Company: MCHB
Filing Date: 2025-04-15
Form Type: ARS
Source: 0001518715-25-000069
Chunk: 102

Company: Mechanics Bancorp
Filing Date: 2025-04-15
Form: ARS
Chunk 102
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10,489 — 10,489 — Total assets $ 1,375,458 $ 24,830 $ 1,272,828 $ 77,800 Liabilities: Derivative Futures $ 3 $ 3 $ — $ — Forward sale commitments 288 — 288 — Interest rate swaps 10,492 — 10,492 — Total liabilities $ 10,783 $ 3 $ 10,780 $ — There were no transfers between levels of the fair value hierarchy during 2024 and 2023. Level 3 Recurring Fair Value Measurements The 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 IRCLs, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs during 2024 and 2023, see Note 9, Mortgage Banking Operations. 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 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 in the value of servicing. Changes in the fall-out factor and value of servicing do not increase or decrease based on movements in other significant unobservable inputs. 82

The Company recognizes unrealized gains and losses from the time that an IRLC is initiated until the gain