Company: MCHB
Filing Date: 2025-07-03
Form Type: S-4
Source: 0001140361-25-024872
Chunk: 346

Company: Mechanics Bancorp
Filing Date: 2025-07-03
Form: S-4
Chunk 346
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ively, these form the overall loss rate for the portfolio segment. For each scenario, all future year losses for each instrument are calculated using adjusted PD and LGD. The sum of the present value of all future losses is the allowance. When multiple scenarios are considered, the results are weighted.

Single Family Residential and Home Equity Loans. The Bank uses a specific model for the Single Family Residential (SFR) and Home Equity portfolios. These portfolios represent traditional residential real estate products dependent on the borrower’s ability to service debt. Based on borrower ability to repay and underwriting metrics (FICO, LTV, loan type, geography, origination year, collateral type), the model generates loan level PD, prepayment, and LGD vectors which are then simulated through various scenario forecasts to calculate an allowance. Past due status post-origination is also a key input in the models. Current and future changes in economic conditions, including unemployment rates, home prices, index rates, and mortgage rates, are also considered.

<div align='center'>F-13</div>

#### TABLE OF CONTENTS
Commercial & Industrial, Commercial Real Estate – Owner Occupied, and Consumer Loans. A C&I loss rate model is utilized for the C&I, CRE Owner Occupied, and Consumer portfolios. The CRE Owner Occupied segment uses the same model as the C&I portfolio because repayment is reliant upon cash flow from associated businesses operating at these properties. The C&I loss rate model considers loan age, credit spread at origination, loan size at origination, regulatory risk rating, loan type, industry sector and macroeconomic factors to determine loan level lifetime expected loss rates.

#### Qualitative Factors
Estimating the timing and amounts of future losses is subject to significant management judgment as these loss cash flows rely upon estimates, such as default rates, loss severities, collateral valuations, the amounts and timing of principal payments (including any expected prepayments) or other factors that are reflective of current or future expected conditions. These estimates, in turn, depend on the duration of current overall economic conditions, industry, borrower, or portfolio specific conditions, the expected outcome of bankruptcy or insolvency proceedings, as well as, in certain circumstances, other economic factors, including the level of current and future real estate prices. All of these estimates and assumptions require significant management judgment and certain assumptions that are highly subjective. Model imprecision also exists in the allowance for credit losses estimation process due to the inherent time lag of available industry information and differences between expected and actual outcomes.

Management