Company: MCHB
Filing Date: 2025-07-16
Form Type: 424B3
Source: 0001140361-25-026051
Chunk: 376

Company: Mechanics Bancorp
Filing Date: 2025-07-16
Form: 424B3
Chunk 376
---
 |

| Level 2 | Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |

| Level 3 | Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |

The Bank used the following methods and significant assumptions to estimate fair value in accordance with ASC 820-10. Assets and Liabilities Measured on a Recurring Basis Debt Securities Available-for-Sale: The fair values of U.S. treasury securities and equity securities are generally determined by quoted market prices in active markets, if available (Level 1). If quoted market prices are not available, the Bank employs an independent pricing service that utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and respective terms and conditions for debt instruments. The Bank employs procedures to monitor the pricing service’s assumptions and establishes processes to challenge the pricing service’s valuations that appear unusual or unexpected. Level 2 securities include U.S. government agency securities, mortgage backed securities - residential and commercial – collateralized loan obligations - and corporate bonds. When a market is illiquid or there is a lack of transparency

F-45

TABLE OF CONTENTS

around the inputs to valuation, the securities are classified as Level 3 and reliance is placed upon internally developed models, and management judgment and evaluation for valuation. The Bank had no securities available-for-sale classified as Level 3 at December 31, 2024 and 2023. Derivative Instruments: Derivatives instruments include interest rate swaps and forward loan sales. Valuation for the swaps is calculated using key valuation inputs, including the SOFR swap curve, volatility curve, reset rates and updates to swap notional amounts. These instruments are classified as Level 2 in the fair value hierarchy. Valuation for the forward loan sales is the difference between the market value at the end of the month and the contract price. The fair value is based on the market value as indicated by Fannie Mae (the Bank’s purchaser) as of month end resulting in a Level 2 recurring basis classification. The following table presents the Bank’s Financial Assets and Liabilities measured at fair value on a recurring basis as of the dates indicated: