NASDAQ: MCHB

portfolio until May 1, 2025, when it entered into a servicing agreement with a third-party servicer to oversee and manage

Mechanics Bank’s active portfolio of auto loans. The portfolio consisted of new and pre-owned retail automobile sales

contracts purchased from both franchised and independent automobile dealerships in the United States.

The Company’s business strategy is to offer a full range of financial products and services to our customer base consistent

with a regional bank’s offerings while providing the responsive and personalized service of a community bank. We expect

to maintain our business by:

•marketing our services directly to prospective new customers;

•obtaining new client referrals from existing customers;

•adding experienced relationship managers, branch managers and loan officers who may have established client

relationships that we can serve;

•cross-selling our products and services; and

•making opportunistic acquisitions of complementary businesses and/or establishing de novo offices in select

markets within and outside our existing market areas.

Our primary sources of liquidity include deposits, loan repayments and investment securities payments, both principal and

interest, borrowings, and proceeds from the sale of loans and investment securities. Borrowings may include advances from

FHLB, borrowings from the Federal Reserve Bank, federal funds purchased and borrowings from other financial

institutions.

9

Locations

In addition to our main office, as of December 31, 2025, we operated 166 full service branch locations throughout

California, Oregon, Washington and Hawaii, and three stand-alone commercial lending centers in Southern California,

Idaho and Utah.

Loan Products

We are committed to offering competitive lending products that meet the needs of our clients, are underwritten in a prudent

manner, and provide an adequate return based on their size, credit risk and interest rate risk. Our loan products include

commercial business loans, single family residential mortgages, consumer loans, commercial loans secured by residential

and commercial real estate, and construction loans for residential and commercial real estate development. The lending

units under which these loans are offered include: Commercial Banking; Mortgage and Consumer Lending; Multifamily

Lending; Commercial Real Estate Lending and Residential Construction Lending and Private Banking. In addition, certain

consumer loans are offered through our retail branch network.

We believe that we mitigate the risks inherent in our loan portfolio by adhering to sound underwriting practices, managed

by experienced and knowledgeable credit professionals. These practices may include, among other considerations: analysis

of a borrower’s prior credit history, financial statements, tax returns, cash flow projections, valuations of collateral based

on reports of independent appraisers and verifications of liquid assets. Although we believe that our underwriting criteria is

appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and

these losses may exceed the amounts set aside as reserves in our allowance for credit losses. While we believe that our

allowance for credit losses is adequate to cover potential losses, we cannot guarantee that future increases to the allowance

for credit losses may not be required by regulators or other third-party loan review or financial audits.

Commercial Banking

Loans originated by Commercial Banking are generally supported by the cash flows generated from the business

operations of the entity to which the loan is made, and, except for loans secured by owner occupied commercial real estate,

are generally secured by non-real estate assets, such as equipment, inventories or accounts receivable. Commercial Banking

is focused on developing quality full-service business banking relationships, including loans and deposits. We typically

focus on commercial clients that are manufacturers, distributors, wholesalers and professional service companies. These

loans are generated primarily by our relationship managers and business development officers with minimal direct

marketing support.

Commercial Loans: We offer commercial term loans and commercial lines of credit to our clients. Commercial loans

generally are made to businesses that have demonstrated a history of profitable operations. To qualify for such loans,

prospective borrowers generally must have operating cash flow sufficient to meet their obligations as they become due,

good payment histories, responsible balance sheet management and experienced management. Commercial term loans are

either fixed rate or adjustable rate loans with interest rates tied to a variety of independent indices and are generally made

for terms ranging from one to seven years based in part on the useful life of the asset financed. Commercial lines of credit

are adjustable rate loans with interest rates usually tied to our prime lending rate or other independent indices and are made

for terms typically ranging from one to two years. These loans contain various covenants, including possible requirements

that the borrower reduce its credit line borrowings to zero for specified time periods during the term of the line of credit,

maintain required levels of liquidity with advances tied to periodic reviews of amounts borrowed based upon a percentage

of accounts receivable, and inventory or unmonitored lines for those with significant financial strength and liquidity.

Commercial loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of the

borrower and guarantors, the borrower’s ability to repay, debt service coverage ratios, historical and projected client

income, borrower liquidity and credit history and the trends in income and balance sheet management. In addition, we

perform stress testing for changes in interest rates and other factors and review general economic trends in the client’s

industry. We typically require full recourse from the owners of the entities to which we make such loans.

Commercial Real Estate Loans - Owner Occupied: Owner occupied CRE loans are generally made to businesses that have

demonstrated a history of profitable operations. To qualify for such loans, prospective borrowers generally must have

operating cash flow sufficient to meet their obligations as they become due, good payment histories, proper balance sheet

management of key cash flow drivers, and experienced management. Our commercial real estate loans are secured by first

liens on nonresidential real property, typically office, industrial or warehouse properties. These loans generally have fixed

interest rates for periods ranging from three to ten years and adjust thereafter based on an applicable indices and terms. We

10

may also offer adjustable rate loans with interest rates tied to a variety of independent indices. These loans generally have

interest rate floors, payment caps, and prepayment fees. The loans are underwritten based on a variety of criteria, including

an evaluation of the creditworthiness of the borrower and guarantors, the borrower’s ability to repay, loan-to-value and

debt service coverage ratios, borrower liquidity and credit history and the trends in balance sheet and income statement

management. We typically require full recourse from the owners of the entities to which we make such loans.

Shared National Credits/Participation Lending: We may participate in multi-bank transactions referred to as Shared

National Credits or Participations when an individual loan may be too large to be made by a single institution or an

institution wants to reduce their credit exposure from a single loan. These loans are typically originated and led by other

larger banks and Mechanics Bank is a participant in the transaction. The loans are sourced through relationships with

originating lenders as well as through purchases of loans in the secondary market. These loans are generally made to

businesses that have demonstrated a history of profitable operations. To qualify for such loans, prospective borrowers

generally must have operating cash flow sufficient to meet their obligations as they become due, good payment histories,

proper balance sheet management of key cash flow drivers, and experienced management. Syndicated/Participated term

loans are either fixed rate or adjustable rate loans with interest rates tied to a variety of independent indices and are

generally made for terms ranging from one to seven years based in part on the useful life of the asset financed. Lines of

credit are adjustable rate loans with interest rates tied to a variety of independent indices and are generally made with terms

from one to five years, and contain various covenants, including possible requirements that the borrower maintain liquidity

requirements with advances tied to periodic reviews. These loans are underwritten independently by us based on a variety

of criteria, including an evaluation of the creditworthiness of the borrower, the borrower’s ability to repay, debt service

coverage ratios, historical and projected client income, borrower liquidity and credit history, and their trends in income and

balance sheet management. In addition, we perform stress testing for changes in interest rates and other factors and review

general economic trends in the client’s industry. Full recourse from the owners of these entities is usually not required for

these loans.

Small Business Lending and SBA Lending: We provide small business lending term loans and lines of credit through our

retail branch network. These products typically have a maximum loan amount of $250,000 and are generally supported by

the cash flows generated from the business operations of the entity to which the loan is made. These loans are generally

secured by perfected UCC filings on the assets of the borrowing entity and typically require full recourse from the owners

of the borrowing entity. Mechanics Bank has applied for approval as a SBA preferred lender. We are committed to our

small business commercial lending to serve our communities and small businesses that operate in proximity to our network

of retail branch locations. As these are government guaranteed programs, we are required to comply with the relevant

agency’s underwriting guidelines, servicing and monitoring requirements, and terms and conditions set forth under the

related programs standard operating procedures. SBA loans generally follow our underwriting guidelines established for

non-SBA commercial and industrial loans and meet the criteria set forth by the SBA.

Mortgage and Consumer Lending

Loans originated by Mortgage and Consumer Lending are generally supported by cash flows of the borrower and are

secured by one to four unit residential properties. Mortgage and Consumer Lending loans are originated for sale or to be

held for investment. We also make construction loans to qualified borrowers, which upon completion of the construction

phase convert to long-term Mortgage and Consumer Lending loans that are eligible for sale in the secondary market. Home

equity loans are originated to be held for investment. In addition to leads generated by our loan officers, we utilize referrals

from various sources in the Bank, including consumer and business banking, commercial lending, private banking, and

wealth management to generate leads. We do not originate loans defined as high cost by state or federal banking regulators.

Mortgage and Consumer Lending Loans Originated for Sale: These loans are generally underwritten and documented in

accordance with the guidelines established by the FHLMC and FNMA. These loans are delivered/sold into securities issued

by either FNMA or FHLMC. Government insured loans are underwritten and documented in accordance with the

guidelines established by HUD and the VA. These loans are delivered/sold into securities issued by GNMA. We also

participate in correspondent and broker relationships under which we originate and sell loans to other financial institutions

in compliance with their underwriting guidelines. As part of these guidelines, we underwrite these loans based on a variety

of criteria, including an evaluation of the creditworthiness of the borrower, the borrower’s ability to repay, loan-to-value

and debt-to-income ratios, borrower liquidity, income verification and credit history. Our loan-to-value limits are generally

up to 80% of the lesser of the appraised value or purchase price of the property. We offer both fixed and adjustable rate

loans. The majority of our fixed rate loans have terms of 15 or 30 years. Our adjustable rate loans are typically amortized

over a 30-year period with fixed rate periods ranging between three to ten years and adjust thereafter based on the

11

applicable index and terms. Adjustable rate loans generally have interest rate floors and caps. Mortgage and Consumer

Lending loans are generally sold servicing retained.

Mortgage and Consumer Lending Loans Held for Investment: These loans take the form of Conforming and Non-

conforming loans collateralized by real properties located in our market areas. These loans have fixed or adjustable rates

with initial fixed rate periods ranging from three to ten years and a term not exceeding 30 years. These loans generally have

interest rate floors and caps. The loans are underwritten based on a variety of criteria, including an evaluation of the

creditworthiness of the borrower, the borrower’s ability to repay, loan-to-value and debt-to-income ratios, borrower

liquidity, income verification and credit history.

Home Equity Lines of Credit: HELOCs are secured by first or second liens on residential properties and are structured as

revolving lines of credit whereby the borrower can draw upon and repay the loan at any time. These loans have adjustable

rates with interest rates tied to a variety of independent indices, with interest rate floors and caps and with terms of up to

ten years. We underwrite these loans based on a variety of criteria, including an evaluation of the creditworthiness of the

borrower, the borrower’s ability to repay, loan-to-value and debt-to-income ratios, borrower liquidity, income verification

and credit history.

Cash Surrender Value of Life Insurance (“CSVLI”) Lending: Credit facilities secured by CSVLI are structured as lines of

credit. The lines are originated and serviced through a third-party program partnership. Line limits are primarily based on

the underlying cash collateral. The lines are renewable annually and priced at promotional fixed rates or variable rates

based on the WSJ Prime Rate.

CRE Lending

Loans originated by CRE Lending are supported by the underlying cash flow from operations of the related real estate

collateral for loans except for construction related loans. The loans originated by CRE Lending consist of multifamily, non-

owner occupied CRE and CRE construction loans, including bridge loans. The business is primarily sourced through our

loan officers’ relationships and through brokers with little direct marketing support.

CRE Residential Mortgage Loans-Multifamily: We make multifamily residential mortgage loans for terms up to 15 years,

but offer 30 year amortization for five or greater unit properties. These loans generally have fixed interest rates for periods

ranging from three to ten years and adjust thereafter based on an applicable indices and terms. We may also offer

adjustable rates with interest rates tied to a variety of independent indices. These loans generally have interest rate floors,

payment caps, and prepayment fees. The loans are underwritten based on a variety of criteria, including an evaluation of

the subject real estate collateral cash flow, the creditworthiness of the borrower and guarantors, the borrower’s ability to

repay, loan-to-value and debt service coverage ratios, borrower liquidity and credit history. In addition, we perform stress

testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as rental

rates, market values and vacancy rates. We typically require full or limited recourse from the owners of the entities to

which we make such loans. Our multifamily real estate loans originated under our Fannie Mae DUS© lender service

authorization are sold to or securitized by Fannie Mae after origination, with the Company generally retaining the servicing

rights. We may sell multifamily loans to other financial institutions, usually servicing released. See discussion in Item 7.

“Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Other Recent Developments

—Asset Sale” for details on the pending sale of the DUS business line.

CRE Loans-Non-owner Occupied: Our commercial real estate loans are secured by first liens on nonresidential real

property with terms typically up to ten years. We typically focus on multi-tenant industrial, office and retail real estate

collateral with strong, stable tenancy, and strong, stable historical cash flow located in submarket locations with strong,

stable demand. These loans generally have fixed interest rates for periods ranging from three to ten years and adjust

thereafter based on an applicable indices and terms. We may also offer adjustable rates with interest rates tied to a variety

of independent indices. These loans generally have interest rate floors, payment caps, and prepayment fees. The loans are

underwritten based on a variety of criteria, including an evaluation of the subject real estate collateral cash flow, the

creditworthiness of the borrower and guarantors, the borrower’s ability to repay, loan-to-value and debt service coverage

ratios, borrower liquidity and credit history. In addition, we perform stress testing for changes in interest rates,

capitalization rates and other factors and review general economic trends such as lease rates, values and absorption rates.

We typically require full recourse from the owners of the entities to which we make such loans.

CRE Construction Loans: CRE construction loans are provided to borrowers with extensive construction experience and

are primarily focused on multifamily, commercial building and warehouse developments. These loans are custom tailored

12

to fit the individual needs of each specific request. We typically consider CRE construction loan requests in the submarket

locations where we have experience and offer permanent real estate loans. We may also offer bridge loans which are

designed to fund a project for a short period of time until permanent financing can be arranged. Construction loans and

bridge loans usually only require interest payments which are usually supported by an interest reserve established at the

time the loan is originated. Construction loans typically are disbursed as construction progresses and are subject to

inspection by third party experts. Construction loans, including bridge loans, carry a higher degree of risk because

repayment of these loans is dependent, in part, on the successful completion of the project or, to a lesser extent, the ability

of the borrower to refinance the loan or sell the property upon completion of the project, rather than the ability of the

borrower or guarantor to repay principal and interest. Because of these factors, these loans require equity either as up-front

cash equity in the project or equity in the value of the underlying property. These loans are typically secured by the

underlying development and, even if we foreclose on the loan, we may be required to fund additional amounts to complete

the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it. CRE

construction and bridge loans are secured by first liens on real property. These loans typically have adjustable rates with

interest rates tied to a variety of independent indices. These loans generally have interest rate floors and payment caps. The

loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of the borrower and

guarantors, the borrower’s ability to repay, loan to value and debt service coverage ratios, borrower liquidity and credit

history. In addition, we perform stress testing for changes in interest rates and other factors and review general economic

trends such as lease rates, values and absorption rates. We typically require full recourse from the owners of the entities to

which we make such loans.

Residential Construction Lending

Loans originated by Residential Construction Lending include single family residential construction loans, lot acquisition

loans and land development loans. Our residential construction loans are generally to experienced local developers with

extensive track records in building single family homes. Our lot acquisition loans and land development loans are typically

on entitled land, versus raw land, and are used to support our vertically integrated and experienced local developers who

maintain inventory for building single family projects. Construction loans are disbursed as construction progresses. These

loans require repayment as residences or lots are sold. The business is primarily sourced through our relationship managers

with minimal direct marketing support.

We typically consider residential construction loan requests in the submarket locations where we have experience and a

relationship manager is located. Construction loans, lot acquisition loans and land development loans usually only require

interest payments which may be supported by an interest reserve established at the time the loan is originated. Construction

loans typically are disbursed as construction progresses. Construction loans carry a higher degree of risk because

repayment of these loans is dependent, in part, on the success of the ultimate project or, to a lesser extent, the ability of the

borrower to sell the home or lots upon completion of the project. Because of these factors, these loans require equity either

as up-front cash equity in the project or equity in the value of the underlying property. These loans are secured by the

underlying real estate and improvements. In the event of a foreclosure on the loan, we may be required to fund additional

amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to

dispose of it. Residential Construction Lending loans are secured by first liens on real property. These loans generally have

adjustable rates with interest rates tied to our prime lending rate. These loans generally have interest rate floors and

payment caps. The loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of

the borrower and guarantors, the borrower’s ability to repay, loan to value and loan to cost ratios, borrower leverage and

liquidity, credit history and guarantor support. In addition, we perform stress testing for changes in interest rates and other

factors and review general economic trends such as values and absorption rates. We typically require full recourse from the

owners of the entities to which we make such loans.

Private Banking

Loans originated by Private Banking include the partner loan program, personal lines of credit and investment management

& trust lines of credit. Private Banking also originates mortgages and HELOCs, using the same product types, features, and

pricing as Mortgage and Consumer Lending. Additionally, Private Banking also refers and originates certain Commercial

Banking loans in partnership with the applicable business units.

Partner Loan Program (“PLP”): We make installment loans to assist newly promoted partners with their buy-in into a

professional firm, such as a legal or accounting firm. The loan is made to an individual, with a guarantee from the firm.

Loan amounts are offered up to $350,000 with terms of three, five, or seven years. The rate is based on prime, plus an

additional rate component depending on the client’s deposit relationship with the Company.

13

Personal Line of Credit (“PLOC”): We extend lines of credit to assist Private Banking clients with personal liquidity needs

and management. Loan amounts are offered up to $300,000, with terms of three, five, or seven years. There is an initial

draw period of 18 months, with the balance termed out over the remainder of the loan. The rate is based on prime, plus an

additional rate component depending on the client’s deposit relationship with the Company.

Investment Management & Trust Line of Credit (“IMT LOC”): We extend lines of credit to individuals secured by an

investment account held and managed by our wealth management department. Advances are limited to 65% of the account

value. The rate is based on prime and renewed every two years.

Other

Through our retail branch network, we offer unsecured consumer installment loans and personal reserve accounts serving

as overdraft lines of credit to our customers allowing them to meet short term cash flow needs. Installment loans are

generally fixed rate loans made for terms ranging from one to three years. Personal reserve accounts are open ended lines

of credit tied to a consumer checking account. The loans are underwritten based on a variety of criteria, including an

evaluation of the creditworthiness and credit history of the borrower and guarantors, the borrower’s ability to repay, debt-

to-income ratios, borrower liquidity and income verification.

Deposit Products and Services

FDIC-insured deposits represent our principal source of funds for making loans and acquiring other interest-earning assets.

These deposits are serviced through our retail branch network, which includes 166 branches as of December 31, 2025.

These retail branches serve as one of our primary contact points with our customers. These branches are typically staffed

with three to six employees, including a branch manager who is responsible for servicing our existing customers and

generating new business. As part of our asset-liability management strategy, we closely monitor customer deposit

maturities and interest rate trends to effectively manage our cost of funds. Our pricing approach is designed to align with

our broader product and service offerings, enabling us to grow and retain client relationships without relying primarily on

offering the highest rate in the market.

We offer a wide range of deposit products including personal, business and analyzed checking, savings accounts,

individual retirement accounts, money market accounts, time certificates of deposit, and safe deposit boxes.

Our suite of specialty deposit services is tailored to deposit-rich industry segments, including real estate, escrow services,

title, labor unions, nonprofits and property management. Additionally, we serve government entities and international

clients with customized banking solutions designed to meet their unique operational needs. These niche offerings support

our strategy to attract and retain stable, relationship-based deposits across diversified markets.

Treasury Management: Treasury Management products and services provide our customers tools to bank with us

conveniently without having the need to visit one of our offices and are necessary to attract complex commercial and

specialty deposit clients. These products and services include automated bill payments, remote and mobile deposit capture,

automated clearing house origination, wire transfer, lockbox, payee positive pay, and direct deposit. We participate in the

IntraFi Network, utilizing deposit placement services such as Insured Cash Sweep (“ICS”) and Certificate of Deposit

Account Registry Service (“CDARS”). These solutions are intended to optimize liquidity management while ensuring that

large deposits remain fully eligible for FDIC insurance, enhancing flexibility for our clients.

Digital Banking: We provide online access to a comprehensive range of banking services for both consumer and business

clients. This includes account management information reporting functions, transaction review and processing through our

full suite of treasury management solutions. Additionally, our mobile banking platform extends these capabilities, offering

convenient and secure 24/7 access.

Mergers and Acquisitions History

On April 30, 2015, an affiliate of the Ford Financial Funds acquired a majority of the voting shares of legacy Mechanics

Bank from certain shareholders. Since that date, legacy Mechanics Bank, and now Mechanics Bancorp, has been a

controlled company of the Ford Financial Funds.

14

On October 1, 2016, legacy Mechanics Bank completed its acquisition of California Republic Bancorp in a transaction

pursuant to which California Republic Bancorp and its subsidiary, California Republic Bank, were merged with and into

legacy Mechanics Bank.

On June 1, 2018, legacy Mechanics Bank completed its acquisition of Scott Valley Bank in a transaction pursuant to which

Scott Valley Bank was merged with and into legacy Mechanics Bank.

On August 31, 2019, legacy Mechanics Bank completed its acquisition of Rabobank, N.A., a subsidiary of Rabobank

International Holding B.V., in a transaction pursuant to which Rabobank, N.A. was merged with and into legacy

Mechanics Bank.

On September 2, 2025, the Company consummated the strategic reverse merger pursuant to the terms of the Merger

Agreement, by and among the Company, HomeStreet Bank and legacy Mechanics Bank, whereby (i) legacy HomeStreet

Bank merged with and into legacy Mechanics Bank, with legacy Mechanics Bank surviving the Merger and becoming a

wholly-owned subsidiary of the Company and (ii), pursuant to the amended and restated articles of incorporation effective

immediately before the Merger on September 2, 2025, the Company changed its name to “Mechanics Bancorp”. As a result

of the Merger, the Company’s business became primarily the business conducted by legacy Mechanics Bank, and the

combined company is run by the leadership team of legacy Mechanics Bank.

Legal Proceedings

We are periodically party to or otherwise involved in legal proceedings arising in the normal course of business, such as

claims to enforce liens, claims involving the making and servicing of real property loans, and other issues incident to our

business. We do not believe that there is any pending or threatened proceeding against us which, if determined adversely,

would have a material adverse effect on our consolidated financial position, liquidity or results of operations.

Competition

We encounter strong competition both in making loans and in attracting deposits. The deregulation of the banking industry

and the widespread enactment of state laws that permit multi-bank holding companies, as well as an increasing level of

interstate banking, have created a highly competitive environment for commercial banking. We compete with national,

regional and community banks within the various markets where we operate. We also face competition from many other

types of financial institutions, including savings and loan associations, savings banks, finance companies and credit unions.

A number of these banks and other financial institutions have substantially greater resources and lending limits, larger

branch systems and a wider array of banking services than we do. We also compete with other providers of financial

services, such as money market mutual funds, brokerage and investment banking firms, consumer finance companies,

pension trusts, governmental organizations and, increasingly, fintech companies, each of which may offer more favorable

financing than we are able to provide. In addition, some of our non-bank competitors are not subject to the same extensive

regulations that we are. The banking business in California and other markets in which we operate has remained

competitive over the past several years, and we expect the level of competition we face to further increase. Competition for

deposits and in providing lending products and services to consumers and businesses in our market area continues to be

competitive and pricing is important.

Other factors encountered in competing for savings deposits are convenient office locations, interest rates and fee structures

of products offered. Direct competition for savings deposits also comes from other commercial bank and thrift institutions,

money market mutual funds and corporate and government securities that may offer more attractive rates than insured

depository institutions are willing to pay. Competition for loans is based on factors such as interest rates, loan origination

fees and the range of services offered by the provider. Our profitability depends on our ability to compete effectively in

these markets. This competition may reduce or limit our margins on banking services, reduce our market share and

adversely affect its results of operations and financial condition. Our mortgage origination business faces vigorous

competition from banks and other financial institutions, including large financial institutions as well as independent

mortgage banking companies, commercial banks, savings banks and savings and loan associations.

Overall, competition among providers of financial products and services continues to increase as technological advances,

including the rise of artificial intelligence and automation, have lowered the barriers to entry for financial technology

companies, with consumers having the opportunity to select from a growing variety of traditional and nontraditional

alternatives, including online checking, savings and brokerage accounts, online lending, online insurance underwriters,

crowdfunding, digital wallets, and money transfer services. The ability of non-banking financial institutions to provide

15

services previously limited to commercial banks has intensified competition. Because non-banking financial institutions are

not subject to many of the same regulatory restrictions as banks and bank holding companies, they can often operate with

greater flexibility and lower cost structures.

Human Capital Management

Our success is dependent, to a large degree, upon the continued service and skills of our management team and other key

employees with long-term customer relationships. Our continued success and growth depend in large part on the efforts of

these key employees and our ability to attract, motivate and retain highly qualified senior and middle management and

other skilled employees to complement our core senior management team. Our business and growth strategies rely upon

our ability to retain employees with experience and business relationships.

Employee Headcount

As of December 31, 2025, we employed 1,971 employees across our geographic footprint, 92% of which are classified as

full-time. None of our employees are covered by a collective bargaining agreement. Our employee turnover rate was 30%

for 2025, primarily driven by Merger-related efficiencies.

Compensation of Employees

As part of our goal of providing high-quality banking and financial services to our customers while creating a positive

impact in the local communities in which we do business, we designed our compensation program with the intention of

attracting and retaining highly qualified employees. To incentivize our employees, we use a mix of base salary, cash-based

short-term incentive plans, defined contributions to the 401(k) plan for participating employees, and equity based long-term

incentive compensation for a limited number of employees. Employee performance is considered, evaluated and discussed

through performance check-ins between manager and direct report.

We have a variety of group benefit programs designed to provide our employees with health and wellness benefits,

financial benefits in the event of planned or unplanned expenses, or losses relating to illness, disability, or death, and to

help plan for retirement, or provide support with employment-related or personal needs.

Employee Training and Development

As part of our employee development program, we provide a variety of training and educational opportunities to help our

employees grow and develop their professional skills. In addition to third party training and education opportunities, we

use an online learning management system to create, assign, and track compliance and professional development learning

programs across many topical areas such as banking, mortgage and regulatory education, technology training, development

of strong customer relationship and customer service skills.

Employee Community Involvement

We are committed to our communities and prioritize the active involvement of our employees in supporting their

communities. Employees are given time off to volunteer for community organizations, and when employees make a

substantial commitment of time to a particular organization, we offer an additional financial contribution to those

organizations in recognition of the commitment of our employees. We also create active partnerships with local

organizations and our employees provide leadership, educational support, hands-on service, expertise, and financial support

to those organizations. We focus primarily on organizations within the scope of the Community Reinvestment Act that

provide support for affordable housing, basic needs, and economic development for those of low and moderate income.

Where You Can Obtain Additional Information

We file annual, quarterly, current and other reports with the SEC. We make available free of charge on or through our

website http://www.mechanicsbank.com all of these reports (and all amendments thereto), as soon as reasonably

practicable after we file these materials with the SEC. Please note that the contents of our website do not constitute a part

of our reports, and those contents are not incorporated by reference into any of our securities filings. The SEC’s website,

www.sec.gov, contains reports, proxy and information statements, and other information that we file or furnish

electronically with the SEC.

16

Regulation and Supervision

General

Mechanics Bancorp is a bank holding company, as defined in the BHCA, that has elected to be a financial holding

company. As a financial holding company, which is a type of bank holding company, it is primarily regulated by the FRB

and the Federal Reserve Bank of Dallas (the “Federal Reserve Bank,” and together with the FRB, the “Federal Reserve”).

Mechanics Bank is a California state-chartered commercial bank. Mechanics Bank is subject to regulation, examination

and supervision by the CDFPI and the FDIC. Because the assets of Mechanics Bank exceed $10 billion, Mechanics Bank is

subject to additional regulation, examination and supervision of the CFPB.

Accordingly, we are subject to extensive regulation under federal and state laws and by various governmental and other

regulatory authorities. The regulatory framework is intended primarily for the protection of customers and clients, and not

for the protection of our stockholders or creditors. In many cases, the applicable regulatory authorities have broad

enforcement power over bank holding companies, banks and their subsidiaries, including the power to impose substantial

fines and other penalties for violations of laws and regulations. The following discussion provides an overview of certain

elements of banking regulations that currently apply to Mechanics Bancorp and Mechanics Bank and is not intended to be a

complete list of all the activities regulated by the banking regulations. Rather, it is intended only to briefly summarize some

material provisions of the statutes and regulations applicable to our businesses, and is qualified by reference to the statutory

and regulatory provisions discussed.

New statutes, regulations and guidance are regularly considered that may change the regulatory framework applicable to

financial institutions operating in our markets and in the United States generally. Any change in policies, legislation or

regulation, including through interpretive decisions or enforcement actions, by any of our regulators, including the Federal

Reserve, the CDFPI, FDIC and the CFPB or by any other government branch or agency with authority over us, could have

a material impact on our operations.

Regulation Applicable to Mechanics Bancorp and Mechanics Bank

Capital Requirements

Capital rules (the “Rules”) adopted by Federal banking regulators (including the Federal Reserve and the FDIC) establish a

framework for measuring capital adequacy using quantitative measures of Mechanics Bancorp’s and Mechanics Bank’s

assets, liabilities and certain off‑balance sheet items as calculated under regulatory accounting practices. The capital

amounts and classification are also subject to qualitative judgments by the regulators about risk weightings and other

factors.

Generally, the Rules recognize three components, or tiers, of capital: common equity Tier 1 capital, additional Tier 1

capital and Tier 2 capital. Common equity Tier 1 capital generally consists of retained earnings and common stock

instruments (subject to certain adjustments), as well as AOCI except to the extent that Mechanics Bancorp and Mechanics

Bank exercise a one-time irrevocable option to exclude certain components of AOCI. Mechanics Bancorp and Mechanics

Bank made this election in 2015. Additional Tier 1 capital generally includes non-cumulative preferred stock and related

surplus subject to certain adjustments and limitations. Tier 2 capital generally includes certain capital instruments (such as

subordinated debt) and portions of the amounts of the allowance for credit losses, subject to certain requirements and

deductions. The term “Tier 1 capital” means common equity Tier 1 capital plus additional Tier 1 capital, and the term “total

capital” means Tier 1 capital plus Tier 2 capital.

The Rules generally measure an institution’s capital using four capital measures or ratios. The common equity Tier 1

capital ratio is the ratio of the institution’s common equity Tier 1 capital to its total risk-weighted assets. The Tier 1 risk-

based capital ratio is the ratio of the institution’s Tier 1 capital to its total risk-weighted assets. The total risk-based capital

ratio is the ratio of the institution’s total capital to its total risk-weighted assets. The Tier 1 leverage ratio is the ratio of the

institution’s Tier 1 capital to its adjusted average total consolidated assets as determined in accordance with the Rules. To

determine risk-weighted assets, assets of an institution are generally placed into a risk category as prescribed by the

regulations and given a percentage weight based on the relative risk of that category. An asset’s risk-weighted value will

generally be its percentage weight multiplied by the asset’s value as determined under generally accepted accounting

principles. In addition, certain off-balance-sheet items are converted to balance-sheet credit equivalent amounts, and each

amount is then assigned to one of the risk categories. An institution’s federal regulator may require the institution to hold

17

more capital than would otherwise be required under the Rules if the regulator determines that the institution’s capital

requirements under the Rules are not commensurate with the institution’s credit, market, operational or other risks.

To be adequately capitalized under the Rules, both Mechanics Bancorp and Mechanics Bank are required to have a

common equity Tier 1 capital ratio of at least 4.5% or more, a Tier 1 leverage ratio of 4.0% or more, a Tier 1 risk-based

ratio of 6.0% or more and a total risk-based ratio of 8.0% or more. In addition to the preceding requirements both

Mechanics Bancorp and Mechanics Bank are required to maintain a “conservation buffer,” consisting of common equity

Tier 1 capital, which is at least 2.5% above each of the required minimum levels. An institution that does not meet the

conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases

and discretionary bonuses to executive officers.

The Rules also prescribe the methods for calculating certain risk-based assets and risk-based ratios. Higher or more

sensitive risk weights are assigned to various categories of assets, among which are credit facilities that finance the

acquisition, development or construction of real property, certain exposures or credits that are 90 days past due or are

nonaccrual, foreign exposures, certain corporate exposures, securitization exposures, equity exposures and in certain cases

mortgage servicing rights and deferred tax assets.

In addition, Mechanics Bank is subject to the prompt corrective action framework. See “Regulation and Supervision of

Mechanics Bank—Prompt Corrective Action” below.

Bank Secrecy Act and USA PATRIOT Act

Mechanics Bancorp and Mechanics Bank are subject to the Bank Secrecy Act, as amended by the USA PATRIOT Act,

which gives the federal government powers to address money laundering and terrorist threats through enhanced domestic

security measures, expanded surveillance powers by imposing mandatory recordkeeping and reporting obligations, as well

as obligations to prevent and detect money laundering on financial institutions. By way of example, the Bank Secrecy Act

imposes an affirmative obligation on Mechanics Bank to report currency transactions that exceed certain thresholds, to

report other transactions determined to be suspicious, and to maintain an anti-money laundering compliance program. The

Bank Secrecy Act requires financial institutions, including Mechanics Bank, to meet certain customer due diligence

requirements, including obtaining and verifying certain identity information on its customers, understanding the customers’

intended and actual use of Mechanics Bank’s services, and obtaining a certification from the individual opening the

account on behalf of the legal entity that identifies the beneficial owner(s) of the entity and to conduct enhanced due

diligence on certain types of customers. The purpose of customer due diligence requirements is to enable Mechanics Bank

to form a reasonable belief it knows the true identity if its customers and to be able to understand the types of transactions

in which a customer is likely to engage, which should in turn assist in identifying when transactions that could require

reporting pursuant to obligations to report suspicious activity.

Like all United States companies and individuals, Mechanics Bancorp and Mechanics Bank are prohibited from transacting

business with certain individuals and entities named on the OFAC list of Specially Designated Nationals and Blocked

Persons. Prohibitions also include conducting business involving jurisdictions targeted by OFAC for comprehensive,

embargo-type sanctions, such as Cuba, Iran, North Korea, and certain of the Russia-occupied areas of Ukraine, as well as

conducting certain other limited types of transactions with persons listed on additional lists of sanctions targets maintained

by OFAC. Failure to comply may result in fines and other penalties. OFAC has issued guidance directed at financial

institutions, including guidance regarding the recommended elements of OFAC compliance programs, and Mechanics

Bancorp‘s regulators generally examine Mechanics Bancorp for compliance with OFAC’s substantive prohibitions as well

as OFAC’s compliance program guidance.

Compensation

Compensation policies and practices at Mechanics Bancorp and Mechanics Bank are subject to regulations and policies by

their respective banking regulators. These regulations and policies are generally intended to prohibit excessive

compensation and to help ensure that incentive compensation policies do not encourage imprudent risk-taking and are

consistent with the safety and soundness of the financial institution. In addition, FDIC regulations may restrict our ability

to make certain “golden parachute” and “indemnification” payments.

As a public company, Mechanics Bancorp is subject to various SEC rules regarding disclosure of compensation payments

and policies as well as providing its shareholders certain non-binding votes relating to Mechanics Bancorp’s disclosed

compensation practices. In certain cases, incentive compensation payments may have to be clawed back from executives.

18

Regulation and Supervision of Mechanics Bancorp

General

Mechanics Bancorp, which owns all of the outstanding capital stock of Mechanics Bank, is a financial holding company

registered under the BHCA. As a financial holding company, Mechanics Bancorp is subject to Federal Reserve regulations,

examinations, supervision and reporting requirements relating to bank holding companies. Among other things, the Federal

Reserve is authorized to restrict or prohibit activities that are determined to be a serious risk to the financial safety,

soundness or stability of a subsidiary bank. Mechanics Bancorp is also required to file with the Federal Reserve an annual

report and such other additional information as the Federal Reserve may require pursuant to the BHCA. The Federal

Reserve also examines Mechanics Bancorp and each of its on-bank subsidiaries. Mechanics Bancorp is subject to risk-

based capital requirements adopted by the Federal Reserve, which are substantially identical to those applicable to

Mechanics Bank, and which are described above. Since Mechanics Bank is chartered under California law, the CDFPI has

authority to regulate, examine and receive reports from Mechanics Bancorp relating to its conduct affecting Mechanics

Bank.

Source of Strength

Under the Dodd Frank Act and Federal Reserve Policy, Mechanics Bancorp is required to act as a source of financial and

managerial strength for Mechanics Bank. This means that Mechanics Bancorp may be required to commit resources, as

necessary, to support Mechanics Bank including at times when we may not be in a financial position to provide such

resources, and it may not be in our, or our shareholders’ best interests to do so.

Non-Banking Activities

With some exceptions, the BHCA prohibits a bank holding company from acquiring or retaining direct or indirect

ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding company,

or from engaging directly or indirectly in activities other than those of banking, managing, or controlling banks, or

providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities

that, by statute or by Federal Reserve regulation or order, have been identified as activities so closely related to the business

of banking as to be a proper incident thereto. In addition, a bank holding company that has elected to be a financial holding

company, such as Mechanics Bancorp, may engage, directly or through a subsidiary, in certain expanded activities deemed

financial in nature, such as securities underwriting and dealing, insurance underwriting and brokerage, merchant banking

and other activities that are determined by the FRB to be “financial in nature or incidental thereto” or that the FRB

determines unilaterally to be “complementary” to financial activities. To maintain its status as a financial holding company,

a bank holding company (and all of its depository institution subsidiaries) must each remain “well capitalized” and “well

managed.” If a bank holding company fails to meet these regulatory standards, the Federal Reserve could place limitations

on its ability to conduct the broader financial activities permissible for financial holding companies or impose limitations or

conditions on the conduct or activities of the bank holding company or its affiliates. If the deficiencies persisted, the

Federal Reserve could order the bank holding company to divest any subsidiary bank or to cease engaging in any activities

permissible for financial holding companies that are not permissible for bank holding companies.

Expansion Activities

The BHCA requires a bank holding company to obtain the prior approval of the Federal Reserve before merging with

another bank holding company, acquiring substantially all the assets of any bank or bank holding company, or acquiring

directly or indirectly any ownership or control of more than five percent of the voting shares of any bank. In addition, the

prior approval of the FDIC and CDFPI is required for a California state-chartered bank to merge with another bank or

purchase the assets or assume the deposits of another bank. In determining whether to approve a proposed bank acquisition,

bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected

to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring

institution’s record of addressing the credit needs of the communities it serves.

Acquisition of Control

Two statutes, the BHCA and the Change in Bank Control Act, together with regulations promulgated thereunder, require

federal regulatory review before any company may acquire “control” of a bank or a bank holding company. Transactions

subject to the BHCA are exempt from Change in Bank Control Act requirements. Under the BHCA, control is deemed to

19

exist if a company acquires 25% or more of any class of voting securities of a bank holding company, controls the election

of a majority of the members of the board of directors or exercises a controlling influence over the management or policies

of a bank or bank holding company. On January 30, 2020, the Federal Reserve issued a final rule (which became effective

September 30, 2020) that clarified and codified the Federal Reserve’s standards for determining whether one company has

control over another. The final rule established four categories of tiered presumptions of noncontrol, each of which may be

rebutted, based on the percentage of voting shares held by the investor (i.e., less than 5%, 5-9.9%, 10-14.9% and

15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control

are permitted without falling outside of the presumption of noncontrol. These indicia of control include nonvoting equity

ownership, director representation, management interlocks, business relationship, solicitation of proxies to replace more

than the permitted number of directors and limiting contractual rights. Under the final rule, investors can hold up to 24.9%

of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence.

Under the federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve if any person (including

a company), or group acting in concert, seeks to acquire “control” of a bank holding company. An acquisition of control

can occur upon the acquisition of 10.0% or more of the voting stock of a bank holding company or as otherwise defined by

the Federal Reserve. Under the Change in Bank Control Act, the Federal Reserve has 60 days from the filing of a complete

notice to act, unless extended, taking into consideration certain factors, including the financial and managerial resources of

the acquirer and the competitive effects of the acquisition. Control can also exist if an individual or company has, or

exercises, directly or indirectly or by acting in concert with others, a controlling influence over a bank. California law also

imposes certain limitations on the ability of persons and entities to acquire control of a banking institution and controlling

persons and entities of such institution based on factors including, among others, competitive effects, financial stability of

the subject banking institutions, managerial experience of the acquirer and the fairness of the proposed acquisition with

respect to depositors, creditors and shareholders of the subject banking institution.

Dividends

Under Washington law, Mechanics Bancorp is generally permitted to make a distribution, including payments of

dividends, only if, after giving effect to the distribution, in the judgment of the board of directors, (1) Mechanics Bancorp

would be able to pay its debts as they become due in the ordinary course of business and (2) Mechanics Bancorp’s total

assets would at least equal the sum of its total liabilities plus the amount that would be needed if Mechanics Bancorp were

to be dissolved at the time of the distribution to satisfy the preferential rights upon dissolution of shareholders whose

preferential rights are superior to those receiving the distribution. In addition, it is the policy of the Federal Reserve that

bank holding companies generally should pay dividends only out of net income generated over the past year and only if the

prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall

financial condition. The policy also provides that bank holding companies should not maintain a level of cash dividends

that places undue pressure on the capital of its subsidiary bank or that may undermine its ability to serve as a source of

strength. The Federal Reserve has the authority to place additional restrictions and limits on payment of dividends. Capital

rules, as well as regulatory policy, impose additional requirements on the ability of Mechanics Bancorp to pay dividends.

Regulation and Supervision of Mechanics Bank

General

As a commercial bank chartered under the laws of the State of California, Mechanics Bank is subject to applicable

provisions of California law and regulations of the CDFPI. As a state-chartered commercial bank, Mechanics Bank’s

primary federal regulator is the FDIC. It is subject to regulation and examination by the CDFPI and the FDIC and its

deposits are insured by the FDIC. Mechanics Bank is also subject to regulation and examination by the CFPB with respect

to federal consumer protection laws. See “Consumer Protection Laws and Regulations and Regulation by the CFPB.”

California Banking Regulation

As a California bank, Mechanics Bank’s operations and activities are substantially regulated by California law and

regulations, which govern, among other things, Mechanics Bank’s ability to take deposits and pay interest, make loans on

or invest in residential and other real estate, make consumer and commercial loans, invest in securities, offer various

banking services to its customers and establish branch offices.

California law also governs numerous corporate activities relating to Mechanics Bank, including Mechanics Bank’s ability

to pay dividends, to engage in merger activities and to amend its articles of incorporation, as well as limitations on change

20

of control of Mechanics Bank. Mergers involving Mechanics Bank and sales or acquisitions of its branches are generally

subject to the approval of the CDFPI and the FDIC. No person or entity may acquire control of Mechanics Bank unless the

Commissioner of the CDFPI has approved such acquisition of control. California law defines “control” of an entity to mean

the ownership, directly or indirectly, of shares or equity securities possessing more than 50% of the voting power of the

entity. Amendments to Mechanics Bank’s articles of incorporation, including certain amendments in connection with a

merger, require the approval and endorsement of the CDFPI.

Mechanics Bank is subject to periodic examination by and reporting requirements of the CDFPI, as well as enforcement

actions initiated by the CDFPI. The CDFPI’s enforcement powers include the suspension or revocation of the license of

Mechanics Bank, the possession of properties of Mechanics Bank and the imposition of civil penalties. The CDFPI has

authority to place Mechanics Bank under supervisory direction or to take possession of Mechanics Bank and to appoint the

FDIC as receiver.

Insurance of Deposit Accounts and Regulation by the FDIC

The FDIC is Mechanics Bank’s principal federal bank regulator. As such, the FDIC is authorized to conduct examinations

of, and to require reporting by Mechanics Bank. The FDIC may prohibit Mechanics Bank from engaging in any activity

determined by law, regulation or order to pose a serious risk to the institution, and may take a variety of enforcement

actions in the event Mechanics Bank violates a law, regulation or order or engages in an unsafe or unsound practice or

under certain other circumstances. The FDIC also has the authority to appoint itself as receiver of Mechanics Bank or to

terminate Mechanics Bank’s deposit insurance if it were to determine that Mechanics Bank has engaged in unsafe or

unsound practices or is in an unsafe or unsound condition.

Mechanics Bank is a member of the DIF administered by the FDIC, which insures customer deposit accounts. The amount

of federal deposit insurance coverage is $250,000, per depositor, for each account ownership category at each depository

institution. The $250,000 amount is subject to periodic adjustments. In order to maintain the DIF, member institutions,

such as Mechanics Bank, are assessed insurance premiums, which are now based on an insured institution’s average

consolidated assets less tangible equity capital.

Each institution is provided an assessment rate, which is generally based on the risk that the institution presents to the DIF.

FDIC assessment rates for large institutions, which are banks with $10 billion or more in assets and include Mechanics

Bank, are determined by a scorecard method. The initial base assessment rate for large institutions, based on rates effective

January 1, 2023, can range from 5 to 32 basis points. However, adjustments can further impact the final assessment rate. In

the future, if the reserve ratio reaches certain levels, these assessment rates will generally be lowered.

Prompt Corrective Action

Section 38 of the Federal Deposit Insurance Act establishes a framework of supervisory actions for insured depository

institutions that are not adequately capitalized, also known as “prompt corrective action.” All of the federal banking

agencies have promulgated substantially similar regulations to implement a system of prompt corrective action. As

modified by the Rules, the framework establishes five capital categories; under the Rules, a bank is:

•“well capitalized” if it has a total risk-based capital ratio of 10.0% or more, a Tier 1 risk-based capital ratio of

8.0% or more, a common equity Tier 1 risk-based ratio of 6.5% or more, and a leverage capital ratio of 5.0% or

more, and is not subject to any written agreement, order or capital directive to meet and maintain a specific capital

level for any capital measure;

•“adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio

of 6.0% or more, a common equity Tier 1 risk-based ratio of 4.5% or more, and a leverage capital ratio of 4.0% or

more;

•“undercapitalized” if it has a total risk-based capital ratio less than 8.0%, a Tier 1 risk-based capital ratio less than

6.0%, a common equity risk-based ratio less than 4.5% or a leverage capital ratio less than 4.0%;

•“significantly undercapitalized” if it has a total risk-based capital ratio less than 6.0%, a Tier 1 risk-based capital

ratio less than 4.0%, a common equity risk-based ratio less than 3.0% or a leverage capital ratio less than 3.0%;

and

•“critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

A bank that, based upon its capital levels, is classified as “well capitalized,” “adequately capitalized” or “undercapitalized”

may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice

21

and opportunity for a hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants

such treatment.

At each successive lower capital category, an insured bank is subject to increasingly severe supervisory actions. These

actions include, but are not limited to, restrictions on asset growth, interest rates paid on deposits, branching, allowable

transactions with affiliates, ability to pay bonuses and raises to senior executives and pursuing new lines of business.

Additionally, all “undercapitalized” banks are required to implement capital restoration plans to restore capital to at least

the “adequately capitalized” level, and the FDIC is generally required to close “critically undercapitalized” banks within a

90-day period.

Limitations on Transactions with Affiliates

Transactions between Mechanics Bank and any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act.

An affiliate of Mechanics Bank is any company or entity that controls, is controlled by or is under common control with

Mechanics Bank but which is not a subsidiary of Mechanics Bank. Mechanics Bancorp and its nonbank subsidiaries are

affiliates of Mechanics Bank. Generally, Section 23A limits the extent to which Mechanics Bank or its subsidiaries may

engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of Mechanics Bank’s capital stock and

surplus, and imposes an aggregate limit on all such transactions with all affiliates in an amount equal to 20.0% of such

capital stock and surplus. Section 23B applies to “covered transactions” as well as certain other transactions and requires

that all transactions be on terms substantially the same, or at least as favorable to Mechanics Bank, as those provided to a

non-affiliate. The term “covered transaction” includes the making of loans to an affiliate, the purchase of or investment in

the securities issued by an affiliate, the purchase of assets from an affiliate, the acceptance of securities issued by an

affiliate as collateral security for a loan or extension of credit to any person or company, the issuance of a guarantee,

acceptance or letter of credit on behalf of an affiliate, or certain transactions with an affiliate that involves the borrowing or

lending of securities and certain derivative transactions with an affiliate.

In addition, Sections 22(g) and (h) of the Federal Reserve Act place restrictions on loans, derivatives, repurchase

agreements and securities lending to executive officers, directors and principal shareholders of Mechanics Bancorp and its

affiliates.

Standards for Safety and Soundness

The federal banking regulatory agencies have adopted a set of guidelines for all insured depository institutions prescribing

safety and soundness standards. These guidelines establish general standards for internal controls, information systems,

internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality,

earnings standards, compensation, fees and benefits. In general, the guidelines require appropriate systems and practices to

identify and manage the risks and exposures specified in the guidelines before capital becomes impaired. The guidelines

prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the

amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or

principal shareholder.

Each insured depository institution must implement a comprehensive written information security program that includes

administrative, technical and physical safeguards appropriate to the institution’s size and complexity and the nature and

scope of its activities. The information security program also must be designed to ensure the security and confidentiality of

customer information, protect against any unanticipated threats or hazards to the security or integrity of such information,

protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to

any customer and ensure the proper disposal of customer and consumer information. Each insured depository institution

must also develop and implement a risk-based response program to address incidents of unauthorized access to customer

information in customer information systems. If the Federal Reserve or FDIC determines that Mechanics Bancorp or

Mechanics Bank fails to meet any standard prescribed by the guidelines, it may require Mechanics Bancorp or Mechanics

Bank to submit an acceptable plan to achieve compliance with the standard.

Risk Retention

The Dodd-Frank Act requires that, subject to certain exemptions, securitizers of mortgage and other asset-backed securities

retain not less than five percent of the credit risk of the mortgages or other assets and that the securitizer not hedge or

otherwise transfer the risk it is required to retain. Generally, the implemented regulations provide various ways in which

22

the retention of risk requirement can be satisfied and also describe exemptions from the retention requirements for various

types of assets, including mortgages.

Activities and Investments of Insured State-Chartered Financial Institutions

Federal law generally prohibits FDIC-insured state banks from engaging as a principal in activities, and from making

equity investments, other than those that are permissible for national banks. An insured state bank is not prohibited from,

among other things, (1) acquiring or retaining a majority interest in certain subsidiaries, (2) investing as a limited partner in

a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction

of a qualified housing project, provided that such limited partnership investments may not exceed two percent of the bank’s

total assets, (3) acquiring up to 10.0% of the voting stock of a company that solely provides or reinsures directors’,

trustees’ and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured

depository institutions or (4) acquiring or retaining the voting shares of a depository institution if certain requirements are

met.

Under California law, the Commissioner of the CDFPI may issue regulations to authorize a state-chartered financial

institution to conduct an activity allowed for a federal institution unless such activity is expressly prohibited by state law.

Federal Home Loan Bank System

The Federal Home Loan Bank system consists of 11 regional Federal Home Loan Banks. Among other benefits, each of

these serves as a reserve or central bank for its members within its assigned region. Each of the Federal Home Loan Banks

makes available loans or advances to its members in compliance with the policies and procedures established by its board

of directors. Mechanics Bank is a member of the Federal Home Loan Bank of San Francisco (the “San Francisco FHLB”).

As a member of the San Francisco FHLB, Mechanics Bank is required to own stock in the San Francisco FHLB.

Community Reinvestment Act of 1977

Banks are subject to the provisions of the CRA, which requires the appropriate federal bank regulatory agency to assess a

bank’s record in meeting the credit needs of the assessment areas serviced by the bank, including low and moderate income

neighborhoods. The regulatory agency’s assessment of the bank’s record is made available to the public. Further, these

assessments are considered by regulators when evaluating mergers, acquisitions and applications to open or relocate a

branch or facility. Mechanics Bank currently has a rating of “Satisfactory” under the CRA.

Dividends

Dividends from Mechanics Bank constitute an important source of funds for dividends that may be paid by Mechanics

Bancorp to shareholders. The amount of dividends payable by Mechanics Bank to Mechanics Bancorp depends upon

Mechanics Bank’s earnings and capital position and is limited by federal and state laws. Under California law, a bank, or

any majority owned subsidiary of a bank, is generally prohibited from making any distribution in an amount that exceeds

the lesser of the retained earnings of a bank or the net income of a bank in the last three fiscal years, less the amount of any

distributions made by a bank or any majority owned subsidiary of a bank to shareholders of a bank. Notwithstanding this

restriction, a bank may, with the prior approval of the Commissioner of the CDFPI, make a distribution to its shareholder

by means of redeeming its redeemable shares and, with the prior approval of its outstanding shares and of the

Commissioner of the CDFPI, make a distribution to its shareholders in connection with a reduction of its contributed

capital. These restrictions are in addition to restrictions imposed by federal law, such as the Rules, which impose minimum

levels of capital adequacy.

Consumer Protection Laws and Regulations and Regulation by the CFPB

The Dodd-Frank Act created the CFPB, an independent bureau that is responsible for regulating consumer financial

products and services under federal consumer financial laws. The CFPB has broad rulemaking authority with respect to

such laws and exclusive examination and primary enforcement authority with respect to banks and their subsidiaries with

consolidated assets of more than $10 billion. Accordingly, Mechanics Bank is subject to ongoing supervision, examination,

loan portfolio review and other enhanced supervision by the CFPB. Mechanics Bank is also required to provide

information to the CFPB on a quarterly basis and will be subject to periodic examinations by the CFPB regarding

compliance with consumer laws and regulations.

23

Mechanics Bank and its affiliates are subject to a broad array of federal and state consumer protection laws and regulations

that govern almost every aspect of its business relationships with consumers. Although this list is not exhaustive, these

include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds

Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Secure and Fair Enforcement in Mortgage

Licensing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting

Act, the Fair Debt Collection Practices Act, the Service Members’ Civil Relief Act, the Right to Financial Privacy Act, the

Gramm-Leach-Bliley Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit

Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance,

laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and

deceptive business practices, foreclosure laws and various regulations that implement some or all of the foregoing. The

Federal Reserve also promulgated regulations limiting the amount of debit interchange fees that large bank issuers may

charge or receive on their debit card transactions.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions

must deal with customers when taking deposits, making loans, collecting loans and providing other services. Failure to

comply with these laws and regulations can subject Mechanics Bank to various penalties, including but not limited to,

enforcement actions, injunctions, fines, civil money penalties, civil liability, criminal penalties, punitive damages and the

loss of certain contractual rights. Mechanics Bank has a compliance governance structure in place to help ensure its

compliance with these requirements.

Privacy

Under the Gramm-Leach-Bliley Act, financial institutions are required to disclose their policies for collecting and

protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic

personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of

transactions requested by the consumer or when the financial institution is jointly sponsoring a product or service with a

nonaffiliated third-party. Additionally, financial institutions generally may not disclose consumer account numbers to any

nonaffiliated third-party for use in telemarketing, direct mail marketing or other marketing to consumers. Mechanics Bank

and all of its subsidiaries have established policies and procedures to comply with the privacy provisions of the Gramm-

Leach-Bliley Act.

Brokered Deposits

Under FDICIA, banks may be restricted in their ability to accept brokered deposits, depending on their capital

classification. “Well capitalized” banks are permitted to accept brokered deposits, but banks that are not “well capitalized”

are not permitted to accept such deposits. The FDIC may, on a case-by-case basis, permit banks that are “adequately

capitalized” to accept brokered deposits if the FDIC determines that acceptance of such deposits would not constitute an

unsafe or unsound banking practice with respect to such bank. As of December 31, 2025, Mechanics Bank’s capital ratios

exceeded the minimum necessary to be considered “well capitalized” and therefore was not subject to any limitations with

respect to its ability to accept brokered deposits.

24