Mechanics Bancorp

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 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.

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.

Previous wording

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.”

Current wording

Unless we state otherwise or the context 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.”

Previous 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.

Current wording

On May 1, 2026, Mechanics Bank completed the previously announced sale of its DUS business line to Fifth Third and on September 16, 2026, completed the sale of the substantial majority of its remaining performing indirect auto loans. Refer to discussions in Note 1, “Summary of Significant Accounting Policies—DUS Business Line Sale and —Auto Loans Sale.”

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 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.

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 nine months ended September 30, 2026.

Previous 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.

Current wording

General: Our net income and income before taxes were $46.0 million and $62.5 million, respectively, for the third quarter of 2026 as compared to net income and net income before taxes of $57.7 million and $79.3 million, respectively, for the second quarter of 2026. The $16.8 million decrease in income before taxes compared to the second quarter of 2026 was primarily due to a decrease in noninterest income due to losses on the sales of auto loans and AFS securities during the quarter. In addition, the third quarter included a reversal of provision for credit losses of $15.2 million, which was primarily driven by decreases in expected losses on our multifamily and CRE investor loans, corresponding decreases in qualitative factors and the auto loan portfolio sale.

Previous 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.

Current wording

Income Taxes: Our effective tax rate during the third quarter of 2026 was 26.4% as compared to 27.2% in the second 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 tax benefits related to stock awards that vested in the third quarter.

Previous 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.

Current wording

(3)Cost of all deposits, including noninterest-bearing deposits, was 1.33% and 1.25% for the quarters ended September 30, 2026 and June 30, 2026, respectively.

Previous 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.

Current wording

Net interest income in the third quarter of 2026 was $2.3 million lower than the second quarter of 2026 primarily as a result of higher deposit costs and a $133.1 million decrease in average interest earning assets. Mechanics’ net interest margin decreased from 3.62% to 3.55% primarily due to higher deposit costs, partially offset by higher investment securities interest income from the partial quarter benefit of the AFS securities restructuring. Dividends and interest income from FHLB stock and other investments in the third quarter of 2026 was also $1.2 million lower than the second quarter of 2026, which also contributed to the reduction in net interest margin.

Previous 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.

Current wording

Provision for Credit Losses: The reversal of provision for credit losses in the third quarter of 2026, which consists of the provision for loans and unfunded commitments, was $15.2 million, compared to a reversal of provision of $2.8 million for the second quarter of 2026. The reversal of provision for the third quarter was primarily driven by decreases in expected losses on our multifamily and CRE investor loans, corresponding decreases in qualitative factors and the auto loan portfolio sale.

Previous 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.

Current wording

Noninterest income (loss) in the third quarter of 2026 decreased $37.2 million from the second quarter of 2026 primarily due to the losses on the sales of auto loans and AFS securities during the quarter, partially offset by the increase in other noninterest income from a gain on other equity investments. In addition, noninterest income decreased in the third quarter of 2026 relative to the second quarter of 2026 due to the gain on sale of the Fannie Mae DUS business line in other noninterest income and a mortgage servicing rights valuation adjustment in net gain (loss) on sales of loans in the prior quarter.

Previous wording

Noninterest expense decreased $6.0 million in the second quarter of 2026 compared to the first quarter of 2026, primarily due to lower salaries and employee benefits expense from a decrease in headcount as a result of integration following the Merger.

Current wording

Noninterest expense decreased $10.3 million in the third quarter of 2026 compared to the second quarter of 2026, primarily due to lower acquisition and integration related costs and lower salaries and employee benefits expense due to headcount reductions as a result of continued integration following the Merger.

Previous 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.

Current wording

General: Our net income and income before taxes were $147.8 million and $203.6 million, respectively, for the nine months ended September 30, 2026 as compared to net income and net income before taxes of $154.6 million and $184.3 million, respectively, for the nine months ended September 30, 2025. The $19.3 million increase in income before taxes compared to the nine months ended September 30, 2025 was primarily due to an increase in net interest income from the Merger and a decrease in provision for credit losses driven primarily by the auto portfolio sale, lower qualitative adjustments, lower balances and lower unfunded commitments reserves. The increase in income before taxes was partially offset by decreases in noninterest income due to losses on the sales of auto loans and AFS securities during 2026 and the bargain purchase gain from the Merger recognized in 2025 and increases in noninterest expense from the Merger.

Previous 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.

Current wording

Income Taxes: Our effective tax rate for the nine months ended September 30, 2026 was 27.4% as compared to 16.2% for the nine months ended September 30, 2025 and our federal statutory rate was 21.0%. The effective tax rate increased compared to the nine months ended September 30, 2025 as a result of a non-taxable $90.4 million bargain purchase gain from the Merger in 2025 and a $1.7 million remeasurement of deferred tax assets in 2026.

Previous 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.

Current wording

(3)Cost of all deposits, including noninterest-bearing deposits, was 1.29% and 1.39% for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

Net interest income for the six months ended June 30, 2026 increased $97.6 million as compared to the six months ended June 30, 2025 due primarily to an increase of $4.7 billion in average interest-earning assets, as well as an increase in net interest margin from 3.44% in the six months ended June 30, 2025 to 3.61% in the six months ended June 30, 2026 as a result of the Merger.

Current wording

Net interest income for the nine months ended September 30, 2026 increased $128.4 million as compared to the nine months ended September 30, 2025 due primarily to an increase of $3.9 billion in average interest-earning assets, as well as an increase in net interest margin from 3.40% in the nine months ended September 30, 2025 to 3.59% in the nine months ended September 30, 2026 as a result of the Merger.

Previous wording

Provision for Credit Losses: The provision for credit losses was $5.0 million for the six months ended June 30, 2026, compared to a reversal of provision of $4.0 million for the six months ended June 30, 2025. The increase in provision for the six months ended June 30, 2026 was driven primarily by an increase in modeled loss rates for multifamily loans during 2026, offset slightly by downward qualitative adjustments and lower balances. The increase in provision was partially offset by a reduction in the unfunded commitments reserve.

Current wording

Provision for Credit Losses: The reversal of provision for credit losses was $10.2 million for the nine months ended September 30, 2026, compared to a provision of $22.7 million for the nine months ended September 30, 2025. The decrease in provision for the nine months ended September 30, 2026 was driven primarily by the auto portfolio sale, lower qualitative adjustments, lower balances and lower unfunded commitments reserves.

Previous wording

Noninterest income for the six months ended June 30, 2026 increased $10.2 million from the six months ended June 30, 2025 primarily due to higher loan servicing income, ATM network fee income and other noninterest income, which were all driven by the Merger. In addition, the increase in other noninterest income resulted from the gain on sale of the DUS business line and a mortgage servicing rights valuation adjustment. The increases in noninterest income were partially offset by lower gain on sales and calls of investment securities.

Current wording

Noninterest income for the nine months ended September 30, 2026 decreased $113.0 million from the nine months ended September 30, 2025 primarily due to the losses on the sales of auto loans and AFS securities during 2026 and the bargain purchase gain from the Merger recognized in 2025. The decrease was partially offset by an increase in noninterest income that resulted from a gain on other equity investments and gain on sale of the DUS business line in other noninterest income and a mortgage servicing rights valuation adjustment in net gain (loss) on sales of loans in 2026.

Previous 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.

Current wording

Noninterest expense increased $29.0 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to higher salaries and employee benefits expense, occupancy costs, equipment expense, and amortization of intangibles, partially offset by lower acquisition and integration related costs from the Merger.

Previous 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.

Current wording

During the nine months ended September 30, 2026, total assets decreased $1.4 billion, total liabilities decreased $1.1 billion and shareholders’ equity decreased $294.9 million.

Previous 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.

Current wording

Trading securities totaled $46.1 million and $49.5 million at September 30, 2026 and December 31, 2025, respectively. Securities available-for-sale increased by $298.9 million during the nine months ended September 30, 2026 to $4.3 billion at September 30, 2026, primarily due to purchases of agency MBS, partially offset by sales, paydowns and declines in fair values. During the third quarter of 2026, the Company performed a restructuring of the balance sheet through the sale of low-yielding AFS securities and reinvestment in MBS at then current market rates. Securities held-to-maturity decreased by $77.1 million in the nine months ended September 30, 2026, due to paydowns, and totaled $1.3 billion at September 30, 2026.

Previous 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.

Current wording

Total loans at September 30, 2026 were $13.0 billion, a decrease of $1.2 billion from $14.2 billion at December 31, 2025, due primarily to the sale of auto loans and loan repayments, partially offset by originations and advances.

Previous 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.

Current wording

Total deposits decreased by $1.0 billion during the nine months ended September 30, 2026 to $18.0 billion at September 30, 2026, due primarily to runoff of certificates of deposit, as well as a decrease in core deposits.

Previous 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.

Current wording

Noninterest-bearing demand deposits totaled $6.3 billion and represented 35% of total deposits at September 30, 2026, compared to $6.7 billion, or 35% of total deposits, at December 31, 2025.

Previous 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.

Current wording

Insured deposits of $10.4 billion represented 58% of total deposits at September 30, 2026, compared to insured deposits of $12.2 billion, or 64% of total deposits at December 31, 2025.

Previous 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.

Current wording

Total long-term debt was $132.0 million at September 30, 2026, compared to $192.0 million at December 31, 2025. The decrease in the nine months ended September 30, 2026 was due to the redemption of the $65.0 million Senior Notes on March 1, 2026.

Previous 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.

Current wording

During the nine months ended September 30, 2026, total shareholders’ equity decreased by $294.9 million to $2.6 billion and tangible common equity (1) decreased by $173.3 million to $1.6 billion. The decrease in total shareholders’ equity for the nine months ended September 30, 2026 primarily resulted from a net decrease in retained earnings from net income, less dividends paid to common shareholders, and an increase in accumulated other comprehensive loss due to changes in fair value of securities available-for-sale from higher interest rates. 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 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.

Current wording

At September 30, 2026, book value per common share decreased to $11.59, compared to $12.93 at December 31, 2025. At September 30, 2026, tangible book value per common share (1) decreased to $7.05, 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 nine months ended September 30, 2026 primarily resulted from a net decrease in retained earnings and an increase in accumulated other comprehensive loss. 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 $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.

Current wording

In addition to AFS and HTM securities, the Company held $46.1 million and $49.5 million of trading securities at September 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 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.

Current wording

At September 30, 2026, total delinquent loans were $67.5 million, compared to $93.1 million at December 31, 2025. The decrease was primarily due to the auto portfolio sale. Total delinquent loans as a percentage of total loans were 0.52% at September 30, 2026, as compared to 0.66% at December 31, 2025.

Previous 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.

Current wording

At September 30, 2026, nonperforming assets were $59.7 million, compared to $51.8 million at December 31, 2025. Nonperforming assets as a percentage of total assets increased to 0.28% at September 30, 2026, as compared to 0.23% at December 31, 2025.

Previous 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.

Current wording

As of September 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, offset by sale of the auto loan portfolio and runoff of the non-owner occupied commercial real estate, and construction and land development portfolios.

Previous 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.

Current wording

At September 30, 2026, Mechanics had available borrowing capacity of $5.8 billion from the FHLB, $4.2 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 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.

Current wording

For the nine months ended September 30, 2026, cash and cash equivalents decreased by $427.5 million compared to an increase of $442.9 million during the nine months ended September 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 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.

Current wording

Mechanics’ operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans. For the nine months ended September 30, 2026, net cash of $93.4 million was provided by operating activities from ongoing bank operations, compared to $79.7 million provided by operating activities in the nine months ended September 30, 2025.

Previous 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.

Current wording

Mechanics’ investing activities are primarily related to investment securities and LHFI. For the nine months ended September 30, 2026, net cash of $861.7 million was provided by investing activities primarily from AFS investment security sales, maturities and calls, proceeds from sales of loans, 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 nine months ended September 30, 2025, net cash of $1.6 billion was provided by investing activities primarily from AFS investment security sales, maturities and calls and net loan originations and principal collections, and cash acquired in the Merger, 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 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.

Current wording

Mechanics’ financing activities are primarily related to deposits, net proceeds or repayments from borrowings and equity transactions. For the nine months ended September 30, 2026, net cash of $1.4 billion was used by financing activities, due to a decrease in deposits, repayment of Senior Notes and dividends paid. For the nine months ended September 30, 2025, net cash of $1.2 billion was used by financing activities, due to repayment of FHLB advances acquired in the Merger and a decrease 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 $307.9 million and $361.4 million at June 30, 2026 and December 31, 2025, respectively.

Current wording

(2)Within the commercial portfolio lines, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments, were $261.4 million and $361.4 million at September 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 June 30, 2026, the capital conservation buffers for Mechanics Bancorp and Mechanics Bank were 8.39% and 8.74%, 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 September 30, 2026, the capital conservation buffers for Mechanics Bancorp and Mechanics Bank were 8.73% and 8.96%, respectively.

Previous 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.”

Current wording

The Company paid cash dividends of $0.25 per share for Class A shareholders and $2.50 per share for Class B shareholders in the third quarter of 2026 and paid cash dividends of $1.35 per share for Class A shareholders and $13.50 per share for Class B shareholders for the nine months ended September 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

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.

Current wording

This document contains non-GAAP financial measures of our financial performance, including tangible common equity, 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, our GAAP results. The non-GAAP financial measures Mechanics presents may differ from similarly captioned measures presented by other companies.