Company: MCHB
Filing Date: 2025-04-15
Form Type: ARS
Source: 0001518715-25-000069
Chunk: 69

Company: Mechanics Bancorp
Filing Date: 2025-04-15
Form: ARS
Chunk 69
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 over the life of the loans for the LHFI portfolio. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Bank’s historical loss experience and eight qualitative factors for current and forecasted periods. As of December 31, 2024, the historical expected loss rates increased when compared to December 31, 2023. During 2024, expected loss rates increased primarily due to product mix and risk level composition changes and specific reserves on commercial loans, which were partially offset by a reduction in loan balances resulting from our $990 million loan sale. As of December 31, 2024, the Bank expects slight near-term deterioration in commercial collateral values offset by improvement in commercial and single family collateral values in later periods of the two-year forecast period in the markets in which it operates. Additionally, over the near term and two-year forecast period in the markets in which it operates, the Bank expects neutral economic conditions. The Company maintains a separate allowance for unfunded loan commitments which is included in accounts payable and other liabilities on our consolidated balance sheets. The allowance for unfunded commitments was $1.1 million and $1.8 million at December 31, 2024 and 2023, respectively. The Bank has elected to exclude accrued interest receivable from the evaluation of the ACL. Accrued interest on LHFI was $25.1 million and $28.9 million at December 31, 2024 and 2023, respectively, and was reported in other assets on the consolidated balance sheets. 55

Activity in the ACL for LHFI and the allowance for unfunded commitments was as follows: Years Ended December 31, (in thousands) 2024 2023 Beginning balance $ 40,500 $ 41,500 Provision for credit losses 677 (67) Net (charge-offs) recoveries (2,434) (933) Ending balance $ 38,743 $ 40,500 Allowance for unfunded commitments Beginning balance $ 1,823 $ 2,197 Provision for credit losses (677) (374) Ending balance $ 1,146 $ 1,823 Provision for credit losses: Allowance for credit losses-loans $ 677 $ (67) Allowance for unfunded commitments (677) (374) Total $ — $ (441) Activity in the ACL by loan portfolio and loan sub-class was as follows: Year Ended December 31, 2024 (in thousands) Beginning balance Charge-offs Recoveries Provision