Company: MCHB
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001518715-25-000110
Chunk: 65

Company: Mechanics Bancorp
Filing Date: 2025-08-06
Form: 10-Q
Item: Item 8
Chunk 65
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5 and no gain or loss was recognized.

Economic and Market Conditions

The current level of interest rates continues to adversely impact our results of operations as our overall cost of funds are high in relation to the yield on our earning assets, resulting in a low net interest margin. With the decrease in short term interest rates in the latter part of 2024, our cost of funds have stabilized and started to decrease. As a result of the fourth quarter 2024 loan sale, we improved our net interest margin by selling lower yielding loans and paying off higher cost wholesale funding. Given the scheduled repricing of our multifamily and other commercial real estate loans, future anticipated reductions in borrowings, the expectation of further reductions in short-term interest rates by the Federal Reserve and continued effective non-interest expense management, we anticipate a return to earnings in 2025 and then earnings for the foreseeable future.

Management's Overview of the Second Quarter 2025 Financial Performance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Second Quarter of 2025 Compared to the First Quarter of 2025

Non-core amounts: For the second quarter and first quarter of 2025 non-core items include $1.7 million and $2.1 million of merger related expenses, respectively.

General: Our net loss and loss before income taxes were $4.4 million and $4.8 million, respectively, in the second quarter of 2025, as compared to $4.5 million and $4.8 million, respectively, in the first quarter of 2025. Our core net loss and core loss before income taxes, which excludes merger related expenses, were $3.1 million and $3.0 million, respectively, in the second quarter of 2025, as compared to $2.9 million and $2.7 million, respectively, in the first quarter of 2025. The increase in core loss before income taxes was primarily due to an increase in the provision for credit losses, partially offset by increases in net interest income and noninterest income and lower noninterest expenses.

Income Taxes: Due to our cumulative losses over the three year period ended December 31, 2024, accounting rules required us to provide a valuation allowance for the balance of our deferred tax assets in the fourth quarter of 2024. As a result, we do not expect to recognize income tax expense until the deferred tax assets valuation allowance no longer exists. The $0.4 million and $0.3 million of