Company: MCHB
Filing Date: 2025-07-15
Form Type: S-4/A
Source: 0001140361-25-025920
Chunk: 90

Company: Mechanics Bancorp
Filing Date: 2025-07-15
Form: S-4/A
Chunk 90
---
 products and services. As a result, Mechanics’ financial performance, including credit quality and loan growth, could be adversely affected by these policy changes.

**An adverse change in real estate market values may result in losses and otherwise adversely affect profitability.**

Many loans in Mechanics’ portfolio contain commercial or residential real estate as the primary component of collateral. The real estate collateral in such cases provides a source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. A decline in commercial or residential real estate values generally, and in California specifically, could impair the value of the collateral underlying a significant portion of Mechanics’ loan portfolio and ability to sell the collateral upon any foreclosure. In the event

<div align='center'>45</div>

#### TABLE OF CONTENTS
of a default with respect to any of these loans, the amounts Mechanics receives upon sale of the collateral may be insufficient to recover the outstanding principal and interest on the loan. As a result, Mechanics’ results of operations and financial condition may be materially adversely affected by a decrease in real estate market values.

**Mechanics relies upon independent appraisals to determine the value of the real estate that secures a substantial portion of Mechanics’ loans, and the values indicated by such appraisals may not be realizable if Mechanics is forced to foreclose upon such loans.**

A substantial portion of Mechanics’ loan portfolio consists of loans secured by real estate. Mechanics relies upon appraisers at the time of origination to estimate the value of such real estate. Appraisals are only estimates of value, and the soundness of those estimates may be affected by volatility in the real estate market or other changes in market conditions. In addition, the appraisers may make mistakes of fact or judgment, which adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease. For example, since 2020 and in light of the prevalence of hybrid work arrangements and associated lower occupancy rates, the value of commercial real estate secured by office properties has generally declined. As a result of these factors, the real estate securing some of Mechanics’ loans may be less valuable than anticipated at the time the loans were made. If a default occurs on a loan secured by real estate that is less valuable than originally estimated, then Mechanics may not be able to recover the outstanding balance of the loan and will suffer a loss.

**Some of the small- to medium-sized businesses