Merchants Bancorp (MBIN) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this bank holding company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings es ...

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.Even ...

Most of us have heard the dictum "the trend is your friend." And this is undeniably the key to success when it comes to short-term investing or trading. But it isn't easy to ensure the sustainability of a trend and profit from it.Often, the direction of a stock's price movement reverses quickly after taking a position in it, making investors incur a short-term capital loss. So, it's important to ensure that there are enough factors -- such as sound fundamentals, positive earnings estimate revisions, etc. -- ...

For the quarter ended March 2024, Merchants Bancorp (MBIN) reported revenue of $167.93 million, up 46.1% over the same period last year. EPS came in at $1.80, compared to $1.07 in the year-ago quarter.The reported revenue compares to the Zacks Consensus Estimate of $144.15 million, representing a surprise of +16.50%. The company delivered an EPS surprise of +30.43%, with the consensus EPS estimate being $1.38.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- ...

Merchants Bancorp (MBIN) came out with quarterly earnings of $1.80 per share, beating the Zacks Consensus Estimate of $1.38 per share. This compares to earnings of $1.07 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 30.43%. A quarter ago, it was expected that this bank holding company would post earnings of $1.44 per share when it actually produced earnings of $1.58, delivering a surprise of 9.72%.Over the last four quarters ...

Financial Performance - First quarter 2024 net income reached $87.1 million, a 58% increase compared to $55.0 million in the first quarter of 2023[2] - Diluted earnings per common share for the first quarter 2024 were $1.80, up 68% from $1.07 in the first quarter of 2023[2] - Net income for Q1 2024 reached $87,054,000, representing a 12% increase from Q4 2023 and a 58% increase from Q1 2023[40] - The company reported a net income allocated to common shareholders of $78,387,000, a 14% increase from Q4 2023 and a 69% increase from Q1 2023[40] - Net income for the three months ended March 31, 2024, was $87,054 million, a 12.4% increase from $77,473 million in the previous quarter and a 58.5% increase from $54,955 million in the same quarter last year[49] Asset and Loan Growth - Total assets increased to $17.8 billion, a 25% rise compared to $14.2 billion as of March 31, 2023[7] - Loans receivable amounted to $10.7 billion, reflecting a $2.1 billion increase, or 25%, compared to March 31, 2023[7] - Total assets as of March 31, 2024, reached $17,822,576 million, up from $16,952,516 million at the end of the previous quarter and $14,240,966 million a year ago, reflecting a year-over-year growth of 25.5%[49] - Loans receivable as of March 31, 2024, totaled $10,690,513 million, an increase of 5.5% from $10,127,801 million in the previous quarter and a 24.7% increase from $8,575,210 million a year ago[49] - Total loans, net of allowance for credit losses, reached $14,193,644 million as of March 31, 2024, compared to $13,272,557 million in the previous quarter and $11,430,460 million a year ago, reflecting a year-over-year growth of 23.5%[49] Income and Expense Analysis - Noninterest income surged to $40.9 million, a 187% increase compared to $14.3 million in the prior year[23] - Noninterest Income increased by $6.4 million, or 19%, to $40.9 million, driven by a $21.6 million, or 997%, rise in loan servicing fees[31] - Total noninterest expense decreased by 7% to $48,912,000 compared to Q4 2023, while increasing by 41% from Q1 2023[40] - Noninterest Expense decreased by $3.7 million, or 7%, to $48.9 million, primarily due to lower salaries and employee benefits[32] Efficiency and Ratios - The efficiency ratio improved to 29.1% in the first quarter of 2024, down from 30.3% in the first quarter of 2023[25] - The efficiency ratio improved to 29.1%, a decrease of 398 basis points from 33.1%[32] - Efficiency ratio improved to 29.13%, down from 33.11% in Q4 2023 and 30.25% in Q1 2023[42] - Return on average tangible common shareholders' equity rose to 25.34%, up 174 basis points from Q4 2023 and 645 basis points from Q1 2023[44] Deposits and Cash Management - Total deposits reached $14.0 billion, an increase of $2.6 billion compared to March 31, 2023[14] - Brokered deposits rose to $5.8 billion, a 54% increase from $3.8 billion as of March 31, 2023[15] - Cash balances stood at $508.8 million, an increase of $139.2 million compared to March 31, 2023[17] - Total deposits decreased to $13.98 billion from $14.06 billion, with noninterest-bearing deposits dropping significantly[37] Credit Losses and Risk Management - The allowance for credit losses on loans was $75.7 million, a 46% increase compared to $51.8 million as of March 31, 2023[9] - Provision for credit losses was $4,726,000, a 30% decrease from Q4 2023 and a 31% decrease from Q1 2023[40] - The company reported an allowance for credit losses on loans of $75,712 million as of March 31, 2024, compared to $71,752 million in the previous quarter and $51,838 million a year ago, indicating a proactive approach to risk management[49] Segment Performance - Merchants Bancorp operates multiple segments, including Multi-family Mortgage Banking and Mortgage Warehousing, contributing to its diversified business model[33] - Multi-family mortgage banking segment net income rose to $16,609 million for the three months ended March 31, 2024, compared to $8,580 million in the previous quarter and $1,966 million a year ago, indicating significant growth[49] - Mortgage warehousing segment net income decreased to $20,190 million for the three months ended March 31, 2024, down from $26,362 million in the previous quarter but up from $8,641 million a year ago[49] - The banking segment reported net income of $56,425 million for the three months ended March 31, 2024, an increase from $49,996 million in the previous quarter and $49,307 million a year ago[49]

PART I [Business](index=5&type=section&id=Item%201.%20Business) Merchants Bancorp is a diversified bank holding company with **$17.0 billion** in assets, operating through Multi-family Mortgage Banking, Mortgage Warehousing, and Banking segments, focusing on an originate-to-sell model Company Snapshot (as of December 31, 2023) | Metric | Value | | :--- | :--- | | Total Assets | $17.0 billion | | Total Deposits | $14.1 billion | | Shareholders' Equity | $1.7 billion | - The company's business model is designed to balance net interest income from its loan portfolio with noninterest income generated from the sale of government-backed loans, aiming for lower charge-offs and a reduced expense base[16](index=16&type=chunk)[255](index=255&type=chunk) - The company operates under a comprehensive regulatory framework, with oversight from agencies including the IDFI, Federal Reserve, FDIC, and CFPB. It became subject to heightened scrutiny after crossing the **$10 billion in assets** threshold[51](index=51&type=chunk)[52](index=52&type=chunk)[199](index=199&type=chunk) [Business Segments](index=5&type=section&id=Our%20Business%20Segments) The company's operations are divided into Multi-Family Mortgage Banking, Mortgage Warehousing, and Banking segments, each focusing on distinct lending and financial services - Multi-Family Mortgage Banking: Specializes in originating and servicing loans for affordable multi-family housing and healthcare facilities, primarily through FHA, Fannie Mae, and Freddie Mac programs. It also has a tax credit equity syndication platform for affordable housing projects[19](index=19&type=chunk)[20](index=20&type=chunk)[22](index=22&type=chunk) - Mortgage Warehousing: Provides warehouse financing facilities to non-depository financial institutions. This segment funded **$33.0 billion** in loan principal in 2023, a slight decrease from **$33.2 billion** in 2022[29](index=29&type=chunk)[30](index=30&type=chunk) - Banking: Includes a diverse range of lending and deposit services such as commercial and retail banking, agricultural lending, single-family mortgage lending (retail and correspondent), and SBA lending[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - The business segments are designed to be complementary, creating synergies such as the Banking segment funding loans for the Multi-Family segment and Mortgage Warehousing providing leads for correspondent lending[37](index=37&type=chunk)[328](index=328&type=chunk) [Human Capital](index=11&type=section&id=Human%20Capital) As of December 31, 2023, Merchants Bancorp had **618 employees** with a **10% turnover** rate, emphasizing a positive work environment and employee ownership - The company had approximately **618 employees** as of year-end 2023, with 364 located in Central Indiana[40](index=40&type=chunk) - Employee turnover was **10% turnover** in 2023. The company was named a "Top Workplace" by The Indianapolis Star in 2023[41](index=41&type=chunk) - An Employee Stock Ownership Plan (ESOP) was established in 2020 to reward employees and align their interests with shareholders. The company also makes a discretionary **3% company contribution** to employee 401(k) plans[43](index=43&type=chunk) [Supervision and Regulation](index=14&type=section&id=SUPERVISION%20AND%20REGULATION) The company and its subsidiaries are subject to extensive federal and state banking regulations, with heightened scrutiny as an institution exceeding **$10 billion in assets** - As a Bank Holding Company (BHC), Merchants Bancorp is supervised by the Federal Reserve under the BHC Act, which governs acquisitions, permitted nonbanking activities, and requires the BHC to act as a source of strength for its subsidiary banks[55](index=55&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - Merchants Bank is an Indiana-chartered bank supervised by the FDIC and IDFI. It must comply with numerous laws including the Bank Secrecy Act (BSA), USA Patriot Act, and Community Reinvestment Act (CRA)[65](index=65&type=chunk)[66](index=66&type=chunk)[93](index=93&type=chunk) - The company is subject to Basel III capital requirements. As of December 31, 2023, both the company and Merchants Bank were categorized as **well-capitalized** under the regulatory framework[77](index=77&type=chunk)[84](index=84&type=chunk) - Having exceeded **$10 billion in assets**, Merchants Bank is subject to direct examination by the Consumer Financial Protection Bureau (CFPB) for compliance with consumer protection laws[99](index=99&type=chunk)[200](index=200&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including interest rate sensitivity in mortgage banking, credit risks, operational vulnerabilities, market and liquidity risks, and extensive regulatory compliance burdens - **Mortgage Banking and Community Banking Risks**: Profitability is highly dependent on mortgage origination volume, which is sensitive to interest rate changes and competitive pricing pressures[118](index=118&type=chunk)[121](index=121&type=chunk) - **Credit and Financial Risks**: The business is sensitive to general economic conditions. An economic decline could increase nonperforming loans and charge-offs, and the **Allowance for Credit Losses (ACL)** may prove insufficient[131](index=131&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk) - **Operational Risks**: The company is exposed to system failures, cybersecurity breaches, reliance on third-party vendors, and is highly dependent on its senior executive team[155](index=155&type=chunk)[160](index=160&type=chunk)[164](index=164&type=chunk) - **Market, Interest Rate, and Liquidity Risks**: Fluctuations in interest rates can reduce net interest income and affect asset values. Liquidity depends on the ability to raise funds through deposits and borrowings, with a significant portion of deposits concentrated in large mortgage institutions[175](index=175&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - **Legal, Regulatory, and Compliance Risks**: The company is subject to heightened regulatory requirements and scrutiny for exceeding **$10 billion in assets**, which increases compliance costs and operational complexity[199](index=199&type=chunk)[200](index=200&type=chunk) [Unresolved Staff Comments](index=60&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - **None**[215](index=215&type=chunk) [Cybersecurity](index=60&type=section&id=Item%201C.%20Cybersecurity) The company manages cybersecurity risk through a comprehensive Information Security Program, overseen by the Board's IT Committee, with annual risk assessments and an Incident Response Plan - The company maintains a comprehensive Information Security Program (ISP) that includes annual risk assessments, an Incident Response Plan, and a layered control environment[218](index=218&type=chunk)[219](index=219&type=chunk) - Governance is provided by the Board's IT Committee, which includes senior management and risk experts. The committee reviews security policies, risk assessments, and incident reports, reporting quarterly to the full Board[223](index=223&type=chunk) - The Information Security Officer, who has over a decade of experience and multiple industry certifications, is responsible for implementing and monitoring the security program[224](index=224&type=chunk) [Properties](index=64&type=section&id=Item%202.%20Properties) The company owns its headquarters building in Carmel, Indiana, which is undergoing expansion, and believes its facilities are adequate for foreseeable operational needs - The Company owns its headquarters building in Carmel, Indiana, which is in the process of being expanded[227](index=227&type=chunk) [Legal Proceedings](index=64&type=section&id=Item%203.%20Legal%20Proceedings) The company is not involved in any material pending legal proceedings outside of ordinary routine litigation incidental to its business - There are no material pending legal proceedings other than ordinary routine litigation incidental to the business[228](index=228&type=chunk) [Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **None**[229](index=229&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Merchants Bancorp's common stock trades on Nasdaq under "MBIN," with the company intending to pay quarterly dividends subject to board discretion and regulatory limitations - The company's common stock trades on the Nasdaq Capital Market under the symbol "MBIN"[231](index=231&type=chunk) - The company intends to continue paying quarterly dividends, but this is subject to board discretion and various restrictions, including the requirement to pay dividends on preferred stock first[232](index=232&type=chunk)[233](index=233&type=chunk) - As a holding company, its ability to pay dividends is dependent on receiving dividends from its subsidiary, Merchants Bank, which is subject to regulatory limitations[234](index=234&type=chunk) [Selected Financial Data](index=67&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of key financial data, highlighting significant growth in assets, loans, and deposits, and includes reconciliations for non-GAAP financial measures Selected Financial Data (2023 vs. 2022) | (Dollars in thousands, except per share data) | 2023 | 2022 | | :--- | :--- | :--- | | **Balance Sheet Data:** | | | | Total Assets | $16,952,516 | $12,615,227 | | Loans held for investment | $10,199,553 | $7,470,872 | | Deposits | $14,061,460 | $10,071,345 | | Total shareholders' equity | $1,701,084 | $1,459,739 | | **Income Statement Data:** | | | | Net interest income | $448,071 | $318,551 | | Net income | $279,234 | $219,721 | | **Per Share Data (Common Stock):** | | | | Diluted earnings per share | $5.64 | $4.47 | | Tangible book value (non-GAAP) | $27.40 | $21.88 | - The company provides reconciliations for non-GAAP financial measures, including tangible common shareholders' equity, tangible book value per share, and efficiency ratio, to their nearest GAAP equivalents[240](index=240&type=chunk)[246](index=246&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=71&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, net income increased **27%** to **$279.2 million**, and diluted EPS rose **26%** to **$5.64**, driven by a **41%** increase in net interest income and significant asset and loan growth, while maintaining strong liquidity Financial Highlights (2023 vs. 2022) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Income | **$279.2 million** | **$219.7 million** | **+27%** | | Diluted EPS | **$5.64** | **$4.47** | **+26%** | | Net Interest Income | **$448.1 million** | **$318.6 million** | **+41%** | | Total Assets | **$17.0 billion** | **$12.6 billion** | **+34%** | | Loans Receivable, Net | **$10.1 billion** | **$7.4 billion** | **+36%** | - The increase in net income was primarily driven by a **$129.5 million (41%)** increase in net interest income, partially offset by higher noninterest expense and a larger provision for credit losses[251](index=251&type=chunk)[288](index=288&type=chunk) - The company completed a **$303.6 million securitization** of multi-family mortgage loans and raised **$483.7 million in equity** for its LIHTC syndication business in 2023[257](index=257&type=chunk) - In **January 2024**, the company completed the sale of its Farmers-Merchants Bank of Illinois branches to focus on its core mortgage lending businesses[257](index=257&type=chunk)[482](index=482&type=chunk) [Comparison of Operating Results (2023 vs. 2022)](index=81&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Years%20Ended%20December%2031%2C%202023%20and%202022) Net income for 2023 rose **27%** to **$279.2 million**, primarily due to a **41%** increase in net interest income, despite higher provision for credit losses and noninterest expenses - Net interest income increased by **$129.5 million (41%)**, driven by a $597.0 million increase in interest income from higher loan yields and balances, which was partially offset by a $467.4 million increase in interest expense on deposits and borrowings[289](index=289&type=chunk) - Net interest margin improved by **9 basis points to 3.06%** in 2023 from 2.97% in 2022[290](index=290&type=chunk) - The provision for credit losses increased by **$22.9 million to $40.2 million**, reflecting loan growth, changes in qualitative factors, and specific reserves[310](index=310&type=chunk)[312](index=312&type=chunk) - Noninterest income decreased by **$11.3 million (9%)**, primarily due to a **$16.0 million (25%)** decrease in gain on sale of loans as the business mix shifted towards holding more multi-family loans on the balance sheet[313](index=313&type=chunk)[314](index=314&type=chunk) - Noninterest expense increased by **$38.6 million (28%)**, mainly from a **$19.1 million** rise in salaries and benefits and a **$10.1 million** increase in FDIC deposit insurance expenses[319](index=319&type=chunk) [Operating Segment Analysis](index=91&type=section&id=Operating%20Segment%20Analysis%20for%20the%20Years%20Ended%20December%2031%2C%202023%20and%202022) In 2023, Mortgage Warehousing and Banking segments drove profitability with strong net income growth, while Multi-family Mortgage Banking saw a decline due to lower gain on sale of loans Net Income by Segment (2023 vs. 2022) | (Dollars in thousands) | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Multi-family Mortgage Banking | $36,473 | $54,642 | -33% | | Mortgage Warehousing | $73,525 | $48,604 | +51% | | Banking | $194,398 | $134,221 | +45% | - Multi-family Mortgage Banking net income decreased due to a **$31.9 million** decline in noninterest income, reflecting lower gain on sale of loans as origination volume for sale decreased[332](index=332&type=chunk)[333](index=333&type=chunk) - Mortgage Warehousing net income increased significantly despite a mere **1% decrease** in funded loan volume, outperforming the **29% industry-wide decline**[337](index=337&type=chunk)[338](index=338&type=chunk) - Banking segment net income growth was driven by a **$100.2 million** increase in net interest income from higher balances in multi-family and healthcare bridge loans[340](index=340&type=chunk) [Comparison of Financial Condition (as of Dec 31, 2023 vs. Dec 31, 2022)](index=96&type=section&id=Comparison%20of%20Financial%20Condition%20at%20December%2031%2C%202023%20and%202022) Total assets grew **34%** to **$17.0 billion**, driven by a **36%** increase in net loans, funded by a **40%** rise in deposits, including a significant increase in brokered deposits Key Balance Sheet Items | (Dollars in billions) | Dec 31, 2023 | Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Assets | **$17.0** | **$12.6** | **+34%** | | Loans Receivable, Net | **$10.1** | **$7.4** | **+36%** | | Deposits | **$14.1** | **$10.1** | **+40%** | | Shareholders' Equity | **$1.7** | **$1.5** | **+17%** | - The loan portfolio growth was led by increases of **$870.6 million** in multi-family financing, **$752.3 million** in healthcare financing, and **$664.4 million** in commercial loans[357](index=357&type=chunk) - The ACL-Loans increased to **$71.8 million (0.70% of loans)** from **$44.0 million (0.59% of loans)**, primarily due to loan growth and specific reserves in the healthcare and multi-family portfolios[361](index=361&type=chunk)[365](index=365&type=chunk) - The company significantly increased its use of brokered deposits, which grew by **$3.2 billion** to **$6.0 billion**, making up **42% of total deposits** compared to 27% in the prior year[375](index=375&type=chunk) [Liquidity and Capital Resources](index=109&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$10.6 billion** in liquid assets and unused borrowing capacity, and all regulatory capital ratios remained **well-capitalized** - The company has **$6.0 billion** in unused borrowing capacity with the FHLB and Federal Reserve, and total liquid assets plus this capacity amounted to **$10.6 billion**, or **62% of total assets**[385](index=385&type=chunk)[386](index=386&type=chunk) - Uninsured deposits totaled approximately **$2.7 billion**, representing **less than 20% of total deposits**. The company offers an insured cash sweep program to provide additional FDIC coverage[387](index=387&type=chunk) - The company announced it will redeem all outstanding shares of its **7% Series A Preferred Stock** on April 1, 2024, using cash on hand[401](index=401&type=chunk)[728](index=728&type=chunk) Merchants Bancorp Capital Ratios (December 31, 2023) | Ratio | Actual | Minimum to be Well Capitalized w/ Buffer | | :--- | :--- | :--- | | Total capital to risk-weighted assets | 11.6% | 10.5% | | Tier 1 capital to risk-weighted assets | 11.1% | 8.5% | | Common Equity Tier 1 capital | 7.8% | 7.0% | | Tier 1 capital to average assets | 10.1% | 5.0% | [Quantitative and Qualitative Disclosures About Market Risk](index=121&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk through its Asset-Liability Committee, using NII at Risk and EVE models, with results remaining within established policy limits - The company's main market risk is interest rate risk, which it manages by balancing its portfolio between fixed-rate loans held for sale and adjustable-rate loans held for investment[432](index=432&type=chunk)[434](index=434&type=chunk) Net Interest Income (NII) Sensitivity (as of Dec 31, 2023) | Rate Shock | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | +200 bps | $57,294 | +11.7% | | **+100 bps** | $29,601 | **+6.0%** | | **-100 bps** | $(36,576) | **-7.5%** | | -200 bps | $(73,311) | -15.0% | Economic Value of Equity (EVE) Sensitivity (as of Dec 31, 2023) | Rate Shock | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | +200 bps | $(79,455) | -4.7% | | **+100 bps** | $(34,800) | **-2.1% decrease** | | -100 bps | $92,793 | +5.5% | | -200 bps | $180,864 | +10.8% | [Financial Statements and Supplementary Data](index=126&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2023, with an **unqualified auditor's opinion** on both financial statements and internal control over financial reporting - The independent registered public accounting firm, FORVIS, LLP, issued an **unqualified opinion** on the consolidated financial statements as of December 31, 2023 and 2022[449](index=449&type=chunk) - The auditor's report identified the **Allowance for Credit Losses (ACL)** as a **critical audit matter** due to the high degree of subjectivity and complexity involved in management's estimates, particularly regarding qualitative factor adjustments[457](index=457&type=chunk)[460](index=460&type=chunk) - The company adopted ASU 2016-13 (CECL) for measuring credit losses effective January 1, 2022[451](index=451&type=chunk)[519](index=519&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=226&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - **None**[835](index=835&type=chunk) [Controls and Procedures](index=226&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were **effective as of December 31, 2023**, with the independent auditor issuing an **unqualified opinion** - The Chairman/CEO and CFO concluded that the company's disclosure controls and procedures were **effective as of December 31, 2023**[836](index=836&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective as of December 31, 2023**, based on the COSO framework[841](index=841&type=chunk) - The independent auditor, FORVIS, LLP, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[844](index=844&type=chunk)[845](index=845&type=chunk) [Other Information](index=230&type=section&id=Item%209B.%20Other%20Information) The company reports no other information under this item - **None**[852](index=852&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=230&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - **Not Applicable**[853](index=853&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=231&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders - Information required by this item is incorporated by reference from the Registrant's proxy statement for its 2024 annual meeting of shareholders[856](index=856&type=chunk) [Executive Compensation](index=231&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the 2024 Proxy Statement[858](index=858&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=231&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership by beneficial owners and management is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the 2024 Proxy Statement[859](index=859&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=231&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the 2024 Proxy Statement[860](index=860&type=chunk) [Principal Accounting Fees and Services](index=231&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the 2024 Proxy Statement[861](index=861&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=232&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance documents and required certifications - This item lists the financial statements and exhibits filed with the Form 10-K, including governance documents, incentive plans, and required certifications[864](index=864&type=chunk)[865](index=865&type=chunk) [Form 10-K Summary](index=234&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary under this optional item - **None**[868](index=868&type=chunk)

PART I [Item 1. Interim Financial Statements (Unaudited)](index=4&type=section&id=Item%201%20Interim%20Financial%20Statements%20(Unaudited)) This section presents Merchants Bancorp's unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, for the period ending September 30, 2023 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased by 31% to $16.5 billion as of September 30, 2023, primarily driven by a significant rise in loans receivable and deposits Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$16,495,236** | **$12,615,227** | **30.8%** | | Cash and cash equivalents | $407,238 | $226,164 | 80.1% | | Loans held for sale | $3,477,036 | $2,910,576 | 19.5% | | Loans receivable, net | $9,910,681 | $7,426,858 | 33.4% | | **Total Liabilities** | **$14,862,521** | **$11,155,488** | **33.2%** | | Total deposits | $13,007,338 | $10,071,345 | 29.2% | | Borrowings | $1,654,075 | $930,392 | 77.8% | | **Total Shareholders' Equity** | **$1,632,715** | **$1,459,739** | **11.8%** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income for Q3 2023 increased 39% to $81.5 million, driven by a 38% rise in net interest income, with nine-month net income growing 24% to $201.8 million Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $117,436 | $85,385 | 37.5% | | Provision for credit losses | $4,014 | $2,225 | 80.4% | | Noninterest Income | $36,068 | $29,186 | 23.6% | | **Net Income** | **$81,504** | **$58,488** | **39.4%** | | **Diluted EPS** | **$1.68** | **$1.22** | **37.7%** | | **Metric** | **9M 2023** | **9M 2022** | **YoY Change (%)** | | Net Interest Income | $323,746 | $223,141 | 45.1% | | Provision for credit losses | $33,484 | $10,888 | 207.5% | | Noninterest Income | $80,214 | $102,954 | -22.1% | | **Net Income** | **$201,761** | **$162,565** | **24.1%** | | **Diluted EPS** | **$4.06** | **$3.36** | **20.8%** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, operating activities resulted in a $1.1 billion net cash outflow, while financing activities provided $3.6 billion, leading to a net increase in cash of $181.1 million Net Cash Flow for Nine Months Ended Sep 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,070,774) | $1,833,916 | | Net cash used in investing activities | $(2,371,045) | $(3,049,944) | | Net cash provided by financing activities | $3,622,893 | $507,375 | | **Net Change in Cash and Cash Equivalents** | **$181,074** | **$(708,653)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies and financial data, covering topics such as the planned sale of bank branches, loan portfolio, allowance for credit losses, and regulatory capital adequacy - On September 7, 2023, the Company entered into agreements to sell its Farmers-Merchants Bank of Illinois branch locations, including approximately **$219 million in deposits** and **$49 million in loans**, pending regulatory approval[25](index=25&type=chunk)[26](index=26&type=chunk) - The Allowance for Credit Losses on Loans (ACL-Loans) increased to **$66.9 million** as of September 30, 2023, from **$44.0 million** at year-end 2022, with a provision for credit losses of **$32.4 million** for the first nine months of 2023[85](index=85&type=chunk) - The company's total loan servicing portfolio had an unpaid principal balance of **$24.5 billion** as of September 30, 2023, serving as a significant source of noninterest income and deposits[298](index=298&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=66&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2023 financial performance, highlighting a 39% net income increase, significant asset growth driven by loan expansion, and a review of financial condition, asset quality, and segment results [Financial Highlights and Business Overview](index=66&type=section&id=Financial%20Highlights%20and%20Business%20Overview) Q3 2023 saw net income increase 39% to $81.5 million, with total assets reaching $16.5 billion, supported by strong liquidity and a balanced business model - Net income for Q3 2023 increased **39% to $81.5 million**, and diluted EPS increased **38% to $1.68** compared to Q3 2022[185](index=185&type=chunk) - Total assets reached **$16.5 billion**, a **31% increase** from December 31, 2022[185](index=185&type=chunk) - The company had **$5.4 billion** in unused borrowing capacity and total liquid assets (including unused capacity) of **$10.7 billion**, representing **65% of total assets**[185](index=185&type=chunk) [Financial Condition](index=67&type=section&id=Financial%20Condition) Total assets increased 31% to $16.5 billion, driven by a $2.5 billion rise in loans receivable and a $2.9 billion increase in deposits, while shareholders' equity grew 12% to $1.6 billion - Loans receivable increased by **$2.5 billion (33%) to $9.9 billion**, with significant growth in healthcare financing (+$614.2M), commercial & CRE (+$581.4M), multi-family financing (+$573.8M), and mortgage warehouse lines (+$557.9M)[203](index=203&type=chunk)[212](index=212&type=chunk) - Deposits grew by **$2.9 billion (29%) to $13.0 billion**, with brokered deposits increasing by **$1.6 billion to $4.4 billion**, representing **34% of total deposits**[216](index=216&type=chunk)[218](index=218&type=chunk) - Uninsured deposits were approximately **$2 billion**, representing less than **20% of total deposits**, with the company's insured cash sweep program holding **$1.8 billion**[217](index=217&type=chunk) - Shareholders' equity increased by **$173.0 million (12%) to $1.6 billion**, mainly from net income of **$201.8 million**, partially offset by **$36.4 million** in dividends[225](index=225&type=chunk) [Asset Quality](index=75&type=section&id=Asset%20Quality) Asset quality deteriorated with nonperforming loans increasing to $60.2 million (0.60% of total loans), though the allowance for credit losses covered 111% of these loans Asset Quality Indicators | Metric | Sep 30, 2023 | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | :--- | | Nonperforming Loans | $60.2M | $26.7M | $26.6M | | Nonperforming Loans / Total Loans | 0.60% | 0.36% | 0.38% | | ACL-Loans / Nonperforming Loans | 111% | 165% | 147% | | Loans > 30 Days Past Due | $125.4M | $39.8M | $26.6M | - For the nine months ended Sep 30, 2023, net charge-offs were **$9.56 million**, primarily related to one customer, compared to net recoveries of **$0.5 million** in the prior-year period[230](index=230&type=chunk) [Results of Operations](index=75&type=section&id=Results%20of%20Operations) Q3 2023 net income grew 39% driven by a 38% increase in net interest income to $117.4 million, while nine-month net income rose 24% to $323.7 million, despite a decrease in noninterest income Q3 2023 vs Q3 2022 Performance | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $117.4M | $85.4M | +38% | | Net Interest Margin | 2.99% | 3.05% | -6 bps | | Provision for Credit Losses | $4.0M | $2.2M | +$1.8M | | Noninterest Income | $36.1M | $29.2M | +24% | | Noninterest Expense | $42.9M | $35.0M | +23% | 9M 2023 vs 9M 2022 Performance | Metric | 9M 2023 | 9M 2022 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $323.7M | $223.1M | +45% | | Net Interest Margin | 3.07% | 2.90% | +17 bps | | Provision for Credit Losses | $33.5M | $10.9M | +$22.6M | | Noninterest Income | $80.2M | $103.0M | -22% | | Noninterest Expense | $122.0M | $98.9M | +23% | - The decrease in noninterest income for the nine-month period was primarily due to a **$24.0 million (45%) decrease** in gain on sale of loans, reflecting a business mix shift in the multi-family portfolio[291](index=291&type=chunk)[293](index=293&type=chunk) [Segment Analysis](index=91&type=section&id=Segment%20Analysis) In Q3 2023, all segments reported increased net income, with Banking leading at $52.4 million, while for the nine-month period, Multi-family Mortgage Banking's net income decreased due to lower gain on sale of loans Segment Net Income (in thousands) | Segment | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Multi-family Mortgage Banking | $14,685 | $13,366 | $27,893 | $44,414 | | Mortgage Warehousing | $19,926 | $11,801 | $47,163 | $36,828 | | Banking | $52,445 | $39,344 | $144,402 | $94,040 | | Other | $(5,552) | $(6,023) | $(17,697) | $(12,717) | | **Total** | **$81,504** | **$58,488** | **$201,761** | **$162,565** | - Multi-family Mortgage Banking's 9-month net income fell **37%** due to a **$36.8 million decrease** in noninterest income, primarily from lower gain on sale of loans[311](index=311&type=chunk) - Mortgage Warehousing's Q3 net income grew **69%** driven by a **$11.5 million increase** in net interest income from higher yields and loan volumes, outperforming the industry[315](index=315&type=chunk)[317](index=317&type=chunk) - Banking's 9-month net income rose **54%** due to an **$84.8 million increase** in net interest income, despite higher provisions and expenses[322](index=322&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=107&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk, its primary market risk, through an asset-sensitive position, with NII and EVE sensitivity analyses showing results within policy limits - The company's primary market risk is **interest rate risk**, arising from timing differences in asset and liability repricing, embedded options, and yield curve changes[363](index=363&type=chunk)[364](index=364&type=chunk) Net Interest Income (NII) Sensitivity (Twelve Months Forward) | Rate Change (bps) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | +200 | $51,728 | 10.5% | | +100 | $26,931 | 5.5% | | -100 | $(40,859) | -8.3% | | -200 | $(82,126) | -16.7% | Economic Value of Equity (EVE) Sensitivity (Immediate Shock) | Rate Change (bps) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | +200 | $(65,764) | -4.2% | | +100 | $(25,408) | -1.6% | | -100 | $19,426 | 1.2% | | -200 | $34,279 | 2.2% | [Item 4. Controls and Procedures](index=112&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2023, the Company's disclosure controls and procedures were effective[381](index=381&type=chunk) - No changes in the Company's internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[382](index=382&type=chunk) PART II – OTHER INFORMATION [Other Information (Items 1-5)](index=113&type=section&id=Items%201-5) This section confirms no legal proceedings, no material changes to risk factors, no unregistered equity sales, no defaults on senior securities, and no other reportable information - Item 1: The company reports no legal proceedings[385](index=385&type=chunk) - Item 1A: There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[386](index=386&type=chunk) - Items 2, 3, 5: The company reports 'None' for Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, and Other Information[387](index=387&type=chunk)[388](index=388&type=chunk)[390](index=390&type=chunk) [Item 6. Exhibits](index=114&type=section&id=Item%206%20Exhibits) This section lists exhibits filed with Form 10-Q, including corporate governance documents and CEO/CFO certifications required by the Sarbanes-Oxley Act - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[392](index=392&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission File No. 001-38258 (317) 569-7420 (Registrant's telephone number, including area code) N/A (Forme ...

PART I – FINANCIAL INFORMATION [Item 1. Interim Financial Statements (Unaudited)](index=4&type=section&id=Item%201%20Interim%20Financial%20Statements%20(Unaudited)) Presents the unaudited condensed consolidated financial statements for Q1 2023, including key statements and notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew 13% to $14.2 billion in Q1 2023, driven by loan growth and funded by increased deposits and borrowings Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$14,240,966** | **$12,615,227** | **+12.9%** | | Cash and cash equivalents | $369,586 | $226,164 | +63.4% | | Loans held for sale | $2,855,250 | $2,910,576 | -1.9% | | Loans receivable, net | $8,575,210 | $7,426,858 | +15.5% | | **Total Liabilities** | **$12,735,282** | **$11,155,488** | **+14.2%** | | Total deposits | $11,345,231 | $10,071,345 | +12.6% | | Borrowings | $1,233,762 | $930,392 | +32.6% | | **Total Shareholders' Equity** | **$1,505,684** | **$1,459,739** | **+3.1%** | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income for Q1 2023 rose to $55.0 million, as a 53% surge in net interest income offset lower noninterest income Condensed Consolidated Income Statement Highlights (in thousands, except EPS) | Account | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $100,693 | $65,725 | +53.2% | | Provision for credit losses | $6,867 | $2,451 | +180.2% | | Noninterest Income | $14,264 | $34,597 | -58.8% | | Noninterest Expense | $34,772 | $31,033 | +12.0% | | **Net Income** | **$54,955** | **$50,142** | **+9.6%** | | **Diluted EPS** | **$1.07** | **$1.02** | **+4.9%** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 saw a net cash outflow from operations and increased investing use, offset by cash from financing activities Net Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(301,533) | $1,295,630 | | Net cash used in investing activities | $(1,120,176) | $(247,149) | | Net cash provided by (used in) financing activities | $1,565,131 | $(1,669,574) | | **Net Change in Cash and Cash Equivalents** | **$143,422** | **$(621,093)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details the company's accounting policies, including CECL adoption, portfolio composition, and segment reporting - The company adopted CECL on January 1, 2022, which replaced the incurred loss model with an expected loss model for measuring credit losses, resulting in a net decrease to retained earnings of **$3.6 million**[28](index=28&type=chunk)[30](index=30&type=chunk) - The loan portfolio is segmented into Mortgage warehouse, Residential real estate, Multi-family financing, Healthcare financing, Commercial, Agricultural, and Consumer loans, with the **Allowance for Credit Losses (ACL)** determined using various methodologies[80](index=80&type=chunk) - The company's business is divided into three reportable segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking, with the **Banking segment being the largest contributor to net income** for Q1 2023[161](index=161&type=chunk)[162](index=162&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes Q1 2023 financial performance, highlighting net income growth, improved margins, and strong liquidity - **Net income for Q1 2023 increased by 10% to $55.0 million** compared to Q1 2022, primarily due to a **$35.0 million (53%) increase in net interest income**[178](index=178&type=chunk)[218](index=218&type=chunk) - **Total assets grew 13% to $14.2 billion** from year-end 2022, driven by a **$1.1 billion (15%) increase in loans receivable**, particularly in multi-family and healthcare financing[178](index=178&type=chunk)[187](index=187&type=chunk)[195](index=195&type=chunk) - The company maintains **strong liquidity, with $7.8 billion in liquid assets** and unused borrowing capacity, which is significantly greater than its **$2.0 billion in uninsured deposits**[178](index=178&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - In March 2023, the company issued **$158.1 million in senior credit linked notes** to reduce risk-weighted assets and benefit regulatory capital ratios, supporting future loan growth[154](index=154&type=chunk)[184](index=184&type=chunk) [Financial Condition](index=68&type=section&id=Financial%20Condition) Total assets grew 13% to $14.2 billion in Q1 2023, driven by a $1.1 billion increase in net loans receivable Key Balance Sheet Changes (Q1 2023 vs YE 2022) | Account | Change ($M) | Change (%) | Key Driver | | :--- | :--- | :--- | :--- | | Total Assets | +$1,600 | +13% | Loan growth | | Loans Receivable, Net | +$1,100 | +15% | Growth in multi-family and healthcare loans | | Total Deposits | +$1,300 | +13% | $1.0B increase in brokered CDs | | Borrowings | +$303.4 | +33% | Increased Fed discount window usage and new credit linked notes | - **Uninsured deposits totaled approximately $2.0 billion**, representing less than 25% of total deposits, with the company offering an Insured Cash Sweep program holding $1.6 billion[205](index=205&type=chunk) - **Nonperforming loans increased to $65.3 million (0.76% of total loans)** from $26.7 million (0.36%) at year-end 2022, mainly due to delinquencies from two customers[212](index=212&type=chunk)[215](index=215&type=chunk) [Results of Operations](index=74&type=section&id=Results%20of%20Operations) Q1 2023 net income grew 10% to $55.0 million, as a 53% surge in net interest income offset a 59% drop in noninterest income Net Interest Income Analysis (Q1 2023 vs Q1 2022) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $100.7M | $65.7M | +$35.0M | | Net Interest Margin | 3.27% | 2.62% | +65 bps | | Interest Rate Spread | 2.76% | 2.55% | +21 bps | - **Noninterest income decreased by $20.3 million (59%)**, primarily due to an **$11.2 million decrease in gain on sale of loans** and a $7.4 million decrease in loan servicing fees[234](index=234&type=chunk) - The **provision for credit losses increased by $4.4 million (180%) to $6.9 million**, reflecting loan growth and changes in portfolio mix[233](index=233&type=chunk) [Segment Analysis](index=82&type=section&id=Segment%20Analysis) The Banking segment's net income surged 71%, while Multi-family Mortgage Banking and Mortgage Warehousing income declined Net Income by Segment (in thousands) | Segment | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Multi-family Mortgage Banking | $1,966 | $11,492 | -82.9% | | Mortgage Warehousing | $8,641 | $13,159 | -34.3% | | Banking | $49,307 | $28,764 | +71.4% | | **Total Net Income** | **$54,955** | **$50,142** | **+9.6%** | - The decrease in Multi-family Mortgage Banking income was primarily due to a **$12.9 million drop in gain on sale of loans**[245](index=245&type=chunk) - Mortgage Warehousing experienced a **42% decrease in loan funding volume to $5.4 billion**, which was better than the 52% industry-wide decrease[248](index=248&type=chunk) [Liquidity and Capital Resources](index=85&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position and robust capital resources, with all ratios exceeding 'well-capitalized' minimums - As of March 31, 2023, the company had **$4.0 billion in available unused borrowing capacity** with the FHLB and the Federal Reserve discount window[263](index=263&type=chunk) - The company's investment portfolio has **minimal unrealized losses**, with AOCI at $(7.7) million, representing less than 1% of total equity[255](index=255&type=chunk) Company Capital Ratios (as of March 31, 2023) | Ratio | Actual | Minimum for Adequately Capitalized | | :--- | :--- | :--- | | Total capital (to risk weighted assets) | 12.4% | 8.0% | | Tier I capital (to risk weighted assets) | 11.9% | 6.0% | | Common Equity Tier I capital | 7.9% | 4.5% | | Tier I capital (to average assets) | 11.6% | 4.0% | [Quantitative and Qualitative Disclosures About Market Risk](index=92&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, which is managed within policy limits for NII and EVE sensitivity Net Interest Income (NII) Sensitivity (Twelve Months Forward) | Rate Change (bps) | NII Change (%) | Status | | :--- | :--- | :--- | | +200 | +17.0% | Within Policy Limit (30%) | | +100 | +8.7% | Within Policy Limit (20%) | | -100 | -11.1% | Within Policy Limit (20%) | | -200 | -22.2% | Within Policy Limit (30%) | Economic Value of Equity (EVE) Sensitivity (Immediate Shock) | Rate Change (bps) | EVE Change (%) | Status | | :--- | :--- | :--- | | +200 | -1.2% | Within Policy Limit (20%) | | +100 | -0.4% | Within Policy Limit (15%) | | -100 | +0.1% | Within Policy Limit (15%) | | -200 | +0.3% | Within Policy Limit (20%) | [Controls and Procedures](index=96&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2023, the **Company's disclosure controls and procedures were effective**[302](index=302&type=chunk) - **No changes in internal control over financial reporting occurred** during the quarter that materially affected, or are reasonably likely to materially affect, these controls[303](index=303&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=97&type=section&id=Item%201%20Legal%20Proceedings) The company reported no legal proceedings for the period - There are **no legal proceedings to report**[305](index=305&type=chunk) [Risk Factors](index=97&type=section&id=Item%201A%20Risk%20Factors) No material changes were reported for risk factors disclosed in the 2022 Annual Report on Form 10-K - **No material changes have been made** to the risk factors disclosed in the 2022 Annual Report on Form 10-K[306](index=306&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=97&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds - There were **no unregistered sales of equity securities or use of proceeds to report**[307](index=307&type=chunk) [Exhibits](index=98&type=section&id=Item%206%20Exhibits) Lists exhibits filed with the Form 10-Q, including required CEO and CFO certifications - Key exhibits filed include **CEO and CFO certifications** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[312](index=312&type=chunk)