Company: MCHB
Filing Date: 2025-04-15
Form Type: ARS
Source: 0001518715-25-000069
Chunk: 92

Company: Mechanics Bancorp
Filing Date: 2025-04-15
Form: ARS
Chunk 92
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 speed assumptions, which are primarily reflected by changes in mortgage interest rates. (3) The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $1.2 million and $1.4 million in 2024 and 2023, respectively. The Company determines fair value of single family MSRs using a valuation model that calculates the net present value of estimated future cash flows. Estimates of future cash flows include contractual servicing fees, ancillary income and costs of servicing, the timing of which are impacted by assumptions, primarily expected prepayment speeds and discount rates, which relate to the underlying performance of the loans. The changes in single family MSRs measured at fair value are as follows: Years Ended December 31, (in thousands) 2024 2023 Beginning balance $ 74,249 $ 76,617 Additions and amortization: Originations 3,409 3,136 Purchases — 460 Amortization (1) (6,500) (6,378) Net additions and amortization (3,091) (2,782) Changes in fair value assumptions (2) 1,743 414 Ending balance $ 72,901 $ 74,249 (1) Represents changes due to collection/realization of expected cash flows and curtailments. (2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates. Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows: Years Ended December 31, (rates per annum) (1) 2024 2023 Constant prepayment rate ("CPR") (2) 18.07 % 14.89 % Discount rate 10.23 % 11.99 % (1) Based on a weighted average. (2) Represents the expected lifetime average CPR used in the model. 74

For single family MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below: At December 31, 2024 At December 31, 2023 Range of Inputs Average (1) Range of Inputs Average (1) CPRs 6.00% - 13.50% 6.60 % 6.80%- 32.50% 7.00 % Discount Rates 10.00% - 17