Company: MCHB
Filing Date: 2025-07-03
Form Type: S-4
Source: 0001140361-25-024872
Chunk: 350

Company: Mechanics Bancorp
Filing Date: 2025-07-03
Form: S-4
Chunk 350
---
 account in order to determine whether derecognition of assets is warranted. The Bank is not eligible to become a debtor under the bankruptcy code. Instead, the insolvency of the Bank is generally governed by relevant provisions of the Federal Deposit Insurance Corporation (FDIC) Federal Deposit Insurance Act and the FDIC’s regulations. However, the “true sale” legal analysis with respect to the Bank is similar to the “true sale” analysis that would be done if the Bank were subject to the bankruptcy code. Legal opinions regarding legal isolation for the securitizations have been obtained by the Bank. The “true sale” opinion provides reasonable assurance that the purchased assets would not be characterized as the property of the transferring Bank’s receivership or conservatorship estate in the event of insolvency.

<div align='center'>F-15</div>

#### TABLE OF CONTENTS
The third-party trustee establishes special purpose entities to facilitate the sale to investors. The Bank has determined each of these special purpose entities to be a variable interest entity (VIE). The Bank does not otherwise have a controlling financial interest in the VIEs. A variable ownership interest fluctuates with the changes in the value of the VIEs’ underlying assets and liabilities. While through the servicing function the Bank controls the activities that affect the economic performance of the variable interest entities, the Bank has determined that their servicing fees are not a variable interest and the Bank is determined to be neither the primary beneficiary or have a significant variable interest. The fee arrangements paid are both customary and commensurate with the level of effort required for the services provided.

Derivative Instruments and Hedging Activities: In the ordinary course of business, the Bank enters into derivative transactions to manage various risks and to accommodate the business requirements of its customers. The fair value of derivative instruments are recognized as either assets or liabilities on the Consolidated Balance Sheets. All derivatives are evaluated at inception as to whether or not they are hedge accounting or non-hedge accounting activities. For derivative instruments designated as non-hedge accounting activities (also referred to as economic hedges), the change in fair value is recognized currently in earnings.

If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in other comprehensive income (loss) is amortized to earnings over the period the forecasted hedged transactions impact earnings.

Derivative instruments expose the Bank to credit risk in the event of nonperformance by counterparties. This risk consists primarily of the termination value of agreements where the Bank is in a favorable