Company: MCHB
Filing Date: 2025-07-15
Form Type: S-4/A
Source: 0001140361-25-025920
Chunk: 380

Company: Mechanics Bancorp
Filing Date: 2025-07-15
Form: S-4/A
Chunk 380
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 using significant observable inputs (Level 3). Assets and Liabilities Measured on a Non-Recurring Basis Collateral Dependent Loan and Lease Receivables: The fair value of collateral dependent loan and lease receivables with specific allocations of the allowance for credit losses based on collateral values is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of

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approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Loss exposure for collateral dependent loans is typically determined by the “practical expedient” which allows these loans to be assessed using the Fair Value of Collateral method, which compares the net realizable value of the collateral (fair value less costs of sale) to the amortized cost basis of the loan (the “carrying value”). The fair value of real estate collateral is based on appraisals, evaluations or internal values. Other real estate owned: Non-recurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of the carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property or internal evaluations based on comparable sales, resulting in a Level 3 classification. Appraisals for both collateral-dependent impaired loans and real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Bank. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. In cases where the carrying amount exceeds the fair value, less cost to sell, an impairment loss is recognized. Management also considers inputs regarding market trends or other relevant factors and selling and commission costs. As of the years ended December 31, 2024 and 2023, the fair value of other real estate owned as presented in the Consolidated Balance Sheets was $15.6 million and $17.0 million, respectively. Other real