Company: MCHB
Filing Date: 2025-07-03
Form Type: S-4
Source: 0001140361-25-024872
Chunk: 347

Company: Mechanics Bancorp
Filing Date: 2025-07-03
Form: S-4
Chunk 347
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 considers adjustments for these conditions in its allowance for credit loss estimates qualitatively where they may not be measured directly in its individual or collective assessments, including but not limited to: Control Environment, Economy, Loan Growth, Management & Staffing, Loan Review, Concentrations, Competition- Legal, Regulatory Changes and Other.

#### Individually Evaluated Loans
When a loan is assigned a substandard non-accrual or worse risk rating grade, the loan subsequently is evaluated on an individual basis and no longer evaluated on a collective basis. The net realizable value of the loan is compared to the appropriate loan basis to determine any allowance for credit losses. The Bank generally considers non-accrual loans to be collateral-dependent. The practical expedient to measure credit losses using the fair value of the collateral has been exercised.

For commercial real estate loans, the fair value of collateral is primarily based on appraisals. For owner occupied real estate loans, underlying properties are occupied by the borrower in its business, and evaluations are based on business operations used to service the debt. For non-owner occupied real estate loans, underlying properties are income-producing and evaluations are based on tenant revenues. For income producing construction and land development loans, appraisals reflect the assumption that properties are completed.

For 1-4 family residential loans that are graded substandard non-accrual, an assessment of value is made using the most recent appraisal on file. If the appraisal on file is older than two years, the latest property tax assessment is used for the assessment of value. The assessment of value is discounted for selling costs and compared against the appropriate basis of the loan to determine if a reserve might be required.

Consumer loans are charged off when they reach 90 days delinquency as a general rule. There are limited cases where the loan is not charged off due to special circumstances and is subject to the collateral review process.

**Off-Balance Sheet Credit Exposures, Including Unfunded Loan Commitments**

Beyond an ACL to cover estimated expected credit losses in all outstanding loans and leases, the Bank provides for any binding commitments to cover estimated credit losses over the contractual period, including other off-balance sheet obligations, such as Letters of Credit (standby), and unused commitments on lines of credits and loans. In order to calculate the Off Balance Sheet Reserve for the collectively evaluated segments, usage rates are supported for the unfunded commitments and then multiplied against the qualitative factor adjusted expected credit loss rate of each pool.

Classified Assets: Federal regulations provide for the classification