Company: MCHB
Filing Date: 2025-03-07
Form Type: 10-K
Source: 0001518715-25-000026
Chunk: 140

Company: Mechanics Bancorp
Filing Date: 2025-03-07
Form: 10-K
Item: Item 8
Chunk 140
---
Level 3 – Unobservable inputs for the asset or liability. These inputs reflect the Company's assumptions of what market participants would use in pricing the asset or liability.

92

The Company's policy regarding transfers between levels of the fair value hierarchy is that all transfers are assumed to occur at the end of the reporting period.Estimation of Fair ValueFair value is based on quoted market prices, when available. In cases where a quoted price for an asset or liability is not available, the Company uses valuation models to estimate fair value. These models incorporate inputs such as forward yield curves, loan prepayment assumptions, expected loss assumptions, market volatilities and pricing spreads utilizing market-based inputs where readily available. The Company believes its valuation methods are appropriate and consistent with those that would be used by other market participants. However, imprecision in estimating unobservable inputs and other factors may result in these fair value measurements not reflecting the amount realized in an actual sale or transfer of the asset or liability in a current market exchange.The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions and classification of the Company's assets and liabilities valued at fair value on a recurring basis.Asset/Liability classValuation methodology, inputs and assumptionsClassificationInvestment securitiesTrading securitiesFair Value is based on quoted prices in an active market.Level 1 recurring fair value measurement.Investment securities AFSObservable market prices of identical or similar securities are used where available. Level 2 recurring fair value measurement.If market prices are not readily available, value is based on discounted cash flows using the following significant inputs: •      Expected prepayment speeds •      Estimated credit losses •      Market liquidity adjustmentsLevel 3 recurring fair value measurement.LHFSSingle family loans, excluding loans transferred from held for investmentFair value is based on observable market data, including:•       Quoted market prices, where available •       Dealer quotes for similar loans •       Forward sale commitmentsLevel 2 recurring fair value measurement.When not derived from observable market inputs, fair value is based on discounted cash flows, which considers the following inputs:•       Benchmark yield curve  •       Estimated discount spread to the benchmark yield curve                                                                                            •       Expected prepayment speedsEstimated fair value classified as Level 3.Mortgage servicing rightsSingle family MSRsFor information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 9, Mortgage Banking