Company: MCHB
Filing Date: 2025-04-15
Form Type: ARS
Source: 0001518715-25-000069
Chunk: 103

Company: Mechanics Bancorp
Filing Date: 2025-04-15
Form: ARS
Chunk 103
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 or loss is realized at the time the loan closes, which generally occurs within 30-90 days. For IRLCs that fall out, any unrealized gain or loss is reversed, which generally occurs at the end of the commitment period. The gains and losses recognized on IRLC derivatives generally correlates to volume of single family interest rate lock commitments made during the reporting period (after adjusting for estimated fall-out) while the amount of unrealized gains and losses realized at settlement generally correlates to the volume of single family closed loans during the reporting period. The Company uses the discounted cash flow model to estimate the fair value of certain loans that have been transferred from held for sale to held for investment and single family LHFS when the fair value of the loans is not derived using observable market inputs. The key assumption in the valuation model is the implied spread to benchmark interest rate curve. The implied spread is not directly observable in the market and is derived from third party pricing which is based on market information from comparable loan pools. The fair value estimate of single family loans that have been transferred from held for sale to held for investment are sensitive to changes in the benchmark interest rate which might result in a significantly higher or lower fair value measurement. The Company transferred certain loans from held for sale to held for investment. These loans were originated as held for sale loans where the Company had elected the fair value option. The Company determined these loans to be level 3 recurring assets as the valuation technique included a significant unobservable input. The total amount of held for investment loans where fair value option election was made was $1.3 million at December 31, 2024 and 2023. The following information presents significant Level 3 unobservable inputs used to measure fair value of certain assets: (dollars in thousands) Fair Value Valuation Technique Significant Unobservable Input Low High Weighted Average December 31, 2024 Investment securities AFS $ 1,698 Income approach Implied spread to benchmark interest rate curve 2.25% 2.25% 2.25% Single family LHFI 1,287 Income approach Implied spread to benchmark interest rate curve 2.94% 5.56% 3.69% Interest rate lock commitments, net 126 Income approach Fall-out factor 0.83% 29.13% 9.28% Value of servicing 0.78% 2.15% 1.37% December 31, 2023 Investment securities AFS $ 1,860 Income