Mechanics Bank and HomeStreet Inc. announced Monday that they’ve entered into a definitive merger agreement, which provides for an all-stock business transaction between the two entities.
Under the terms of the merger — which was unanimously approved by the boards of directors of both companies — HomeStreet Bank will be merged with and into Mechanics Bank. Homestreet will be renamed as Mechanics Bancorp and remain a publicly traded company upon the completion of the merger.
The merger, which is expected to close in third-quarter 2025, creates a combined company with 168 branches and $23 billion in assets.
Mechanics Bank, a 120-year-old, full-service community bank with 112 branches throughout California and more than $16 billion in assets, is based in Walnut Creek, California. Founded in 1921, Seattle-based HomeStreet operates 56 branches throughout Washington, Oregon, California and Hawaii, and it has approximately $8 billion in assets.
Mechanics Bank is surviving as a banking corporation incorporated under the laws of California and as a wholly owned subsidiary of HomeStreet. The company confirmed that its existing shareholders will receive common stock in HomeStreet in exchange for their Mechanics Bank shares.
“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,” Carl B. Webb, chairman of the board of directors of Mechanics Bank, said in a statement.
“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 companies’ announcement said that HomeStreet has a pre-transaction estimated equity value of $300 million, while Mechanics Bank has equity value of $3.3 billion.
Existing HomeStreet shareholders are expected to own approximately 8.3% of the combined company by the completion date of the merger. The remaining ownership share of approximately 91.7% will be held by legacy Mechanics Bank shareholders.
The companies have yet to name a board of directors for the combined company, but they said that the officers of Mechanics Bank will be the officers of the combined company. Mark Mason, the chairman, president and CEO of HomeStreet, will remain with the combined company in a consulting capacity.
“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,” Mason said.
“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.”
Wachtell, Lipton Rosen & Katz is serving as legal adviser to Mechanics Bank, with J.P. Morgan Securities serving as its financial adviser. Sullivan & Cromwell LLP is serving as legal adviser to HomeStreet, with Keefe, Bruyette & Woods serving as its financial adviser.
“This transaction is strategically and financially compelling for shareholders of both Mechanics Bank and HomeStreet,” said 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.”
