Company: MCHB
Filing Date: 2025-11-17
Form Type: 10-Q
Source: 0001518715-25-000181
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Company: Mechanics Bancorp
Filing Date: 2025-11-17
Form: 10-Q
Item: Part I, Item 3
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ITEM 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Market Risk Management

The primary objective of the following information is to provide forward-looking quantitative and qualitative information 

about our potential exposure to market risks. Market risk is defined as the sensitivity of income, fair value measurements 

and capital to changes in interest rates, foreign currency exchange rates, commodity prices and other relevant market rates 

or prices. The primary market risks that we are exposed to are price and interest rate risks. Price risk is defined as the risk 

to current or anticipated earnings or capital arising from changes in the value of either assets or liabilities that are entered 

into as part of distributing or managing risk. Interest rate risk is defined as risk to current or anticipated earnings or capital 

arising from movements in interest rates. This forward-looking information provides an indicator of how we view and 

manage our ongoing market risk exposures.

Mechanics is engaged primarily in the business of investing funds obtained from deposits and borrowings in interest 

earning loans and investments, and our primary component of market risk is sensitivity to changes in interest rates. 

Consequently, our earnings depend to a significant extent on our net interest income, which is the difference between 

interest income on loans and investments and our interest expense on deposits and borrowings. To the extent that our 

interest-bearing liabilities do not reprice or mature at the same time as our interest-bearing assets, we are subject to interest 

rate risk and corresponding fluctuations in net interest income.

For the Company, price and interest rate risks arise from the financial instruments and positions we hold. This includes 

loans, MSRs, investment securities, deposits, borrowings, long-term debt and derivative financial instruments. Due to the 

nature of our current operations, we are not subject to foreign currency exchange or commodity price risk. Our real estate 

loan portfolio is subject to risks associated with the local economies of our various markets, in particular, the regional 

economy of the western United States, including Hawaii.

The spread between the yield on interest-earning assets and the cost of interest-bearing liabilities and the relative dollar 

amounts of these assets and liabilities are the principal items affecting net interest income. Changes in net interest rates 

(interest rate risk) are influenced to a significant degree by the repricing characteristics of assets and liabilities (timing 

risk), the relationship between various rates (basis risk), customer options (option risk) and changes in the shape of the 

yield curve (time-sensitive risk). We manage