Mechanics Bank and HomeStreet, Inc. (NASDAQ: HMST) (“HomeStreet”), the holding company of HomeStreet Bank, jointly announced that they have entered into a definitive merger agreement (the “Merger Agreement”) providing for an all-stock business combination between HomeStreet and Mechanics Bank. Under the terms of the Merger Agreement, which was unanimously approved by the boards of directors of both companies, HomeStreet Bank will be merged with and into Mechanics Bank (the “Merger”), with Mechanics Bank surviving as a banking corporation incorporated under the laws of the State of California and as a wholly owned subsidiary of HomeStreet (the resulting holding company of Mechanics Bank following the Merger, the “combined company”). Existing shareholders of Mechanics Bank will receive common stock in HomeStreet in exchange for their Mechanics Bank shares. Upon completion of the Merger, HomeStreet will be renamed Mechanics Bancorp and remain a publicly traded company.

Mechanics Bank is a 120-year-old full-service community bank based in Walnut Creek, California, with 112 branches throughout California and more than $16 billion in assets. Founded in 1921, HomeStreet operates 56 branches throughout Washington, Oregon, Southern California and Hawaii and has approximately $8 billion in assets. The transaction will expand Mechanics Bank’s West Coast footprint and create a combined company with 168 branches and $23 billion in assets.

The transaction values HomeStreet at a pre-transaction estimated equity value of $300 million and Mechanics Bank at a pre-transaction estimated equity value of $3.3 billion. Upon completion of the Merger, existing HomeStreet shareholders are expected to own approximately 8.3% of the combined company, and the remaining ownership of approximately 91.7% will be held by legacy Mechanics Bank shareholders, with Ford Financial Fund and its affiliates owning approximately 74.3% of the combined company.

“This is a very significant milestone for Mechanics Bank and we are excited through this transaction to extend our market presence with a full West Coast footprint from San Diego to Seattle,” said Carl B. Webb, Chairman of the board of directors of Mechanics Bank. “This strategic merger also provides us with the opportunity to become a publicly-traded bank holding company, which better positions Mechanics Bank for future opportunities.”

The board of directors of the combined company will consist of directors of Mechanics Bank and one director of HomeStreet, to be named at a later date. The officers of Mechanics Bank will be the officers of the combined company. Mark Mason, Chairman, President and CEO of HomeStreet, will remain with the combined company in a consulting capacity.

Mr. Mason said, “This merger validates the intrinsic value of HomeStreet’s loyal customer base, strong management and dynamic markets in which we operate and allows our shareholders to participate in the benefits of the combination going forward. The combined company will have a strong branch footprint and deposit market share in the best markets in the west, strong core deposit funding, a well-diversified, conservatively underwritten loan portfolio and a growing wealth management and trust business. We believe this merger will improve our customers’ experiences and create new opportunities for many of our employees, enabling the company to retain and attract top talent. Both organizations share very similar banking strategies, strong credit cultures and a deep commitment to our customers, community service and being good corporate citizens.”

“This transaction is strategically and financially compelling for shareholders of both Mechanics Bank and HomeStreet,” commented C.J. Johnson, CEO and President of Mechanics Bank. “We have completed a thorough due diligence process and look forward to welcoming HomeStreet’s clients and employees to our company.”

The transactions contemplated by the Merger Agreement are subject to customary closing conditions, including the receipt of regulatory approvals and approval by HomeStreet’s and Mechanics Bank’s shareholders. Ford Financial Fund and its affiliates and certain other shareholders of Mechanics Bank have entered into support agreements agreeing, among other things, to vote their shares in favor of the Merger, which collectively represent the required vote of Mechanics Bank shareholders. The Merger is expected to close in the third quarter of 2025.

Advisors

Wachtell, Lipton Rosen & Katz is serving as legal advisor to Mechanics Bank with J.P. Morgan Securities LLC serving as its financial advisor. Sullivan & Cromwell LLP is serving as legal advisor to HomeStreet with Keefe, Bruyette & Woods, A Stifel Company, serving as its financial advisor.