Company: MCHB
Filing Date: 2025-07-03
Form Type: S-4
Source: 0001140361-25-024872
Chunk: 351

Company: Mechanics Bancorp
Filing Date: 2025-07-03
Form: S-4
Chunk 351
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 position. The Bank minimizes counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, as appropriate.

The Bank also executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. These interest rate swaps are economically hedged by simultaneously entering into an offsetting interest rate swap that the Bank executes with a third party, such that the Bank minimizes its net risk exposure.

Loan Servicing: The Bank retains servicing for the automobile loans sold through securitizations and flow loan sale agreements throughout 33 states: Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Iowa, Idaho, Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, North Carolina, North Dakota, Nebraska, Nevada, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming. Income received for servicing activities is recorded in the Noninterest Income portion of the Consolidated Income Statements. As of December 31, 2024 and 2023, there were no serviced automobile loans previously sold through securitizations and there were remaining balances of $4.3 million and $8.1 million, respectively, of loans previously sold through flow loan sale agreements. The Bank estimates the cost of servicing these loans approximates the servicing income received, any resulting servicing asset or obligation is insignificant and is not recorded.

The Bank originates loans secured by first or second trust deeds on individual residential properties. Some of the residential mortgage loans are sold, with servicing retained, in the secondary market. The Bank also services participation loans sold to other institutions. Total loan balances serviced under these arrangements were $204 million and $223 million as of December 31, 2024 and 2023, respectively.

#### Other Real Estate Owned (OREO)
: Other real estate owned (OREO), which represents real estate acquired through foreclosure of real estate related loans, is initially recorded at fair value less estimated selling costs of the real estate. This valuation is based on current independent appraisals obtained at the time of acquisition, less costs to sell when acquired, thus establishing a new carrying value. Loan balances in excess of carrying value of the real estate acquired at the date of acquisition are charged to the Allowance for Credit Losses. Any subsequent operating expenses or income of such properties as well as gains and losses on the sale of OREO are included in Noninterest Expense on the Consolidated Income Statements. As of December 31, 202