Company: MCHB
Filing Date: 2025-07-15
Form Type: S-4/A
Source: 0001140361-25-025920
Chunk: 87

Company: Mechanics Bancorp
Filing Date: 2025-07-15
Form: S-4/A
Chunk 87
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 decrease in the absolute level of interest rates, among other things, may lead to prepayments in Mechanics’ loan and mortgage-backed securities portfolios, as well as increased competition for deposits. Accordingly, changes in the general level of market interest rates may adversely affect Mechanics’ net yield on interest-earning assets, loan origination volume and Mechanics’ overall results.

In addition, Mechanics holds securities that may be sold in response to changes in market interest rates, changes in securities’ prepayment risk, increases in loan demand, general liquidity needs and other similar factors. Such securities are classified as available for sale and are carried at estimated fair value, which may fluctuate with changes in market interest rates. The effects of an increase in market interest rates have in the past resulted in, and may in the future result in, a decrease in the value of Mechanics’ available for sale investment portfolio.

Market interest rates are affected by many factors outside of Mechanics’ control, including inflation, recession, unemployment, money supply, political factors, international disorder and instability in domestic and foreign financial markets. Mechanics may not be able to accurately predict the likelihood, nature and magnitude of such changes or how and to what extent such changes may affect Mechanics’ business. Mechanics also may not be able to adequately prepare for, or compensate for, the consequences of such changes. Any failure to predict and prepare for changes in interest rates, or adjust for the consequences of these changes, may adversely affect Mechanics’ earnings and capital levels and overall results of operations and financial condition.

**Inflationary pressures and rising prices may affect results of operations and financial condition.**

Inflation rose sharply at the end of 2021 and continued rising into 2024 at elevated levels. While the rise in inflation has slowed during the latter half of 2024, inflationary pressures are still expected to remain elevated throughout 2025. Small- to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of Mechanics’ business customers to repay their loans may deteriorate, and, in some cases, this deterioration may occur quickly, which would adversely impact Mechanics’ results of operations and financial condition. Similarly, rising interest rates will negatively impact Mechanics’ mortgage business by making home mortgages more expensive for home buyers and by making mortgage refinancing transactions less likely, which would adversely impact Mechanics’ results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to Mechanics to increase,