Mechanics Bancorp Reports Fourth Quarter and Full Year 2025 Results

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Key Terms

cet1 ratio financial

CET1 ratio measures a bank's core equity capital (the most loss-absorbing funds like common stock and retained earnings) relative to the size of its risk-adjusted assets. It shows how big the bank's financial cushion is compared with what it has on its books; a higher ratio means greater ability to absorb losses, lower regulatory risk, and generally more investor confidence in the bank's stability.

allowance for credit losses financial

Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.

bargain purchase gain financial

A bargain purchase gain happens when a buyer acquires another company's assets for less than those assets' estimated fair value, producing an immediate accounting profit for the buyer. For investors, it matters because that one-time gain boosts the acquirer's reported earnings and can signal a very favorable deal — like finding a valuable item at a steep discount — but it may also prompt scrutiny about whether asset values or the deal terms were estimated correctly.

delegated underwriting and servicing technical

Delegated underwriting and servicing is a setup where an investor or agency authorizes a private lender to evaluate, approve and fund loans and then handle the ongoing administration (collecting payments, managing defaults) on the investor’s behalf. Think of it like a franchisor allowing a local shop to sell and manage its products: it speeds up origination and leverages the lender’s operations, but transfers some credit and operational risk to the parties involved. Investors care because it affects expected returns, loan performance, legal exposure and how quickly capital is deployed.

bank term funding program financial

A bank term funding program is a central bank’s temporary lending facility that gives banks a multi‑week or multi‑month loan using high‑quality assets as collateral, like an emergency line of credit secured by securities. It matters to investors because it helps banks cover short‑term cash needs without selling assets at a loss, reducing the chance of bank runs or failures and stabilizing bank shares, lending conditions, and overall market confidence.

accounting standards update regulatory

An accounting standards update is a change to the official rulebook that companies use to prepare and present their financial statements. Investors care because those changes can alter how revenue, expenses, assets, or liabilities appear on the books—like a revised recipe that produces a different-looking dish even with the same ingredients—affecting comparability, reported profitability, and valuation across companies and time.

securities available-for-sale financial

Securities available-for-sale are bonds, stocks or similar investments a company holds with the intention that they might be sold but not traded day-to-day. Think of them as items on a store shelf: their value can go up or down while held, and those paper gains or losses are recorded separately from regular profits until the company actually sells them. Investors watch this category because changes affect a company’s reported net worth and signal how management might convert investments into cash.

purchased seasoned loans financial

Purchased seasoned loans are existing loans that an investor buys after they have been outstanding for some time and have a track record of payments. Like buying a used car with a known service history, these loans give buyers clearer information about how likely borrowers are to keep paying, which helps investors estimate future cash flow, potential losses, and the returns they can expect.

01/30/2026 - 05:45 AM

WALNUT CREEK, Calif.--(BUSINESS WIRE)-- Mechanics Bancorp (Nasdaq: MCHB):

Fourth Quarter Highlights

$22.4 billion

Total Assets

$124.3 million

Net Income

14.07%

CET1 Ratio ⁽¹⁾

$12.93
Book Value Per Share
$7.81
Tangible Book Value Per Share ⁽²⁾

Mechanics Bancorp (Nasdaq: MCHB) (“Mechanics” or the “Company”), the financial holding company of Mechanics Bank, today announced its financial results for the quarter and year ended December 31, 2025. Mechanics reported net income of $124.3 million, or $0.54 per diluted share ⁽³⁾, for the fourth quarter of 2025, compared to $55.2 million, or $0.25 per diluted share, for the third quarter of 2025. For 2025, Mechanics reported net income of $265.7 million, or $1.22 per diluted share, compared to $29.0 million, or $0.14 per diluted share, for 2024. Mechanics’ financial results in 2025 were materially impacted by the merger of HomeStreet Bank with and into Mechanics Bank, which was completed on September 2, 2025. Refer to “Presentation of Results – HomeStreet Bank Merger” below for additional information about the presentation of the financial statements following the merger. In addition, financial results for the fourth quarter of 2025 were impacted by the Company’s adoption of new accounting guidance for certain loans acquired in the HomeStreet merger. Refer to “Adoption of Purchased Seasoned Loans Accounting Standard” for additional discussion.

C.J. Johnson, President and CEO of Mechanics, said, “We had a very strong fourth quarter and I’m quite pleased with the progress that’s been made on our merger integration. More hard work remains, but I’m confident we’ll finish the job and be well-positioned for continued success in 2026 and beyond.”

Fourth Quarter and Year End 2025 Highlights:

Total assets of $22.4 billion at December 31, 2025, compared with $22.7 billion at September 30, 2025 and $16.5 billion at December 31, 2024.
Total loans of $14.2 billion at December 31, 2025, resulting in a loans-to-deposits ratio of 75%, compared with $14.6 billion at September 30, 2025 and $9.6 billion at December 31, 2024.
Total deposits of $19.0 billion at December 31, 2025, compared with $19.5 billion at September 30, 2025 and $13.9 billion at December 31, 2024, and noninterest-bearing deposits of $6.7 billion at December 31, 2025, compared with $6.7 billion at September 30, 2025 and $5.6 billion at December 31, 2024.
Total cost of deposits was 1.43% for the quarter and 1.40% for the year ended December 31, 2025.
Strong capital ratios ⁽¹⁾, including an estimated 16.28% Total risk-based capital ratio, 14.07% Tier 1 capital ratio, 14.07% CET1 capital ratio and 8.65% Tier 1 leverage ratio at December 31, 2025.

(1)	Regulatory capital ratios at December 31, 2025 are preliminary.
(2)	Non-GAAP measure. Refer to section “Non-GAAP Financial Measures and Reconciliations” below.
(3)	Unless otherwise specified, refers to diluted earnings per share for Class A common stock.

Allowance for credit losses (“ACL”) to total loans of 1.08%, down from 1.16% at the prior quarter-end.
No wholesale funding, as all HomeStreet Federal Home Loan Bank (“FHLB”) borrowings and brokered deposits have been paid off.
Preliminary bargain purchase gain recognized of $145.5 million from the HomeStreet merger, consisting of $55.1 million in the fourth quarter and $90.4 million in the third quarter. The additional bargain purchase gain in the fourth quarter resulted from an updated valuation on Mechanics Bank’s Fannie Mae Delegated Underwriting and Servicing (“DUS”) intangible as a result of the agreement announced in the fourth quarter of 2025 to sell our DUS business line to Fifth Third Bank, which is subject to Fannie Mae’s approval and is expected to close in the first quarter of 2026.
Non-recurring acquisition and integration costs of $3.5 million in the quarter, compared to $63.9 million in the prior quarter. Such costs were $73.4 million in 2025.

Presentation of Results – HomeStreet Bank Merger

On September 2, 2025, the merger of HomeStreet Bank, the wholly owned subsidiary of Mechanics Bancorp (formerly known as HomeStreet, Inc.) with and into Mechanics Bank, was completed. Mechanics Bank is the accounting acquirer (legal acquiree), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp is the legal acquirer. Mechanics’ financial results for all periods ended prior to September 2, 2025 reflect Mechanics Bank’s historical financial results on a standalone basis. In addition, Mechanics’ reported financial results for the year ended December 31, 2025 reflect Mechanics Bank’s financial results on a standalone basis until the closing of the merger on September 2, 2025 and results of the combined company from September 2, 2025 through December 31, 2025. For periods prior to September 2, 2025, the number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Mechanics have been retrospectively restated to reflect the equivalent number of shares issued in the merger since the merger was accounted for as a reverse acquisition. As the accounting acquirer, Mechanics Bank remeasured the identifiable assets acquired and liabilities assumed in the merger as of September 2, 2025 at their acquisition date fair values. The estimates of fair value were recorded based on valuations as of the merger date. These estimates are considered preliminary as of December 31, 2025, are subject to change for up to one year after the merger date, and any changes could be material.

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 HomeStreet 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. The impact of the adjustments is reflected in the fourth quarter 2025 results presented in this earnings release. Required disclosures regarding the impact of the adoption and its impact on reported third quarter 2025 results will be presented when the Company files its 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.

INCOME STATEMENT HIGHLIGHTS

Summary Income Statement

	Quarter Ended									Year Ended
(in thousands)	December 31, 2025			September 30, 2025			December 31, 2024			December 31, 2025			December 31, 2024

Total interest income	$	255,138		$	204,888		$	176,852		$	811,764		$	735,718
Total interest expense		73,673			59,218			48,452			226,046			216,549
Net interest income		181,465			145,670			128,400			585,718			519,169
Provision (reversal of provision) for credit losses on loans		(22,160	)		46,058			(4,243	)		20,503			(1,559	)
Provision (reversal of provision) for credit losses on unfunded lending commitments		(1,316	)		960			(465	)		(987	)		52
Total provision (reversal of provision) for credit losses		(23,476	)		47,018			(4,708	)		19,516			(1,507	)
Net gain (loss) on sales and calls of investment securities		276			155			—			4,568			(207,203	)
Bargain purchase gain		55,097			90,363			—			145,460			—
Other noninterest income		23,148			19,260			18,535			72,877			68,083
Total noninterest income (loss)		78,521			109,778			18,535			222,905			(139,120	)
Acquisition and integration costs		3,507			63,869			—			73,365			—
Other noninterest expense		126,003			99,460			84,449			396,192			345,859
Total noninterest expense		129,510			163,329			84,449			469,557			345,859
Income before income tax expense (benefit)		153,952			45,101			67,194			319,550			35,697
Income tax expense (benefit)		29,650			(10,060	)		15,531			53,811			6,698
Net income	$	124,302		$	55,161		$	51,663		$	265,739		$	28,999

Net Interest Income

Q4 2025 vs. Q3 2025

Net interest income in the fourth quarter of 2025 was $35.8 million higher than the third quarter of 2025 primarily as a result of the merger with HomeStreet Bank in September 2025. Mechanics’ net interest margin increased from 3.36% to 3.47% primarily due to the full quarter of interest income on the HomeStreet acquired loans and slightly lower cost of deposits.