Company: MCHB
Filing Date: 2025-07-03
Form Type: S-4
Source: 0001140361-25-024872
Chunk: 349

Company: Mechanics Bancorp
Filing Date: 2025-07-03
Form: S-4
Chunk 349
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 be provided and where the borrower is experiencing financial difficulties are considered troubled debt restructurings (TDR).

#### Loan Securitizations
: The securitization process involves the sale of loans to a third-party trustee, which then sells undivided interests to other third-party investors that entitle the investors to specified cash flows generated from the securitized loans. These undivided interests are usually represented by certificates with varying interest rates, are secured by the payments on the loans acquired by the trust, and commonly include senior and subordinated classes. The Bank has no obligation to provide credit support to either the third-party investors or third-party trustee.

Generally, neither third-party investors nor third-party trustees have recourse to the Bank’s assets, and neither have the ability to require the Bank to repurchase their securities other than through enforcement of standard representations and warranties. The Bank does make certain representations and warranties concerning the loans, such as lien status, and if the Bank is found to have breached a representation or warranty, the Bank may be required to repurchase the loan from the third-party trustee. The Bank does not guarantee any securities issued by the third-party trustee. As part of the securitization transaction, the Bank represents and warrants certain terms and conditions of the loans sold. To the extent that loans are determined to not meet these criteria, the Bank is required to repurchase such loans from the trust. The Bank did not repurchase any loans in 2024, 2023 or 2022.

A transfer of financial assets in which the Bank surrenders control over the assets is accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The carrying value of the assets sold is allocated between the assets sold and the retained interest, if any, based on their relative fair values. For certain transactions, a “true sale” analysis of the treatment of the transfer under state law as if the Bank was a debtor under the bankruptcy code is required. A “true sale” legal analysis includes several legally relevant factors, such as the nature and level of recourse to the transferor and the nature of retained servicing rights. The analytical conclusion as to a “true sale” is not absolute and unconditional, but contains qualifications based on the inherent equitable powers of a bankruptcy court, as well as the unsettled state of the common law.

Once the legal isolation test has been met, other factors concerning the nature and extent of the transferor’s control over the transferred assets are taken into