Mechanics Bancorp — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported net income of $46.0 million ($0.20 per diluted share) for the quarter ended September 30, 2026, compared to $57.7 million ($0.25 per diluted share) in the second quarter of 2026.
• Net income for the nine months ended September 30, 2026, was $147.8 million ($0.64 per diluted share), compared to $154.6 million ($0.72 per diluted share) for the same period in 2025.
• Total assets were $20.9 billion at September 30, 2026, down from $21.2 billion at June 30, 2026.
• Total loans were $13.0 billion at September 30, 2026, down from $13.6 billion at June 30, 2026.
• Total deposits were $18.0 billion at September 30, 2026, down from $18.1 billion at June 30, 2026.
• Net interest income was $174.9 million for the third quarter of 2026, down from $177.2 million in the second quarter of 2026.
• Net interest margin was 3.55% for the third quarter of 2026, down from 3.62% in the second quarter of 2026.
• Total noninterest expense was $114.2 million for the third quarter of 2026, down from $124.5 million in the second quarter of 2026.
• Allowance for credit losses (ACL) to total loans was 1.03% at September 30, 2026, down from 1.12% at June 30, 2026.
• Total delinquent loans decreased to $67.5 million (0.52% of total loans) at September 30, 2026, from $95.4 million (0.70%) at June 30, 2026.
• Book value per share was $11.59 at September 30, 2026, down from $12.15 at June 30, 2026.
• Tangible book value per share was $7.05 at September 30, 2026, down from $7.56 at June 30, 2026.

Guidance and Future Outlook:

• Management indicated a focus on maintaining credit discipline, prudent expense management, and preserving financial flexibility while navigating a challenging interest rate environment.
• The company aims to build long-term shareholder value through prudent growth, expense management, strong credit quality, and returning capital via a market-leading dividend yield.

Business Segments and Product Lines:

• Completed the sale of $417 million of performing indirect auto loans, resulting in a $10.3 million loss on sale, to accelerate the exit from this non-core business line.
• Completed a $308 million securities portfolio restructuring, selling low-yielding AFS securities and reinvesting proceeds in MBS at current market rates, resulting in a $32.3 million loss on sale.
• Recorded a gain on other equity investments of $5.1 million for the third quarter of 2026 due to valuation updates.
• Reported a bargain purchase gain of $2.8 million for the third quarter of 2026.
• Noninterest expense decreased due to lower acquisition and integration costs ($0.6 million in Q3 2026 vs. $5.9 million in Q2 2026) and reduced salaries and employee benefits following headcount reductions.

Market and Competitive Landscape:

• The HomeStreet Bank merger was completed on September 2, 2025, with Mechanics Bank as the accounting acquirer.
• The company early adopted Accounting Standards Update (ASU) 2025-08 regarding purchased seasoned loans effective January 1, 2025, which impacted comparative prior period results.
• The company operates 166 branches across California, Oregon, Washington, and Hawaii.

Risks and Challenges:

• Forward-looking statements highlight risks including substantial non-recurring and integration costs, failure to realize anticipated merger benefits, and the ability to manage expanded operations.
• Risks include interest rate fluctuations, inflationary pressures, adverse changes in real estate market values, and the impact of climate change.
• Potential risks involve the adequacy of allowances for credit losses, exposure to fraudulent acts, legal claims, and dependence on the Ford Financial Funds which control approximately 77% of voting power.

Management Commentary and Tone:

• C.J. Johnson, President and CEO, stated that third-quarter results reflect continued execution of strategic priorities with the HomeStreet integration behind them, moving forward from a position of strength.
• Nathan Duda, CFO, noted that balance sheet optimization actions, including the securities restructuring and auto loan portfolio sale, enhance the earnings profile and position the company well for the future.
• Management emphasized strong credit performance supported by a reduction in delinquent loans and disciplined underwriting practices.

Other Key Points:

• Dividends paid in the third quarter of 2026 were $0.25 per share of Class A common stock and $2.50 per share of Class B common stock.
• Capital ratios remain strong, with a Total risk-based capital ratio of 16.98%, Tier 1 capital ratio of 14.73%, and CET1 capital ratio of 14.73% at September 30, 2026.
• The company had available borrowing capacity of $5.8 billion from the FHLB, $4.2 billion from the Federal Reserve, and $5.0 billion under lines with other financial institutions.
• Total borrowings were zero at September 30, 2026, compared to $80.0 million at June 30, 2026, due to the payoff of short-term Federal Reserve Discount Window borrowings.
• Noninterest-bearing demand deposits totaled $6.3 billion, representing 35% of total deposits at September 30, 2026.
• The company hosted a conference call and webcast on October 29, 2026, to discuss results.