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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended
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Mar. 31, 2026
Accounting Policies [Abstract] |
Basis of Presentation | Basis of Presentation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its wholly-owned subsidiaries. The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the financial services industry. The Merger is considered a reverse acquisition in accordance with ASC 805-40, “Business Combinations-Reverse Acquisitions.” Mechanics Bank is the accounting acquirer (“legal acquiree”), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp, formerly HomeStreet, Inc., is the legal acquirer. Mechanics Bancorp’s financial results for all periods ended prior to September 2, 2025 reflect legacy Mechanics Bank’s results only on a standalone basis. In addition, Mechanics Bancorp’s reported financial results reflect legacy Mechanics Bank’s financial results only 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. Refer to Note 2, “Business Combination,” for additional information on the transaction.
Reclassifications | Certain prior period amounts have been reclassified to conform to the current presentation. These reclassifications had no impact on the Company’s prior year net income or shareholders’ equity.
Use of Estimates | Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for credit losses. Other significant estimates that may be subject to change include fair value determinations and disclosures, evaluation of goodwill and other intangible assets for impairment, and the realization of deferred tax assets. These estimates may be adjusted as more current information becomes available, and any adjustments may be significant.
Business Combinations | Business Combinations: Purchase accounting requires that the assets purchased, the liabilities assumed, and non-controlling interests all be reported on the acquirer’s financial statements at their fair value, with any excess of purchase consideration over the net assets being reported as goodwill. A bargain purchase gain is realized when the excess of the fair value of identifiable net assets acquired is greater than the consideration paid and it is recognized in earnings on the acquisition date.
Recent Adopted Accounting Guidance and Recent Accounting Developments | 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 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 of 2025, and recorded it as part of the acquired loans initial amortized cost basis. Required disclosures regarding the impact of the adoption were presented in the Company’s 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. Recent Accounting Developments In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. In January 2025, the FASB also issued ASU 2025-01, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures-Clarifying the Effective Date,” which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The enhanced income statement expense disclosure requirements apply on a prospective basis. However, retrospective application in all prior periods presented is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures. The adoption of ASU 2024-03 and ASU 2025-01 will not have an impact on the Company’s financial position or results of operations as it impacts disclosures only. We are assessing the impact on our disclosures.
Fair Value | The term “fair value” is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The Company’s approach is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. Fair Value Hierarchy A three-level valuation hierarchy has been established under ASC 820 for disclosure of fair value measurements. The valuation hierarchy is based on the observability of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels are defined as follows: •Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. •Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This includes quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability for substantially the full term of the financial instrument. •Level 3 – Unobservable inputs for the asset or liability. These inputs reflect the Company’s assumptions of what market participants would use in pricing the asset or liability. The Company’s policy regarding transfers between levels of the fair value hierarchy is that all transfers are assumed to occur at the end of the reporting period. Estimation of Fair Value Fair value is based on quoted market prices, when available. In cases where a quoted price for an asset or liability is not available, the Company uses valuation models to estimate fair value. These models incorporate inputs such as forward yield curves, loan prepayment assumptions, expected loss assumptions, market volatilities and pricing spreads utilizing market-based inputs where readily available. The Company believes its valuation methods are appropriate and consistent with those that would be used by other market participants. However, imprecision in estimating unobservable inputs and other factors may result in these fair value measurements not reflecting the amount realized in an actual sale or transfer of the asset or liability in a current market exchange. The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions and classification of the Company’s assets and liabilities valued at fair value on a recurring basis.
Asset/Liability class |  | Valuation methodology, inputs and assumptions |  | Classification
Investment securities |  |  |  |
U.S Treasury securities (Trading securities and Investment securities AFS) |  | Fair Value is based on quoted prices in an active market. |  | Level 1 recurring fair value measurement.
Investment securities AFS (level 2) |  | Observable market prices of identical or similar securities are used where available. |  | Level 2 recurring fair value measurement.
Investment securities AFS (level 3) |  | If market prices are not readily available, value is based on discounted cash flows using the following significant inputs: •Expected prepayment speeds •Estimated credit losses •Market liquidity adjustments |  | Level 3 recurring fair value measurement.
LHFS |  |  |  |
Single family loans |  | Fair value is based on observable market data, including: •Quoted market prices, where available •Dealer quotes for similar loans •Forward sale commitments |  | Level 2 recurring fair value measurement.
Equity securities |  | Observable market prices of identical or similar securities are used where available. |  | Level 2 recurring fair value measurement.
Mortgage servicing rights |  |  |  |
Single family MSRs |  | For information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 9, “Mortgage Banking Operations.” |  | Level 3 recurring fair value measurement.
Derivatives |  |  |  |
Futures and Options |  | Fair value is based on closing exchange prices. |  | Level 1 recurring fair value measurement.
Forward sale commitments and interest rate swaps |  | Fair value is based on quoted prices for identical or similar instruments, when available. When quoted prices are not available, fair value is based on internally developed modeling techniques, which require the use of multiple observable market inputs including: •Forward interest rates •Interest rate volatilities |  | Level 2 recurring fair value measurement.
IRLC |  | The fair value considers several factors including: •Fair value of the underlying loan based on quoted prices in the secondary market, when available. •Value of servicing •Fall-out factor |  | Level 3 recurring fair value measurement.

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