Company: MCHB
Filing Date: 2025-07-16
Form Type: 424B3
Source: 0001140361-25-026051
Chunk: 346

Company: Mechanics Bancorp
Filing Date: 2025-07-16
Form: 424B3
Chunk 346
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. The Bank does not guarantee any securities issued by the third-party trustee. As part of the securitization transaction, the Bank represents and warrants certain terms and conditions of the loans sold. To the extent that loans are determined to not meet these criteria, the Bank is required to repurchase such loans from the trust. The Bank did not repurchase any loans in 2024, 2023 or 2022.

A transfer of financial assets in which the Bank surrenders control over the assets is accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The carrying value of the assets sold is allocated between the assets sold and the retained interest, if any, based on their relative fair values. For certain transactions, a “true sale” analysis of the treatment of the transfer under state law as if the Bank was a debtor under the bankruptcy code is required. A “true sale” legal analysis includes several legally relevant factors, such as the nature and level of recourse to the transferor and the nature of retained servicing rights. The analytical conclusion as to a “true sale” is not absolute and unconditional, but contains qualifications based on the inherent equitable powers of a bankruptcy court, as well as the unsettled state of the common law.

Once the legal isolation test has been met, other factors concerning the nature and extent of the transferor’s control over the transferred assets are taken into account in order to determine whether derecognition of assets is warranted. The Bank is not eligible to become a debtor under the bankruptcy code. Instead, the insolvency of the Bank is generally governed by relevant provisions of the Federal Deposit Insurance Corporation (FDIC) Federal Deposit Insurance Act and the FDIC’s regulations. However, the “true sale” legal analysis with respect to the Bank is similar to the “true sale” analysis that would be done if the Bank were subject to the bankruptcy code. Legal opinions regarding legal isolation for the securitizations have been obtained by the Bank. The “true sale” opinion provides reasonable assurance that the purchased assets would not be characterized as the property of the transferring Bank’s receivership or conservatorship estate in the event of insolvency.

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The third-party trustee establishes special purpose entities to facilitate the sale to investors. The Bank has determined each of these special purpose entities to be a variable interest entity (VIE). The Bank does not otherwise have a controlling financial interest in the