Company: MCHB
Filing Date: 2025-07-03
Form Type: S-4
Source: 0001140361-25-024872
Chunk: 88

Company: Mechanics Bancorp
Filing Date: 2025-07-03
Form: S-4
Chunk 88
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’ interest income may not increase as rapidly as Mechanics’ cost of funds during periods of increasing interest rates, which could have a material adverse effect on Mechanics’ results of operations. If Mechanics needs to offer higher interest rates on checking accounts to maintain current clients or attract new clients, then Mechanics’ interest expense will increase, perhaps materially. Furthermore, if Mechanics fails to offer

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interest in a sufficient amount to keep these demand deposits, Mechanics’ core deposits may be reduced, which would require Mechanics to obtain funding in other ways or risk slowing its future asset growth.

An increase in the absolute level of interest rates may also, among other things, adversely affect the demand for loans and Mechanics’ ability to originate loans. In particular, if mortgage interest rates increase, the demand for residential mortgage loans and the refinancing of residential mortgage loans will likely decrease, which will have an adverse effect on Mechanics’ income generated from mortgage origination activities. Conversely, a decrease in the absolute level of interest rates, among other things, may lead to prepayments in Mechanics’ loan and mortgage-backed securities portfolios, as well as increased competition for deposits. Accordingly, changes in the general level of market interest rates may adversely affect Mechanics’ net yield on interest-earning assets, loan origination volume and Mechanics’ overall results.

In addition, Mechanics holds securities that may be sold in response to changes in market interest rates, changes in securities’ prepayment risk, increases in loan demand, general liquidity needs and other similar factors. Such securities are classified as available for sale and are carried at estimated fair value, which may fluctuate with changes in market interest rates. The effects of an increase in market interest rates have in the past resulted in, and may in the future result in, a decrease in the value of Mechanics’ available for sale investment portfolio.

Market interest rates are affected by many factors outside of Mechanics’ control, including inflation, recession, unemployment, money supply, political factors, international disorder and instability in domestic and foreign financial markets. Mechanics may not be able to accurately predict the likelihood, nature and magnitude of such changes or how and to what extent such changes may affect Mechanics’ business. Mechanics also may not be able to adequately prepare for, or compensate for, the consequences of such changes. Any failure to predict and prepare for changes in interest rates, or adjust for the consequences of these changes, may adversely affect Mechanics’ earnings and capital levels and overall results of operations and financial condition.

**Inflationary pressures and rising prices may affect results of