Mechanics Bancorp · NASDAQ:MCHB
Mechanics Bancorp — Merger or Acquisition (March 2025)
42 slides from Mechanics Bancorp's merger presentation, Mar 31, 2025
Slide 1: Mechanics + HomeStreet
Mechanics + HomeStreet Introducing the premier West Coast community bank March 31, 2025 Seattle, WA San Francisco, CA Los Angeles, CA
Slide 2: Disclaimer
Disclaimer Cautionary Note Regarding Forward Looking Statements When used in this presentation and in other documents filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”), in press releases or other public shareholder communications, or in oral statements made with the
Slide 3: Disclaimer (cont'd)
Disclaimer (cont’d) No Offer or Solicitation This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration
Slide 4: Agenda
Agenda Transaction overview Ford Financial Fund / Mechanics Strategic and financial rationale Significant value creation Appendix
Slide 5: Transaction summary
Transaction summary ▪ HomeStreet Bank will merge with and into Mechanics ▪ HomeStreet will issue shares to Mechanics shareholders 1 Structure ▪ HomeStreet will remain a publicly traded bank holding company under a new name, Mechanics Bancorp ▪ Mechanics will be the accounting acquiror ▪ HomeStreet’s
Slide 6: Combined company will be the leading community bank in attractive West Coast markets
Combined company will be the leading community bank in attractive West Coast markets HomeStreet (56) SCARCITY VALUE IN ATTRACTIVE WEST COAST MARKETS Mechanics (112) Headquarters WA MT ✓ $23bn in pro forma assets 1 ✓ 3rd largest West Coast and California midcap bank by deposits¹ Seattle ✓ #3 rank in
Slide 7: Compelling investment thesis deserving premium valuation
Compelling investment thesis deserving premium valuation ✓ Premier community bank in West Coast markets (#3 largest in West Coast and California by deposits¹) ✓ Leading profitability relative to West Coast² banks (~19% 2027E ROATCE, ~1.5% 2027E ROAA) ✓ Low-risk asset strategy powered by best-in-clas
Slide 8: Agenda
Agenda Transaction overview Ford Financial Fund / Mechanics Strategic and financial rationale Significant value creation Appendix
Slide 9: Ford Fund has 40+ years of experience with acquisitions
Ford Fund has 40+ years of experience with acquisitions Bank investors 2010 1994 1988 1975 ● $1.8bn in commitments focused on PACIFIC CAPITAL GOLDEN STATE FIRST GIBRALTAR FIRST UNITED community bank investments BANCORP BANCORP BANK ● Fully invested in Mechanics ● Strong relationship with regulators
Slide 10: Mechanics Bank is Ford's fifth banking platform
Mechanics Bank is Ford’s fifth banking platform Acquisitions since Ford purchase of Mechanics Long-tenured, high-quality deposit franchises 2015 2016 2018 2019 ◼ Founded: 1905 ◼ Completed: April 2015 Deal value: $520mm Acquired 69% via tender offer to enter California again, this Entry into Orange,
Slide 11: Mechanics Bank – a high-performing bank
Mechanics Bank – a high-performing bank Standalone Mechanics Overview 680 #3 $16.5bn 112 5 CA market share Total assets Branches Redding by deposits² Oakland Key stats vs. KRX¹ mid-cap banking index Chico San Francisco 880 As of Q4’24 Yuba City 80 680 CoD: 1.38% NIB: 40% Eff. ratio: 55% Sacramento 6
Slide 12: Top decile deposit franchise
Top decile deposit franchise Key takeaways Deposit breakdown since Rabobank acquisition $bn USD Core deposits Non-core deposits Branches Cost of deposits ▪ One of the most attractive, high-quality deposit franchises in the U.S. 144 144 ▪ Average deposit account size of $43k and an average account te
Slide 13: Dual-pronged strategy: acquisitions and operational excellence
Dual-pronged strategy: acquisitions and operational excellence PREMIER DEPOSIT INSTITUTIONS: DEEP-ROOTED COMMUNITY TIES: Focus on leveraging Mechanics platform Community bank with 100+ year history, to acquire high-quality, core deposit exceptional deposit tenure and institutions that provide low-co
Slide 14: Mechanics' loan portfolio has delivered superior credit quality
Mechanics’ loan portfolio has delivered superior credit quality Mechanics has had cumulative net recoveries of $27.4mm since the Rabobank acquisition with only $11.0mm of charge-offs / losses and $38.4mm of recoveries / interest recapture NCOs / average loans NPAs / assets Commercial banks Total Exc
Slide 15: Mechanics has granular, low-risk CRE with a multifamily focus
Mechanics has granular, low-risk CRE with a multifamily focus ✓ Highly granular and well-diversified across both collateral types and the sub-markets of California ✓ Focus on multifamily lending, with an emphasis on Southern California (54% of total multifamily) ▪ Average multifamily loan size of $3
Slide 16: Superior risk-adjusted returns with significant capital flexibility
Superior risk-adjusted returns with significant capital flexibility Net income Efficiency ratio Adjusted for securities repositioning $230 $217 62% $206 $202 $205 $187 57% 54% $178¹ 52% 54% 52% 49% 49% $93 $29 2020 2021 2022 2023 2024 2025E 2026E 2027E 2020 2021 2022 2023 2024 2025E 2026E 2027E ROAT
Slide 17: Agenda
Agenda Transaction overview Ford Financial Fund / Mechanics Strategic and financial rationale Significant value creation Appendix
Slide 18: 3rd Largest West Coast and California bank by deposits
3rd Largest West Coast and California bank by deposits Top West Coast Headquartered Banks by deposits Top California Headquartered Banks by deposits Includes banks headquartered in California, Oregon and Washington with less Includes banks headquartered in California with less than $250bn total asse
Slide 19: Top share in many West Coast markets
Top 10 share in many West Coast markets Top pro forma markets California and Washington are especially attractive markets Top 10 10–20 Deposits ($bn) | Rank >20 California is the 2nd largest deposit market in the U.S. Seattle $4.0 | #8 $4.0 | #8 San Francisco $3.9 | #10 $3.9 | #10 California has the
Slide 20: HomeStreet's high growth was supported with expensive funding
HomeStreet's high growth was supported with expensive funding . . . Securities and Loans $bn USD Securities Net Loans $8.6 $8.9 $9.1 $8.9 $8.7 $8.8 $8.7 $8.6 $8.6 $8.1 $7.4 $7.0 Change vs Q4’21: $6.6 7.2 7.4 7.5 7.4 7.4 7.4 7.4 6.8 7.4 7.3 5.9 6.2 5.5 Loans: +$0.7bn 1.0 1.1 1.3 1.4 1.5 1.6 1.5 1.3 1
Slide 21: Bifurcated deposit base with attractive core funding
. . . resulting in a bifurcated deposit base with attractive core funding that is in line with Mechanics' acquisition strategy Balance sheet composition as of 4Q’24 (%) Assets Liabilities and equity Cash and Equity cash equivalents $8.1bn $16.5bn $8.1bn $16.5bn Securities Other liabilities 5% 6% 0%
Slide 22: Mechanics' capital and liquidity provide capacity to mark assets and pay down funding
Mechanics’ capital and liquidity provide capacity to mark assets, paydown expensive wholesale funding and add high quality deposits Illustrative paydown of HomeStreet wholesale borrowings ($mm) Post-paydown benefits FHLB Brokered deposits Other high-cost deposits $2,000 ✓ $0 FHLB borrowings $249 ($2
Slide 23: Combined company will use low-beta deposits to fund low-risk loans
Combined company will use low-beta, high-quality deposits to fund low- risk, duration-matched loans . . . Auto Auto Loans: In runoff Consumer / Other In runoff CRE CRE CRE Consumer / Other 1-4 Family 7% 15% 10% 19% 17% 21% Consumer / Other 5% 18% 5% 1-4 Family $9.6bn 5% $6.2bn 21% $15.9bn C&I 24% 8%
Slide 24: Creating a highly profitable combined institution
. . . creating a highly profitable combined institution Combination unlocks HomeStreet earnings Key highlights ~23% EPS accretion ($34) $302 $52 to HomeStreet shareholders $59 Meaningful cost saves $59mm of after-tax savings ~$302mm | ~$314mm 2026E Pro forma earnings $277 Operating earnings | cash e
Slide 25: Combined company is the most profitable among West Coast banks
Combined company is the most profitable among West Coast banks¹ . . . 2026E ROATCE ~19% ~18%² 16.1% 14.5% 14.5% 13.7% 12.9% 12.5% 12.0% 11.7% 11.4% 10.3% 10.1% 10.0% 7.4% 4.2% 2027 Pro 2026 Pro MB FHB GBCI CVBF BOH FIBK BANR TCBK HFWA WAFD HTBK BANC PPBI HMST forma forma 2026E ROAA ~1.5% ~1.4%² 1.39
Slide 26: Low-risk, well-capitalized, core funded balance sheet
. . . with a low-risk, well-capitalized, core funded balance sheet Cost of funds 3.14% 3.27% 2.57% 1.73% 1.85% 1.89% 1.58% 1.59% 1.61% 1.65% 1.70% 1.72% 1.38% ~1.4%¹ 1.14% CVBF MB Pro forma TCBK FHB BANR HFWA HTBK GBCI FIBK BOH PPBI BANC WAFD HMST Loan / deposits 97% 99% 83% 84% 84% 84% 84% 88% 72%
Slide 27: Pro forma franchise has increased scale, less risk and top decile profitability
Pro forma franchise has increased scale, less risk and top decile profitability . . . Total assets $8.1bn $23bn ✓ Deposit rank in West coast market¹ 14 3 ✓ Markets Deposit rank in California¹ – 3 ✓ Branches 56 168 ✓ Ownership 100.0% 8.3% Net income $20mm $302mm² HomeStreet net income $20mm $25mm ✓ P
Slide 28: Financially compelling to existing shareholders
. . . and is financially compelling to existing shareholders Highly accretive to earnings $1.31 ~23% 230bps+ 2026E EPS¹ 2026E EPS accretion¹ Annual CET1 generation² Low-risk, well- 0% capitalized, core funded balance 12.4% 8.3% Wholesale funded CET1 Tier 1 leverage (no brokered deposits sheet and FH
Slide 29: Agenda
Agenda Transaction overview Ford Financial Fund / Mechanics Strategic and financial rationale Significant value creation Appendix
Slide 30: Combined company expected to materially outperform West Coast and high-multiple banks
Combined company is expected to materially outperform most West Coast and high-multiple national banks High-multiple West coast banks² f banks³ Estimated Better than Better than pro forma West coast high-multiple (2026E)¹ banks? banks? Median⁴ Top quartile⁴ Median⁴ Net interest margin 3.9% #1 #1 3.4
Slide 31: Combined company positioned for upside
Combined company positioned for upside High-multiple West coast banks¹ banks² Long-term Metric Median Top quartile Median median⁴ Price / Pro forma '26E EPS³ $1.31 11.1x 12.4x 12.9x 14.4x Current share price HomeStreet share price⁵ $9.30 $14.55 $16.23 $16.80 $18.79 Implied multiples Potential upside
Slide 32: Illustrative value creation to HomeStreet shareholders
Illustrative value creation to HomeStreet shareholders 2026E P/E $mm 10.0x 11.0x 12.0x 13.0x 14.0x 15.0x 16.0x 17.0x 2026E pro forma net income¹ $302 $302 $302 $302 $302 $302 $302 $302 Value of pro forma company² $3,020 $3,322 $3,624 $3,926 $4,228 $4,530 $4,832 $5,134 Dividend yield³ 9.9% 9.0% 8.3%
Slide 33: Forward ROATCE vs P/TBV regression
West Coast banks¹: Forward ROATCE vs P/TBV regression 3.00x y = 19.69x - 0.78; R² = 0.76 Illustrative pro forma company 2.76x 2.75x 2026E ROATCE: 18%² Implied P/TBV: 2.76x 2.50x TCE at close: $1,737mm GBCI Implied equity value: $4,798mm 2.25x BOH 2.00x P/TBV FHB CVBF 1.75x BANR 1.50x TCBK FIBK HFWA
Slide 34: Future Mechanics Bank strategy
Future Mechanics Bank strategy Opportunistic M&A paired with the operational excellence of a talented management team ✓ Efficiently integrate HomeStreet acquisition, including carefully planned core systems conversion in Q1 2026 ✓ Continued prudence with mortgage and commercial real estate lending 1
Slide 35: Agenda
Agenda Transaction overview Ford Financial Fund / Mechanics Strategic and financial rationale Significant value creation Appendix
Slide 36: Extensive due diligence conducted on HomeStreet
Extensive due diligence conducted on HomeStreet 2 Mechanics’ third-party 51% $2.4bn Due diligence processes % of commercial loans⁴ Commercial loan balances advisors completed by Mechanics reviewed by Mechanics reviewed by Mechanics J.P. Morgan, Wachtell, KPMG (2024, 2025) Key themes: Diligence focus
Slide 37: Key financial assumptions
Key financial assumptions ▪ Mechanics: Management forecast through 2027, as reflected on slide 16 Earnings ▪ HomeStreet: Consensus estimates for 2026; Mechanics management forecast in 2027 ▪ $82mm pre-tax (42% of HMST 2024 reported non-interest expense) Cost synergies ▪ 32% phase-in in Q4’25; 55% ph
Slide 38: Purchase accounting summary
Purchase accounting summary Tangible book value per basic share Bargain purchase gain calculation mm mm $mm $mm shares $ per share $mm Fixed exchange ratio 3301.1x HomeStreet Mechanics contribution 3,300 HomeStreet tangible book value as of Dec. 31, 2024 $390 18.9 $20.60 Mechanics shares outstanding
Slide 39: Purchase accounting summary (cont'd)
Purchase accounting summary (cont’d) Earnings per share accretion $mm, except per share values 2026E HomeStreet consensus standalone net income $20 Mechanics standalone net income 205 Combined net income $225 Cost synergies 59 HomeStreet existing amortization expense 1 Accretion / (amortization) of
Slide 40: Details on Mechanics Bank standalone CRE portfolio
Details on Mechanics Bank standalone CRE portfolio CRE by collateral ($mm) % of Avg Total Non-ow ner Ow ner Collateral type Balance Ow ner-occupied LTV¹ size classified classified classified Multifamily $2,799 0% 52% $3.3 $1.3 $1.3 $0.0 Retail 688 3% 51% 3.6 9.1 7.7 1.4 Office 535 18% 52% 2.1 19.7 1
Slide 41: Details on Mechanics Bank standalone CRE portfolio (cont'd)
Details on Mechanics Bank standalone CRE portfolio (cont’d) CRE by collateral and reset / maturity ($mm) Balance m aturing Rate resets Maturity & rate reset Collateral type Balance next 24 m onths next 24 m onths % of loans Multifamily $2,799 $56 $45 4% Retail 688 354 0 52% Office 535 184 1 35% Indu
Slide 42: Pro forma deposit overview
Pro forma deposit overview Mechanics HomeStreet Num ber of Deposit Deposit Average Weighted Num ber of Deposit Deposit Average Weighted Segm ent accounts balance ($bn) balance (%) account size age (yrs) Cost¹ Segm ent accounts balance ($bn) balance (%) account size age (yrs) Cost¹ Consumer 268,152 $
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