983 $1,029,983 $— $— 
Securities held-to-maturity1,336,632 1,170,818 — 1,167,818 3,000 
Loan receivables, net14,023,617 13,665,520 — — 13,665,520 
Mortgage servicing rights – multifamily and SBA27,737 28,276 — 28,276 — 
Liabilities:
Time deposits$2,784,608 $2,768,873 $— $2,768,873 $— 
Long-term debt192,014 203,272 — 203,272 — 
Fair Value Option
Single family loans held for sale accounted under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are recognized in net gain on mortgage loan origination and sale activities within other noninterest income. The change in fair value of loans held for sale is primarily driven by changes in interest rates subsequent to loan funding and changes in fair value of the related servicing asset, resulting in revaluation adjustments to the recorded fair value. The use of the fair value option allows the change in the fair value of loans to more effectively offset the change in fair value of derivative instruments that are used as economic hedges of loans held for sale.
The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale accounted for under the fair value option as of March 31, 2026 and December 31, 2025:
March 31, 2026December 31, 2025
(in thousands)Fair ValueAggregate Unpaid Principal BalanceFair Value Less Aggregated Unpaid Principal BalanceFair ValueAggregate Unpaid Principal BalanceFair Value Less Aggregated Unpaid Principal Balance
Single family LHFS$4,692 $4,648 $44 $5,967 $5,883 $84 
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NOTE 13 – REVENUE FROM CONTRACTS WITH CUSTOMERS
All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income in the consolidated income statements. A description of the Company’s revenue streams accounted for under ASC 606 are as follows:
Service Charges on Deposit Accounts and Other Deposit Service Fees: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. Other deposit service fees are recognized at the point in time that the transaction occurs or the services provided.
Trust Fees: The Company earns trust fees from its contracts with trust customers to manage assets for investment services. These fees are primarily earned over time as the Company provides the contracted monthly services and are generally assessed based on a tiered scale of the market value of assets under management at month-end. Other related services provided, which are based on a fixed fee schedule, are recognized when the services are rendered.
Merchant Processing Services, ATM processing and Debit Card Fees: ATM processing fees are recognized at the point in time that the transaction occurs or the services provided. The Company earns interchange fees from cardholder transactions conducted through the payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
The following is a summary of the revenue from contracts with customers in the scope of ASC 606 that is recognized within noninterest income:
Quarter Ended March 31,
(in thousands)20262025
Noninterest income in scope of ASC 606:
Service charges on deposit accounts$6,043 $5,494 
Trust fees and commissions3,070 3,119 
ATM network fee income3,904 2,888 
Noninterest income subject to ASC 60613,017 11,501 
Noninterest income not subject to ASC 6068,003 3,480 
Total noninterest income $21,020 $14,981 
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NOTE 14–EARNINGS PER SHARE
The Company has two classes of common stock and, as such applies the “two-class method” of computing earnings per share in accordance with ASC 260, “Earnings Per Share.” Earnings are allocated in the same manner as dividends would be distributed. The Company’s common shareholders are entitled to equally share in all dividends and distributions based on such shareholders’ pro rata ownership interest in the Company, except that each share of Class B common stock is treated as if such share had been converted into ten Class A Shares for purposes of calculating the economic rights of the Class B Shares, including upon liquidation of the Company or the declaration of dividends or distributions by the Company.
The following table summarizes the calculation of earnings per share under the two-class method:
Quarter Ended March 31,
20262025
(dollars in thousands, except per share amounts)Class A common stockClass B common stockConsolidatedClass A common stockClass B common stockConsolidated
Net income $44,090 $43,791 
Basic:
Numerator
Allocation of distributed earnings (cash dividends declared)$88,110 $4,458 $92,568 $— $— $— 
Allocation of undistributed earnings (losses)(46,151)(2,327)(48,478)41,489 2,302 43,791 
Allocation of distributed and undistributed earnings$41,959 $2,131 $44,090 $41,489 $2,302 $43,791 
Denominator
Basic weighted average common shares outstanding221,047,803 1,114,448 222,162,251 200,884,880 1,114,448 201,999,328 
Basic earnings per share (1)
$0.19 $1.91 $0.20 $0.21 $2.07 $0.22 
Diluted:
Numerator
Allocation of distributed and undistributed earnings$41,959 $2,131 $44,090 $41,489 $2,302 $43,791 
Denominator
Basic weighted average common shares outstanding221,047,803 1,114,448 222,162,251 200,884,880 1,114,448 201,999,328 
Dilutive effect of unvested RSUs or PSUs (2)
155,490 — 155,490 59,420 — 59,420 
Diluted weighted average common shares outstanding221,203,293 1,114,448 222,317,741 200,944,300 1,114,448 202,058,748 
Diluted earnings per share (1)
$0.19 $1.91 $0.20 $0.21 $2.07 $0.22 
(1)Periods prior to September 2, 2025 have been restated as a result of the adjustment to common shares outstanding based on the exchange ratio from the Merger of 3,301.0920 for Class A common stock and 330.1092 for Class B common stock.
(2)No RSUs or PSUs were antidilutive for the quarter ended March 31, 2026 and 2025.
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NOTE 15–SHARE-BASED COMPENSATION PLANS
The 2025 Equity Plan, adopted by shareholders in August 2025, provides for the issuance of incentive stock options, nonqualified stock options, stock appreciation rights, RSUs, PSUs, dividend equivalent awards and other awards. All share-based awards granted after the Merger date were issued under the 2025 Equity Plan. As of March 31, 2026, only RSUs and PSUs have been granted under the 2025 Equity Plan. Shares available for grant under the 2025 Equity Plan were 6,799,632 shares as of March 31, 2026.
In connection with Mechanics Bank becoming a wholly-owned subsidiary of the Company, which is publicly traded, and the stock of Mechanics Bank being exchanged for shares of Class A common stock of the Company as a result of the Merger, the Company has elected to settle share-based compensation awards in Class A common stock of the Company that were outstanding following the Merger that historically were settled in cash by Mechanics Bank. Accordingly, during 2025, the Company modified the classification of these outstanding awards from liability to equity (RSU awards). These outstanding awards also were remeasured at the modification date fair value of the Company’s stock, and the previously recognized liability was reclassified to common stock within the consolidated balance sheets. Upon modification, $13.6 million of previously recognized liability-classified awards was reclassified to additional paid-in capital.
Compensation expense on the accompanying consolidated income statements was $1.3 million and $2.6 million for the quarter ended March 31, 2026 and 2025, respectively. The income tax benefit recognized in the consolidated income statements related to this expense was $259 thousand and $733 thousand for the quarter ended March 31, 2026 and 2025, respectively. The amount of unrecognized compensation expense related to all RSUs and PSUs as of March 31, 2026 totaled $14.2 million. Such expense is expected to be recognized over a weighted average period of 2.61 years.
RSUs generally vest over a period of three to four years and PSUs vest over a period of three years with the fair market value of the awards determined at the grant date based on the Company’s stock price. The vesting date fair value of RSUs vested in the quarter ended March 31, 2026 and 2025 was $2.3 million and zero, respectively.
NumberWeighted Average
Grant Date Fair Value
Outstanding at December 31, 2025
1,553,634 $13.02 
Granted528,127 14.26 
Dividends reinvested into shares24,383 13.87 
Cancelled or forfeited(23,611)13.86 
Vested(154,017)13.72 
Outstanding at March 31, 2026
1,928,516 $13.96 
NOTE 16-SHAREHOLDERS’ EQUITY AND DIVIDEND LIMITATIONS
On September 2, 2025, HomeStreet Bank merged with and into Mechanics Bank, and Mechanics Bank became a wholly-owned subsidiary of Mechanics Bancorp (formerly known as HomeStreet, Inc.).
In connection with the Merger, the Company amended its articles of incorporation to increase the number of authorized shares of Company common stock from 160,000,000 to 1,900,000,000 and Company preferred stock from 100,000 to 120,000 and authorize the issuance of two (2) classes of Company common stock, 1,897,500,000 shares of which are designated Class A common stock and 2,500,000 shares of which are designated Class B common stock.
Legacy Mechanics Bank’s number of shares issued and outstanding have been retrospectively restated for periods prior to the Merger to reflect the equivalent number of shares issued in the Merger since the Merger was accounted for as a reverse acquisition. In all prior periods, the fixed exchange ratio of 3,301.0920 was applied to shares of outstanding Mechanics Bank voting common stock, which were converted to Class A common stock, and the fixed exchange ratio of 330.1092 was applied to shares of outstanding Mechanics Bank non-voting common stock, which were converted to Class B common stock.
Class A common stock: Our Class A common stock is listed on Nasdaq under the symbol “MCHB” and there were 220,286,142 shares outstanding at March 31, 2026, and 220,190,561 shares outstanding at December 31, 2025.
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Class B common stock: Our Class B common stock is not listed or traded on any national securities exchange or automated quotation system, and there currently is no established trading market for such stock. There were 1,114,448 shares outstanding at March 31, 2026 and December 31, 2025.
Each holder of Class A common stock and Class B common stock is entitled to one vote per share of combined company common stock on matters submitted to the vote of holders of combined company common stock. The Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of combined company shareholders, except as may otherwise be required by law or certain adverse amendments to the rights of Class B common stock. The Company’s common shareholders are entitled to equally share in all dividends and distributions based on such shareholders’ pro rata ownership interest in the Company, except that each share of Class B common stock is treated as if such share had been converted into ten Class A shares for purposes of calculating the economic rights of the Class B shares, including upon liquidation of the Company or the declaration of dividends or distributions by the Company.
Mechanics is a separate legal entity from Mechanics Bank, which is the primary source of funds available to Mechanics to service its debt, fund its operations, pay dividends to shareholders, repurchase shares and otherwise satisfy its obligations. The availability of dividends from Mechanics Bank is limited by various statutes and regulations, capital rules regarding requirements to maintain a “well capitalized” position at Mechanics Bank, as well as by our policy of retaining a significant portion of our earnings to support Mechanics Bank’s operations. Under California law, Mechanics Bank, or any majority owned subsidiary of Mechanics Bank, generally may not declare a cash dividend on its capital stock in an amount that exceeds the lesser of the retained earnings of Mechanics Bank or the net income of Mechanics Bank in the last three fiscal years, less the amount of any distributions made by Mechanics Bank or any majority owned subsidiary of Mechanics Bank to shareholders of Mechanics Bank, unless approved by the California Department of Financial Protection and Innovation.
NOTE 17–SUBSEQUENT EVENTS
Legal Contingencies
McClain Feed Yard Litigation. On April 10, 2026, in the consolidated actions pending in the U.S. Bankruptcy Court for the Northern District of Texas to which Mechanics Bank is a party, as described in Note 11, “Contingencies—Legal Contingencies,” the bankruptcy court issued an order dismissing the Chapter 7 Trustee’s only remaining claims against Mechanics Bank (for actual and constructive fraudulent transfers and preferential transfers). The court ordered the constructive fraudulent transfer claims be dismissed with prejudice to refiling. The court ordered the claims for preferential and actual fraudulent transfers be dismissed without prejudice to refiling. This follows an earlier bankruptcy court order dismissing all of the Chapter 7 Trustee’s common law claims against Mechanics Bank with prejudice, as described in Note 11.
Asset Sale
On May 1, 2026, Mechanics Bank completed the previously announced sale of its Fannie Mae DUS business line to Fifth Third for aggregate cash consideration of approximately $126 million. Under the terms of the completed transaction, Fifth Third acquired Mechanics Bank’s approximately $1.8 billion DUS servicing portfolio, including associated escrow amounts, and hired Mechanics Bank employees who operate the DUS business line.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Annual Report on Form 10-K”) filed with the SEC. This Quarterly Report contains forward-looking statements that involve risks and uncertainties, including those described in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” There are a number of important risks and uncertainties that could cause our actual results to differ materially from those discussed in these forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in our other disclosures and filings.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, 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 Quarterly Report, 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. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates, and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements.

We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Factors that could affect the Company’s future results from those expressed or implied in any forward-looking statements include, but are not limited to:
•substantial non-recurring and integration costs, which may be greater than anticipated due to unexpected events;
•failure to realize the anticipated benefits of the Merger;
•our ability to effectively manage our expanded operations;
•negative developments and events impacting the financial services industry;
•the soundness of other financial institutions;
•our ability to maintain sufficient liquidity, or an increase in the cost of liquidity;
•unpredictable economic, market and business conditions;
•interest rate risk, and fluctuations in interest rates;
•inflationary pressures and rising prices;
•adverse changes in real estate market values;
•the impact of climate change, including indirectly through impacts on our customers;
•the adequacy of our allowances for credit losses for loans and debt securities;
•incurring losses in our loan portfolio despite strict adherence to our underwriting practices;
•fluctuations in our mortgage origination business based upon seasonal and other factors;
•our geographic concentration, which may magnify the adverse effects and consequences of any regional or local economic downturn;
•the accuracy of independent appraisals to determine the value of the real estate that secures a substantial portion of our loans;
•the ability of our small- to medium-sized borrowers to weather adverse business developments;
•our ability to fully identify and mitigate exposure to the various risks that we face, including interest rate, credit, liquidity and market risk;
•our ability to mitigate our exposure to interest rate risk;
•negative publicity regarding us, or financial institutions in general;
•environmental liability risk associated with our lending activities;
•our ability to manage risks associated with new lines of business, products, product enhancements and services;
•our ability to adapt our services to changes in the marketplace related to mortgage servicing or origination, technology or in changes in the requirements of governmental authorities and customers;
•our ability to develop, implement and maintain an effective system of internal control over financial reporting;
•the potential that we may identify material weaknesses in our internal control over financial reporting in the future, which may result in material misstatements of our financial statements;
•the potential that we may write off goodwill and other intangible assets resulting from business combinations;
•dependence on our management team;
•exposure to fraudulent and negligent acts by our customers and the parties they do business with, as well as from employees, contractors and vendors;
•legal claims and litigation, including potential securities law liabilities;
•employee class action lawsuits or other legal proceedings;
•our ability to raise additional capital, if needed;
•competition from other financial institutions and financial service companies;
•regulatory restrictions that may delay, impede or prohibit our ability to consider certain acquisitions and opportunities;
•extensive supervision and regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to generate income;
•our ability to comply with stringent capital requirements;
•the impact of federal and state regulators’ examination of our business;
•our ability to comply with the Bank Secrecy Act and other anti-money laundering statutes and regulations;
•our reliance on dividends from Mechanics Bank;
•our ability to raise debt or capital to pay off our debts upon maturity;
•our level of indebtedness following the completion of the Merger;
•increasing and continually evolving cybersecurity and other technological risks;
•our ability to adapt to rapid technological change;
•our ability to effectively implement new technological solutions or enhancements to existing systems or platforms;
•our ability to manage risks and challenges relating to the development and use of artificial intelligence;
•our dependence on our computer and communications systems;
•our ability to effectively manage and aggregate data;
•Ford Financial Funds and their controlled affiliates control approximately 77% of the voting power of Mechanics Bancorp, and have the ability to elect all of our directors and control most other matters submitted to our shareholders for approval;
•we are a “controlled company” within the meaning of the rules of Nasdaq and, as a result, we qualify for, and rely on, exemptions from certain corporate governance standards;
•future sales of shares by existing shareholders could cause our stock price to decline;
•our reliance on certain entities affiliated with the Ford Financial Funds for services;
•reduced disclosure requirements as a smaller reporting company; and
•certain of our shareholders have registration rights, the exercise of which could adversely affect the trading price of our common stock.

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 Item 1A “Risk Factors” included in our 2025 Annual Report on Form 10-K, filed with the SEC. We strongly recommend readers review those disclosures in conjunction with the discussions herein. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and should not be relied upon as a prediction of actual results or future events.
Forward-looking statements in this Quarterly Report are based on management’s expectations at the time such statements are made and speak only as of the date made. We do not assume any obligation or undertake to update any forward-looking statements after the date of this Quarterly Report as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although we may do so from time to time.
All future written and oral forward-looking statements attributable to us or any person acting on our 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 we currently deem immaterial may become material, and it is impossible for us to predict these events or how they may affect us.
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Overview
Mechanics Bancorp is a financial holding company and primarily operates through 121-year-old Mechanics Bank, a full-service community bank with 166 branches throughout California, Washington, Oregon and Hawaii. Following the strategic Merger of HomeStreet Bank with and into Mechanics Bank on September 2, 2025, with Mechanics Bank surviving the Merger as a wholly owned subsidiary of the Company, the assets, liabilities and operations of HomeStreet Bank became the assets, liabilities and operations of Mechanics Bank. Headquartered in Walnut Creek, California, Mechanics Bank provides 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.
General
The Company’s management’s discussion and analysis of results of operations and financial condition (“MD&A”) is intended to assist the reader in understanding and assessing significant changes and trends related to the results of operations and financial condition of the Company. This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying footnotes in this Quarterly Report on Form 10-Q.
Recent Developments
Presentation of Results - HomeStreet Bank Merger
On September 2, 2025, we completed the Merger of HomeStreet Bank, the wholly-owned subsidiary of Mechanics Bancorp (formerly known as “HomeStreet, Inc.”) with and into Mechanics Bank, with Mechanics Bank as the surviving bank. Mechanics Bank is the accounting acquirer (“legal acquiree”), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp is the legal acquirer. In this Quarterly Report on Form 10-Q, our financial results for all periods ended prior to September 2, 2025 reflect Mechanics Bank’s results on a standalone basis. In addition, our reported financial results 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 beginning September 2, 2025. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Mechanics Bancorp 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 March 31, 2026, are subject to change for up to one year after the Merger date, and any changes could be material.
Unless we state otherwise or the content otherwise requires, references in this Quarterly Report on Form 10-Q to “Mechanics,” “we,” “our,” “us” or the “Company” refer collectively to Mechanics Bancorp, Mechanics Bank (the “Bank”) and other direct and indirect subsidiaries of Mechanics Bancorp, following completion of the Merger. In some instances, we refer to Mechanics Bank prior to the effective time of the Merger as “legacy Mechanics Bank,” HomeStreet Bank prior to the effective time of the Merger as “legacy HomeStreet Bank,” and HomeStreet, Inc. prior to the effective time of the Merger as “legacy HomeStreet, Inc.”
Asset Sale
As discussed in Note 17, “Subsequent Events—Asset Sale,” on May 1, 2026, Mechanics Bank completed the previously announced sale of its DUS business line to Fifth Third.
Critical Accounting Estimates
The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements and the notes thereto, which have been prepared in accordance with GAAP and accounting practices in the banking industry. Certain of those accounting policies are considered critical accounting policies because they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates and assumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were to occur in the events, trends or other circumstances on which our estimates or assumptions were based, these changes could have a material adverse effect on the carrying value of assets and liabilities and on our results of operations. As a result of the
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Merger, the Company updated critical accounting estimates. Management believes the ACL policy and estimate, the valuation of single family MSRs and business combinations estimates are important to the portrayal of the Company’s financial condition and results of operations and requires difficult, subjective, or complex judgments and, therefore, management considers them to be critical accounting estimates. There have been no material changes in the methodology of these estimates during the three months ended March 31, 2026.
Our critical accounting policies and estimates are described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2025 Annual Report on Form 10-K.
Summary Financial Data
 Quarter Ended
(dollars in thousands, except per share amounts)March 31, 2026December 31, 2025March 31, 2025
Select income statement data:
Net interest income (1)
$179,045 $182,982 $128,454 
Provision (reversal of provision) for credit losses on loans (1)
7,593 (1,908)(3,752)
Provision (reversal of provision) for credit losses on unfunded lending commitments174 (1,316)94 
Noninterest income21,020 78,521 14,981 
Noninterest expense130,427 129,510 85,638 
Income before income tax expense (1)
61,871 135,217 61,455 
Net income (1)
44,090 111,187 43,791 
Basic earnings per share: (1)
Class A common stock$0.19 $0.48 $0.21 
Class B common stock$1.91 $4.80 $2.07 
Diluted earnings per share: (1)
Class A common stock$0.19 $0.48 $0.21 
Class B common stock$1.91 $4.80 $2.07 
Basic weighted-average shares outstanding:
Class A common stock221,047,803 220,865,980 200,884,880 
Class B common stock1,114,448 1,114,448 1,114,448 
Diluted weighted-average shares outstanding:
Class A common stock221,203,293 221,095,493 200,944,300 
Class B common stock1,114,448 1,114,448 1,114,448 
Select performance ratios: (1)
Return on average equity (2)
6.25 %15.80 %7.61 %
Return on average tangible equity (2),(3)
11.07 %25.59 %12.76 %
Return on average assets (2)
0.82 %1.97 %1.08 %
Efficiency ratio65.2 %49.5 %59.7 %
Efficiency ratio (non-GAAP) (3)
61.6 %46.7 %57.8 %
Net interest margin (2)
3.61 %3.50 %3.45 %
(1)Prior period comparative disclosures for the fourth quarter of 2025 have been adjusted to reflect the impact of adoption of ASU 2025-08.
(2)Ratios are annualized.
(3)Return on average tangible equity, efficiency ratio (excluding the impact of intangibles amortization), tangible book value per share, and tangible common equity ratio are non-GAAP financial measures. For a reconciliation of these measures to the comparable GAAP financial measure or the computation of the measure, see “Non-GAAP Financial Measures and Reconciliations.”

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 As of
(dollars in thousands, except per share amounts)March 31, 2026December 31, 2025
Selected balance sheet data:
Loans held for sale $4,692 $5,967
Loans held for investment 13,852,209 14,176,936
Allowance for credit losses on loans(156,796)(153,319)
Investment securities5,296,688 5,379,535
Total assets21,388,955 22,351,475
Total deposits18,242,769 19,024,997
Total long-term debt128,815 192,014
Total shareholders’ equity2,791,392 2,862,375
Other data:
Book value per share$12.61 $12.93 
Tangible book value per share (1)
$7.53 $7.81 
Common equity ratio13.05 %12.81 %
Tangible common equity ratio (1)
8.57 %8.48 %
Loans to deposits ratio 75.93 %74.52 %
Full time equivalent employees1,8901,921
Credit quality:
Nonaccrual loans$44,379 $42,863 
Nonperforming assets to total assets0.25 %0.23 %
ACL to total loans1.13 %1.08 %
ACL to nonaccrual loans
353.31 %357.70 %
Nonaccrual loans to total loans 0.32 %0.30 %
Nonperforming assets$53,135 $51,796 
Regulatory capital ratios:
Mechanics Bancorp:
Tier 1 leverage capital8.66 %8.65 %
Common equity Tier 1 capital13.92 %14.09 %
Tier 1 risk-based capital13.92 %14.09 %
Total risk based capital16.16 %16.27 %
Mechanics Bank:
Tier 1 leverage capital9.31 %9.58 %
Common equity Tier 1 capital14.96 %15.59 %
Tier 1 risk-based capital14.96 %15.59 %
Total risk based capital16.21 %16.81 %
(1)    Return on average tangible equity, efficiency ratio (excluding the impact of intangibles amortization), tangible book value per share, and tangible common equity ratio are non-GAAP financial measures. For a reconciliation of these measures to the comparable GAAP financial measure or the computation of the measure, see “Non-GAAP Financial Measures and Reconciliations.”

Management’s Overview of Financial Performance
First Quarter of 2026 Compared to the Fourth Quarter of 2025
General: Our net income and income before taxes were $44.1 million and $61.9 million, respectively, for the first quarter of 2026 as compared to net income and net income before taxes of $111.2 million and $135.2 million, respectively, for the fourth quarter of 2025. The $73.3 million decrease in income before taxes compared to fourth quarter of 2025 was primarily due to a decrease in noninterest income due to the preliminary bargain purchase gain of $55.1 million in the fourth quarter of 2025 from the Merger. The decrease in income before taxes was also due to an increase in provision for credit losses driven primarily by an increase in provision of $6.5 million related to economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East.
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Income Taxes: Our effective tax rate during the first quarter of 2026 was 28.7% as compared to 17.8% in the fourth quarter of 2025 and our federal statutory rate was 21.0%. The effective tax rate increased compared to the prior quarter as a result of a $1.7 million remeasurement of deferred tax assets. In addition, the bargain purchase gain from the Merger, which is an after-tax item, was $55.1 million in the fourth quarter of 2025 and was the primary reason for the low effective tax rate in the fourth quarter of 2025.
Net Interest Income: The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin. The average yields and rates are based on annualized interest income or expense for the periods presented.
Quarter Ended
 March 31, 2026December 31, 2025
(dollars in thousands)Average
Balance		Interest
Average
Yield/Cost (1)
Average
Balance		Interest
Average
Yield/Cost (1)
Assets:
Interest-earning assets:
Cash and cash equivalents$549,799 $4,162 3.07 %$1,094,743 $10,262 3.72 %
Investment securities5,425,705 53,074 3.97 %5,090,812 49,529 3.86 %
Loans (2), (3)
14,002,665 181,190 5.25 %14,412,244 194,108 5.34 %
FHLB stock and other investments146,776 3,510 9.70 %149,275 2,756 7.33 %
Total interest-earning assets (3)
20,124,945 241,936 4.88 %20,747,074 256,655 4.91 %
Noninterest-earning assets1,697,660 1,686,765 
Total assets$21,822,605 $22,433,839 
Liabilities and shareholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand deposits$1,804,524 $2,176 0.49 %$1,789,672 $2,815 0.62 %
Money market and savings 7,740,958 39,060 2.05 %7,637,068 40,636 2.11 %
Certificates of deposit2,472,421 17,087 2.80 %3,089,704 25,516 3.28 %
Total 12,017,903 58,323 1.97 %12,516,444 68,967 2.19 %
Borrowings:
Borrowings24,667 228 3.75 %— — — %
Long-term debt170,987 4,340 10.29 %190,783 4,706 9.79 %
Total interest-bearing liabilities12,213,557 62,891 2.09 %12,707,227 73,673 2.30 %
Noninterest-bearing liabilities:
Demand deposits (4)
6,448,090 6,634,915 
Other liabilities300,464 299,387 
Total liabilities18,962,111 19,641,529 
Shareholders’ equity2,860,494 2,792,310 
Total liabilities and shareholders’ equity$21,822,605 $22,433,839 
Net interest income (3)
$179,045 $182,982 
Net interest spread (3)
2.79 %2.61 %
Net interest margin (3)
3.61 %3.50 %
(1)Ratios are annualized.
(2)Includes loans held for sale.
(3)Prior period comparative disclosures for the fourth quarter of 2025 have been adjusted to reflect the impact of adoption of ASU 2025-08.
(4)Cost of deposits including noninterest-bearing deposits, was 1.28% and 1.43% for the quarter ended March 31, 2026 and December 31, 2025, respectively.
Net interest income in the first quarter of 2026 was $3.9 million lower than the fourth quarter of 2025 primarily as a result of a decrease in average interest earning assets of $622.1 million, partially offset by lower interest expense on certificates of deposit. Mechanics’ net interest margin increased from 3.50% to 3.61% primarily due to lower cost of deposits from Federal Reserve rate cuts and runoff of higher cost certificates of deposit. In the first quarter of 2026, there was a 21 basis point reduction in the rates paid on interest-bearing liabilities, partially offset by a 3 basis point decrease on interest-earning asset yields. The decrease in rates paid on interest-bearing liabilities was primarily driven by the decrease in rates paid on
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deposits after the Federal Reserve cut federal funds rates in 2025, and runoff of higher cost certificates of deposit. The slight decrease in earning asset yields was primarily driven by lower yields on loans, partially offset by higher yields on investment securities.
Provision for Credit Losses: The provision for credit losses in the first quarter of 2026, which consists of the provision for credit losses on loans and provision for unfunded commitments, was $7.8 million, compared to a reversal of provision of $3.2 million for the fourth quarter of 2025. Although net charge-offs were favorable and credit metrics remained strong, the provision in the first quarter of 2026 was driven primarily by an increase in provision of $6.5 million related to economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East. The reversal of provision in the fourth quarter of 2025 was primarily due to lower loan balances due to repayments during the quarter.
Noninterest Income: The following table presents the components of noninterest income:  
 Quarter Ended
(in thousands)March 31, 2026December 31, 2025
Noninterest income
Service charges on deposit accounts$6,043 $6,360 
Trust fees and commissions3,070 3,565 
ATM network fee income3,904 4,137 
Loan servicing income1,927 1,873 
Net gain on sales and calls of investment securities52 276 
Income from bank-owned life insurance1,165 1,699 
Bargain purchase gain— 55,097 
Other4,859 5,514 
Total noninterest income$21,020 $78,521 
Loan servicing income, a component of noninterest income, consisted of the following:
 Quarter Ended
(in thousands)March 31, 2026December 31, 2025
Single family servicing income, net:
Servicing fees and other$2,898 $2,993 
Changes in fair value of single family MSRs - other (1)
(1,442)(1,494)
Net1,456 1,499 
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)
702 (221)
Net gain (loss) from economic hedging (3)
(886)250 
Subtotal(184)29 
Single family servicing income 1,272 1,528 
Commercial loan servicing income:
Servicing fees and other2,293 2,388 
Amortization of capitalized MSRs(1,638)(2,043)
Subtotal655 345 
Total loan servicing income$1,927 $1,873 
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
(3)Comprised of net gains on derivatives used as economic hedges of single family MSRs, and net gains on U.S. Treasury notes trading securities used for hedging purposes.
Noninterest income in the first quarter of 2026 decreased from the fourth quarter of 2025 primarily due to the preliminary bargain purchase gain from the Merger of $55.1 million in the fourth quarter of 2025.
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Noninterest Expense: The following table presents the components of noninterest expense:
 Quarter Ended
(in thousands)March 31, 2026December 31, 2025
Noninterest expense
Salaries and employee benefits$68,550 $68,566 
Occupancy12,429 11,967 
Equipment9,615 9,826 
Professional services 6,071 6,816 
FDIC assessments and regulatory fees2,990 1,851 
Amortization of intangible assets7,222 7,479 
Data processing3,873 4,876 
Loan related3,506 3,802 
Marketing and advertising907 1,123 
Other real estate owned related384 (221)
Acquisition and integration costs4,794 3,507 
Other10,086 9,918 
Total noninterest expense$130,427 $129,510 
Noninterest expense increased $917 thousand in the first quarter of 2026 compared to the fourth quarter of 2025, primarily due to a slight increase in non-recurring acquisition and integration related costs from the Merger, which were $4.8 million in the first quarter of 2026 compared to $3.5 million in the fourth quarter of 2025.
First Quarter of 2026 Compared to the First Quarter of 2025
General: Our net income and income before taxes were $44.1 million and $61.9 million, respectively, for the first quarter of 2026 as compared to net income and net income before taxes of $43.8 million and $61.5 million, respectively, for the first quarter of 2025. The $416 thousand increase in income before taxes compared to the first quarter of 2025 was primarily due to an increase in net interest income and noninterest income from the Merger. The increases were partially offset by an increase in provision for credit losses and increases in noninterest expense from the Merger.
Income Taxes: Our effective tax rate for the first quarter of 2026 and 2025 was 28.7% and our federal statutory rate was 21.0%. The current quarter tax provision included a $1.7 million remeasurement of deferred tax assets.
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Net Interest Income: The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin. The average yields and rates are based on annualized interest income or expense for the periods presented.
Quarter Ended March 31,
 20262025
(dollars in thousands)Average
Balance		Interest
Average
Yield/Cost (1)
Average
Balance		Interest
Average
Yield/Cost (1)
Assets:
Interest-earning assets:
Cash and cash equivalents$549,799 $4,162 3.07 %$734,534 $7,187 3.97 %
Investment securities5,425,705 53,074 3.97 %4,781,791 47,585 4.04 %
Loans (2)
14,002,665 181,190 5.25 %9,491,710 117,792 5.03 %
FHLB stock and other investments146,776 3,510 9.70 %101,230 1,021 4.09 %
Total interest-earning assets20,124,945 241,936 4.88 %15,109,265 173,585 4.66 %
Noninterest-earning assets1,697,660 1,300,110 
Total assets$21,822,605 $16,409,375 
Liabilities and shareholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand deposits$1,804,524 $2,176 0.49 %$1,403,053 $1,299 0.38 %
Money market and savings 7,740,958 39,060 2.05 %6,051,918 38,140 2.56 %
Certificates of deposit2,472,421 17,087 2.80 %939,273 5,692 2.46 %
Total 12,017,903 58,323 1.97 %8,394,244 45,131 2.18 %
Borrowings:
Borrowings24,667 228 3.75 %— — — %
Long-term debt170,987 4,340 10.29 %— — — %
Total interest-bearing liabilities12,213,557 62,891 2.09 %8,394,244 45,131 2.18 %
Noninterest-bearing liabilities:
Demand deposits (3)
6,448,090 5,442,140 
Other liabilities300,464 238,223 
Total liabilities18,962,111 14,074,607 
Shareholders’ equity2,860,494 2,334,768 
Total liabilities and shareholders’ equity$21,822,605 $16,409,375 
Net interest income
$179,045 $128,454 
Net interest spread2.79 %2.48 %
Net interest margin3.61 %3.45 %
(1)Ratios are annualized.
(2)Includes loans held for sale.
(3)Cost of deposits including noninterest-bearing deposits, was 1.28% and 1.32% for the quarter ended March 31, 2026 and 2025, respectively.
Net interest income in the first quarter of 2026 increased $50.6 million as compared to the first quarter of 2025 due primarily to an increase in average interest-earning assets of $5.0 billion and an increase in net interest margin from 3.45% in the first quarter of 2025 to 3.61% in the first quarter of 2026, primarily as a result of the Merger. The increase in net interest margin is primarily due to a 9 basis point reduction in the rates paid on interest-bearing liabilities and a 22 basis point increase on interest-earning asset yields. The decrease in rates paid on interest-bearing liabilities was primarily driven by the decrease in rates paid on deposits after the Federal Reserve cut federal funds rates in 2025, partially offset by higher borrowing costs on debt assumed in the Merger. The increase in earning asset yields was primarily driven by loans acquired in the Merger, as well as higher yields on investment securities purchased in 2025.
Provision for Credit Losses: The provision for credit losses for loans and unfunded commitments was $7.8 million in the first quarter of 2026, compared to a $3.7 million reversal of provision in the first quarter of 2025. The increase in provision for the first quarter of 2026 was primarily driven by economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East.
58

Noninterest Income: The following table presents the components of noninterest income:   
 Quarter Ended
(in thousands)March 31, 2026March 31, 2025
Noninterest income
Service charges on deposit accounts$6,043 $5,494 
Trust fees and commissions3,070 3,119 
ATM network fee income3,904 2,888 
Loan servicing income1,927 177 
Net gain on sales and calls of investment securities52 — 
Income from bank-owned life insurance1,165 527 
Other4,859 2,776 
Total noninterest income$21,020 $14,981 
Loan servicing income, a component of noninterest income, consisted of the following:
 Quarter Ended
(in thousands)March 31, 2026March 31, 2025
Single family servicing income, net:
Servicing fees and other$2,898 $138 
Changes in fair value of single family MSRs - other (1)
(1,442)— 
Net1,456 138 
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)
702 — 
Net gain (loss) from economic hedging (3)
(886)— 
Subtotal(184)— 
Single family servicing income 1,272 138 
Commercial loan servicing income:
Servicing fees and other2,293 39 
Amortization of capitalized MSRs(1,638)— 
Subtotal655 39 
Total loan servicing income$1,927 $177 
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
(3)Comprised of net gains on derivatives used as economic hedges of single family MSRs, and net gains on U.S. Treasury notes trading securities used for hedging purposes.
Noninterest income for the first quarter of 2026 increased from the first quarter of 2025 primarily due to higher loan servicing income and higher other noninterest income, both of which were driven by the Merger.
59

Noninterest Expense consisted of the following:
 Quarter Ended
(in thousands)March 31, 2026March 31, 2025
Noninterest expense
Salaries and employee benefits$68,550 $48,851 
Occupancy12,429 7,972 
Equipment9,615 5,869 
Professional services 6,071 4,916 
FDIC assessments and regulatory fees2,990 2,213 
Amortization of intangible assets7,222 2,738 
Data processing3,873 1,350 
Loan related3,506 1,577 
Marketing and advertising907 584 
Other real estate owned related384 2,684 
Acquisition and integration costs4,794 350 
Other10,086 6,534 
Total noninterest expense$130,427 $85,638 
Noninterest expense increased $44.8 million for the first quarter of 2026 compared to the first quarter of 2025. The increase in noninterest expense was mainly driven by higher salaries and employee benefits expense, occupancy costs, amortization of intangibles and acquisition and integration related costs from the Merger.
Financial Condition March 31, 2026 compared to December 31, 2025
During the first quarter of 2026, total assets decreased $962.5 million, total liabilities decreased $891.5 million and shareholders’ equity decreased $71.0 million.
Investment Securities
Trading securities totaled $49.5 million at March 31, 2026 and December 31, 2025. Securities available-for-sale decreased by $59.7 million during the first quarter of 2026 to $3.9 billion at March 31, 2026, primarily due to paydowns and declines in fair values. Securities held-to-maturity decreased by $23.1 million in the first quarter of 2026, due to paydowns, and totaled $1.3 billion at March 31, 2026.
Loans
Total loans at March 31, 2026 were $13.9 billion, a decrease of $324.7 million from $14.2 billion at December 31, 2025, due primarily to loan repayments during the quarter.
Deposits
Total deposits decreased by $782.2 million during the first quarter of 2026 to $18.2 billion at March 31, 2026, due primarily to maturities of certificates of deposits acquired in the Merger, as well as seasonal outflows in noninterest-bearing demand deposits.
Noninterest-bearing demand deposits totaled $6.5 billion and represented 36% of total deposits at March 31, 2026, compared to $6.7 billion, or 35% of total deposits, at December 31, 2025.
Insured deposits of $10.8 billion represented 59% of total deposits at March 31, 2026, compared to insured deposits of $12.2 billion, or 64% of total deposits at December 31, 2025.
Borrowings
Total borrowings were $128.8 million at March 31, 2026, compared to $192.0 million at December 31, 2025. The decrease in the first quarter of 2026 was due to the redemption of the $65.0 million Senior Notes on March 1, 2026.
60

Equity
During the first quarter of 2026, total shareholders’ equity decreased by $71.0 million to $2.8 billion and tangible common equity (1) decreased by $63.8 million to $1.7 billion at March 31, 2026. The decrease in total shareholders’ equity for the first quarter of 2026 primarily resulted from a net decrease in retained earnings in the first quarter of 2026 from net income, less dividends paid to common shareholders, and a decrease in accumulated other comprehensive income due to changes in fair value of securities available-for-sale.
At March 31, 2026, book value per common share decreased to $12.61, compared to $12.93 at December 31, 2025. At March 31, 2026, tangible book value per common share (1) decreased to $7.53, compared to $7.81 at December 31, 2025. The decrease in book value per common share and tangible book value per common share for the first quarter of 2026 primarily resulted from a net decrease in retained earnings in the first quarter of 2026 from net income, less dividends paid to common shareholders, and a decrease in accumulated other comprehensive income due to changes in fair value of securities available-for-sale.
(1)    Tangible common equity and tangible book value per share are non-GAAP financial measures. For a reconciliation of these measures to the comparable GAAP financial measure or the computation of the measure, see “Non-GAAP Financial Measures and Reconciliations.”
Debt Securities
Debt securities AFS and HTM are as follows:
 March 31, 2026December 31, 2025
(in thousands)Amortized CostFair ValueAmortized CostFair Value
Securities available-for-sale
Obligations of states and political subdivisions$454,978 $459,869 $458,290 $471,159 
Mortgage-backed securities - residential2,818,727 2,807,719 2,871,733 2,884,289 
Mortgage-backed securities - commercial369,056 357,981 381,934 371,806 
Collateralized loan obligations230,500 229,708 188,500 188,316 
Corporate bonds52,028 51,135 51,828 49,915 
U.S. Treasury securities20,648 20,536 20,623 20,669 
Agency debentures6,816 6,757 7,243 7,231 
Total securities available-for-sale3,952,753 3,933,705 3,980,151 3,993,385 
Securities held-to-maturity
Obligations of states and political subdivisions12,967 13,359 12,902 13,441 
Mortgage-backed securities - residential989,514 857,370 1,012,716 877,722 
Mortgage-backed securities - commercial311,039 279,240 311,014 279,655 
Total securities held-to-maturity1,313,520 1,149,969 1,336,632 1,170,818 
Total AFS and HTM debt securities$5,266,273 $5,083,674 $5,316,783 $5,164,203 
In addition to AFS and HTM securities, the Company held $49.5 million of trading securities at March 31, 2026 and December 31, 2025, consisting of U.S. Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at fair value and reported as trading securities on the consolidated balance sheets.
61

The fair value of available-for-sale securities and the amortized cost of held-to-maturity debt securities are shown by contractual maturities and weighted average yields in the following table:
 March 31, 2026
One Year Or LessMore than One to Five YearsMore than Five Years to Ten YearsMore than Ten YearsTotal
(dollars in thousands)Amount
Weighted Average
 Yield (1)
Amount
Weighted Average
 Yield (1)
Amount
Weighted Average
 Yield (1)
Amount
Weighted Average
 Yield (1)
Amount
Weighted Average
 Yield (1)
Securities available-for-sale
Obligations of states and political subdivisions$342 2.49 %$44,871 3.81 %$125,131 3.77 %$289,525 4.35 %$459,869 4.13 %
Mortgage-backed securities - residential376 1.92 %12,295 2.13 %23,170 2.29 %2,771,878 4.94 %2,807,719 4.91 %
Mortgage-backed securities - commercial2,600 2.43 %196,499 2.85 %143,676 4.59 %15,206 4.08 %357,981 3.58 %
Collateralized loan obligations— — %— — %— — %229,708 5.13 %229,708 5.13 %
Corporate bonds— — %4,302 25.39 %46,833 4.48 %— — %51,135 6.13 %
U.S. Treasury securities— — %20,536 3.60 %— — %— — %20,536 3.60 %
Agency debentures— — %1,109 3.87 %3,501 4.24 %2,147 4.67 %6,757 4.32 %
Total securities available-for-sale3,318 2.38 %279,612 3.32 %342,311 4.07 %3,308,464 4.95 %3,933,705 4.71 %
Securities held-to-maturity
Obligations of states and political subdivisions3,500 0.73 %3,106 4.09 %4,708 4.34 %1,653 7.88 %12,967 3.76 %
Mortgage-backed securities - residential— — %53 2.49 %— — %989,461 1.78 %989,514 1.78 %
Mortgage-backed securities - commercial— — %179,638 1.75 %131,401 1.84 %— — %311,039 1.79 %
Total securities held-to-maturity3,500 0.73 %182,797 1.10 %136,109 0.82 %991,114 1.79 %1,313,520 1.80 %
Total AFS and HTM debt securities$6,818 1.53 %$462,409 2.78 %$478,420 3.37 %$4,299,578 4.18 %$5,247,225 3.98 %
(1)Weighted-average yields are calculated based on the contractual coupon, including amortization of premiums and accretion of discounts, weighted by amortized cost.
62

Loans
The composition of our LHFI portfolio is as follows:
(in thousands)March 31, 2026December 31, 2025
Commercial and industrial$460,081 $482,170 
Commercial real estate
Multifamily5,291,597 5,355,252 
Non-owner occupied1,711,611 1,740,277 
Owner occupied586,698 689,079 
Construction and land development399,546 493,992 
Residential real estate4,017,120 3,970,803 
Auto639,825 791,012 
Other consumer745,731 654,351 
Total LHFI13,852,209 14,176,936 
ACL
(156,796)(153,319)
Total LHFI less ACL$13,695,413 $14,023,617 
The following table shows the contractual maturity of our loan portfolio by loan type:
 March 31, 2026
Loans due after one year
by rate characteristic
(in thousands)Within one year
Due after
one year through
five years
Due after
five through fifteen
years
Due after fifteen
years
Total
Fixed-
rate
Adjustable-
rate
Commercial and industrial$170,986 $153,679 $123,511 $11,905 $460,081 $206,359 $82,736 
Commercial real estate
Multifamily64,455 158,567 3,053,288 2,015,287 5,291,597 192,363 5,034,779 
Non-owner occupied437,044 634,081 640,486 — 1,711,611 849,211 425,356 
Owner occupied50,949 214,973 264,346 56,430 586,698 422,161 113,588 
Construction and land304,971 62,066 10,336 22,173 399,546 26,975 67,600 
Residential real estate7,539 24,542 186,473 3,798,566 4,017,120 2,019,452 1,990,129 
Auto57,405 582,393 27 — 639,825 582,420 — 
Other consumer702,531 12,606 17,442 13,152 745,731 41,548 1,652 
Total LHFI
$1,795,880 $1,842,907 $4,295,909 $5,917,513 $13,852,209 $4,340,489 $7,715,840 
The following table shows the activity in loan balances:
Quarter Ended
(in thousands)March 31, 2026March 31, 2025
Loans - beginning of period$14,176,936 $9,643,497 
Originations and advances 569,231 337,379 
Purchases3,478 29,230 
Loans sold(7,600)— 
Payoffs, paydowns and other (882,631)(581,865)
Charge-offs(7,205)(12,217)
Loans - end of period$13,852,209 $9,416,024 
63

The following table shows loan originations and advances:
Quarter Ended
(in thousands)March 31, 2026March 31, 2025
Commercial and industrial$101,424 $76,208 
Commercial real estate
Multifamily23,864 65,254 
Non-owner occupied4,194 2,328 
Owner occupied5,797 6,502 
Construction and land development72,389 25,687 
Residential real estate186,891 94,860 
Other consumer174,672 66,540 
Total $569,231 $337,379 
Credit Risk Management: Delinquent Loans, Nonperforming Assets and Provision for Credit Losses
Asset Quality Information and Ratios
(dollars in thousands)March 31, 2026December 31, 2025
Delinquent loans held for investment:
30-89 days past due$43,556 $58,459 
90+ days past due33,447 34,686 
Total delinquent loans $77,003 $93,145 
Total delinquent loans to loans held for investment0.56 %0.66 %
Nonperforming assets:
Nonaccrual loans$44,379 $42,863 
90+ days past due and accruing4,098 3,943 
Total nonperforming loans 48,477 46,806 
Foreclosed assets4,658 4,990 
Total nonperforming assets$53,135 $51,796 
Allowance for credit losses on loans$156,796 $153,319 
Allowance for credit losses on loans to total loans held for investment1.13 %1.08 %
Allowance for credit losses on loans to nonaccrual loans353.31 %357.70 %
Nonaccrual loans to total loans held for investment0.32 %0.30 %
Nonperforming assets to total assets0.25 %0.23 %
At March 31, 2026, total delinquent loans were $77.0 million, compared to $93.1 million at December 31, 2025. The decrease was primarily due to improvement in auto loan portfolio delinquencies. Total delinquent loans as a percentage of total loans declined to 0.56% at March 31, 2026, as compared to 0.66% at December 31, 2025.
At March 31, 2026, nonperforming assets were $53.1 million, compared to $51.8 million at December 31, 2025. The slight increase was primarily due to a commercial real estate loan that was modified and was placed on nonaccrual status. Nonperforming assets as a percentage of total assets increased to 0.25% at March 31, 2026 as compared to 0.23% at December 31, 2025.
64

Delinquent, nonaccrual and current loans by loan type consisted of the following:
 March 31, 2026
Past Due and Still Accruing
(dollars in thousands)30-59 
days		60-89 
days
90 days or
more
Nonaccrual
Total past
due and nonaccrual
CurrentTotal loans
Commercial and industrial$956 $52 $— $11,698 $12,706 $447,375 $460,081 
Commercial real estate
Multifamily— — — — — 5,291,597 5,291,597 
Non-owner occupied— — — 17,024 17,024 1,694,587 1,711,611 
Owner occupied— — — 722 722 585,976 586,698 
Construction and land development— — — 3,225 3,225 396,321 399,546 
Residential real estate13,776 1,932 4,098 8,177 27,983 3,989,137 4,017,120 
Auto18,976 3,808 — 3,529 26,313 613,512 639,825 
Other consumer272 152 — 4 428 745,303 745,731 
Total loans$33,980 $5,944 $4,098 $44,379 $88,401 $13,763,808 $13,852,209 
%0.25 %0.04 %0.03 %0.32 %0.64 %99.36 %100.00 %
 December 31, 2025
Past Due and Still Accruing
(dollars in thousands)30-59 
days		60-89 
days
90 days or
more
Nonaccrual
Total past
due and nonaccrual
CurrentTotal loans
Commercial and industrial$3,276 $315 $— $11,196 $14,787 $467,383 $482,170 
Commercial real estate
Multifamily— — — 3,387 3,387 5,351,865 5,355,252 
Non-owner occupied50 — — 12,539 12,589 1,727,688 1,740,277 
Owner occupied— 176 — 1,870 2,046 687,033 689,079 
Construction and land development— — — 2,962 2,962 491,030 493,992 
Residential real estate13,293 4,558 3,943 6,765 28,559 3,942,244 3,970,803 
Auto25,895 6,547 — 4,143 36,585 754,427 791,012 
Other consumer289 149 — 1 439 653,912 654,351 
Total loans$42,803 $11,745 $3,943 $42,863 $101,354 $14,075,582 $14,176,936 
%0.30 %0.08 %0.03 %0.30 %0.71 %99.29 %100.00 %
Management considers the current level of the allowance for credit losses on loans to be appropriate to cover estimated lifetime losses within our LHFI portfolio. For additional information on the Company’s allowance for credit losses, refer to Note 4, “Loans and Credit Quality.”
The following table presents the amount of allowance for credit losses on loans by product type, as well as the percentage of each respective portfolio's loan balance to total loans:
 March 31, 2026December 31, 2025
(dollars in thousands)Balance
Loan balance % to total loans
Balance
Loan balance % to total loans
Commercial and industrial$8,860 3.3 %$8,417 3.4 %
Commercial real estate120,758 57.7 %114,326 58.4 %
Residential real estate13,621 29.0 %13,294 28.0 %
Auto11,446 4.6 %15,003 5.6 %
Other consumer2,111 5.4 %2,279 4.6 %
Total ACL $156,796 100.0 %$153,319 100.0 %
65

As of March 31, 2026, the expected loss rates increased when compared to December 31, 2025 due to higher forecasted product risk metrics in certain geographically concentrated areas, partially offset by runoff of the auto, non-owner occupied commercial real estate, and construction and land development portfolios. During the quarter ended March 31, 2026, the qualitative factors primarily increased due to economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East.
The following table presents net charge-offs for the loan portfolio for the dates indicated:
Quarter Ended
March 31, 2026March 31, 2025
(dollars in thousands)Net loan charge-offs (recoveries)Average balance
Net loan charge-offs to average loans (1)
Net loan charge-offs (recoveries)Average balance
Net loan charge-offs to average loans (1)
Commercial and industrial$(35)$471,421 (0.03)%$114 $375,603 0.12 %
Commercial real estate(111)8,131,888 (0.01)%— 4,893,279 0.00 %
Residential real estate(353)3,987,440 (0.04)%— 2,302,223 0.00 %
Auto4,122 714,681 2.34 %8,718 1,479,713 2.39 %
Other consumer493 681,837 0.29 %459 440,223 0.42 %
Total$4,116 $13,987,267 0.12 %$9,291 $9,491,041 0.40 %
(1)    Ratios are annualized.
Deposits
Deposit balances and weighted average rates were as follows for the periods indicated:
March 31, 2026December 31, 2025
(dollars in thousands)AmountWeighted Average RateAmountWeighted Average Rate
Deposits by product:
Noninterest-bearing demand deposits$6,511,998 — %$6,744,082 — %
Interest-bearing:
Interest-bearing demand deposits1,767,403 0.40 %1,878,468 0.75 %
Savings1,363,137 0.02 %1,367,475 0.03 %
Money market6,455,561 2.50 %6,250,364 2.41 %
Certificates of deposit2,144,670 2.44 %2,784,608 3.01 %
Total interest-bearing deposits11,730,771 1.89 %12,280,915 2.00 %
Total deposits$18,242,769 1.21 %$19,024,997 1.29 %
Uninsured deposits$7,456,727 $6,825,674 
The following table presents the schedule of maturities of certificates of deposit as of March 31, 2026:
(in thousands)Three Months or LessOver Three Months through Six MonthsOver Six Months through Twelve MonthsOver Twelve MonthsTotal
Time deposits of $250 thousand or less$880,896 $517,591 $207,560 $44,150 $1,650,197 
Time deposits greater than $250 thousand236,914 144,960 105,497 7,102 494,473 
Total$1,117,810 $662,551 $313,057 $51,252 $2,144,670 
66

Liquidity and Sources of Funds
Liquidity risk management is primarily intended to ensure we are able to maintain sources of cash to adequately fund operations and meet our obligations, including demands from depositors, draws on lines of credit and paying any creditors, on a timely and cost-effective basis, in various market conditions. Our liquidity profile is influenced by changes in market conditions, the composition of the balance sheet and risk tolerance levels. Mechanics has established liquidity guidelines and operating plans that detail the sources and uses of cash and liquidity.
Mechanics’ primary sources of liquidity include deposits, loan repayments and investment securities payments, both principal and interest, borrowings, and proceeds from the sale of loans and investment securities. Borrowings may include advances from the FHLB, borrowings from the Federal Reserve, federal funds purchased and borrowings from other financial institutions. While scheduled principal repayments on loans and investment securities are a relatively predictable source of funds, deposit inflows and outflows and prepayments of loans and investment securities are greatly influenced by interest rates, economic conditions and competition.
Mechanics’ contractual cash flow obligations include the maturity of certificates of deposit, short-term and long-term borrowings, interest on certificates of deposit and borrowings, operating leases and fees for information technology-related services and professional services. Obligations for certificates of deposit are typically satisfied through excess cash reserve balances, the renewal of these instruments or the generation of new deposits. Interest payments and obligations related to leases and services are typically met by cash generated from our operations.
At March 31, 2026, Mechanics had available borrowing capacity of $6.1 billion from the FHLB, $4.2 billion from the Federal Reserve and $5.1 billion under borrowing lines established with other financial institutions. We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity will be sufficient to meet our liquidity needs for at least the next 12 months. We are currently not aware of any other trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our liquidity needs during or beyond the next 12 months.
Cash Flows
For the first quarter of 2026, cash and cash equivalents decreased by $546.5 million compared to a decrease of $201.4 million during the first quarter of 2025. As a banking institution, Mechanics has extensive access to liquidity. Mechanics manages its cash positions to conservative minimum cash buffer levels and does not attempt to maximize the level of cash and cash equivalents. The following discussion highlights the major activities and transactions that affected our cash flows during these periods.
Cash flows from operating activities
Mechanics’ operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans. For the first quarter of 2026, net cash of $11.4 million was provided by operating activities from ongoing bank operations, compared to $1.4 million used in operating activities in the first quarter of 2025.
Cash flows from investing activities
Mechanics’ investing activities are primarily related to investment securities and LHFI. For the first quarter of 2026, net cash of $381.8 million was provided by investing activities primarily from AFS investment security maturities and calls, net loan originations and principal collections, partially offset by AFS investment security purchases. For the first quarter of 2025, net cash of $244.4 million was used by investing activities primarily from AFS investment security purchases, partially offset by net loan originations and principal collections.
Cash flows from financing activities
Mechanics’ financing activities are primarily related to deposits, net proceeds or repayments from borrowings and equity transactions. For the first quarter of 2026, net cash of $939.7 million was used by financing activities, due to a decrease in deposits, repayment of Senior Notes and dividends paid. For the first quarter of 2025, net cash of $44.4 million was provided by financing activities due to an increase in deposits.
67

Off-Balance Sheet Arrangements
In the normal course of business, we are a party to financial instruments that carry off-balance sheet risk. These financial instruments (which include commitments to originate loans and commitments to purchase loans) include potential credit risk in excess of the amount recognized in the accompanying consolidated financial statements. These transactions are designed to (1) meet the financial needs of our customers, (2) manage our credit, market or liquidity risks, (3) diversify our funding sources and/or (4) optimize capital.
These commitments include the following:
(in thousands)March 31, 2026December 31, 2025
Unused consumer portfolio lines$832,068 $835,480 
Commercial portfolio lines (1)
1,410,402 1,355,452 
Commitments to fund loans36,222 11,830 
Total $2,278,692 $2,202,762 
Standby letters of credit$27,411 $17,257 
(1)Within the commercial portfolio lines, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments were $308.4 million and $361.4 million at March 31, 2026 and December 31, 2025, respectively.
Capital Resources
The capital rules applicable to United States based bank holding companies and federally insured depository institutions require Mechanics Bancorp and Mechanics Bank to meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. In addition, prompt corrective action regulations place a federally insured depository institution, such as Mechanics Bank, into one of five capital categories on the basis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized. A depository institution’s primary federal regulatory agency may determine that, based on certain qualitative assessments, the depository institution should be assigned to a lower capital category than the one indicated by its capital ratios. At each successive lower capital category, a depository institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.
The following tables present the regulatory capital amounts and ratios (inclusive of the capital 2.5% conservation buffer, where applicable) for Mechanics Bancorp and Mechanics Bank as of the dates indicated:
68

At March 31, 2026
ActualFor Minimum Capital
Adequacy Purposes (including Capital Conservation Buffer)		To Be Categorized As
“Well Capitalized” 
(dollars in thousands)AmountRatioAmountRatioAmountRatio
Mechanics Bancorp
Tier 1 leverage capital (to average assets)$1,800,026 8.66 %$831,621 4.0 %n/an/a
Common equity Tier 1 capital (to risk-weighted assets)1,800,026 13.92 %905,344 7.0 %n/an/a
Tier 1 risk-based capital (to risk-weighted assets)1,800,026 13.92 %1,099,347 8.5 %n/an/a
Total risk-based capital (to risk-weighted assets)2,090,540 16.16 %1,358,016 10.5 %n/an/a
Mechanics Bank
Tier 1 leverage capital (to average assets)$1,936,097 9.31 %$832,148 4.0 %$1,040,184 5.0 %
Common equity Tier 1 capital (to risk-weighted assets)1,936,097 14.96 %906,162 7.0 %841,436 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)1,936,097 14.96 %1,100,340 8.5 %1,035,614 8.0 %
Total risk-based capital (to risk-weighted assets)2,097,940 16.21 %1,359,243 10.5 %1,294,517 10.0 %
At December 31, 2025
ActualFor Minimum Capital
Adequacy Purposes (including Capital Conservation Buffer)		To Be Categorized As
“Well Capitalized”
(dollars in thousands)AmountRatioAmountRatioAmountRatio
Mechanics Bancorp
Tier 1 leverage capital (to average assets)$1,854,132 8.65 %$857,147 4.0 %n/an/a
Common equity Tier 1 capital (to risk-weighted assets)1,854,132 14.09 %921,471 7.0 %n/an/a
Tier 1 risk-based capital (to risk-weighted assets)1,854,132 14.09 %1,118,929 8.5 %n/an/a
Total risk-based capital (to risk-weighted assets)2,141,745 16.27 %1,382,207 10.5 %n/an/a
Mechanics Bank
Tier 1 leverage capital (to average assets) $2,054,349 9.58 %$857,560 4.0 %$1,071,950 5.0 %
Common equity Tier 1 capital (to risk-weighted assets)2,054,349 15.59 %922,177 7.0 %856,307 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)2,054,349 15.59 %1,119,786 8.5 %1,053,917 8.0 %
Total risk-based capital (to risk-weighted assets)2,214,783 16.81 %1,383,266 10.5 %1,317,396 10.0 %
As of the dates set forth in the above tables, Mechanics Bancorp exceeded the minimum required capital ratios applicable to it and Mechanics Bank’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. In addition to the minimum capital ratios, Mechanics Bancorp and Mechanics Bank are required to maintain a capital conservation buffer consisting of additional Common Equity Tier 1 Capital of 2.5% in addition to the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. Mechanics maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated. At March 31, 2026, the capital conservation buffers for Mechanics Bancorp and Mechanics Bank were 7.92% and 8.21%, respectively.
69

The Company paid cash dividends of $0.40 per share for Class A shareholders and $4.00 per share for Class B shareholders in the first quarter of 2026 and paid cash dividends of $0.21 per share for Class A shareholders and $2.10 per share for Class B shareholders in the fourth quarter of 2025. The Company did not pay cash dividends in the first three quarters of 2025. The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain statutory requirements and regulatory restrictions.
We had no material commitments for capital expenditures as of March 31, 2026.
Non-GAAP Financial Measures and Reconciliations
This document contains non-GAAP financial measures of our financial performance, including return on average tangible equity, efficiency ratio (excluding the impact of intangibles amortization), tangible book value per share and tangible common equity ratio. We believe that these non-GAAP financial measures provide useful information because they are used by management to evaluate our operating performance, without the impact of goodwill and other intangible assets. However, these financial measures are not intended to be considered in isolation of or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP and should be viewed in addition to, and not as an alternative to, its GAAP results. The non-GAAP financial measures Mechanics presents may differ from similarly captioned measures presented by other companies.
The following table presents the calculations of our non-GAAP financial measures.
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(dollars in thousands, except per share amounts)Quarter Ended
Return on Average Equity and Return on Average Tangible Equity (1)
Ref.March 31, 2026December 31, 2025March 31, 2025
Net income(a)$44,090 $111,187 $43,791 
Add: intangibles amortization, net of tax (2)
5,254 5,442 1,958 
Net income, excluding the impact of intangible amortization, net of tax(b)$49,344 $116,629 $45,749 
Average shareholders’ equity(c)$2,860,494 $2,792,310 $2,334,768 
Less: average goodwill and other intangible assets1,052,479 984,105 880,812 
Average tangible shareholders’ equity(d)$1,808,015 $1,808,205 $1,453,956 
Return on average equity (3)
(a) / (c)6.25 %15.80 %7.61 %
Return on average tangible equity (non-GAAP) (3)
(b) / (d)11.07 %25.59 %12.76 %
Quarter Ended
Efficiency Ratio (1)
Ref.March 31, 2026December 31, 2025March 31, 2025
Noninterest expense(e)$130,427 $129,510 $85,638 
Less: intangibles amortization7,222 7,479 2,738 
Noninterest expense, excluding the impact of intangible amortization(f)$123,205 $122,031 $82,900 
Net interest income(g)$179,045 $182,982 $128,454 
Noninterest income (h)$21,020 $78,521 $14,981 
Efficiency ratio(e) / (g+h)65.2 %49.5 %59.7 %
Efficiency ratio (non-GAAP)(f) / (g+h)61.6 %46.7 %57.8 %
(dollars in thousands, except per share amounts)As of
Book Value per Share and Tangible Book Value per ShareRef.March 31,
2026		December 31,
2025
Total shareholders’ equity(i)$2,791,392 $2,862,375 
Less: goodwill and other intangible assets1,048,574 1,055,796 
Total tangible shareholders’ equity(j)$1,742,818 $1,806,579 
Common shares outstanding - Class A and B(k)221,400,590 221,305,009 
Common shares outstanding - Class A220,286,142 220,190,561 
Common shares outstanding - Class B adjusted11,144,480 11,144,480 
Common shares outstanding at period end - adjusted (4)
(l)231,430,622 231,335,041 
Book value per share(i) / (k)$12.61 $12.93 
Tangible book value per share (non-GAAP)
(j) / (l)$7.53 $7.81 
As of
Common Equity Ratio and Tangible Common Equity RatioRef.March 31,
2026		December 31,
2025
Total shareholders’ equity(m)$2,791,392 $2,862,375 
Less: goodwill and other intangible assets1,048,574 1,055,796 
Total tangible shareholders’ equity(n)$1,742,818 $1,806,579 
Total assets(o)$21,388,955 $22,351,475 
Less: goodwill and other intangible assets1,048,574 1,055,796 
Total tangible assets(p)$20,340,381 $21,295,679 
Common equity ratio(m) / (o)13.05 %12.81 %
Tangible common equity ratio (non-GAAP)
(n) / (p)8.57 %8.48 %
(1)Prior period comparative disclosures for the fourth quarter of 2025 have been adjusted to reflect the impact of adoption of ASU 2025-08.
(2)Estimated statutory tax rate of 27.25%, 27.25% and 28.50% for the quarter ended March 31, 2026, December 31, 2025 and March 31, 2025, respectively.
(3)Ratios are annualized.
(4)Includes 11,144,480 Class A Shares issuable upon the conversion of 1,114,448 Class B Shares outstanding. Class B Shares also are treated as if such share had been converted into ten Class A Shares for purposes of calculating the economic rights of the Class B Shares, including upon liquidation of the Company or the declaration of dividends or distributions by the Company.
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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Management
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. Market risk is defined as the sensitivity of income, fair value measurements and capital to changes in interest rates, foreign currency exchange rates, commodity prices and other relevant market rates or prices. The primary market risks that we are exposed to are price and interest rate risks. Price risk is defined as the risk to current or anticipated earnings or capital arising from changes in the value of either assets or liabilities that are entered into as part of distributing or managing risk. Interest rate risk is defined as risk to current or anticipated earnings or capital arising from movements in interest rates. This forward-looking information provides an indicator of how we view and manage our ongoing market risk exposures.
Mechanics is engaged primarily in the business of investing funds obtained from deposits and borrowings in interest earning loans and investments, and our primary component of market risk is sensitivity to changes in interest rates. Consequently, our earnings depend to a significant extent on our net interest income, which is the difference between interest income on loans and investments and our interest expense on deposits and borrowings. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-bearing assets, we are subject to interest rate risk and corresponding fluctuations in net interest income.
For the Company, price and interest rate risks arise from the financial instruments and positions we hold. This includes loans, MSRs, investment securities, deposits, borrowings, long-term debt and derivative financial instruments. Due to the nature of our current operations, we are not subject to foreign currency exchange or commodity price risk. Our real estate loan portfolio is subject to risks associated with the local economies of our various markets, in particular, the regional economy of the western United States, including Hawaii.
The spread between the yield on interest-earning assets and the cost of interest-bearing liabilities and the relative dollar amounts of these assets and liabilities are the principal items affecting net interest income. Changes in net interest rates (interest rate risk) are influenced to a significant degree by the repricing characteristics of assets and liabilities (repricing risk), the relationship between various rates (basis risk), customer options (optionality risk) and changes in the shape of the yield curve (yield curve risk). We manage the available-for-sale investment securities portfolio while maintaining a balance between risk and return. The Company's funding strategy is to grow core deposits while we efficiently supplement using wholesale borrowings.
We estimate the sensitivity of our net interest income to changes in market interest rates using an interest rate simulation model that includes assumptions related to the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments for multiple interest rate change scenarios. Interest rate sensitivity depends on certain repricing characteristics in our interest-earning assets and interest-bearing liabilities, including the maturity structure of assets and liabilities and their repricing characteristics during the periods of changes in market interest rates. Effective interest rate risk management seeks to ensure both assets and liabilities respond to changes in interest rates within an acceptable timeframe, minimizing the impact of interest rate changes on net interest income and capital. Interest rate sensitivity is measured as the difference between the volume of assets and liabilities, at a point in time, which are subject to repricing at various time horizons, known as interest rate sensitivity gaps.
72

The following table presents sensitivity gaps for these different intervals:
 At March 31, 2026
(dollars in thousands)3 Mos.
or Less		More Than
3 Mos.
to 6 Mos.		More 
Than
6 Mos.
to 12 Mos.		More Than
12 Mos.
to 3 Yrs.		More Than
3 Yrs.
to 5 Yrs.		More Than
5 to 15 Yrs.		More 
Than
15 Yrs.		Total
Interest-earning assets:
Cash & cash equivalents
$483,513$—$—$—$—$—$—$483,513 
Investment securities (1)
893,933158,111234,248833,927968,6041,962,363245,5025,296,688 
Loans held for sale4,692——————4,692 
Loan receivables (1)
3,236,735789,3201,401,4124,083,5162,117,9642,123,44299,82013,852,209 
FHLB stock and other investments——————144,833144,833 
Total rate sensitive assets$4,618,873 $947,431 $1,635,660 $4,917,443 $3,086,568 $4,085,805 $490,155 $19,781,935 
Interest-bearing liabilities:
Demand deposits (2), (3)
$385,122$—$—$—$—$7,894,279$—$8,279,401 
Savings (2)
1,099————1,362,038—1,363,137 
Money market accounts (2)
5,777,476————678,085—6,455,561 
Certificates of deposit
1,060,090637,096396,23242,5967,681943322,144,670 
Long-term debt (4)
128,815——————128,815 
Total rate sensitive liabilities$7,352,602$637,096 $396,232 $42,596 $7,681 $9,935,345 $32 $18,371,584 
Interest sensitivity gap(2,733,729)310,3351,239,4284,874,8473,078,887(5,849,540)490,123
Cumulative interest sensitivity gap$(2,733,729)$(2,423,394)$(1,183,966)$3,690,881$6,769,768$920,228$1,410,351
Cumulative ratio of interest-earning assets to interest-bearing liabilities63 %70 %86 %144 %180 %105 %108 %
Ratio of interest sensitivity gap to total assets(13)%1 %6 %23 %14 %(27)%2 %
Ratio of cumulative gap to total assets(13)%(11)%(6)%17 %32 %4 %7 %
(1)Based on contractual maturities, repricing dates and forecasted principal payments assuming normal amortization and, where applicable, prepayments.
(2)Interest-bearing deposits with a rate less than 25 basis points are included in the More than 5 to 15 Years category.
(3)Non-interest bearing demand accounts are included in the More than 5 to 15 Years category based on the projected weighted average life of those deposits.
(4)Based on repricing dates.
The negative interest sensitivity gap for durations less than 12 months in the interest rate analysis indicates that net interest income would decline if short-term rates increase. Because of the inherent limitations in the interest rate gap analysis, Mechanics employs multiple interest rate risk measurement approaches. Mechanics runs interest rate simulations to the existing repricing conditions to rising and falling interest rates in increments and decrements of 100 basis points to determine the effect on net interest income changes for the next twelve months. In addition, Mechanics also measures the effects that changes in interest rates on the economic value of equity by discounting future cash flows. We believe that the simulation analysis presents a more accurate picture than the gap analysis. Our simulation analysis recognizes that deposit products may not react to changes in interest rates as quickly or with the same magnitude as earning assets contractually tied to a market rate index. The sensitivity to changes in market rates varies across deposit products.
The estimated impact on our net interest income over a time horizon of one year and the change in net portfolio value as of March 31, 2026 are provided in the table below. For the scenarios shown, the interest rate simulation assumes an instantaneous and parallel shift in market interest rates and no change in the composition or size of the balance sheet.
73

 At March 31, 2026
Change in Interest Rates
(basis points)		Percentage Change
Net Interest 
Income (1)
Net Portfolio 
Value (2)
-300(1.1)%(2.9)%
-2000.3 %0.5 %
-1000.4 %1.6 %
+100(1.1)%(4.9)%
+200(2.4)%(12.0)%
+300(3.9)%(19.8)%
(1)This percentage change represents the impact to net interest income for a one-year period, assuming there is no change in the structure of the balance sheet.
(2)This percentage change represents the impact to the net present value of equity, assuming contractual runoff of the balance sheet.
The projected changes in the table above were in compliance with established internal policy guidelines and are based on numerous assumptions. The timing and magnitude of future interest rate movements, along with changes to the balance sheet composition, may impact projected changes in net interest income, but may not necessarily reflect the manner in which actual cash flows, yields and costs respond to changes in market interest rates. We continue to evaluate the interest rate risk position and may reposition the banking segment’s balance sheet in the future to better align with management’s target rate risk position. The impact of rate movements will change with the shape of the yield curve, including any changes in steepness or flatness and inversions at any points on the yield curve. Since the assumptions used relative to changes in interest rates are uncertain, the simulation analysis may not be indicative of actual results, particularly in times of stress and uncertainty. In addition, this analysis does not consider actions that management might employ in the future in response to changes in interest rates, as well as changes in earning asset and interest bearing liability balances.
Current Banking Environment
Market conditions and external factors may unpredictably impact the competitive landscape for deposits in the banking industry. Additionally, the higher interest rate environment has increased competition for liquidity and the premium at which liquidity is available to meet funding needs. Reliance on secondary funding sources could increase the Company’s overall cost of funding and reduce net interest income. As of March 31, 2026, the Company had available liquidity of $16.3 billion which is equal to 89% of its total deposits and the level of uninsured deposits was 41% of total deposits. The Company believes it has sufficient liquidity to meet its current needs.
74

ITEM 4.     CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, with the participation of our management and under the supervision of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2026.
Changes in Internal Control over Financial Reporting
As required by Rule 13a-15(d) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Merger, which was completed on September 2, 2025, has had a material impact on the financial position, results of operations, and cash flows of the combined company from the date of acquisition through March 31, 2026. The business combination also resulted in material changes in the combined company's internal control over financial reporting. The Company is in the process of designing and integrating policies, processes, operations, technology, and other components of internal control over financial reporting of the combined company. Management will monitor the implementation of new controls and test the operating effectiveness when instances are available in future periods.
PART II - OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
Because the nature of our business involves the collection of numerous accounts, the validity of liens and compliance with various state and federal lending laws, we are subject to various legal proceedings in the ordinary course of our business related to foreclosures, bankruptcies, condemnation and quiet title actions and alleged statutory and regulatory violations. We are also subject to other legal proceedings in the ordinary course of business. There are currently no matters that, in the opinion of management, would have a material adverse effect on our consolidated financial position, results of operations or liquidity, or for which there would be a reasonable possibility of such a loss based on information known at this time. However, in the event of unexpected future developments, it is reasonably possible that an adverse outcome in any matter could be material to our business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence. Refer to Note 11, “Contingencies—Legal Contingencies” in Item 1 of the accompanying consolidated financial statements for additional information about such estimates.
ITEM 1A.    RISK FACTORS
Refer to Item 1A of the Company’s 2025 Annual Report on Form 10-K for a discussion of factors that could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position. There have been no material changes in our risk factors from those described in the Company’s 2025 Annual Report on Form 10-K.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
75

ITEM 5.    OTHER INFORMATION
During the quarter ended March 31, 2026, none of our directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408(a).
ITEM 6.    EXHIBITS
EXHIBIT INDEX
Exhibit
Number		Description
2.1**
2.2**
2.3**
3.1
3.2
31.1+
31.2+
32.1(1)
32.2(1)
101The following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in Inline XBRL (eXtensible Business Reporting Language) and contained in Exhibit 101: (i) the Consolidated Balance Sheets; (ii) the Consolidated Income Statements;(iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Shareholders’ Equity: (v) the Consolidated Statements of Cash Flows: and (vi) the Notes to Consolidated Financial Statements.
104Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101.
+     Filed herewith.
(1)This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
**     Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish supplementally a copy of any omitted schedule or similar attachment to the SEC upon request.
76

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 8, 2026.
Mechanics Bancorp
By:/s/ C.J. Johnson
C.J. Johnson
President and Chief Executive Officer
(Principal Executive Officer)
Mechanics Bancorp
By:/s/ Nathan Duda
Nathan Duda
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
77

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