Company: MCHB
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001518715-25-000110
Chunk: 52

Company: Mechanics Bancorp
Filing Date: 2025-08-06
Form: 10-Q
Item: Item 8
Chunk 52
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— 175 Interest rate swaps10,250 — 10,250 — Total assets$1,159,871 $34,750 $1,049,060 $76,061 Liabilities:DerivativesForward sale commitments$402 $— $402 $— Interest rate lock commitments49 — — 49 Interest rate swaps10,250 — 10,250 — Total liabilities$10,701 $— $10,652 $49 There were no transfers between levels of the fair value hierarchy during the quarters and six months ended June 30, 2025 and 2024. Level 3 Recurring Fair Value MeasurementsThe Company's Level 3 recurring fair value measurements consist of investment securities AFS, single family MSRs, single family LHFI where fair value option was elected, certain single family LHFS and interest rate lock commitments, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs during the quarter ended and six months ended June 30, 2025 and 2024, see Note 6, Mortgage Banking Operations of this Quarterly Report on Form 10-Q.The fair value of IRLCs considers several factors, including the fair value in the secondary market of the underlying loan resulting from the exercise of the commitment, the expected net future cash flows related to the associated servicing of the loan (referred to as the value of servicing) and the probability that the commitment will not be converted into a funded loan (referred to as a fall-out factor). The fair value of IRLCs on LHFS, while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. The significance of the fall-out factor to the fair value measurement of an individual IRLC is generally highest at the time that the rate lock is initiated and declines as closing procedures are performed and the underlying loan gets closer to funding. The fall-out factor applied is based on historical experience. The value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs and underlying portfolio characteristics. Because these inputs are not observable in 

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market trades, the fall-out factor and value of servicing are considered to be Level 3 inputs. The fair value of IRLCs decreases in value upon an increase in the fall-out factor and increases in value upon an increase