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 |
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 |
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|
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Quarter Ended |
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Year Ended |
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(in thousands) |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
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|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
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.
Full Year 2025 vs. Full Year 2024
Net interest income in 2025 increased $66.5 million as compared to 2024 due primarily to an increase in net interest margin from 3.31% in 2024 to 3.43% in 2025. The increase in net interest margin is primarily due to a 15 basis point reduction in the rates paid on interest-bearing liabilities and a 7 basis point increase on interest-earning asset yields. The decrease in rates paid on interest-bearing liabilities was primarily driven by the payoff of $750 million of Bank Term Funding Program (“BTFP”) borrowings in September 2024, partially offset by higher borrowing costs on acquired debt from the HomeStreet merger. The increase in earning asset yields was primarily driven by higher yields on the investment securities portfolio as a result of higher yields on purchases in 2025.
Provision for Credit Losses
Q4 2025 vs. Q3 2025
The provision for credit losses in the fourth quarter of 2025, which consists of the provision for credit losses on loans and provision for unfunded commitments, was a reversal of provision of $23.5 million, compared to a provision of $47.0 million for the third quarter of 2025. The reversal of provision in the fourth quarter of 2025 was primarily the result of the adoption of ASU 2025-08, which eliminated the double count of the credit mark and the allowance for credit losses on the non-PCD HomeStreet purchased seasoned loans, in addition to lower loan balances due to repayments during the quarter.
Full Year 2025 vs. Full Year 2024
The provision for credit losses for loans and unfunded commitments was $19.5 million in 2025, compared to a $1.5 million reversal of provision in 2024. The increase in provision for 2025 was primarily driven by updates to ACL factors that were driven by a re-evaluation of future economic conditions and interest rate repricing risk.
Noninterest Income
Q4 2025 vs. Q3 2025
Noninterest income in the fourth quarter of 2025 decreased from the third quarter of 2025 primarily due to the bargain purchase gain from the HomeStreet merger, which was $90.4 million in the third quarter and $55.1 million in the fourth quarter.
Full Year 2025 vs. Full Year 2024
Noninterest income for 2025 increased from 2024 primarily due to the bargain purchase gain of $145.5 million from the HomeStreet merger in 2025 and the $207.2 million loss on the sale of lower yielding AFS investment securities as part of a balance sheet restructure in 2024.
Nathan Duda added, “With the updated valuation on the DUS intangible, our bargain purchase gain recognized on the HomeStreet acquisition has increased to a total of $145.5 million, which significantly exceeds our original expectations.”
Noninterest Expense
Q4 2025 vs. Q3 2025
Noninterest expense decreased $33.8 million in the fourth quarter of 2025 compared to the third quarter of 2025, primarily due to non-recurring acquisition and integration related costs of $63.9 million recognized with the HomeStreet merger in the third quarter, partially offset by a full quarter of legacy HomeStreet operating expenses in the fourth quarter.
Full Year 2025 vs. Full Year 2024
Noninterest expense increased $123.7 million for 2025 compared to 2024 primarily due to acquisition and integration related costs of $73.4 million, increases in salaries and employee benefits expense, and four months of legacy HomeStreet operating expenses after the merger.
C.J. Johnson said, “We continue to make progress eliminating redundant costs from the combined banks and are well on our way to achieving our expected cost saves by the fourth quarter of 2026.”
Income Taxes
Q4 2025 vs. Q3 2025
Our effective tax rate during the fourth quarter of 2025 was 19.3% as compared to (22.3)% in the third quarter of 2025 and our federal statutory rate was 21.0%. The bargain purchase gain from the merger with HomeStreet, which is an after-tax item, was $55.1 million in the fourth quarter and $90.4 million in the third quarter. The bargain purchase gain was the primary reason for the low effective tax rate in the fourth quarter and the negative effective tax rate in the third quarter.
Full Year 2025 vs. Full Year 2024
Our effective tax rate for 2025 was 16.8% as compared to 18.8% for 2024 and our federal statutory rate was 21.0%. The $145.5 million bargain purchase gain was the primary reason for the low effective tax rate in 2025.
BALANCE SHEET HIGHLIGHTS
|
Selected Balance Sheet Items |
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|
(in thousands) |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Cash and cash equivalents |
|
$ |
1,029,983 |
|
$ |
1,442,647 |
|
$ |
2,078,960 |
|
$ |
798,309 |
|
$ |
999,711 |
|
Trading securities |
|
|
49,518 |
|
|
50,357 |
|
|
— |
|
|
— |
|
|
— |
|
Securities available-for-sale |
|
|
3,993,385 |
|
|
3,490,478 |
|
|
2,562,438 |
|
|
3,586,322 |
|
|
3,065,251 |
|
Securities held-to-maturity |
|
|
1,336,632 |
|
|
1,363,636 |
|
|
1,391,211 |
|
|
1,416,914 |
|
|
1,440,494 |
|
Loans held for investment (before ACL) |
|
|
14,176,936 |
|
|
14,568,795 |
|
|
9,239,834 |
|
|
9,416,024 |
|
|
9,643,497 |
|
Total assets |
|
|
22,351,475 |
|
|
22,708,820 |
|
|
16,571,173 |
|
|
16,540,317 |
|
|
16,490,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Noninterest-bearing demand deposits |
|
$ |
6,744,082 |
|
$ |
6,748,479 |
|
$ |
5,453,890 |
|
$ |
5,495,994 |
|
$ |
5,616,116 |
|
Total deposits |
|
|
19,024,997 |
|
|
19,452,819 |
|
|
13,968,863 |
|
|
13,986,226 |
|
|
13,941,804 |
|
Long-term debt |
|
|
192,014 |
|
|
190,123 |
|
|
— |
|
|
— |
|
|
— |
|
Total liabilities |
|
|
19,489,100 |
|
|
19,934,686 |
|
|
14,154,556 |
|
|
14,166,227 |
|
|
14,188,244 |
|
Total shareholders’ equity |
|
|
2,862,375 |
|
|
2,774,134 |
|
|
2,416,617 |
|
|
2,374,090 |
|
|
2,301,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment Securities
Trading securities totaled $49.5 million at December 31, 2025, compared to $50.4 million at September 30, 2025 and were acquired in the HomeStreet merger. Securities available-for-sale increased by $502.9 million during the fourth quarter to $4.0 billion at December 31, 2025. Securities held-to-maturity decreased by $27.0 million in the fourth quarter and totaled $1.3 billion at December 31, 2025. The net increase in investment securities was primarily due to securities purchased during the quarter.
Loans
Total loans at December 31, 2025 were $14.2 billion, a decrease of $391.9 million from $14.6 billion at September 30, 2025, due primarily to loan repayments during the quarter.
Deposits
Total deposits decreased by $427.8 million during the fourth quarter of 2025 to $19.0 billion at December 31, 2025, due primarily to maturities of certificates of deposits acquired in the HomeStreet merger.
Noninterest-bearing accounts totaled $6.7 billion and represented 35% of total deposits at December 31, 2025, compared to $6.7 billion, or 35% of total deposits, at September 30, 2025.
Insured deposits of $12.2 billion represented 64% of total deposits at December 31, 2025, compared to insured deposits of $12.8 billion, or 66% of total deposits at September 30, 2025.
Borrowings
Total borrowings were $192.0 million at December 31, 2025, compared to $190.1 million at September 30, 2025, and includes subordinated notes, senior notes and trust preferred debt acquired in the HomeStreet merger.
Equity
During the fourth quarter of 2025, total shareholders’ equity increased by $88.2 million to $2.9 billion and tangible common equity (1) increased by $19.0 million to $1.8 billion at December 31, 2025. The increase in total shareholders’ equity for the fourth quarter resulted from net income in the fourth quarter of 2025, less dividends paid to common shareholders.
At December 31, 2025, book value per common share increased to $12.93, compared to $12.54 at September 30, 2025. At December 31, 2025, tangible book value per common share (1) increased to $7.81, compared to $7.73 at September 30, 2025.
|
(1) |
Non-GAAP measure. Refer to section “Non-GAAP Financial Measures and Reconciliations” below. |
CAPITAL AND LIQUIDITY
Capital ratios remain strong with Total risk-based capital at 16.28% and a Tier 1 leverage ratio of 8.65% at December 31, 2025. The following table presents our regulatory capital ratios as of the dates indicated:
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
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|
|||||
|
Mechanics Bancorp (1),(2) |
|
|
|
|
|
|
|
|
|
|||||
|
Tier 1 leverage capital (to average assets) |
8.65 |
% |
|
10.34 |
% |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
Common equity Tier 1 capital (to risk-weighted assets) |
14.07 |
% |
|
13.42 |
% |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
Tier 1 risk-based capital (to risk-weighted assets) |
14.07 |
% |
|
13.42 |
% |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
Total risk-based capital (to risk-weighted assets) |
16.28 |
% |
|
15.57 |
% |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Mechanics Bank (1) |
|
|
|
|
|
|
|
|
|
|||||
|
Tier 1 leverage capital (to average assets) |
9.58 |
% |
|
11.46 |
% |
|
10.16 |
% |
|
9.91 |
% |
|
9.66 |
% |
|
Common equity Tier 1 capital (to risk-weighted assets) |
15.59 |
% |
|
14.87 |
% |
|
18.27 |
% |
|
16.89 |
% |
|
16.14 |
% |
|
Tier 1 risk-based capital (to risk-weighted assets) |
15.59 |
% |
|
14.87 |
% |
|
18.27 |
% |
|
16.89 |
% |
|
16.14 |
% |
|
Total risk-based capital (to risk-weighted assets) |
16.88 |
% |
|
16.13 |
% |
|
19.10 |
% |
|
17.77 |
% |
|
17.14 |
% |
|
(1) |
On September 2, 2025, HomeStreet Bank merged with and into Mechanics Bank, with Mechanics Bank surviving the merger and becoming a wholly-owned subsidiary of Mechanics Bancorp. As a result, for periods prior to September 30, 2025, regulatory capital ratios are only presented for Mechanics Bank. |
|
(2) |
Regulatory capital ratios at December 31, 2025 are preliminary. |
At December 31, 2025, Mechanics had available borrowing capacity of $6.2 billion from the FHLB, $4.4 billion from the Federal Reserve and $5.3 billion under borrowing lines established with other financial institutions.
CREDIT QUALITY
|
Asset Quality Information and Ratios |
|||||||||||||||||||
|
(dollars in thousands) |
December 31, 2025 |
|
September 30, |
|
June 30, |
|
March 31, 2025 |
|
December 31, |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Delinquent loans held for investment: |
|
|
|
|
|
|
|
|
|
||||||||||
|
30-89 days past due |
$ |
58,459 |
|
|
$ |
55,883 |
|
|
$ |
106,710 |
|
|
$ |
100,225 |
|
|
$ |
91,337 |
|
|
90+ days past due |
|
34,686 |
|
|
|
38,316 |
|
|
|
10,660 |
|
|
|
5,248 |
|
|
|
6,082 |
|
|
Total delinquent loans |
$ |
93,145 |
|
|
$ |
94,199 |
|
|
$ |
117,370 |
|
|
$ |
105,473 |
|
|
$ |
97,419 |
|
|
Total delinquent loans to loans held for investment |
|
0.66 |
% |
|
|
0.65 |
% |
|
|
1.27 |
% |
|
|
1.12 |
% |
|
|
1.01 |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Nonperforming assets |
|
|
|
|
|
|
|
|
|
||||||||||
|
Nonaccrual loans |
$ |
42,863 |
|
|
$ |
60,586 |
|
|
$ |
18,606 |
|
|
$ |
9,905 |
|
|
$ |
10,693 |
|
|
90+ days past due and accruing |
|
3,943 |
|
|
|
2,653 |
|
|
|
717 |
|
|
|
211 |
|
|
|
211 |
|
|
Total nonperforming loans |
|
46,806 |
|
|
|
63,239 |
|
|
|
19,323 |
|
|
|
10,116 |
|
|
|
10,904 |
|
|
Foreclosed assets |
|
4,990 |
|
|
|
1,675 |
|
|
|
— |
|
|
|
13,400 |
|
|
|
15,600 |
|
|
Total nonperforming assets |
$ |
51,796 |
|
|
$ |
64,914 |
|
|
$ |
19,323 |
|
|
$ |
23,516 |
|
|
$ |
26,504 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Allowance for credit losses on loans |
$ |
153,319 |
|
|
$ |
168,959 |
|
|
$ |
68,334 |
|
|
$ |
75,515 |
|
|
$ |
88,558 |
|
|
Allowance for credit losses on loans to total loans held for investment |
|
1.08 |
% |
|
|
1.16 |
% |
|
|
0.74 |
% |
|
|
0.80 |
% |
|
|
0.92 |
% |
|
Allowance for credit losses on loans to nonaccrual loans |
|
357.70 |
% |
|
|
278.88 |
% |
|
|
367.27 |
% |
|
|
762.38 |
% |
|
|
828.22 |
% |
|
Nonaccrual loans to total loans held for investment |
|
0.30 |
% |
|
|
0.42 |
% |
|
|
0.20 |
% |
|
|
0.11 |
% |
|
|
0.11 |
% |
|
Nonperforming assets to total assets |
|
0.23 |
% |
|
|
0.29 |
% |
|
|
0.12 |
% |
|
|
0.14 |
% |
|
|
0.16 |
% |
At December 31, 2025, total delinquent loans were $93.1 million, compared to $94.2 million at September 30, 2025. Total delinquent loans as a percentage of total loans were 0.66% at December 31, 2025, as compared to 0.65% at September 30, 2025.
At December 31, 2025, nonperforming assets were $51.8 million, compared to $64.9 million at September 30, 2025. The decrease was mostly due to loan charge-offs and repayments. Nonperforming assets as a percentage of total assets decreased to 0.23% at December 31, 2025 as compared to 0.29% at September 30, 2025.
|
Allowance for Credit Losses |
||||||||||||||||||||
|
|
|
Quarter Ended |
Year Ended |
|||||||||||||||||
|
(dollars in thousands) |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Allowance for credit losses on loans: |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Beginning balance |
|
$ |
168,959 |
|
|
$ |
68,334 |
|
|
$ |
103,481 |
|
|
$ |
88,558 |
|
|
$ |
133,778 |
|
|
Initial allowance on acquired purchased credit deteriorated (“PCD”) loans |
|
|
— |
|
|
|
63,494 |
|
|
|
— |
|
|
|
63,494 |
|
|
|
— |
|
|
Initial allowance on acquired purchased seasoned loans (“PSL”) (1) |
|
|
20,252 |
|
|
|
— |
|
|
|
— |
|
|
|
20,252 |
|
|
|
— |
|
|
Provision (reversal of provision) for credit losses (1) |
|
|
(22,160 |
) |
|
|
46,058 |
|
|
|
(4,243 |
) |
|
|
20,503 |
|
|
|
(1,559 |
) |
|
Loans charged off |
|
|
(17,052 |
) |
|
|
(12,803 |
) |
|
|
(13,512 |
) |
|
|
(52,021 |
) |
|
|
(59,546 |
) |
|
Recoveries |
|
|
3,320 |
|
|
|
3,876 |
|
|
|
2,832 |
|
|
|
12,533 |
|
|
|
15,885 |
|
|
Ending balance |
|
$ |
153,319 |
|
|
$ |
168,959 |
|
|
$ |
88,558 |
|
|
$ |
153,319 |
|
|
$ |
88,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Allowance for credit losses on unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Beginning balance |
|
$ |
8,431 |
|
|
$ |
3,735 |
|
|
$ |
4,831 |
|
|
$ |
4,366 |
|
|
$ |
4,314 |
|
|
Initial allowance on acquired loans |
|
|
— |
|
|
|
3,736 |
|
|
|
— |
|
|
|
3,736 |
|
|
|
— |
|
|
Provision (reversal of provision) for credit losses |
|
|
(1,316 |
) |
|
|
960 |
|
|
|
(465 |
) |
|
|
(987 |
) |
|
|
52 |
|
|
Ending balance |
|
$ |
7,115 |
|
|
$ |
8,431 |
|
|
$ |
4,366 |
|
|
$ |
7,115 |
|
|
$ |
4,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net charge-offs to average loans (2) |
|
|
0.38 |
% |
|
|
0.32 |
% |
|
|
0.43 |
% |
|
|
0.36 |
% |
|
|
0.43 |
% |
|
(1) |
The third quarter of 2025 included a provision for credit losses of $20.2 million for non-PCD loans, which are also considered purchased seasoned loans, acquired in the HomeStreet merger. As discussed in “Adoption of Purchased Seasoned Loans Accounting Standard,” in the fourth quarter of 2025, 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. 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. |
|
(2) |
For periods less than a year, ratios are annualized. |
The allowance for credit losses on loans totaled $153.3 million, or 1.08% of total loans at December 31, 2025, compared to $169.0 million, or 1.16% of total loans at September 30, 2025. The allowance decreased due to repayments in the auto portfolio, which has a higher level of reserves, and the charge off of a specific reserve associated with an acquired syndicated loan.
Conference Call
The Company will host a conference call and webcast to discuss its fourth quarter 2025 financial results at 11:00 a.m. Eastern Time (ET) on Friday, January 30, 2026. Investors and analysts interested in participating in the call are invited to dial 1-833-470-1428 (international callers please dial 1-646-844-6383) and use access code 763176 approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available on the Company’s website at https://ir.mechanicsbank.com. The earnings presentation for the call will also be available on the Company’s Investor Relations website prior to the call.
A replay of the conference call will be available within two hours of the conclusion of the call and can be accessed through the News & Events tab of the Company’s website as well as by dialing 1-866-813-9403 (international callers please dial 1-929-458-6194).
Contacts
Investor Relations Inquiries:
Mechanics Bancorp
Nathan Duda
Executive Vice President and Chief Financial Officer
[email protected]
