Company: MCHB
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001518715-25-000110
Chunk: 22

Company: Mechanics Bancorp
Filing Date: 2025-08-06
Form: 10-Q
Item: Item 8
Chunk 22
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Includes $1.0 million and $1.3 million of loans at June 30, 2025 and December 31, 2024, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements. Loans totaling $3.2 billion and $4.0 billion at June 30, 2025 and December 31, 2024, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $1.9 billion and $1.4 billion at June 30, 2025 and December 31, 2024, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF").Credit Risk ConcentrationsLHFI are primarily secured by real estate located in the Pacific Northwest, California and Hawaii. At June 30, 2025, and December 31, 2024 single family loans in the state of Washington represented 13% of the total LHFI portfolio. At June 30, 2025 and December 31, 2024, multifamily loans in California represented 30% of the total LHFI portfolio.Credit QualityManagement considers the level of ACL to be appropriate to cover credit losses expected over the life of the loans for the LHFI portfolio. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Bank’s historical loss experience and eight qualitative factors for current and forecasted periods. As of June 30, 2025, the historical expected loss rates increased when compared to December 31, 2024 due to adverse risk migration. During the six months ended June 30, 2025, the qualitative factors decreased primarily due to improved collateral conditions. Additionally, over the two-year forecast period in the markets in which it operates, the Bank expects neutral economic forecasts and neutral to improving collateral forecasts.In addition to the ACL for LHFI, the Company maintains a separate allowance for unfunded loan commitments which is included in accounts payable and other liabilities on our consolidated balance sheets. The allowance for unfunded commitments was $1.1 million at both June 30, 2025 and December 31, 2024.

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The Bank has elected to exclude accrued interest receivable from the evaluation of the ACL. Accrued interest on LHFI was $23.5 million and $25.1 million at