Company: MCHB
Filing Date: 2025-03-07
Form Type: 10-K
Source: 0001518715-25-000026
Chunk: 89

Company: Mechanics Bancorp
Filing Date: 2025-03-07
Form: 10-K
Item: Item 8
Chunk 89
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 - Credit Losses Portfolio Credit QualityThe borrower's financial condition, credit rating, credit score, asset quality or business prospectsThe borrower's ability to make scheduled interest or principal paymentsThe volume and severity of past due financial assets and the volume and severity of adversely classified or rated financial assetsRemaining PaymentsThe remaining payment terms of the financial assetsThe remaining time to maturity and the timing and extent of payments on the financial assetsVolume & NatureThe nature and volume of the entity's financial assetsCollateral ValuesThe value of underlying collateral on financial assets in which the collateral-dependent practical expedient has not been utilizedEconomicThe environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: changes and expected changes in national, regional and local economic and business conditions and developments in which the entity operates, including the condition and expected condition of various market segmentsCredit CultureThe entity's lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices, as well as knowledge of the borrower's operations or the borrower's standing in the communityThe quality of the entity's credit review systemThe experience, ability and depth of the entity's management, lending staff, and other relevant staffBusiness EnvironmentThe environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: regulatory, legal, or technological environment to which the entity has exposureThe environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as:  changes and expected changes in the general market condition of either the geographical area or the industry to which the entity has exposureAn eighth Q-Factor, Management Overlay, allows the Bank to adjust specific pools when conditions exist that were not contemplated in the model design that warrant an adjustment. The economic downturn caused by the COVID-19 pandemic and resulting accounting treatment of forbearances is an example of such a condition.The Company has chosen two years as the forecast period based on management judgment and has determined that reasonable and supportable forecasts should be made for two of the Q-Factors: Economic and Collateral values.Management has assigned weightings for each qualitative factor as well as individual metrics within each qualitative factor as to the relative importance of that factor or metric specific to each portfolio type. The Q-Factors above are evaluated using a seven-point scale ranging from significant improvement to significant deterioration.The CECL Q-Factor methodology bounds the Q-Factor adjustments by a minimum and maximum range, based on the Bank’s own historical expected loss rates for each respective pool. The