Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 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 MERCHANTS BANCORP (Exact name of registrant as specified in its charter) 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 September 30, 2025 ...

Exhibit 99.1 PRESS RELEASE Merchants Bancorp Reports Third Quarter 2025 Results For Release October 28, 2025 · Third quarter 2025 net income of $54.7 million, decreased $6.6 million compared to third quarter of 2024 and increased $16.7 million compared to the second quarter 2025. · Third quarter 2025 diluted earnings per common share of $0.97 decreased 17% compared to the third quarter of 2024 and increased 62% compared to the second quarter of 2025. · The total provision for credit losses decreased 45%, or ...

(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, 2025 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q 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 MERCHANTS BANCORP (Exact name of registrant as specified in its charter) | Ind ...

[Executive Summary & Highlights](index=1&type=section&id=1_ExecutiveSummary) Q2 2025 net income declined due to credit loss provisions, despite record tangible book value and strong liquidity [Second Quarter 2025 Financial Performance Overview](index=1&type=section&id=1_1_FinancialPerformanceOverview) Merchants Bancorp reported a significant decrease in Q2 2025 net income and diluted EPS compared to both Q2 2024 and Q1 2025, primarily due to a substantial increase in provision for credit losses. Despite this, tangible book value per common share reached a record high, and the company maintained strong liquidity and saw growth in core deposits Key Financial Highlights (Q2 2025 vs. Prior Periods) | Metric | Q2 2025 | Change vs Q2 2024 | Change vs Q1 2025 | | :-------------------------------- | :-------- | :------------------ | :------------------ | | Net Income | $38.0 million | -$38.4 million | -$20.3 million | | Diluted EPS | $0.60 | -60% | -35% | | Provision for Credit Losses | N/A | +$43.1 million | +$45.3 million | | Tangible Book Value per Common Share | $35.42 | +13% | +1% | | Total Assets | $19.1 billion | +2% (vs Dec 31, 2024) | +2% (vs Mar 31, 2025) | | Core Deposits | $11.4 billion | +22% (vs Dec 31, 2024) | +7% (vs Mar 31, 2025) | | Brokered Deposits | $1.3 billion | -50% (vs Dec 31, 2024) | -27% (vs Mar 31, 2025) | - Completed a **$373.3 million** securitization of 18 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction[1](index=1&type=chunk) [Management Commentary](index=2&type=section&id=1_2_ManagementCommentary) Management acknowledged a difficult quarter due to increased credit loss provisions and charge-offs, largely from mortgage fraud, but highlighted underlying earnings resilience, significant gain on sale of loans, and record tangible book value. They also noted a reduction in delinquencies and special mention loans, and outlined strategies to enhance asset quality and risk management - CEO Michael F. Petrie noted the difficult quarter was marked by **increased provision for credit losses** and **charge-offs** largely associated with **mortgage fraud**, but highlighted **resilience in underlying earnings**, **significant increase in gain on sale of loans**, and **record-high tangible book value**[3](index=3&type=chunk) - The company saw a **17% reduction in total delinquencies** and a **58% decline in loans receivable classified as special mention** during the quarter[3](index=3&type=chunk) - President and COO Michael J. Dunlap stated that strategies have been implemented to address **asset quality issues** and enhance **overall risk management practices** for long-term resilience[4](index=4&type=chunk) [Financial Position & Asset Quality](index=3&type=section&id=2_FinancialPositionAssetQuality) Total assets grew to $19.1 billion, but asset quality was impacted by increased credit loss allowances, while liquidity remained strong [Total Assets](index=3&type=section&id=2_1_TotalAssets) Total assets grew to $19.1 billion as of June 30, 2025, driven primarily by higher balances in mortgage warehouse portfolios, despite significant loan sale transactions. Return on average assets declined - Total assets of **$19.1 billion** at June 30, 2025, increased by **$343.4 million (2%)** compared to March 31, 2025, and **$335.5 million** compared to December 31, 2024, primarily driven by higher balances in mortgage warehouse portfolios[7](index=7&type=chunk) - Return on average assets was **0.80%** for Q2 2025, down from **1.72%** for Q2 2024 and **1.31%** for Q1 2025[8](index=8&type=chunk) [Asset Quality](index=3&type=section&id=2_2_AssetQuality) The allowance for credit losses increased due to higher provision expenses and charge-offs, mainly from multi-family property value declines and mortgage fraud investigations. While substandard loans increased, special mention loans and total criticized loans decreased, and non-performing loans also declined, partly due to charge-offs. The company continues to use credit protection arrangements to mitigate risk - Allowance for credit losses on loans increased by **$8.4 million (10%)** to **$91.8 million** as of June 30, 2025, compared to March 31, 2025, driven by a **$54.5 million** increase in provision expense partially offset by **$46.1 million** in loan charge-offs[9](index=9&type=chunk) - Charge-offs for Q2 2025 totaled **$46.1 million** for 14 customers, primarily in the multi-family loan portfolio, with no recoveries[10](index=10&type=chunk) - Loans classified as substandard increased to **$417.7 million** (June 30, 2025) from **$323.6 million** (March 31, 2025), while loans classified as special mention declined by **58%** to **$171.5 million**[11](index=11&type=chunk) - Overall criticized loans declined by **19%** to **$589.2 million**, and total delinquencies declined by **17%** compared to March 31, 2025[11](index=11&type=chunk) - Non-performing loans were **$251.5 million (2.39% of loans receivable)** as of June 30, 2025, down from **$284.6 million (2.73%)** as of March 31, 2025[13](index=13&type=chunk) - The Company has credit protection arrangements totaling **$3.7 billion** in loans to reduce risk, with **$2.8 billion** subject to these arrangements as of June 30, 2025[14](index=14&type=chunk) [Total Deposits](index=4&type=section&id=2_3_TotalDeposits) Total deposits increased, driven by growth in core demand and savings deposits. Core deposits now represent a higher percentage of total deposits, while brokered deposits significantly decreased - Total deposits of **$12.7 billion** at June 30, 2025, increased by **$280.7 million (2%)** compared to March 31, 2025, and by **$766.9 million (6%)** compared to December 31, 2024, primarily due to growth in core demand deposits and savings[15](index=15&type=chunk) - Core deposits increased by **$744.6 million (7%)** to **$11.4 billion** from March 31, 2025, and by **$2.0 billion (22%)** from December 31, 2024, representing **90%** of total deposits at June 30, 2025[16](index=16&type=chunk) - Total brokered deposits decreased by **$463.9 million (27%)** to **$1.3 billion** from March 31, 2025, and by **$1.3 billion (50%)** from December 31, 2024[17](index=17&type=chunk) [Liquidity](index=4&type=section&id=2_4_Liquidity) The company maintained strong liquidity with increased cash balances and significant unused borrowing capacity, which, combined with other liquid assets, represents a substantial portion of total assets. Its Federal Reserve Bank line of credit alone could fund a large portion of uninsured deposits - Cash balances increased by **$125.9 million (24%)** to **$647.2 million** as of June 30, 2025, compared to March 31, 2025[18](index=18&type=chunk) - Unused borrowing capacity totaled **$5.0 billion** as of June 30, 2025, an increase from **$4.7 billion** at March 31, 2025[18](index=18&type=chunk) - The Company's most liquid assets, combined with unused borrowing capacity, totaled **$11.9 billion**, or **62%** of its **$19.1 billion** total assets at June 30, 2025[20](index=20&type=chunk) - The **$3.3 billion** line of credit availability with the Federal Reserve Bank of Chicago alone could fund **106%** of its uninsured deposits[20](index=20&type=chunk) [Operating Results Analysis](index=5&type=section&id=3_OperatingResultsAnalysis) Operating results showed stable net interest income year-over-year, increased quarter-over-quarter, and significant noninterest income growth [Comparison: Three Months Ended June 30, 2025 vs. June 30, 2024](index=5&type=section&id=3_1_Q22025vsQ22024) Net interest income remained stable year-over-year, but interest income decreased due to lower yields, while interest expense decreased due to lower deposit rates. Noninterest income saw a significant increase, primarily from gain on sale of loans and syndication fees, but noninterest expense also rose substantially due to increased salaries, legal fees, and credit risk transfer premiums - Net Interest Income of **$128.7 million** remained essentially unchanged compared to **$128.1 million** in Q2 2024[23](index=23&type=chunk) - Interest Income decreased by **$23.9 million (7%)** to **$304.4 million**, primarily reflecting lower average yields on higher average balances on loans and loans held for sale[24](index=24&type=chunk) - Net interest margin decreased **16 basis points** to **2.83%**, negatively impacted by a shift in business mix towards lower-margin warehouse loans[25](index=25&type=chunk) - Interest Expense decreased by **$24.5 million (12%)** to **$175.7 million**, reflecting lower average balances at lower average rates on certificates of deposit[26](index=26&type=chunk) - Noninterest Income increased by **$19.1 million (61%)** to **$50.5 million**, driven by a **109% increase in gain on sale of loans** and a **200% increase in syndication and asset management fees**[27](index=27&type=chunk) - Noninterest Expense increased by **$27.0 million (54%)** to **$77.3 million**, primarily due to a **$15.2 million increase in salaries and employee benefits**, a **$7.1 million increase in other expenses** (taxes, legal fees for nonperforming loans), and a **$2.5 million increase in credit risk transfer premium expense**[28](index=28&type=chunk) [Comparison: Three Months Ended June 30, 2025 vs. March 31, 2025](index=7&type=section&id=3_2_Q22025vsQ12025) Net interest income increased quarter-over-quarter, driven by higher interest income from increased loan balances, despite a slight decrease in net interest margin. Noninterest income significantly surged, primarily from gain on sale of loans and syndication fees, but noninterest expense also rose due to increased staffing and costs related to nonperforming loans - Net Interest Income increased by **$6.5 million (5%)** to **$128.7 million**, primarily due to higher average balances on loans and loans held for sale[31](index=31&type=chunk) - Interest Income increased by **$17.2 million (6%)** to **$304.4 million**, reflecting an increase in average balances at lower yields on loans and loans held for sale[32](index=32&type=chunk) - Net interest margin decreased **6 basis points** to **2.83%**, impacted by a shift in business mix towards lower-margin warehouse loans[34](index=34&type=chunk) - Interest Expense increased by **$10.7 million (6%)** to **$175.7 million**, driven by higher average balances on interest-bearing checking accounts and borrowings[33](index=33&type=chunk) - Noninterest Income increased by **$26.8 million (113%)** to **$50.5 million**, primarily due to a **101% increase in gain on sale of loans** and a **186% increase in syndication and asset management fees**[35](index=35&type=chunk) - Noninterest Expense increased by **$15.7 million (25%)** to **$77.3 million**, primarily driven by a **$7.1 million increase in salaries and employee benefits** associated with the addition of production staff, and a **$6.9 million increase in other expenses** related to nonperforming loans[36](index=36&type=chunk) [Company Information](index=9&type=section&id=4_CompanyInformation) Merchants Bancorp is a diversified bank holding company with $19.1 billion in assets, operating through segments, and provides forward-looking statements [About Merchants Bancorp](index=9&type=section&id=4_1_AboutMerchantsBancorp) Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana, with $19.1 billion in assets and $12.7 billion in deposits as of June 30, 2025. It operates through segments including Multi-family Mortgage Banking, Mortgage Warehousing, and Banking, offering a range of financial services - Merchants Bancorp is a **diversified bank holding company** headquartered in Carmel, Indiana[38](index=38&type=chunk) - As of June 30, 2025, the company had **$19.1 billion in assets** and **$12.7 billion in deposits**[38](index=38&type=chunk) - Operating segments include **Multi-family Mortgage Banking**, **Mortgage Warehousing**, and **Banking**, offering various financing, servicing, and traditional banking services[38](index=38&type=chunk) [Forward-Looking Statements](index=9&type=section&id=4_2_ForwardLookingStatements) The press release contains forward-looking statements based on management's current views, which are subject to inherent uncertainties and risks. Actual results may differ materially, and the company does not undertake to update these statements - Forward-looking statements reflect **management's current views** and are based on **expectations, estimates, and projections** about the industry, management's beliefs, and certain assumptions[39](index=39&type=chunk) - These statements are **not guarantees of future performance** and are subject to **risks, assumptions, estimates, and uncertainties** that are difficult to predict[39](index=39&type=chunk) - The Company does **not undertake any obligation to update or revise** any forward-looking statements[39](index=39&type=chunk) [Contacts](index=9&type=section&id=4_3_Contacts) Provides contact information for media and investor relations - Media Contact: Rebecca Marsh, Phone: (317) 805-4356, Email: rmarsh@bankmerchants.com[40](index=40&type=chunk) - Investor Contact: Sean Sievers, Phone: (317) 663-5197, Email: ssievers@bankmerchants.com[40](index=40&type=chunk) [Consolidated Financial Statements](index=10&type=section&id=5_ConsolidatedFinancialStatements) Consolidated balance sheets and income statements for various periods detail assets, liabilities, equity, revenues, expenses, and earnings per share [Consolidated Balance Sheets](index=10&type=section&id=5_1_ConsolidatedBalanceSheets) Presents the company's consolidated balance sheet data as of June 30, 2025, March 31, 2025, December 31, 2024, September 30, 2024, and June 30, 2024, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheets (Unaudited, In thousands) | | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | --- | --- | --- | --- | --- | --- | | **Assets** | | | | | | | Cash and cash equivalents | $647,165 | $521,296 | $476,610 | $601,906 | $540,882 | | Securities purchased under agreements to resell | 1,539 | 1,550 | 1,559 | 3,279 | 3,304 | | Mortgage loans in process of securitization | 402,427 | 389,797 | 428,206 | 430,966 | 209,244 | | Securities available for sale | 936,343 | 961,183 | 980,050 | 953,063 | 1,017,019 | | Securities held to maturity | 1,548,211 | 1,606,286 | 1,664,686 | 1,755,047 | 1,291,110 | | FHLB stock and other equity securities | 217,850 | 217,850 | 217,804 | 184,050 | 67,499 | | Loans held for sale | 4,105,765 | 3,983,452 | 3,771,510 | 3,808,234 | 3,483,076 | | Loans receivable, net of allowance for credit losses | 10,432,117 | 10,343,724 | 10,354,002 | 10,261,890 | 10,933,189 | | Premises and equipment, net | 71,050 | 67,787 | 58,617 | 53,161 | 46,833 | | Servicing rights | 193,037 | 189,711 | 189,935 | 177,327 | 178,776 | | Interest receivable | 82,391 | 82,811 | 83,409 | 86,612 | 90,360 | | Goodwill | 8,014 | 8,014 | 8,014 | 8,014 | 8,014 | | Other assets and receivables | 495,295 | 424,339 | 571,330 | 329,427 | 343,116 | | **Total assets** | **$19,141,204** | **$18,797,800** | **$18,805,732** | **$18,652,976** | **$18,212,422** | | **Liabilities and Shareholders' Equity** | | | | | | | **Liabilities** | | | | | | | Total deposits | 12,686,835 | 12,406,165 | 11,919,976 | 12,891,887 | 14,917,067 | | Borrowings | 4,009,474 | 4,001,744 | 4,386,122 | 3,568,721 | 1,159,206 | | Deferred tax liabilities | 29,228 | 35,740 | 25,289 | 19,530 | 25,098 | | Other liabilities | 231,035 | 193,416 | 231,035 | 233,731 | 222,904 | | **Total liabilities** | **16,956,572** | **16,637,065** | **16,562,422** | **16,713,869** | **16,324,275** | | **Shareholders' Equity** | | | | | | | Common stock | 241,452 | 240,512 | 240,313 | 239,448 | 238,492 | | Preferred stock (Series C, D, E) | 551,291 | 551,291 | 551,291 | 328,543 | 328,543 | | Retained earnings | 1,392,136 | 1,369,009 | 1,330,995 | 1,250,176 | 1,200,778 | | Accumulated other comprehensive (loss) income | (247) | (77) | (133) | 96 | (510) | | **Total shareholders' equity** | **2,184,632** | **2,160,735** | **2,243,310** | **1,939,107** | **1,888,147** | | **Total liabilities and shareholders' equity** | **$19,141,204** | **$18,797,800** | **$18,805,732** | **$18,652,976** | **$18,212,422** | [Consolidated Statement of Income (Three Months Ended)](index=12&type=section&id=5_2_ConsolidatedStatementOfIncome_3Months) Provides the consolidated statement of income for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, including interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expense, net income, and earnings per share Consolidated Statement of Income (Unaudited, In thousands, except share data) | | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change vs. 1Q25 | Change vs. 2Q24 | | :--------------------------------------- | :------------ | :------------- | :------------ | :-------------- | :-------------- | | **Interest Income** | | | | | | | Loans | $255,641 | $239,280 | $284,421 | 7% | -10% | | Mortgage loans in process of securitization | 5,304 | 3,743 | 3,044 | 42% | 74% | | Investment securities: Available for sale | 12,095 | 12,358 | 14,784 | -2% | -18% | | Investment securities: Held to maturity | 23,166 | 24,358 | 19,799 | -5% | 17% | | FHLB stock and other equity securities (dividends) | 4,641 | 4,372 | 1,277 | 6% | 263% | | Other | 3,552 | 3,093 | 4,948 | 15% | -28% | | **Total interest income** | **304,399** | **287,204** | **328,273** | **6%** | **-7%** | | **Interest Expense** | | | | | | | Deposits | 131,375 | 123,941 | 179,651 | 6% | -27% | | Short-term borrowings | 36,981 | 33,364 | 11,612 | 11% | 218% | | Long-term borrowings | 7,324 | 7,703 | 8,891 | -5% | -18% | | **Total interest expense** | **175,680** | **165,008** | **200,154** | **6%** | **-12%** | | **Net Interest Income** | **128,719** | **122,196** | **128,119** | **5%** | **—** | | Provision for credit losses | 53,027 | 7,727 | 9,965 | 586% | 432% | | **Net Interest Income After Provision for Credit Losses** | **75,692** | **114,469** | **118,154** | **-34%** | **-36%** | | **Noninterest Income** | | | | | | | Gain on sale of loans | 23,342 | 11,619 | 11,168 | 101% | 109% | | Loan servicing fees, net | 6,138 | 4,010 | 10,827 | 53% | -43% | | Mortgage warehouse fees | 2,039 | 1,513 | 1,524 | 35% | 34% | | Syndication and asset management fees | 9,707 | 3,389 | 3,233 | 186% | 200% | | Other income | 9,254 | 3,162 | 4,599 | 193% | 101% | | **Total noninterest income** | **50,480** | **23,693** | **31,351** | **113%** | **61%** | | **Noninterest Expense** | | | | | | | Salaries and employee benefits | 43,566 | 36,419 | 28,373 | 20% | 54% | | Loan expense | 1,142 | 798 | 993 | 43% | 15% | | Occupancy and equipment | 2,494 | 2,351 | 2,239 | 6% | 11% | | Professional fees | 3,159 | 2,894 | 3,556 | 9% | -11% | | Deposit insurance expense | 7,152 | 7,228 | 5,579 | -1% | 28% | | Technology expense | 2,446 | 2,374 | 1,859 | 3% | 32% | | Credit risk transfer premium expense | 4,767 | 3,862 | 2,294 | 23% | 108% | | Other expense | 12,611 | 5,738 | 5,487 | 120% | 130% | | **Total noninterest expense** | **77,337** | **61,664** | **50,380** | **25%** | **54%** | | **Income Before Income Taxes** | **48,835** | **76,498** | **99,125** | **-36%** | **-51%** | | Provision for income taxes | 10,854 | 18,259 | 22,732 | -41% | -52% | | **Net Income** | **$37,981** | **$58,239** | **$76,393** | **-35%** | **-50%** | | Dividends on preferred stock | (10,266) | (10,265) | (7,757) | — | 32% | | Impact of preferred stock redemption | — | (5,371) | (1,823) | -100% | -100% | | **Net Income Available to Common Shareholders** | **$27,715** | **$42,603** | **$66,813** | **-35%** | **-59%** | | Basic Earnings Per Share | $0.60 | $0.93 | $1.50 | -35% | -60% | | Diluted Earnings Per Share | $0.60 | $0.93 | $1.49 | -35% | -60% | [Consolidated Statement of Income (Six Months Ended)](index=13&type=section&id=5_3_ConsolidatedStatementOfIncome_6Months) Presents the consolidated statement of income for the six months ended June 30, 2025, and June 30, 2024, detailing interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expense, net income, and earnings per share Consolidated Statement of Income (Unaudited, In thousands, except share data) | | June 30, 2025 | June 30, 2024 | Change | | :--------------------------------------- | :------------ | :------------ | :----- | | **Interest Income** | | | | | Loans | $494,921 | $556,419 | -11% | | Mortgage loans in process of securitization | 9,047 | 4,764 | 90% | | Investment securities: Available for sale | 24,453 | 29,172 | -16% | | Investment securities: Held to maturity | 47,524 | 40,321 | 18% | | FHLB stock and other equity securities (dividends) | 9,013 | 2,121 | 325% | | Other | 6,645 | 9,649 | -31% | | **Total interest income** | **591,603** | **642,446** | **-8%** | | **Interest Expense** | | | | | Deposits | 255,316 | 350,673 | -27% | | Short-term borrowings | 70,345 | 18,834 | 274% | | Long-term borrowings | 15,027 | 17,764 | -15% | | **Total interest expense** | **340,688** | **387,271** | **-12%** | | **Net Interest Income** | **250,915** | **255,175** | **-2%** | | Provision for credit losses | 60,754 | 14,691 | 314% | | **Net Interest Income After Provision for Credit Losses** | **190,161** | **240,484** | **-21%** | | **Noninterest Income** | | | | | Gain on sale of loans | 34,961 | 20,524 | 70% | | Loan servicing fees, net | 10,148 | 30,229 | -66% | | Mortgage warehouse fees | 3,552 | 2,506 | 42% | | Loss on sale of investments available for sale | — | (108) | 100% | | Syndication and asset management fees | 13,096 | 8,536 | 53% | | Other income | 12,416 | 10,538 | 18% | | **Total noninterest income** | **74,173** | **72,225** | **3%** | | **Noninterest Expense** | | | | | Salaries and employee benefits | 79,985 | 57,969 | 38% | | Loan expense | 1,940 | 1,949 | — | | Occupancy and equipment | 4,845 | 4,476 | 8% | | Professional fees | 6,053 | 7,655 | -21% | | Deposit insurance expense | 14,380 | 10,704 | 34% | | Technology expense | 4,820 | 3,713 | 30% | | Credit risk transfer premium expense | 8,629 | 2,294 | 276% | | Other expense | 18,349 | 10,532 | 74% | | **Total noninterest expense** | **139,001** | **99,292** | **40%** | | **Income Before Income Taxes** | **125,333** | **213,417** | **-41%** | | Provision for income taxes | 29,113 | 49,970 | -42% | | **Net Income** | **$96,220** | **$163,447** | **-41%** | | Dividends on preferred stock | (20,531) | (16,424) | 25% | | Impact of preferred stock redemption | (5,371) | (1,823) | 195% | | **Net Income Available to Common Shareholders** | **$70,318** | **$145,200** | **-52%** | | Basic Earnings Per Share | $1.53 | $3.30 | -54% | | Diluted Earnings Per Share | $1.53 | $3.29 | -53% | [Key Operating Results & Non-GAAP Reconciliation](index=14&type=section&id=6_KeyOperatingResultsNonGAAP) Key operating metrics and non-GAAP reconciliations for three and six-month periods cover efficiency ratios, returns on assets and equity, tangible book value, and capital ratios [Key Operating Results (Three Months Ended)](index=14&type=section&id=6_1_KeyOperatingResults_3Months) Details key operating metrics for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, including efficiency ratio, return on average assets, return on average tangible common shareholders' equity, tangible book value per common share, and capital ratios, along with a reconciliation of non-GAAP measures Key Operating Results (Unaudited, $ in thousands, except share data) | | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change vs. 1Q25 | Change vs. 2Q24 | | :--------------------------------------- | :------------ | :------------- | :------------ | :-------------- | :-------------- | | Noninterest expense | $77,337 | $61,664 | $50,380 | 25% | 54% | | Net interest income (before provision for credit losses) | 128,719 | 122,196 | 128,119 | 5% | — | | Noninterest income | 50,480 | 23,693 | 31,351 | 113% | 61% | | Total income | $179,199 | $145,889 | $159,470 | 23% | 12% | | Efficiency ratio | 43.16% | 42.27% | 31.59% | 89bps | 1,157bps | | Average assets | $18,984,925 | $17,831,950 | $17,814,191 | 6% | 7% | | Net income | 37,981 | 58,239 | 76,393 | -35% | -50% | | Return on average assets | 0.80% | 1.31% | 1.72% | (51)bps | (92)bps | | Return on average tangible common shareholders' equity | 6.75% | 10.65% | 19.55% | (390)bps | (1,280)bps | | Tangible book value per common share | $35.42 | $34.90 | $31.27 | 1% | 13% | | Tangible common shareholders' equity/tangible assets | 8.49% | 8.52% | 7.86% | (3)bps | 63bps | | Total capital/risk-weighted assets | 13.4% | 13.0% | 12.0% | | | | Tier I capital/risk-weighted assets | 12.8% | 12.4% | 11.4% | | | | Common Equity Tier I capital/risk-weighted assets | 9.5% | 9.2% | 8.7% | | | | Tier I capital/average assets | 11.5% | 12.1% | 10.6% | | | Reconciliation of Non-GAAP Measures (Three Months Ended) | | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change vs. 1Q25 | Change vs. 2Q24 | | :--------------------------------------- | :------------ | :------------- | :------------ | :-------------- | :-------------- | | Net income | $37,981 | $58,239 | $76,393 | -35% | -50% | | Less: preferred stock dividends | (10,266) | (10,265) | (7,757) | — | 32% | | Less: impact of preferred stock redemption | - | (5,371) | (1,823) | -100% | -100% | | Net income available to common shareholders | $27,715 | $42,603 | $66,813 | -35% | -59% | | Average shareholders' equity | $2,201,836 | $2,160,169 | $1,824,730 | 2% | 21% | | Less: average goodwill & intangibles | (8,065) | (8,070) | (8,140) | — | -1% | | Less: average preferred stock | (551,290) | (552,633) | (449,387) | — | 23% | | Average tangible common shareholders' equity | $1,642,481 | $1,599,466 | $1,367,203 | 3% | 20% | | Return on average tangible common shareholders' equity | 6.75% | 10.65% | 19.55% | (390)bps | (1,280)bps | | Total equity | $2,184,632 | $2,160,735 | $1888,147 | 1% | 16% | | Less: goodwill and intangibles | (8,062) | (8,068) | (8,108) | — | -1% | | Less: preferred stock | (551,291) | (551,291) | (449,387) | — | 23% | | Tangible common shareholders' equity | $1,625,279 | $1,601,376 | $1,430,652 | 1% | 14% | | Assets | $19,141,204 | $18,797,800 | $18,212,422 | 2% | 5% | | Less: goodwill and intangibles | (8,062) | (8,068) | (8,108) | — | -1% | | Tangible assets | $19,133,142 | $18,789,732 | $18,204,314 | 2% | 5% | | Ending common shares | 45,885,458 | 45,881,706 | 45,757,567 | | | | Tangible book value per common share | $35.42 | $34.90 | $31.27 | 1% | 13% | | Tangible common shareholders' equity/tangible assets | 8.49% | 8.52% | 7.86% | (3)bps | 63bps | [Key Operating Results (Six Months Ended)](index=16&type=section&id=6_2_KeyOperatingResults_6Months) Presents key operating metrics for the six months ended June 30, 2025, and June 30, 2024, including efficiency ratio, return on average assets, return on average tangible common shareholders' equity, tangible book value per common share, and capital ratios, along with a reconciliation of non-GAAP measures Key Operating Results (Unaudited, $ in thousands, except share data) | | June 30, 2025 | June 30, 2024 | Change | | :--------------------------------------- | :------------ | :------------ | :----- | | Noninterest expense | $139,001 | $99,292 | 40% | | Net interest income (before provision for credit losses) | 250,915 | 255,175 | -2% | | Noninterest income | 74,173 | 72,225 | 3% | | Total income | $325,088 | $327,400 | -1% | | Efficiency ratio | 42.76% | 30.33% | 1,243bps | | Average assets | $18,411,623 | $17,303,632 | 6% | | Net income | 96,220 | 163,447 | -41% | | Return on average assets | 1.05% | 1.89% | (84)bps | | Return on average tangible common shareholders' equity | 8.68% | 22.30% | (1,362)bps | | Tangible book value per common share | $35.42 | $31.27 | 13% | | Tangible common shareholders' equity/tangible assets | 8.49% | 7.86% | 63bps | Reconciliation of Non-GAAP Measures (Six Months Ended) | | June 30, 2025 | June 30, 2024 | Change | | :--------------------------------------- | :------------ | :------------ | :----- | | Net income | $96,220 | $163,447 | -41% | | Less: preferred stock dividends | (20,531) | (16,424) | 25% | | Less: impact of preferred stock redemption | (5,371) | (1,823) | 195% | | Net income available to common shareholders | $70,318 | $145,200 | -52% | | Average shareholders' equity | $2,181,117 | $1,786,195 | 22% | | Less: average goodwill & intangibles | (8,067) | (9,317) | -13% | | Less: average preferred stock | (551,958) | (474,497) | 16% | | Average tangible common shareholders' equity | $1,621,092 | $1,302,381 | 24% | | Return on average tangible common shareholders' equity | 8.68% | 22.30% | (1,362)bps | | Total equity | $2,184,632 | $1,888,147 | 16% | | Less: goodwill and intangibles | (8,062) | (8,108) | -1% | | Less: preferred stock | (551,291) | (449,387) | 23% | | Tangible common shareholders' equity | $1,625,279 | $1,430,652 | 14% | | Assets | $19,141,204 | $18,212,422 | 5% | | Less: goodwill and intangibles | (8,062) | (8,108) | -1% | | Tangible assets | $19,133,142 | $18,204,314 | 5% | | Ending common shares | 45,885,458 | 45,757,567 | | | | Tangible book value per common share | $35.42 | $31.27 | 13% | | Tangible common shareholders' equity/tangible assets | 8.49% | 7.86% | 63bps | [Supplemental Financial Data](index=18&type=section&id=7_SupplementalFinancialData) Detailed average balance analysis, segment performance, loan portfolio specifics including credit risk and nonperforming assets, and deposit composition are provided [Average Balance Analysis](index=18&type=section&id=7_1_AverageBalanceAnalysis) Provides a detailed average balance analysis for interest-earning assets and interest-bearing liabilities for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, including average balances, interest income/expense, and rates, as well as net interest spread and margin Average Balance Analysis (Unaudited, $ in thousands) | | June 30, 2025 | | | March 31, 2025 | | | June 30, 2024 | | | | :--------------------------------------- | :------------ | :-------- | :----- | :------------- | :-------- | :----- | :------------ | :-------- | :----- | | | Average Balance | Interest | Yield/Rate | Average Balance | Interest | Yield/Rate | Average Balance | Interest | Yield/Rate | | **Assets:** | | | | | | | | | | | Interest-earning deposits, and other interest or dividends | $539,357 | $8,193 | 6.09% | $511,077 | $7,465 | 5.92% | $438,445 | $6,225 | 5.71% | | Securities available for sale | 955,186 | 12,095 | 5.08% | 961,065 | 12,358 | 5.21% | 1,039,388 | 14,784 | 5.72% | | Securities held to maturity | 1,572,186 | 23,166 | 5.91% | 1,643,703 | 24,358 | 6.01% | 1,160,170 | 19,799 | 6.86% | | Mortgage loans in process of securitization | 376,904 | 5,304 | 5.64% | 277,426 | 3,743 | 5.47% | 234,706 | 3,044 | 5.22% | | Loans and loans held for sale | 14,826,151 | 255,641 | 6.92% | 13,751,197 | 239,280 | 7.06% | 14,347,165 | 284,421 | 7.97% | | **Total interest-earning assets** | **18,269,784** | **304,399** | **6.68%** | **17,144,468** | **287,204** | **6.79%** | **17,219,874** | **328,273** | **7.67%** | | Allowance for credit losses on loans | (90,860) | | | (86,711) | | | (76,456) | | | | Noninterest-earning assets | 806,001 | | | 774,193 | | | 670,773 | | | | **Total assets** | **$18,984,925** | | | **$17,831,950** | | | **$17,814,191** | | | | **Liabilities & Shareholders' Equity:** | | | | | | | | | | | Interest-bearing checking | $6,161,736 | 60,845 | 3.96% | $5,121,343 | 50,609 | 4.01% | $4,935,123 | 58,128 | 4.74% | | Savings deposits | 145,162 | 8 | 0.02% | 146,359 | 15 | 0.04% | 145,262 | 19 | 0.05% | | Money market | 3,354,820 | 35,137 | 4.20% | 3,398,469 | 34,506 | 4.12% | 2,788,335 | 33,207 | 4.79% | | Certificates of deposit | 3,090,250 | 35,385 | 4.59% | 3,369,269 | 38,811 | 4.67% | 6,535,651 | 88,297 | 5.43% | | **Total interest-bearing deposits** | **12,751,968** | **131,375** | **4.13%** | **12,035,440** | **123,941** | **4.18%** | **14,404,371** | **179,651** | **5.02%** | | Borrowings | 3,453,960 | 44,305 | 5.15% | 3,125,935 | 41,067 | 5.33% | 1,031,180 | 20,503 | 8.00% | | **Total interest-bearing liabilities** | **16,205,928** | **175,680** | **4.35%** | **15,161,375** | **165,008** | **4.41%** | **15,435,551** | **200,154** | **5.22%** | | Noninterest-bearing deposits | 376,217 | | | 294,248 | | | 331,246 | | | | Noninterest-bearing liabilities | 200,944 | | | 216,158 | | | 222,664 | | | | **Total liabilities** | **16,783,089** | | | **15,671,781** | | | **15,989,461** | | | | Shareholders' equity | 2,201,836 | | | 2,160,169 | | | 1,824,730 | | | | **Total liabilities and shareholders' equity** | **$18,984,925** | | | **$17,831,950** | | | **$17,814,191** | | | | Net interest income | | $128,719 | | | $122,196 | | | $128,119 | | | Net interest spread | | | 2.33% | | | 2.38% | | | 2.45% | | Net interest-earning assets | $2,063,856 | | | $1,983,093 | | | $1,784,323 | | | | Net interest margin | | | 2.83% | | | 2.89% | | | 2.99% | [Segment Performance](index=19&type=section&id=7_2_SegmentPerformance) Breaks down net income and total assets by segment (Multi-family Mortgage Banking, Mortgage Warehousing, Banking, Other) for various periods, and provides gain on sale of loans by loan type Net Income by Segment (Unaudited, $ in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Multi-family Mortgage Banking | $9,269 | $3,413 | $9,037 | $12,682 | $25,646 | | Mortgage Warehousing | 22,986 | 15,398 | 22,270 | 38,384 | 42,460 | | Banking | 14,574 | 47,107 | 52,378 | 61,681 | 108,803 | | Other | (8,848) | (7,679) | (7,292) | (16,527) | (13,462) | | **Total** | **$37,981** | **$58,239** | **$76,393** | **$96,220** | **$163,447** | Total Assets by Segment (Unaudited, $ in thousands) | Segment | June 30, 2025 Amount (%) | March 31, 2025 Amount (%) | December 31, 2024 Amount (%) | | :-------------------------- | :----------------------- | :------------------------ | :------------------------- | | Multi-family Mortgage Banking | $487,853 (2%) | $460,441 (3%) | $479,099 (2%) | | Mortgage Warehousing | 6,999,701 (37%) | 5,902,165 (31%) | 6,000,624 (32%) | | Banking | 11,404,488 (60%) | 12,002,564 (64%) | 11,761,202 (63%) | | Other | 249,162 (1%) | 432,630 (2%) | 564,807 (3%) | | **Total** | **$19,141,204 (100%)** | **$18,797,800 (100%)** | **$18,805,732 (100%)** | Gain on Sale of Loans by Loan Type (Unaudited, $ in thousands) | Loan Type | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Multi-family | $19,815 | $10,125 | $9,083 | $29,940 | $17,506 | | Single-family | 2,428 | 206 | 524 | 2,634 | 804 | | Small Business Association (SBA) | 1,099 | 1,288 | 1,561 | 2,387 | 2,214 | | **Total** | **$23,342** | **$11,619** | **$11,168** | **$34,961** | **$20,524** | Servicing Rights (Unaudited, $ in thousands) | | June 30, 2025 | March 31, 2025 | June 30, 2024 | June 30, 2025 (6 Months) | June 30, 2024 (6 Months) | | :-------------------------- | :------------ | :------------- | :------------ | :----------------------- | :----------------------- | | Balance, beginning of period | $189,711 | $189,935 | $172,200 | $189,935 | $158,457 | | Additions: Purchased servicing | 70 | - | - | 70 | - | | Additions: Originated servicing | 5,244 | 3,338 | 3,761 | 8,582 | 5,927 | | Subtractions: Paydowns | (2,246) | (2,808) | (2,252) | (5,054) | (4,639) | | Subtractions: Changes in fair value | 258 | (754) | 5,067 | (496) | 19,031 | | **Balance, end of period** | **$193,037** | **$189,711** | **$178,776** | **$193,037** | **$178,776** | [Loan Portfolio Details](index=20&type=section&id=7_3_LoanPortfolioDetails) Details the composition of loans receivable and loans held for sale, including mortgage warehouse repurchase agreements, residential real estate, multi-family financing, healthcare financing, commercial, agricultural, and consumer loans. It also provides a loan credit risk profile, nonperforming loan data, and delinquent loan information Loans Receivable and Loans Held for Sale (Unaudited, $ in thousands) | | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :------------- | :---------------- | | Mortgage warehouse repurchase agreements | $1,843,742 | $1,408,239 | $1,446,068 | | Residential real estate | 988,783 | 1,332,601 | 1,322,853 | | Multi-family financing | 4,833,548 | 4,600,117 | 4,624,299 | | Healthcare financing | 1,442,095 | 1,583,290 | 1,484,483 | | Commercial and commercial real estate | 1,328,765 | 1,418,741 | 1,476,211 | | Agricultural production and real estate | 82,425 | 79,190 | 77,631 | | Consumer and margin loans | 4,570 | 4,959 | 6,843 | | **Loans receivable** | **10,523,928** | **10,427,137** | **10,438,388** | | Less: Allowance for credit losses on loans | 91,811 | 83,413 | 84,386 | | **Loans receivable, net** | **$10,432,117** | **$10,343,724** | **$10,354,002** | | Loans held for sale | 4,105,765 | 3,983,452 | 3,771,510 | | **Total loans, net of allowance** | **$14,537,882** | **$14,327,176** | **$14,125,512** | Loan Credit Risk Profile (Unaudited, $ in thousands) | | June 30, 2025 Amount (%) | March 31, 2025 Amount (%) | December 31, 2024 Amount (%) | | :---------------- | :----------------------- | :------------------------ | :------------------------- | | Pass | $9,934,759 (94.4%) | $9,695,595 (93.0%) | $9,741,087 (93.3%) | | Special mention | 171,512 (1.6%) | 407,895 (3.9%) | 379,969 (3.6%) | | Substandard | 417,657 (4.0%) | 323,647 (3.1%) | 317,332 (3.0%) | | Doubtful | — (—) | — (—) | — (—) | | **Loans receivable** | **$10,523,928 (100.0%)** | **$10,427,137 (100.0%)** | **$10,438,388 (100.0%)** | | Charge-offs (year-to-date) | $56,570 | $10,507 | $10,587 | | Recoveries (year-to-date) | $28 | $28 | $136 | Nonperforming Loans (Unaudited, $ in thousands) | | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :------------- | :---------------- | | Nonaccrual loans | $250,818 | $284,019 | $279,716 | | 90 days past due and still accruing | 714 | 585 | 6 | | **Total nonperforming loans** | **$251,532** | **$284,604** | **$279,722** | | Other real estate owned | $7,049 | $7,049 | $8,209 | | **Total nonperforming assets** | **$258,581** | **$291,653** | **$287,931** | | Nonperforming loans to total loans receivable | 2.39% | 2.73% | 2.68% | | Nonperforming assets to total assets | 1.35% | 1.55% | 1.53% | Delinquent Loans (Unaudited, $ in thousands) | | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :------------- | :---------------- | | Delinquent loans: Loans receivable | $279,009 | $304,560 | $292,263 | | Delinquent loans: Loans held for sale | - | 30,103 | 32,343 | | **Total delinquent loans** | **$279,009** | **$334,663** | **$324,606** | | Total loans receivable and loans held for sale | $14,629,693 | $14,410,589 | $14,209,898 | | Delinquent loans to total loans | 1.91% | 2.32% | 2.28% | [Deposit Composition](index=21&type=section&id=7_4_DepositComposition) Provides a detailed breakdown of deposits, distinguishing between noninterest-bearing and interest-bearing deposits, and further categorizing them into core demand, brokered demand, savings, and certificates of deposit Deposits (Unaudited, $ in thousands) | | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :------------- | :---------------- | | Noninterest-bearing deposits: Core demand deposits | $315,523 | $313,296 | $239,005 | | Interest-bearing deposits: Core demand deposits | 6,066,933 | 5,432,133 | 4,319,512 | | Interest-bearing deposits: Brokered demand deposits | 250,000 | - | - | | **Total interest-bearing demand deposits** | **6,316,933** | **5,432,133** | **4,319,512** | | Savings deposits: Core savings deposits | 3,703,270 | 3,618,210 | 3,442,111 | | Savings deposits: Brokered savings deposits | 358 | 353 | 859 | | **Total savings deposits** | **3,703,628** | **3,618,563** | **3,442,970** | | Certificates of deposit: Core certificates of deposits | 1,346,630 | 1,324,126 | 1,385,270 | | Certificates of deposit: Brokered certificates of deposits | 1,004,121 | 1,718,047 | 2,533,219 | | **Total certificates of deposits** | **2,350,751** | **3,042,173** | **3,918,489** | | **Total interest-bearing deposits** | **12,371,312** | **12,092,869** | **11,680,971** | | **Total deposits** | **$12,686,835** | **$12,406,165** | **$11,919,976** | | **Total core deposits** | **$11,432,356** | **$10,687,765** | **$9,385,898** | | **Total brokered deposits** | **$1,254,479** | **$1,718,400** | **$2,534,078** | | **Total deposits** | **$12,686,835** | **$12,406,165** | **$11,919,976** |

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 March 31, 2025 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 MERCHANTS BANCORP (Exact name of registrant as specified in its charter) Indi ...

Exhibit 99.1 PRESS RELEASE Merchants Bancorp Reports First Quarter 2025 Results For Release April 28, 2025 · First quarter 2025 net income of $58.2 million, decreased $28.8 million compared to first quarter of 2024 and decreased $37.4 million compared to the fourth quarter 2024, reflecting market uncertainty that delayed origination closings and permanent loan conversions in a growing pipeline, which negatively impacted the recognition of gain on sale and net interest margin. The decrease in net income was ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [Mark One] ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | INDIANA | 20-5747400 | | --- | --- | | (State or other jurisdiction of | (I.R.S. Employer | | incorporation or organization) | Identification No.) | | 410 Monon Blvd. Carmel, ...

Exhibit 99.1 PRESS RELEASE Merchants Bancorp Reports Fourth Quarter 2024 Results CARMEL, Indiana – (PR Newswire) - Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank, today reported fourth quarter 2024 net income of $95.7 million, or diluted earnings per common share of $1.85. This compared to $77.5 million, or diluted earnings per common share of $1.58 in the fourth quarter of 2023, and compared to $61.3 million, or diluted earnings per common share of $1.17 i ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Merchants Bancorp's unaudited condensed consolidated financial statements for Q3 and YTD September 30, 2024, along with detailed notes [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Q3 2024 net income decreased to $61.3 million, while YTD net income increased to $224.7 million, with total assets growing to $18.7 billion and deposits decreasing, offset by higher borrowings Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | December 31, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$18,652,976** | **$16,952,516** | **+10.0%** | | Loans receivable, net | $10,261,890 | $10,127,801 | +1.3% | | Loans held for sale | $3,808,234 | $3,144,756 | +21.1% | | Securities held to maturity | $1,755,047 | $1,204,217 | +45.7% | | **Total Liabilities** | **$16,713,869** | **$15,251,432** | **+9.6%** | | Total deposits | $12,891,887 | $14,061,460 | -8.3% | | Borrowings | $3,568,721 | $964,127 | +270.1% | | **Total Shareholders' Equity** | **$1,939,107** | **$1,701,084** | **+14.0%** | Condensed Consolidated Income Statement Highlights (in thousands, except EPS) | Metric | Q3 2024 | Q3 2023 | Change (%) | YTD 2024 | YTD 2023 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $132,821 | $117,436 | +13.1% | $387,996 | $323,746 | +19.8% | | Provision for credit losses | $6,898 | $4,014 | +71.9% | $21,589 | $33,484 | -35.5% | | Noninterest Income | $16,742 | $36,068 | -53.6% | $88,967 | $80,214 | +10.9% | | **Net Income** | **$61,273** | **$81,504** | **-24.8%** | **$224,720** | **$201,761** | **+11.4%** | | **Diluted EPS** | **$1.17** | **$1.68** | **-30.4%** | **$4.45** | **$4.06** | **+9.6%** | - For the nine months ended September 30, 2024, net cash used in operating activities was **$825.3 million** and in investing activities was **$830.8 million**, while financing activities provided **$1.67 billion** in cash, primarily from a significant increase in borrowings[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, loan portfolio composition, increased credit loss allowance, investment changes, a strategic shift to borrowings, regulatory capital, and derivative use - On January 26, 2024, the Company completed the sale of its Farmers-Merchants Bank of Illinois branches, selling approximately **$60.8 million** in assets and **$230.6 million** in liabilities, recognizing a net gain of **$715,000**[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) Loan Portfolio Composition (in thousands) | Loan Category | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Mortgage warehouse repurchase agreements | $1,213,429 | $752,468 | | Residential real estate | $1,317,234 | $1,324,305 | | Multi-family financing | $4,456,129 | $4,006,160 | | Healthcare financing | $1,733,674 | $2,356,689 | | Commercial and commercial real estate | $1,548,689 | $1,643,081 | | **Total Loans Receivable (Gross)** | **$10,346,439** | **$10,199,553** | - Nonaccrual loans increased significantly to **$210.8 million** as of September 30, 2024, from **$73.8 million** at December 31, 2023, primarily driven by multi-family and healthcare loans[101](index=101&type=chunk) - The Company completed a **$628.9 million** private securitization of healthcare bridge loans on September 26, 2024, selling them into a REMIC and repurchasing the **$534.5 million** senior security, which was classified as held-to-maturity[111](index=111&type=chunk) - In May 2024, the Company issued **2.4 million** shares of common stock in a public offering, receiving net proceeds of **$97.7 million**. In April 2024, all outstanding shares of the 7% Series A Preferred Stock were redeemed for **$52 million**[195](index=195&type=chunk)[199](index=199&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=76&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2024 net income decline to $61.3 million due to higher provisions and fair value adjustments, offset by YTD growth to $224.7 million, alongside a strategic funding shift, rising nonperforming loans, and strong capital [Financial Condition](index=81&type=section&id=Financial%20Condition) Total assets grew 10% to $18.7 billion, driven by loans held for sale and securities, while deposits decreased 8% and borrowings increased 270% to $3.6 billion, bolstering shareholders' equity to $1.9 billion - Total assets increased by **$1.7 billion** (10%) to **$18.7 billion** at September 30, 2024, from December 31, 2023, primarily due to growth in loans held for sale and securities held to maturity[246](index=246&type=chunk) - The company strategically shifted its funding mix, decreasing total deposits by **$1.2 billion** (8%) while increasing borrowings by **$2.6 billion** (270%), mainly through additional FHLB advances, which were a more cost-effective option[263](index=263&type=chunk)[270](index=270&type=chunk) - Brokered deposits were reduced by **53%** to **$2.8 billion**, representing **22%** of total deposits, down from **42%** at year-end 2023[267](index=267&type=chunk) [Asset Quality](index=87&type=section&id=Asset%20Quality) Asset quality deteriorated with nonperforming loans rising to $210.9 million (2.04% of total loans) due to interest rate pressures on variable-rate multi-family and healthcare loans, leading to increased substandard loans and specific reserves - Total nonperforming loans rose to **$210.9 million** (**2.04%** of total loans) at Q3 2024, a significant increase from **$82.0 million** (**0.80%**) at year-end 2023, attributed to interest rate pressure on variable-rate multi-family and healthcare loans[274](index=274&type=chunk) - Loans classified as Substandard increased to **$287.8 million** from **$128.6 million** at year-end 2023, with specific reserves of **$19.2 million** established for these impaired loans[280](index=280&type=chunk) - The company is actively managing credit risk through credit protection arrangements (credit linked notes and a credit default swap) covering a **$1.3 billion** loan portfolio as of September 30, 2024[283](index=283&type=chunk) [Results of Operations](index=89&type=section&id=Results%20of%20Operations) Q3 2024 net income decreased 25% to $61.3 million due to lower servicing fees, higher expenses, and increased credit loss provisions, while YTD net income grew 11% to $224.7 million driven by net interest income and lower provisions Q3 2024 vs Q3 2023 Performance Drivers | Metric | Change | Reason | | :--- | :--- | :--- | | Net Interest Income | +$15.4M (+13%) | Higher average loan balances | | Provision for Credit Losses | +$2.9M (+72%) | Increased specific reserves on certain borrowers | | Loan Servicing Fees | -$18.9M (-109%) | Negative fair market value adjustments on servicing rights and derivatives | | Noninterest Expense | +$18.4M (+43%) | Higher commissions, deposit insurance, and credit default swap premiums | Nine Months 2024 vs 2023 Performance Drivers | Metric | Change | Reason | | :--- | :--- | :--- | | Net Interest Income | +$64.3M (+20%) | Higher average balances and yields on earning assets | | Provision for Credit Losses | -$11.9M (-36%) | Lower loan charge-offs and fewer changes to qualitative factors | | Noninterest Income | +$8.8M (+11%) | Higher gain on sale of loans and syndication fees | | Noninterest Expense | +$38.6M (+32%) | Higher salaries/commissions and deposit insurance | - Net interest margin for Q3 2024 was **2.99%**, unchanged from Q3 2023. The nine-month NIM was **3.04%**, a slight decrease from **3.07%** in the prior year, negatively impacted by interest reversals on new nonaccrual loans[288](index=288&type=chunk)[319](index=319&type=chunk) [Segment Performance](index=107&type=section&id=Segment%20Performance) In Q3 2024, all three segments experienced net income declines, with Multi-family Mortgage Banking down 45% to $8.1 million, Mortgage Warehousing down 20% to $15.9 million, and Banking down 14% to $45.0 million Segment Net Income (in thousands) | Segment | Q3 2024 | Q3 2023 | Change (%) | YTD 2024 | YTD 2023 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Multi-family Mortgage Banking | $8,068 | $14,685 | -45.1% | $33,714 | $27,893 | +20.9% | | Mortgage Warehousing | $15,940 | $19,926 | -20.0% | $58,400 | $47,163 | +23.8% | | Banking | $44,983 | $52,445 | -14.2% | $153,786 | $144,402 | +6.5% | - The Multi-family Mortgage Banking segment's Q3 income was heavily impacted by a **$5.1 million** negative fair value adjustment to servicing rights, compared to a **$10.4 million** positive adjustment in Q3 2023[358](index=358&type=chunk)[359](index=359&type=chunk) - The Mortgage Warehousing segment funded **$13.1 billion** in loans in Q3 2024, a **22%** increase YoY, outperforming the industry's **21%** growth[367](index=367&type=chunk) [Liquidity and Capital Resources](index=112&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $5.1 billion in unused borrowing capacity and $11.1 billion in total liquid assets, while capital resources remain robust with all regulatory ratios exceeding 'well capitalized' thresholds - The company has **$5.1 billion** in available unused borrowing capacity with the FHLB and Federal Reserve discount window as of September 30, 2024[376](index=376&type=chunk) - Total liquid assets plus unused borrowing capacity equaled **$11.1 billion** (**59%** of total assets), providing substantial coverage for uninsured deposits (approximately **20%** of total deposits)[377](index=377&type=chunk)[378](index=378&type=chunk) Company Capital Ratios | Ratio | September 30, 2024 | Minimum to be Well Capitalized w/ Buffer | | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 12.2% | 10.5% | | Tier I capital (to risk-weighted assets) | 11.6% | 8.5% | | Common Equity Tier I capital | 8.9% | 7.0% | | Tier I capital (to average assets) | 10.5% | 5.0% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=120&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, managed by ALCO, showing asset sensitivity where a +100 basis point rate increase is projected to raise Net Interest Income by 7.1% over 12 months, with all risk metrics within policy limits - The company is positioned to be asset sensitive, where an increase in short-term interest rates is expected to generate higher net interest income[418](index=418&type=chunk) Net Interest Income (NII) Sensitivity Analysis (Twelve Months Forward) | Rate Change (basis points) | % Change in NII (as of Sep 30, 2024) | % Change in NII (as of Dec 31, 2023) | | :--- | :--- | :--- | | +200 | +14.2% | +11.7% | | +100 | +7.1% | +6.0% | | -100 | -9.9% | -7.5% | | -200 | -19.6% | -15.0% | Economic Value of Equity (EVE) Sensitivity Analysis (Immediate Shock) | Rate Change (basis points) | % Change in EVE (as of Sep 30, 2024) | % Change in EVE (as of Dec 31, 2023) | | :--- | :--- | :--- | | +200 | -0.1% | -4.7% | | +100 | -0.0% | -2.1% | | -100 | +0.2% | +5.5% | | -200 | -0.5% | +10.8% | [Item 4. Controls and Procedures](index=125&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2024, the Company's disclosure controls and procedures were effective[429](index=429&type=chunk) - No material changes were made to the Company's internal control over financial reporting during the third quarter of 2024[430](index=430&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=126&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - There are no legal proceedings to report[433](index=433&type=chunk) [Item 1A. Risk Factors](index=126&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - No material changes from the risk factors disclosed in the 2023 Form 10-K have occurred[434](index=434&type=chunk) [Item 5. Other Information](index=126&type=section&id=Item%205.%20Other%20Information) This section discloses a director and officer adopted a Rule 10b5-1 stock trading plan on August 7, 2024 - On August 7, 2024, Scott A. Evans, a director and officer, adopted a Rule 10b5-1 trading plan to potentially sell up to **25,000** shares of common stock before March 13, 2025[438](index=438&type=chunk) [Item 6. Exhibits](index=127&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q%20Filing%20Information) This section provides the basic filing information for Merchants Bancorp's Quarterly Report on Form 10-Q for the period ended June 30, 2024, including the registrant's identification, filer status, and a list of its registered securities [Filing Details](index=1&type=section&id=Filing%20Details) This section provides the basic filing information for Merchants Bancorp's Quarterly Report on Form 10-Q for the period ended June 30, 2024, including the registrant's identification, filer status, and a list of its registered securities - The registrant is **MERCHANTS BANCORP**, incorporated in Indiana, filing for the quarterly period ended June 30, 2024[2](index=2&type=chunk) - The Company is classified as an **Accelerated filer**[4](index=4&type=chunk) - As of August 1, 2024, **45,757,567 shares** of common stock were issued and outstanding[5](index=5&type=chunk) Registered Securities on NASDAQ | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, without par value | MBIN | NASDAQ | | Depositary Shares, each representing a 1/40th interest in a share of Series B Preferred Stock, without par value | MBINO | NASDAQ | | Depositary Shares, each representing a 1/40th interest in a share of Series C Preferred Stock, without par value | MBINN | NASDAQ | | Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock, without par value | MBINM | NASDAQ | [PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the unaudited interim financial statements, management's discussion and analysis of financial condition and results of operations, and disclosures on market risk and internal controls [Item 1 Interim Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Interim%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Merchants Bancorp, including the balance sheets, statements of income, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items - The accompanying unaudited condensed consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X[21](index=21&type=chunk) - Management believes all necessary normal recurring adjustments have been included for a fair presentation of the financial position, results of operations, and cash flows[22](index=22&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2024, total assets increased by 7.4% to $18.21 billion from $16.95 billion at December 31, 2023, driven by growth in loans receivable and loans held for sale Condensed Consolidated Balance Sheet Highlights (In thousands) | Metric | June 30, 2024 | December 31, 2023 | Change (%) | | :----------------------------------- | :-------------- | :---------------- | :--------- | | Total assets | $18,212,422 | $16,952,516 | 7.43% | | Cash and cash equivalents | $540,882 | $584,422 | -7.45% | | Loans held for sale | $3,483,076 | $3,144,756 | 10.76% | | Loans receivable, net | $10,933,189 | $10,127,801 | 7.95% | | Total deposits | $14,917,067 | $14,061,460 | 6.09% | | Total borrowings | $1,159,206 | $964,127 | 20.24% | | Total liabilities | $16,324,275 | $15,251,432 | 7.03% | | Total shareholders' equity | $1,888,147 | $1,701,084 | 10.99% | - Goodwill decreased by **49%** from **$15.845 million** at December 31, 2023, to **$8.014 million** at June 30, 2024[10](index=10&type=chunk) - Servicing rights increased by **12.8%** from **$158.457 million** at December 31, 2023, to **$178.776 million** at June 30, 2024[10](index=10&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the three months ended June 30, 2024, net income increased by 17.0% to $76.39 million, driven by a 21.3% increase in net interest income and a 55.9% decrease in provision for credit losses Condensed Consolidated Statements of Income Highlights (In thousands, except EPS) | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | Change (%) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Total interest income | $328,273 | $258,069 | 27.20% | $642,446 | $469,363 | 36.88% | | Total interest expense | $200,154 | $152,452 | 31.30% | $387,271 | $263,053 | 47.22% | | Net Interest Income | $128,119 | $105,617 | 21.31% | $255,175 | $206,310 | 23.69% | | Provision for credit losses | $9,965 | $22,603 | -55.91% | $14,691 | $29,470 | -50.15% | | Total noninterest income | $31,351 | $29,882 | 4.92% | $72,225 | $44,146 | 63.59% | | Total noninterest expense | $50,380 | $44,320 | 13.68% | $99,292 | $79,092 | 25.54% | | Net Income | $76,393 | $65,302 | 17.00% | $163,447 | $120,257 | 35.91% | | Diluted Earnings Per Share | $1.49 | $1.31 | 13.74% | $3.29 | $2.38 | 38.24% | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three months ended June 30, 2024, increased to $77.06 million from $65.99 million in the prior year, primarily due to higher net income Condensed Consolidated Statements of Comprehensive Income Highlights (In thousands) | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | Change (%) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Net Income | $76,393 | $65,302 | 17.00% | $163,447 | $120,257 | 35.91% | | Other Comprehensive Income | $663 | $693 | -4.33% | $1,978 | $3,485 | -43.24% | | Comprehensive Income | $77,056 | $65,995 | 16.76% | $165,425 | $123,742 | 33.68% | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Total shareholders' equity increased by 11.0% to $1.89 billion at June 30, 2024, from $1.70 billion at December 31, 2023, driven by net income and common stock offering proceeds - Common stock increased by **$98.1 million**, primarily due to the issuance of **2,400,000 shares** in a public offering, generating **$97.655 million** in net proceeds[16](index=16&type=chunk)[172](index=172&type=chunk) - The **7% Series A Preferred Stock** was fully redeemed for **$50.221 million** during the period[16](index=16&type=chunk)[175](index=175&type=chunk) - Retained earnings increased by **$137.179 million**, reflecting net income less dividends paid[16](index=16&type=chunk) - Dividends on common stock were **$0.36 per share** annually in 2024, up from **$0.32 per share** in 2023[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2024, net cash used in operating activities was $(332.65) million, net cash used in investing activities was $(1.01) billion, and net cash provided by financing activities was $1.30 billion Condensed Consolidated Statements of Cash Flows Highlights (In thousands) | Metric | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net cash used in operating activities | $(332,653) | $(543,020) | -38.60% | | Net cash used in investing activities | $(1,012,173) | $(2,356,545) | -57.05% | | Net cash provided by financing activities | $1,301,286 | $3,050,711 | -57.35% | | Net Change in Cash and Cash Equivalents | $(43,540) | $151,146 | -128.81% | | Cash and Cash Equivalents, End of Period | $540,882 | $377,310 | 43.35% | - Proceeds from issuance of common stock totaled **$97.655 million** for the six months ended June 30, 2024[19](index=19&type=chunk) - Repurchase of preferred stock amounted to **$(52.045) million** for the six months ended June 30, 2024[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the condensed consolidated financial statements, covering the basis of presentation, significant accounting policies, investment securities, loans and allowance for credit losses, variable interest entities, regulatory matters, derivative financial instruments, fair value measurements, leases, deposits, borrowings, earnings per share, common and preferred stock, share-based payment plans, segment information, and recent accounting pronouncements [Note 1: Basis of Presentation](index=10&type=section&id=Note%201:%20Basis%20of%20Presentation) The financial statements are unaudited and consolidate Merchants Bancorp and its subsidiaries, with significant estimates involved in credit losses and fair values - The Company's consolidated entities include **Merchants Bancorp**, **Merchants Bank of Indiana**, **Farmers-Merchants Bank of Illinois** (until its merger on January 26, 2024), and **Merchants Asset Management, LLC**, along with their primary operating subsidiaries[20](index=20&type=chunk)[28](index=28&type=chunk) - The sale of Farmers-Merchants Bank of Illinois branches was completed on **January 26, 2024**, resulting in a net gain of **$715,000** and the extinguishment of **$7.8 million** in goodwill[24](index=24&type=chunk)[26](index=26&type=chunk) - The transaction enhanced the Company's ability to focus on its core business of single and multi-family mortgage lending[24](index=24&type=chunk) - As of June 30, 2024, **$37.0 million** in restricted cash was held as collateral for potential risk of loss on senior credit linked notes[36](index=36&type=chunk) [Note 2: Investment Securities](index=14&type=section&id=Note%202:%20Investment%20Securities) The Company's investment portfolio includes securities available for sale (AFS) and held to maturity (HTM), with unrealized losses on AFS primarily due to interest rate changes Investment Securities Fair Values (In thousands) | Category | June 30, 2024 Fair Value | December 31, 2023 Fair Value | Change (%) | | :----------------------------------- | :------------------------- | :------------------------- | :--------- | | Securities available for sale | $1,017,019 | $1,113,687 | -8.68% | | Securities held to maturity | $1,291,960 | $1,203,535 | 7.35% | - Unrealized losses on available-for-sale securities are attributed to changes in the prevailing interest rate environment, not credit-related factors, and no allowance for credit losses has been recorded[49](index=49&type=chunk) - For the six months ended June 30, 2024, the Company received **$10.0 million** from sales of securities available for sale, recognizing a net loss of **$108,000**[44](index=44&type=chunk) [Note 3: Mortgage Loans in Process of Securitization](index=20&type=section&id=Note%203:%20Mortgage%20Loans%20in%20Process%20of%20Securitization) Mortgage loans in process of securitization are recorded at fair value, with changes recognized in earnings, and are primarily multi-family rental real estate pending settlement - Mortgage loans in process of securitization totaled **$209.2 million** at June 30, 2024, an **89% increase** from **$110.6 million** at December 31, 2023[10](index=10&type=chunk)[219](index=219&type=chunk) - The aggregate fair value adjustment recorded on these loans was **$0.5 million** as of June 30, 2024, down from **$0.8 million** at December 31, 2023[51](index=51&type=chunk) [Note 4: Loans and Allowance for Credit Losses on Loans](index=20&type=section&id=Note%204:%20Loans%20and%20Allowance%20for%20Credit%20Losses%20on%20Loans) Loans receivable, net, increased by 7.95% to $10.93 billion at June 30, 2024, primarily driven by growth in mortgage warehouse repurchase agreements, multi-family, and healthcare financing Loans Receivable Summary (In thousands) | Loan Type | June 30, 2024 | December 31, 2023 | Change (%) | | :----------------------------------- | :-------------- | :---------------- | :--------- | | Mortgage warehouse repurchase agreements | $1,369,965 | $752,468 | 82.07% | | Residential real estate | $1,345,656 | $1,324,305 | 1.61% | | Multi-family financing | $4,160,420 | $4,006,160 | 3.85% | | Healthcare financing | $2,495,910 | $2,356,689 | 5.91% | | Commercial and commercial real estate | $1,566,809 | $1,643,081 | -4.64% | | Agricultural production and real estate | $70,244 | $103,150 | -31.89% | | Consumer and margin loans | $5,213 | $13,700 | -61.95% | | Total loans | $11,014,217 | $10,199,553 | 7.99% | | ACL-Loans | $81,028 | $71,752 | 12.93% | | Loans Receivable, Net | $10,933,189 | $10,127,801 | 7.95% | - The ACL-Loans increased by **$9.3 million**, or **13%**, to **$81.0 million** at June 30, 2024, primarily due to loan growth in multi-family and healthcare portfolios and changes to qualitative loss factors[228](index=228&type=chunk) - Nonperforming loans (nonaccrual and 90+ days late but still accruing) increased to **$143.5 million** (**1.30%** of total loans) at June 30, 2024, from **$82.0 million** (**0.80%**) at December 31, 2023, driven by delinquent payments on variable rate multi-family and healthcare loans[244](index=244&type=chunk) - Loans classified as Special Mention totaled **$244.0 million** at June 30, 2024, and Substandard loans totaled **$246.8 million**, both showing increases compared to December 31, 2023, primarily due to rising interest rates impacting borrower cash flows[249](index=249&type=chunk)[250](index=250&type=chunk) [Note 5: Variable Interest Entities (VIEs)](index=38&type=section&id=Note%205:%20Variable%20Interest%20Entities%20(VIEs)) The Company has investments in various Variable Interest Entities (VIEs), including debt financing entities and low-income housing syndicated funds, with a maximum exposure to loss of $1.63 billion from unconsolidated VIEs - The Company invests in single-family, multi-family, and healthcare debt financing entities, as well as low-income housing syndicated funds that are deemed VIEs[108](index=108&type=chunk) - At June 30, 2024, the Company was not deemed the primary beneficiary for most of its VIEs, thus not consolidating their results[109](index=109&type=chunk) Maximum Exposure to Loss from Unconsolidated VIEs (In thousands) | Category | June 30, 2024 | December 31, 2023 | Change (%) | | :----------------------------------- | :-------------- | :---------------- | :--------- | | Low-income housing tax credit investments | $259,292 | $351,148 | -26.16% | | Debt funds | $67,035 | $119,637 | -43.99% | | Off-balance-sheet REMIC trusts | $1,298,964 | $1,192,201 | 8.95% | | Total Maximum Exposure to Loss | $1,625,291 | $1,662,986 | -2.39% | [Note 6: Regulatory Matters](index=40&type=section&id=Note%206:%20Regulatory%20Matters) Merchants Bancorp and Merchants Bank of Indiana continue to meet all capital adequacy requirements and are categorized as 'well capitalized' by federal banking agencies as of June 30, 2024 - As of June 30, 2024, both Merchants Bancorp and Merchants Bank met all capital adequacy requirements and were categorized as **'well capitalized'** by their respective federal regulators[115](index=115&type=chunk)[116](index=116&type=chunk) Company Capital Ratios (June 30, 2024) | Ratio | Actual Ratio | Minimum to be Well Capitalized with Basel III Buffer | | :----------------------------------- | :----------- | :------------------------------------------- | | Total capital (to risk-weighted assets) | 12.0% | 10.5% | | Tier I capital (to risk-weighted assets) | 11.4% | 8.5% | | Common Equity Tier I capital (to risk-weighted assets) | 8.7% | 7.0% | | Tier I capital (to average assets) | 10.6% | 5.0% | [Note 7: Derivative Financial Instruments](index=42&type=section&id=Note%207:%20Derivative%20Financial%20Instruments) The Company uses non-hedging designated derivative financial instruments to manage interest rate risk, including a credit default swap purchased in March 2024 to manage credit risk on specific multi-family mortgage loans - The Company utilizes forward contracts, interest rate swaps, put options, and interest rate floors to manage interest rate risk[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - In March 2024, a **credit default swap** was purchased to manage credit risk associated with specific multi-family mortgage loans[126](index=126&type=chunk) - All derivative instruments are not designated as accounting hedges and are recorded at fair value, with changes reflected in noninterest income[127](index=127&type=chunk) Derivative Fair Values (In thousands, June 30, 2024) | Instrument | Notional Amount | Asset Fair Value | Liability Fair Value | | :----------------------------------- | :-------------- | :--------------- | :----------------- | | Interest rate lock commitments | $50,471 | $170 | $127 | | Forward contracts | $60,524 | $149 | $88 | | Interest rate swaps | $57,513 | $4,232 | $0 | | Put options | $719,731 | $36,957 | $0 | | Interest rate floors | $1,224,171 | $9,124 | $0 | | Credit derivatives | $76,081 | $0 | $0 | [Note 8: Disclosures about Fair Value of Assets and Liabilities](index=47&type=section&id=Note%208:%20Disclosures%20about%20Fair%20Value%20of%20Assets%20and%20Liabilities) The Company measures certain assets and liabilities at fair value using a three-level hierarchy, with Level 3 assets including servicing rights, certain mortgage-backed securities, and specific derivative instruments - Fair value measurements are categorized into a **three-level hierarchy**: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[135](index=135&type=chunk) - **Level 3 assets** at June 30, 2024, include servicing rights (**$178.8 million**), certain mortgage-backed securities with fair value option (**$462.6 million**), and specific derivative assets and liabilities[136](index=136&type=chunk) - Collateral dependent loans measured at fair value on a nonrecurring basis are classified within **Level 3**, totaling **$29.7 million** at June 30, 2024[152](index=152&type=chunk) - Valuation methodologies for **Level 3 assets** include discounted cash flow models and market comparable properties, with sensitivity analysis performed on unobservable inputs like discount rates, prepayment rates, and market credit spreads[157](index=157&type=chunk)[159](index=159&type=chunk)[162](index=162&type=chunk) [Note 9: Leases](index=60&type=section&id=Note%209:%20Leases) The Company has operating leases for various locations, with right-of-use assets of $8.0 million and liabilities of $9.1 million as of June 30, 2024 - Operating lease right-of-use assets were **$7.992 million** at June 30, 2024, a decrease from **$10.060 million** at December 31, 2023[167](index=167&type=chunk) - Operating lease liabilities were **$9.098 million** at June 30, 2024, down from **$11.251 million** at December 31, 2023[167](index=167&type=chunk) - The weighted average remaining lease term was **4.7 years** at June 30, 2024, with a weighted average discount rate of **3.25%**[167](index=167&type=chunk) [Note 10: Deposits](index=62&type=section&id=Note%2010:%20Deposits) Total deposits increased by 6.1% to $14.92 billion at June 30, 2024, primarily due to a $1.7 billion increase in certificates of deposit, with brokered deposits representing 41% of the total Deposits Composition (In thousands) | Deposit Type | June 30, 2024 | December 31, 2023 | Change (%) | | :----------------------------------- | :-------------- | :---------------- | :--------- | | Noninterest-bearing deposits | $383,260 | $520,070 | -26.29% | | Interest-bearing deposits | $14,533,807 | $13,541,390 | 7.33% | | Total deposits | $14,917,067 | $14,061,460 | 6.09% | - Certificates of deposit increased by **$1.7 billion** (**32.8%**) to **$6.87 billion** at June 30, 2024, with **$6.76 billion** (**98%**) due within one year[168](index=168&type=chunk) - Brokered deposits increased by **$149.7 million** (**2.5%**) to **$6.12 billion** at June 30, 2024, representing **41%** of total deposits[168](index=168&type=chunk)[238](index=238&type=chunk) - Approximately **79%** of total deposits reprice within **three months**, and uninsured deposits represent about **15%** of total deposits[234](index=234&type=chunk)[240](index=240&type=chunk) [Note 11: Borrowings](index=62&type=section&id=Note%2011:%20Borrowings) Total borrowings increased by 20.2% to $1.16 billion at June 30, 2024, primarily due to additional FHLB advances, with the Company maintaining significant unused borrowing capacity of $7.0 billion Borrowings Composition (In thousands) | Borrowing Type | June 30, 2024 | December 31, 2023 | Change (%) | | :----------------------------------- | :-------------- | :---------------- | :--------- | | Short-term subordinated debt | $68,514 | $64,922 | 5.53% | | FHLB advances | $974,008 | $771,392 | 26.26% | | Credit linked notes, net | $108,750 | $119,879 | -9.30% | | Other borrowings | $7,934 | $7,934 | 0.00% | | Total borrowings | $1,159,206 | $964,127 | 20.24% | - Unused borrowing capacity with the FHLB and Federal Reserve discount window totaled **$7.0 billion** at June 30, 2024, up from **$6.0 billion** at December 31, 2023[242](index=242&type=chunk) - A new **$500.0 million** variable rate debt agreement with the FHLB was entered into on May 21, 2024, maturing August 19, 2024, with an interest rate of Federal Funds effective rate + 15 bps (**5.48%** at June 30, 2024)[170](index=170&type=chunk) [Note 12: Earnings Per Share](index=63&type=section&id=Note%2012:%20Earnings%20Per%20Share) Basic EPS for common shareholders was $1.50 for Q2 2024 and $3.30 for H1 2024, while diluted EPS was $1.49 and $3.29, respectively, representing significant increases compared to prior year periods Earnings Per Share (Q2 & H1, except share data) | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income available to common shareholders | $66,813 | $56,634 | $145,200 | $102,922 | | Basic Earnings Per Share | $1.50 | $1.31 | $3.30 | $2.38 | | Diluted Earnings Per Share | $1.49 | $1.31 | $3.29 | $2.38 | [Note 13: Common Stock](index=63&type=section&id=Note%2013:%20Common%20Stock) On May 13, 2024, the Company completed a public offering of 2.4 million common shares at $43.00 per share, generating $97.7 million in net proceeds - On May 13, 2024, the Company issued **2,400,000 shares** of common stock at **$43.00 per share** in an underwritten public offering[172](index=172&type=chunk) - The offering generated total net proceeds of **$97.7 million** after deducting **$5.5 million** in underwriting discounts, commissions, and offering expenses[172](index=172&type=chunk) [Note 14: Preferred Stock](index=63&type=section&id=Note%2014:%20Preferred%20Stock) The Company redeemed all outstanding Series A Preferred Stock on April 1, 2024, for $52 million and continues to have Series B, C, and D Preferred Stock outstanding, with the Series B's floating rate benchmark transitioning to SOFR - All outstanding shares of the **7% Series A Preferred Stock** were redeemed on April 1, 2024, for **$52 million**[175](index=175&type=chunk)[349](index=349&type=chunk) - For the **6% Series B Preferred Stock**, the floating rate benchmark will transition from **three-month LIBOR** to **three-month SOFR** plus a spread of **483.1 basis points**, effective October 1, 2024[351](index=351&type=chunk) - The **6% Series C Preferred Stock** is redeemable at the Company's option on or after April 1, 2026[179](index=179&type=chunk)[354](index=354&type=chunk) - The **8.25% Series D Preferred Stock** is redeemable at the Company's option on or after October 1, 2027, with its dividend rate resetting to the 5-year Treasury rate plus **4.34%** if outstanding after that date[182](index=182&type=chunk)[358](index=358&type=chunk) [Note 15: Share-Based Payment Plans](index=67&type=section&id=Note%2015:%20Share-Based%20Payment%20Plans) The Company issues equity-based incentive awards under the 2017 Equity Incentive Plan, provides restricted common stock to non-executive directors, and maintains an Employee Stock Ownership Plan (ESOP) - Equity-based incentive awards for Company officers are issued pursuant to the **2017 Equity Incentive Plan**[184](index=184&type=chunk) - Non-executive directors receive a portion of their annual fees in restricted common stock, equal to **$70,000** per member quarterly, effective January 1, 2024[185](index=185&type=chunk) - The Employee Stock Ownership Plan (ESOP) received **23,414 shares** for the six months ended June 30, 2024, with recognized expenses of **$573,000**[186](index=186&type=chunk) [Note 16: Segment Information](index=67&type=section&id=Note%2016:%20Segment%20Information) The Company operates in three primary segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking, along with an 'Other' segment for corporate overhead and investments - The Company's reportable business segments are **Multi-family Mortgage Banking**, **Mortgage Warehousing**, and **Banking**, consistent with internal reporting[187](index=187&type=chunk) - The Multi-family Mortgage Banking segment originates and services government-sponsored mortgages and syndicates low-income housing tax credit and debt funds, managing a total servicing portfolio of **$27.1 billion** at June 30, 2024[187](index=187&type=chunk)[309](index=309&type=chunk) - The Mortgage Warehousing segment funds agency-eligible residential and commercial loans, funding **$18.8 billion** for the six months ended June 30, 2024[187](index=187&type=chunk)[310](index=310&type=chunk) - The Banking segment provides retail banking, commercial lending, agricultural lending, and residential mortgage banking, primarily in Indiana[187](index=187&type=chunk)[312](index=312&type=chunk) Net Income by Segment (In thousands) | Segment | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Multi-family Mortgage Banking | $9,037 | $11,242 | $25,646 | $13,208 | | Mortgage Warehousing | $22,270 | $18,596 | $42,460 | $27,237 | | Banking | $52,378 | $42,650 | $108,803 | $91,957 | | Other | $(7,292) | $(7,186) | $(13,462) | $(12,145) | | Total | $76,393 | $65,302 | $163,447 | $120,257 | [Note 17: Recent Accounting Pronouncements](index=69&type=section&id=Note%2017:%20Recent%20Accounting%20Pronouncements) The Company is evaluating the impact of two new FASB ASUs on Segment Reporting and Income Taxes, neither of which is expected to have a material impact on its financial position or results of operations - **FASB ASU 2023-07** (Segment Reporting) requires additional disclosures on reportable segments and is effective for annual periods beginning after December 15, 2023[191](index=191&type=chunk) - **FASB ASU 2023-09** (Income Taxes) requires a tabular tax rate reconciliation and disaggregation of income tax expense/paid by jurisdiction, effective for annual periods beginning after December 15, 2024[195](index=195&type=chunk) - The Company does not expect either ASU to have a material impact on its financial position or results of operations[194](index=194&type=chunk)[196](index=196&type=chunk) [Note 18: Subsequent Events](index=71&type=section&id=Note%2018:%20Subsequent%20Events) No material subsequent events were noted after the reporting period - No material events were noted subsequent to June 30, 2024[197](index=197&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=75&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition at June 30, 2024, and operating results for the three and six months ended June 30, 2024 and 2023 - Net income for the three months ended June 30, 2024, increased **17%** to **$76.4 million**, with diluted earnings per share rising **14%** to **$1.49**[207](index=207&type=chunk) - Total assets increased **7%** to **$18.2 billion** at June 30, 2024, compared to December 31, 2023, driven by growth in warehouse, multi-family, and healthcare loan portfolios[207](index=207&type=chunk)[217](index=217&type=chunk) - Approximately **94%** of total net loans reprice within **three months**, which reduces the risk of market rate increases[207](index=207&type=chunk)[227](index=227&type=chunk) - The Company had **$7.0 billion** in unused borrowing capacity and **$12.6 billion** in highly liquid assets (**69%** of total assets) as of June 30, 2024[207](index=207&type=chunk)[333](index=333&type=chunk) [Business Overview](index=77&type=section&id=Business%20Overview) Merchants Bancorp is a diversified bank holding company operating in Multi-family Mortgage Banking, Mortgage Warehousing, and Banking segments, focusing on originating and selling fixed-rate, low-risk government-backed loans - The Company operates in multiple business segments: **Multi-family Mortgage Banking**, **Mortgage Warehousing**, and **Banking**[209](index=209&type=chunk) - The business strategy involves funding fixed-rate, low-risk multi-family, residential, and SBA loans for sale, and retaining adjustable-rate loans as held for investment to reduce interest rate risk[210](index=210&type=chunk) - Funding sources primarily include mortgage custodial, municipal, retail, commercial, and brokered deposits, and short-term borrowing[210](index=210&type=chunk) [Critical Accounting Policies and Estimates](index=77&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The preparation of financial statements requires management to make significant estimates and judgments, particularly concerning the allowance for credit losses on loans and the fair values of servicing rights and financial instruments - Material estimates susceptible to significant change relate to the determination of the allowance for credit losses on loans and fair values of servicing rights and financial instruments[34](index=34&type=chunk) - There have been no significant changes in critical accounting policies or the assumptions and judgments utilized since the year ended December 31, 2023[212](index=212&type=chunk) [Financial Condition](index=77&type=section&id=Financial%20Condition) Total assets grew 7.4% to $18.2 billion at June 30, 2024, primarily due to increases in loans receivable and loans held for sale, with deposits increasing 6.1% to $14.9 billion Financial Condition Highlights (In thousands) | Metric | June 30, 2024 | December 31, 2023 | Change (%) | | :----------------------------------- | :-------------- | :---------------- | :--------- | | Total assets | $18,212,422 | $16,952,516 | 7.43% | | Loans receivable, net | $10,933,189 | $10,127,801 | 7.95% | | Loans held for sale | $3,483,076 | $3,144,756 | 10.76% | | Total deposits | $14,917,067 | $14,061,460 | 6.09% | | Total borrowings | $1,159,206 | $964,127 | 20.24% | | Total shareholders' equity | $1,888,147 | $1,701,084 | 10.99% | - Loans receivable, net, increased by **$805.4 million**, or **8%**, driven primarily by increases in mortgage warehouse repurchase agreements (up **82%**), multi-family financing (up **4%**), and healthcare financing loans (up **6%**)[225](index=225&type=chunk)[235](index=235&type=chunk) - Deposits increased by **$855.6 million**, or **6%**, primarily due to a **$1.7 billion** increase in certificates of deposit, partially offset by decreases in demand and savings deposits[234](index=234&type=chunk) - Goodwill decreased by **$7.8 million**, or **49%**, due to the elimination of goodwill associated with FMBI upon the sale of its branches[230](index=230&type=chunk) [Asset Quality](index=83&type=section&id=Asset%20Quality) Asset quality deteriorated with nonperforming loans increasing to $143.5 million (1.30% of total loans) at June 30, 2024, primarily due to delinquent payments on variable rate multi-family and healthcare loans - Total nonperforming loans increased to **$143.5 million** (**1.30%** of total loans) at June 30, 2024, from **$82.0 million** (**0.80%**) at December 31, 2023, driven by delinquent payments on variable rate multi-family and healthcare loans[244](index=244&type=chunk) - The Allowance for Credit Losses on Loans (ACL-Loans) as a percentage of nonperforming loans decreased to **56%** at June 30, 2024, from **87%** at December 31, 2023[245](index=245&type=chunk) - Loans classified as Special Mention totaled **$244.0 million** at June 30, 2024, and Substandard loans totaled **$246.8 million**, both showing significant increases compared to December 31, 2023, primarily due to increased interest rates impacting net operating income on certain properties[249](index=249&type=chunk)[250](index=250&type=chunk) - For the six months ended June 30, 2024, there were **$4.4 million** of charge-offs and **$16,000** of recoveries, compared to **$9.5 million** of charge-offs and **$9,000** of recoveries for the same period in 2023[251](index=251&type=chunk) [Comparison of Operating Results for the Three Months Ended June 30, 2024 and 2023](index=85&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20June%2030,%202024%20and%202023) Net income increased 17.0% to $76.4 million, driven by a 21.3% rise in net interest income and a 55.9% decrease in provision for credit losses, partially offset by increased interest and noninterest expenses - Net interest income increased by **$22.5 million**, or **21%**, to **$128.1 million**, with the net interest margin increasing **2 basis points** to **2.99%**[253](index=253&type=chunk)[254](index=254&type=chunk) - Interest income from loans and loans held for sale increased by **$55.7 million**, or **24%**, driven by a **20%** increase in average balances and a **30 basis point** increase in average yield[256](index=256&type=chunk) - Interest expense on deposits increased by **$41.9 million**, or **30%**, primarily due to higher average balances and rates on certificates of deposit and interest-bearing checking accounts[263](index=263&type=chunk) - Provision for credit losses decreased by **$12.6 million**, or **56%**, to **$10.0 million**, primarily due to lower loan charge-offs and relative changes to qualitative factors[272](index=272&type=chunk) - Noninterest income increased by **$1.5 million**, or **5%**, driven by a **26%** increase in net loan servicing fees and a **46%** increase in other income[275](index=275&type=chunk) - Noninterest expense increased by **$6.1 million**, or **14%**, primarily due to a **10%** increase in salaries and employee benefits and a **47%** increase in FDIC deposit insurance expenses[278](index=278&type=chunk) [Comparison of Operating Results for the Six Months Ended June 30, 2024 and 2023](index=92&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Six%20Months%20Ended%20June%2030,%202024%20and%202023) Net income increased 35.9% to $163.4 million, primarily due to a 23.7% increase in net interest income, a 63.6% increase in noninterest income, and a 50.2% decrease in provision for credit losses - Net interest income increased by **$48.9 million**, or **24%**, to **$255.2 million**, though the net interest margin decreased **4 basis points** to **3.07%**[282](index=282&type=chunk)[283](index=283&type=chunk) - Interest income increased by **$173.1 million**, or **37%**, driven by a **23%** increase in average loan balances and a **57 basis point** increase in average loan yield[284](index=284&type=chunk)[286](index=286&type=chunk) - Interest expense increased by **$124.2 million**, or **47%**, primarily due to higher average balances and rates for certificates of deposit (up **52%** volume, **74 bps** rate) and interest-bearing checking accounts (up **20%** volume, **49 bps** rate)[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) - Provision for credit losses decreased by **$14.8 million**, or **50%**, to **$14.7 million**, primarily due to lower loan charge-offs and relative changes to qualitative factors[302](index=302&type=chunk) - Noninterest income increased by **$28.1 million**, or **64%**, driven by a **175%** increase in loan servicing fees (including a **$19.0 million** positive fair value adjustment) and a **73%** increase in other income (including **$3.5 million** in derivative fee income)[303](index=303&type=chunk)[304](index=304&type=chunk) - Noninterest expense increased by **$20.2 million**, or **26%**, primarily due to a **21%** increase in salaries and employee benefits and a **79%** increase in deposit insurance[306](index=306&type=chunk) [Our Segments](index=100&type=section&id=Our%20Segments) The Company's three main segments—Multi-family Mortgage Banking, Mortgage Warehousing, and Banking—demonstrated varied performance, with all showing increased net income for H1 2024 Net Income by Segment (H1 2024 vs H1 2023, In thousands) | Segment | H1 2024 Net Income | H1 2023 Net Income | Change (%) | | :----------------------------------- | :----------------- | :----------------- | :--------- | | Multi-family Mortgage Banking | $25,646 | $13,208 | 94.18% | | Mortgage Warehousing | $42,460 | $27,237 | 55.90% | | Banking | $108,803 | $91,957 | 18.32% | | Other | $(13,462) | $(12,145) | 10.84% | - Multi-family Mortgage Banking's net income increase for H1 2024 was primarily due to a **$19.9 million** increase in servicing fees and a **$3.3 million** increase in syndication and asset management fees[320](index=320&type=chunk) - Mortgage Warehousing's net income increase for H1 2024 was driven by a **36%** increase in warehouse loan volume to **$18.8 billion**[325](index=325&type=chunk) - Banking segment's net income increase for H1 2024 was primarily due to higher net interest income from higher average balances and yields on loans[329](index=329&type=chunk) [Liquidity and Capital Resources](index=105&type=section&id=Liquidity%20and%20Capital%20Resources) The Company maintains strong liquidity with $7.0 billion in unused borrowing capacity and $12.6 billion in highly liquid assets, with all capital ratios remaining above regulatory 'well capitalized' thresholds - The Company had **$7.0 billion** in available unused borrowing capacity with the FHLB and Federal Reserve discount window at June 30, 2024[332](index=332&type=chunk) - Highly liquid assets (cash, short-term investments, mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit) totaled **$12.6 billion**, or **69%** of total assets, at June 30, 2024[333](index=333&type=chunk) - Uninsured deposits represent approximately **15%** of total deposits, with the Federal Reserve Board line of credit alone capable of funding **118%** of uninsured deposits[334](index=334&type=chunk) - Total shareholders' equity increased by **$187.1 million**, or **11%**, to **$1.9 billion** at June 30, 2024, primarily from net income and **$97.7 million** from a common stock offering, partially offset by the **$52.0 million** redemption of Series A Preferred Stock[345](index=345&type=chunk) - The Company and Merchants Bank met all capital adequacy requirements and were categorized as **'well capitalized'** by federal banking agencies as of June 30, 2024[365](index=365&type=chunk)[366](index=366&type=chunk) [Item 3 Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company actively manages market risk, primarily interest rate risk, through its Asset-Liability Committee (ALCO), using NII at Risk and EVE models to assess sensitivity to interest rate changes - The Company's primary sources of market risk are **interest rate risk** and **price risk** related to market demand[369](index=369&type=chunk) - The **Asset-Liability Committee (ALCO)** manages **interest rate risk** within board-established policy limits, monitoring reprice risk, option risk, yield curve risk, and spread risk[373](index=373&type=chunk) - Interest rate risk is measured using **Net Interest Income at Risk (NII at Risk)** and **Economic Value of Equity (EVE)** models[377](index=377&type=chunk) Net Interest Income Sensitivity (Merchants Bank, 12 Months Forward, June 30, 2024) | Scenario | Dollar Change (in thousands) | Percent Change | | :----------------------------------- | :--------------------------- | :------------- | | -200 bps | $(89,293) | (16.8)% | | -100 bps | $(44,404) | (8.4)% | | +100 bps | $36,099 | 6.8% | | +200 bps | $70,343 | 13.3% | Economic Value of Equity Sensitivity (Merchants Bank, Immediate Change in Rates, June 30, 2024) | Scenario | Dollar Change (in thousands) | Percent Change | | :----------------------------------- | :--------------------------- | :------------- | | -200 bps | $148,524 | 8.1% | | -100 bps | $77,540 | 4.2% | | +100 bps | $(25,446) | (1.4)% | | +200 bps | $(65,403) | (3.6)% | - All **NII at Risk** and **EVE** sensitivities are within the board-approved policy limits[381](index=381&type=chunk)[383](index=383&type=chunk) [Item 4 Controls and Procedures](index=118&type=section&id=Item%204%20Controls%20and%20Procedures) As of June 30, 2024, the Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024[387](index=387&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the period covered by this report[388](index=388&type=chunk) [PART II – OTHER INFORMATION](index=119&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part addresses legal proceedings, risk factors, equity sales, senior security defaults, mine safety, other disclosures, and a list of exhibits and signatures [Item 1 Legal Proceedings](index=119&type=section&id=Item%201%20Legal%20Proceedings) No legal proceedings were reported for the period - No legal proceedings were reported[390](index=390&type=chunk) [Item 1A Risk Factors](index=119&type=section&id=Item%201A%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[391](index=391&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=119&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities and use of proceeds were reported[392](index=392&type=chunk) [Item 3 Defaults Upon Senior Securities](index=119&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[393](index=393&type=chunk) [Item 4 Mine Safety Disclosures](index=119&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable[394](index=394&type=chunk) [Item 5 Other Information](index=119&type=section&id=Item%205%20Other%20Information) No other information was reported for the period - No other information was reported[395](index=395&type=chunk) [Item 6 Exhibits](index=120&type=section&id=Item%206%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications from the CEO and CFO, and XBRL-related documents - Exhibits include the Second Amended and Restated Articles of Incorporation, Articles of Amendment, and Second Amended and Restated By-Laws[396](index=396&type=chunk) - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002** are included[396](index=396&type=chunk) - **XBRL** Instance Document and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are provided[396](index=396&type=chunk) [SIGNATURES](index=121&type=section&id=SIGNATURES) The report was duly signed on August 9, 2024, by Michael F. Petrie, Chairman & Chief Executive Officer, and John F. Macke, Chief Financial Officer - The report was signed by **Michael F. Petrie**, Chairman & Chief Executive Officer, and **John F. Macke**, Chief Financial Officer, on **August 9, 2024**[400](index=400&type=chunk)