Company: MCHB
Filing Date: 2025-07-03
Form Type: S-4
Source: 0001140361-25-024872
Chunk: 152

Company: Mechanics Bancorp
Filing Date: 2025-07-03
Form: S-4
Chunk 152
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 they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates and assumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were to occur in the events, trends or other circumstances on which our estimates or assumptions were based, these changes could have a material adverse effect on the carrying value of assets and liabilities and on our results of operations. We have identified the allowance for credit losses (“ACL”) policy and estimate as being critical because it requires management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

Mechanics utilizes a blend of economic forecast scenarios from Moody’s Analytics, specifically, the baseline, upside (“S1”), and downside (“S3”) scenarios, as key inputs in estimating our ACL. These scenarios are refreshed quarterly and provide forward-looking assumptions on key macroeconomic indicators such as GDP growth, unemployment rates, and commercial real estate conditions. Within this framework, our current expected credit loss models generate a Probability of Default (“PD”) and Loss Given Default (“LGD”) at the individual loan or pooled segment level. These components are modeled using borrower characteristics, loan terms, and scenario-specific economic conditions. The product of PD and LGD results in the expected credit loss for each instrument, which aggregates into our total ACL. In addition to model-driven outputs, we incorporate qualitative adjustments where management determines additional reserves may be warranted. These adjustments consider factors not fully captured in the models and are reassessed regularly to ensure reserves remain appropriate.

The decline in ACL during the reporting period primarily reflects the runoff of our auto loan portfolio, which we exited in the first quarter of 2023. Mechanics continuously monitors its ACL methodology to ensure it remains appropriately calibrated to reflect both modeled outputs and emerging risks.

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TABLE OF CONTENTS

Summary Financial Data for the Fiscal Years Ended December 31, 2024, 2023 and 2022

| (in thousands, except shares, per share and FTE data)         |     | Year Ended December 31, 
                    2024 |     |      2023 |     |      2022 |
|:--------------------------------------------------------------|:----|------------------------:|:----