Company: MCHB
Filing Date: 2025-07-16
Form Type: 424B3
Source: 0001140361-25-026051
Chunk: 84

Company: Mechanics Bancorp
Filing Date: 2025-07-16
Form: 424B3
Chunk 84
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 appropriate. Asymmetrical changes in interest rates, such as if short-term rates increase or decrease at a faster rate than long-term rates, can affect the slope of the yield curve. A continued inversion of the yield curve, as measured by the difference between 10-year U.S. Treasury bond yields and 3-month yields, could adversely impact the net interest income of Mechanics’ business as the spread between interest-earning assets and interest-bearing liabilities becomes further compressed. A subset of Mechanics’ loans are advanced to its customers on a variable or adjustable-rate basis and a subset of Mechanics’ loans were advanced to Mechanics’ customers on a fixed-rate basis. As a result, an increase in interest rates could result in increased loan defaults, foreclosures and charge-offs and could necessitate further increases to the allowance for credit losses, any of which could have a material adverse effect on Mechanics’ business, financial condition or results of operations. The inability of certain of Mechanics’ loans to adjust downward can contribute to increased income in periods of declining interest rates, although this result is subject to the risks that borrowers may refinance these loans during periods of declining interest rates. Also, when adjustable rate loans have interest rate floors, there is a further risk that Mechanics’ 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’