Company: MCHB
Filing Date: 2025-07-15
Form Type: S-4/A
Source: 0001140361-25-025920
Chunk: 154

Company: Mechanics Bancorp
Filing Date: 2025-07-15
Form: S-4/A
Chunk 154
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 to a decrease in our net interest margin. Our net interest margin decreased from 3.42% in 2023 to 3.31% in 2024 due to a 70 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 32 basis point increase in the yield on interest earning assets. Yields on interest-earning assets increased as yields on investment securities increased due to a securities restructure that occurred in early 2024. In the first quarter of 2024, Mechanics sold $1.8 billion of investment securities with a weighted average yield of 1.68% and recognized a loss on the sale of $207 million. Mechanics used the proceeds to buy $1.6 billion of investment securities that yielded 5.69%. The increase in the rates paid on our interest-bearing liabilities was primarily due to higher market rates on deposits. Net interest income in 2023 decreased $68.0 million as compared to 2022 due primarily to a decrease in our net interest margin. Our net interest margin decreased from 3.67% in 2022 to 3.42% in 2023 due to a 150 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 59 basis point increase in the yield on interest-earning assets. Yields on interest-earning assets increased as yields on adjustable-rate loans increased due to higher underlying rates. The increase in the rates paid on our interest-bearing liabilities was primarily due to higher market rates on deposits. Higher borrowing rates in 2023 also resulted from utilization of the Bank Term Funding Program of $750 million, which was outstanding for most of 2023. Provision for Credit Losses on Loans and Leases: There was a $1.6 million reversal of provision for credit losses on loans and leases recognized during 2024 as compared to a $2.6 million provision in 2023 and a $25.4 million provision in 2022. For 2024, the reversal of provision primarily relates to the overall ACL decline driven by the runoff of the auto loan portfolio. In addition to portfolio runoff, improvements in management’s expectations for credit performance in the auto segment contributed to the reduction in provision. Specifically, actual losses outperformed modeled projections, prompting management to apply a more favorable scenario weighting for the auto portfolio in the ACL framework. The provision for credit losses in 2023 primarily relates to maintaining appropriate ACL levels for the auto loan portfolio, alongside the steady stream