Company: MCHB
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001518715-25-000110
Chunk: 84

Company: Mechanics Bancorp
Filing Date: 2025-08-06
Form: 10-Q
Item: Item 8
Chunk 84
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 subject to risks associated with the local economies of our various markets, in particular, the regional economy of the western United States, including Hawaii.

The spread between the yield on interest-earning assets and the cost of interest-bearing liabilities and the relative dollar amounts of these assets and liabilities are the principal items affecting net interest income. Changes in net interest rates (interest rate risk) are influenced to a significant degree by the repricing characteristics of assets and liabilities (timing risk), the relationship between various rates (basis risk), customer options (option risk) and changes in the shape of the yield curve (time-sensitive risk). We manage the available-for-sale investment securities portfolio while maintaining a balance between risk and return. The Company's funding strategy is to grow core deposits while we efficiently supplement using wholesale borrowings.

We estimate the sensitivity of our net interest income to changes in market interest rates using an interest rate simulation model that includes assumptions related to the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments for multiple interest rate change scenarios. Interest rate sensitivity depends on certain repricing characteristics in our interest-earnings assets and interest-bearing liabilities, including the maturity structure of assets and liabilities and their repricing characteristics during the periods of changes in market interest rates. Effective interest rate risk management seeks to ensure both assets and liabilities respond to changes in interest rates within an acceptable timeframe, minimizing the impact of interest rate changes on net interest income and capital. Interest rate sensitivity is measured as the difference between the volume of assets and liabilities, at a point in time, that are subject to repricing at various time horizons, known as interest rate sensitivity gaps.

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The following table presents sensitivity gaps for these different intervals:

 At June 30, 2025(in thousands)3 Mos.or LessMore Than3 Mos.to 6 Mos.More Than6 Mos.to 12 Mos.More Than12 Mos.to 3 Yrs.More Than3 Yrs.to 5 Yrs.More Than5 to 15 Yrs.More Than15 Yrs.Non-Rate-SensitiveTotalInterest-earning assets:Cash & cash equivalents$201,080 $— $— $— $— $— $— $— $201,080 FHLB Stock$46,845 — — — — — 4,873 — 51,718 Investment securities (1)109,651 123,985 46