Mechanics Bancorp

Previous wording

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.

Current wording

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 (“Exchange Act”). 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.

Previous wording

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.

Current wording

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 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 June 30, 2026, are subject to change for up to one year after the Merger date, and any changes could be material.

Previous wording

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.

Current wording

As discussed in Note 1, “Summary of Significant Accounting Policies—Asset Sale,” on May 1, 2026, Mechanics Bank completed the previously announced sale of its DUS business line to Fifth Third.

Previous wording

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

Current wording

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 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 quarter and six months ended June 30, 2026.

Previous wording

(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.”

Current wording

(2)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.”

Previous wording

(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.”

Current wording

(2)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.”

Previous wording

First Quarter of 2026 Compared to the First Quarter of 2025

Current wording

Second Quarter of 2026 Compared to the First Quarter of 2026

Previous wording

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.

Current wording

General: Our net income and income before taxes were $57.7 million and $79.3 million, respectively, for the second quarter of 2026 as compared to net income and net income before taxes of $44.1 million and $61.9 million, respectively, for the first quarter of 2026. The $17.4 million increase in income before taxes compared to the first quarter of 2026 was due to a reversal of provision in the second quarter, which was primarily driven by the elimination of economic qualitative adjustments now that the Middle East conflict and corresponding economic impact are embedded in expected loss rate modeling, and a reduction in residential construction and HELOC unfunded commitments, offset by an increase in modeled loss rates for multifamily loans.

Previous wording

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.

Current wording

Income Taxes: Our effective tax rate during the second quarter of 2026 was 27.2% as compared to 28.7% in the first quarter of 2026 and our federal statutory rate was 21.0%. The effective tax rate decreased compared to the prior quarter as a result of a $1.7 million remeasurement of deferred tax assets in the first quarter.

Previous wording

(3)Cost of deposits including noninterest-bearing deposits, was 1.28% and 1.32% for the quarter ended March 31, 2026 and 2025, respectively.

Current wording

(3)Cost of deposits, including noninterest-bearing deposits, was 1.25% and 1.28% for the quarters ended June 30, 2026 and March 31, 2026, respectively.

Previous wording

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 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.

Current wording

Net interest income in the second quarter of 2026 was $1.9 million lower than the first quarter of 2026 primarily as a result of a decrease in average interest earning assets of $468.4 million, partially offset by lower interest expense on certificates of deposit. Mechanics’ net interest margin increased from 3.61% to 3.62% primarily due to runoff of higher cost certificates of deposit.

Previous wording

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.

Current wording

Provision for Credit Losses: The reversal of provision for credit losses in the second quarter of 2026, which consists of the reversal of provision for loans and unfunded commitments, was $2.8 million, compared to a provision of $7.8 million for the first quarter of 2026. The reversal of provision for the second quarter was primarily driven by the elimination of economic qualitative adjustments now that the Middle East conflict and corresponding economic impact are embedded in expected loss rate modeling, and a reduction in residential construction and HELOC unfunded commitments, offset by an increase in modeled loss rates for multifamily loans.

Previous wording

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.

Current wording

Noninterest income in the second quarter of 2026 increased $2.8 million from the first quarter of 2026 primarily due to higher other noninterest income from the gain on sale of the Fannie Mae DUS business line and a mortgage servicing rights valuation adjustment.

Previous wording

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.

Current wording

General: Our net income and income before taxes were $101.8 million and $141.1 million, respectively, for the six months ended June 30, 2026 as compared to net income and net income before taxes of $86.3 million and $120.5 million, respectively, for the six months ended June 30, 2025. The $20.6 million increase in income before taxes compared to the six months ended June 30, 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.

Previous wording

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.

Current wording

Income Taxes: Our effective tax rate for the six months ended June 30, 2026 was 27.9% as compared to 28.4% for the six months ended June 30, 2025 and our federal statutory rate was 21.0%. The effective tax rate decreased compared to the six months ended June 30, 2025 as a result of a lower state tax rate due to more taxable income being apportioned to states with lower tax rates and an increase in tax exempt investments and loans, both a result of the Merger. These were partially offset by the $1.7 million remeasurement of deferred tax assets in the current year.

Previous wording

(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.

Current wording

(3)Cost of deposits, including noninterest-bearing deposits, was 1.27% and 1.35% for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

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.

Current wording

Noninterest expense increased $78.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to higher salaries and employee benefits expense, occupancy costs, equipment expense, amortization of intangibles and acquisition and integration related costs from the Merger.

Previous wording

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.

Current wording

During the six months ended June 30, 2026, total assets decreased $1.1 billion, total liabilities decreased $948.2 million and shareholders’ equity decreased $172.4 million.

Previous wording

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.

Current wording

Trading securities totaled $46.6 million and $49.5 million at June 30, 2026 and December 31, 2025, respectively. Securities available-for-sale increased by $125.8 million during the six months ended June 30, 2026 to $4.1 billion at June 30, 2026, primarily due to purchases of agency MBS, partially offset by paydowns and declines in fair values. Securities held-to-maturity decreased by $49.8 million in the six months ended June 30, 2026, due to paydowns, and totaled $1.3 billion at June 30, 2026.

Previous wording

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.

Current wording

Total loans at June 30, 2026 were $13.6 billion, a decrease of $600.7 million from $14.2 billion at December 31, 2025, due primarily to loan repayments, partially offset by originations.

Previous wording

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.

Current wording

Total deposits decreased by $935.6 million during the six months ended June 30, 2026 to $18.1 billion at June 30, 2026, due primarily to certificates of deposit runoff, as well as seasonal outflows in noninterest-bearing demand deposits.

Previous wording

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.

Current wording

Noninterest-bearing demand deposits totaled $6.4 billion and represented 35% of total deposits at June 30, 2026, compared to $6.7 billion, or 35% of total deposits, at December 31, 2025.

Previous wording

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.

Current wording

Insured deposits of $10.3 billion represented 57% of total deposits at June 30, 2026, compared to insured deposits of $12.2 billion, or 64% of total deposits at December 31, 2025.

Previous wording

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.

Current wording

Total long-term debt was $130.4 million at June 30, 2026, compared to $192.0 million at December 31, 2025. The decrease in the six months ended June 30, 2026 was due to the redemption of the $65.0 million Senior Notes on March 1, 2026.

Previous wording

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.

Current wording

During the six months ended June 30, 2026, total shareholders’ equity decreased by $172.4 million to $2.7 billion and tangible common equity (1) decreased by $57.9 million to $1.7 billion at June 30, 2026. The decrease in total shareholders’ equity for the six months ended June 30, 2026 primarily resulted from a net decrease in retained earnings in the six months ended June 30, 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. Tangible common equity decreased less than total shareholders equity due to the reduction in intangibles from the sale of the DUS business line, which offset the decrease in total shareholders’ equity.

Previous wording

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.

Current wording

At June 30, 2026, book value per common share decreased to $12.15, compared to $12.93 at December 31, 2025. At June 30, 2026, tangible book value per common share (1) decreased to $7.56, 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 six months ended June 30, 2026 primarily resulted from a net decrease in retained earnings and a decrease in accumulated other comprehensive income. For tangible book value per share, these decreases were partially offset by a reduction in intangibles.

Previous wording

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.

Current wording

In addition to AFS and HTM securities, the Company held $46.6 million and $49.5 million of trading securities at June 30, 2026 and December 31, 2025, respectively, 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.

Previous wording

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.

Current wording

At June 30, 2026, total delinquent loans were $95.4 million, compared to $93.1 million at December 31, 2025. The increase was primarily due to two matured commercial real estate loans that became past due during the second quarter and were in process of refinance or extension as of June 30, 2026, partially offset by improvement in auto loan portfolio delinquencies. Total delinquent loans as a percentage of total loans increased to 0.70% at June 30, 2026, as compared to 0.66% at December 31, 2025.

Previous wording

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.

Current wording

At June 30, 2026, nonperforming assets were $59.4 million, compared to $51.8 million at December 31, 2025. The increase was primarily due to additional single family, home equity and commercial real estate nonperforming loans. Nonperforming assets as a percentage of total assets increased to 0.28% at June 30, 2026, as compared to 0.23% at December 31, 2025.

Previous wording

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.

Current wording

As of June 30, 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.

Previous wording

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.

Current wording

At June 30, 2026, Mechanics had available borrowing capacity of $5.9 billion from the FHLB, $4.4 billion from the Federal Reserve and $5.0 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.

Previous wording

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.

Current wording

For the six months ended June 30, 2026, cash and cash equivalents decreased by $476.1 million compared to an increase of $1.1 billion during the six months ended June 30, 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.

Previous wording

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.

Current wording

Mechanics’ operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans. For the six months ended June 30, 2026, net cash of $64.2 million was provided by operating activities from ongoing bank operations, compared to $63.7 million provided by operating activities in the six months ended June 30, 2025.

Previous wording

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.

Current wording

Mechanics’ investing activities are primarily related to investment securities and LHFI. For the six months ended June 30, 2026, net cash of $634.6 million was provided by investing activities primarily from AFS investment security maturities and calls, net loan originations and principal collections, and proceeds from the sale of the DUS business line, partially offset by AFS investment security purchases. For the six months ended June 30, 2025, net cash of $988.5 million was provided by investing activities primarily from AFS investment security sales, maturities and calls and net loan originations and principal collections, partially offset by AFS investment security purchases.

Previous wording

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.

Current wording

Mechanics’ financing activities are primarily related to deposits, net proceeds or repayments from borrowings and equity transactions. For the six months ended June 30, 2026, net cash of $1.2 billion was used by financing activities, due to a decrease in deposits, repayment of Senior Notes and dividends paid, partially offset by proceeds from short-term borrowings. For the six months ended June 30, 2025, net cash of $27.1 million was provided by financing activities due to an increase in deposits.

Previous wording

(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.

Current wording

(1)Within the commercial portfolio lines, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments were $307.9 million and $361.4 million at June 30, 2026 and December 31, 2025, respectively.

Previous wording

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.

Current wording

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 June 30, 2026, the capital conservation buffers for Mechanics Bancorp and Mechanics Bank were 8.39% and 8.74%, respectively.

Previous wording

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.

Current wording

The Company paid cash dividends of $0.70 per share for Class A shareholders and $7.00 per share for Class B shareholders in the second quarter of 2026 and paid cash dividends of $1.10 per share for Class A shareholders and $11.00 per share for Class B shareholders for the six months ended June 30, 2026. The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain statutory requirements and regulatory restrictions. For additional information on the Company’s dividends, refer to Note 16, “Shareholders’ Equity and Dividends.”

Previous wording

(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.

Current wording

(1)Estimated statutory tax rate of 27.25% for the quarters ended June 30, 2026 and March 31, 2026, and 27.25% and 28.50% for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

(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.

Current wording

(3)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.