Mechanics Bancorp (MCHB) M&A Announcement summary

Deal rationale and strategic fit

• The merger creates a premier, publicly traded West Coast bank with a full footprint from San Diego to Seattle, making it the third largest regional bank by deposits in California and Seattle, with virtually no branch overlap and strong market share in key cities.

• Combines complementary business models, strong credit cultures, and a focus on core deposit funding and conservative lending, enhancing scale and profitability.

• Ford Financial Fund's experience and alignment with public investors support long-term value creation.

• The merger allows shareholders to participate in future value creation and provides expanded opportunities for employees.

• Strategic move positions Mechanics Bank for future opportunities as a public bank holding company.

Financial terms and conditions

• All-stock transaction values HomeStreet at $300 million and Mechanics Bank at $3.3 billion pre-transaction; HomeStreet shareholders will own 8.3% and Mechanics Bank shareholders 91.7% of the combined company.

• Ford Financial Fund II and III will hold 74.3%, Rabobank 9.1%, HomeStreet 8.3%, and legacy Mechanics Bank shareholders 8.3%.

• HomeStreet issues 212.5mm shares to Mechanics shareholders; pro forma diluted shares: 231.7mm.

• HomeStreet will be renamed Mechanics Bancorp and remain publicly traded; Mechanics is the accounting acquiror.

• No special dividends are planned; a high percentage of quarterly earnings will be paid as dividends, targeting an 8.25% Tier 1 leverage ratio.

Synergies and expected cost savings

• $82 million in non-interest expense reduction targeted, representing 42% of HomeStreet's 2024 expenses, mainly from shared services, vendor contracts, and back-office consolidation.

• $59 million after-tax cost savings expected, with 90% phased in by Q2 2026.

• $52 million incremental net interest income from balance sheet repositioning.

• Cost savings are expected to be fully realized by the end of Q2 2026.

• EPS accretion of 23% for HomeStreet shareholders in 2026.