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 For the transition period from _______ to _______ Commission file number 001-38258 MERCHANTS BANCORP (Exact name of Registrant as specified in its charter) | INDIANA | 20-57474 ...

[Financial Performance Highlights](index=1&type=section&id=Financial%20Performance%20Highlights) Merchants Bancorp achieved record full-year 2024 net income and diluted EPS, with strong Q4 growth driven by a significant increase in noninterest income and record total assets [Q4 and Full-Year 2024 Key Results](index=1&type=section&id=Q4%20and%20Full-Year%202024%20Key%20Results) Merchants Bancorp achieved record full-year 2024 net income and diluted EPS, with strong Q4 growth driven by a significant increase in noninterest income and record total assets Full Year 2024 vs. 2023 Performance | Metric | FY 2024 | Change vs. FY 2023 | | :--- | :--- | :--- | | Net Income | $320.4 million | ▲ 15% | | Diluted EPS | $6.30 | ▲ 12% | Q4 2024 Performance Highlights | Metric | Q4 2024 | Change vs. Q4 2023 | Change vs. Q3 2024 | | :--- | :--- | :--- | :--- | | Net Income | $95.7 million | ▲ 23% | ▲ 56% | | Diluted EPS | $1.85 | ▲ 17% | ▲ 58% | | Noninterest Income | - | - | ▲ 253% | Key Balance Sheet and Value Metrics (as of Dec 31, 2024) | Metric | Value | Change vs. Dec 31, 2023 | Change vs. Sep 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $18.8 billion | ▲ 11% | ▲ 1% | | Tangible Book Value per Share | $34.15 | ▲ 25% | ▲ 5% | - Q4 2024 results were positively impacted by favorable fair market value adjustments to servicing rights (**$10.4 million**) and interest rate floor derivatives (**$2.6 million**), contributing approximately **$0.21 per diluted common share**, effectively reversing the negative impact of **$0.24 per share** from similar adjustments in Q3 2024[1](index=1&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management attributed record 2024 performance to a superior business model, emphasizing effective capital management, shareholder value, and strategic risk mitigation despite increased nonperforming loans - Chairman and CEO Michael F. Petrie attributed the **record-breaking 2024 performance** to a superior business model that enables growth in any environment, emphasizing the focus on managing capital and delivering value to shareholders[3](index=3&type=chunk) - President and COO Michael J. Dunlap stated that despite recent increases in nonperforming loans, **delinquencies have declined** and **charge-offs have been minimal**, expressing confidence in the team's ability to deliver profitable growth, supported by strategic risk mitigation and capital strengthening actions[4](index=4&type=chunk) [Financial Condition Analysis](index=3&type=section&id=Financial%20Condition%20Analysis) The company's financial condition at year-end 2024 reflects record asset growth, strategic deposit mix shifts, and active credit risk management, despite an increase in non-performing loans [Total Assets](index=3&type=section&id=Total%20Assets) Total assets reached a record **$18.8 billion** by year-end 2024, growing **11%** YoY, primarily from loan portfolio expansion, with Q4 return on average assets at **2.07%** Total Assets Growth | Date | Total Assets | Change (YoY) | Change (QoQ) | | :--- | :--- | :--- | :--- | | Dec 31, 2024 | $18.8 billion | ▲ 11% | ▲ 1% | - The year-over-year increase in assets was mainly due to growth in **loans held for sale** and in the **warehouse and multi-family loan portfolios**[7](index=7&type=chunk) Return on Average Assets (ROA) | Period | ROA | | :--- | :--- | | Q4 2024 | 2.07% | | Q3 2024 | 1.34% | | Q4 2023 | 1.86% | | FY 2024 | 1.79% | | FY 2023 | 1.85% | [Asset Quality and Credit Risk](index=3&type=section&id=Asset%20Quality%20and%20Credit%20Risk) Asset quality showed mixed signals with a **18%** YoY increase in allowance for credit losses and a rise in non-performing loans to **2.68%**, though total delinquencies declined sequentially, supported by active credit risk management Allowance for Credit Losses on Loans | Date | Allowance | Change (YoY) | Change (QoQ) | | :--- | :--- | :--- | :--- | | Dec 31, 2024 | $84.4 million | ▲ 18% | ▼ $163,000 | Non-Performing Loans (NPLs) | Date | NPLs | NPLs as % of Gross Loans | | :--- | :--- | :--- | | Dec 31, 2024 | $279.7 million | 2.68% | | Sep 30, 2024 | $210.9 million | 2.04% | | Dec 31, 2023 | $82.0 million | 0.80% | - The increase in NPLs was primarily driven by **multi-family and healthcare customers** with variable rate loans impacted by higher interest rates[12](index=12&type=chunk) - Despite the rise in NPLs, total loan delinquency levels declined by **$56.3 million** to **$324.6 million** compared to the previous quarter[12](index=12&type=chunk) - The company has been actively reducing credit risk through credit protection arrangements, including credit default swaps, with **$2.3 billion** in loans covered as of December 31, 2024[14](index=14&type=chunk) [Securities Portfolio](index=4&type=section&id=Securities%20Portfolio) The securities portfolio showed divergent trends, with available-for-sale securities decreasing **12%** to **$980.0 million** and held-to-maturity securities increasing **38%** to **$1.7 billion** by year-end 2024 - Total securities available for sale stood at **$980.0 million**, a decrease of **12%** compared to December 31, 2023, mainly due to maturities and repayments[15](index=15&type=chunk) - Total securities held to maturity reached **$1.7 billion**, an increase of **38%** compared to December 31, 2023, driven by purchases of senior investment securities from the company's own credit risk transfer securitizations[16](index=16&type=chunk) [Deposits and Liquidity](index=5&type=section&id=Deposits%20and%20Liquidity) The company strategically reduced total deposits by **15%** to **$11.9 billion** by year-end 2024, significantly decreasing brokered deposits while growing core deposits by **16%** to comprise **79%** of the total, maintaining strong liquidity Deposit Composition Changes (YoY) | Deposit Type | Dec 31, 2024 | Change vs. Dec 31, 2023 | | :--- | :--- | :--- | | Total Deposits | $11.9 billion | ▼ 15% | | Core Deposits | $9.4 billion | ▲ 16% | | Brokered Deposits | $2.5 billion | ▼ 58% | - Core deposits as a percentage of total deposits increased significantly, from **58%** at year-end 2023 to **79%** at year-end 2024[19](index=19&type=chunk) - The company reported significant borrowing capacity with unused lines of credit totaling **$4.3 billion** as of December 31, 2024, with Federal Reserve Bank of Chicago availability alone able to fund **111%** of its uninsured deposits[21](index=21&type=chunk) [Results of Operations](index=6&type=section&id=Results%20of%20Operations) The company achieved record net income in FY 2024, driven by strong growth in both net interest and noninterest income, with significant Q4 sequential improvements from fair value adjustments [Comparison for the Three Months Ended (Q4 2024 vs. Q4 2023)](index=6&type=section&id=Comparison%20for%20the%20Three%20Months%20Ended%20(Q4%202024%20vs.%20Q4%202023)) Q4 2024 net income increased **23%** YoY to **$95.7 million**, driven by an **8%** rise in net interest income and a **72%** surge in noninterest income, partially offset by a **20%** increase in noninterest expense [Net Interest Income (YoY)](index=6&type=section&id=Net%20Interest%20Income%20(YoY)) Net interest income grew **8%** YoY to **$134.6 million**, primarily from higher average balances in loans and securities, despite a **6 basis point** decrease in net interest margin to **2.99%** - Net interest income rose **$10.3 million**, or **8%**, to **$134.6 million**, driven by higher average balances of loans and securities held to maturity[25](index=25&type=chunk) Key Net Interest Income Drivers (Q4 2024 vs Q4 2023) | Metric | Q4 2024 | Change vs. Q4 2023 | | :--- | :--- | :--- | | Net Interest Margin | 2.99% | ▼ 6 bps | | Avg. Loans & LHF Sale | $14.3 billion | ▲ 4% | | Avg. Yield on Loans | 7.43% | ▼ 55 bps | | Avg. Borrowings | $3.0 billion | ▲ 323% | [Noninterest Income (YoY)](index=7&type=section&id=Noninterest%20Income%20(YoY)) Noninterest income surged **72%** YoY to **$59.1 million**, primarily driven by a **$17.1 million** increase in net loan servicing fees, including a positive fair value adjustment, and gains on loan sales and syndication fees - Noninterest income increased by **$24.7 million (72%)**, driven by a **$17.1 million** increase in net loan servicing fees, a **$5.7 million** increase in gain on sale of loans, and a **$4.4 million** increase in syndication and asset management fees[29](index=29&type=chunk) - Loan servicing fees in Q4 2024 included a **$10.4 million positive fair market value adjustment** to servicing rights, compared to a **$7.6 million negative adjustment** in Q4 2023[33](index=33&type=chunk)[4](index=4&type=chunk) [Noninterest Expense (YoY)](index=7&type=section&id=Noninterest%20Expense%20(YoY)) Noninterest expense rose **20%** YoY to **$63.2 million**, primarily due to increased salaries, a **61%** rise in deposit insurance expenses, and higher credit risk transfer premium expense - Noninterest expense rose by **$10.6 million (20%)**, primarily due to increased salaries, a **$2.4 million (61%)** rise in deposit insurance expenses, and a **$1.9 million** increase in credit risk transfer premium expense[30](index=30&type=chunk) - The efficiency ratio improved slightly, decreasing by **49 basis points** to **32.62%** compared to **33.11%** in Q4 2023[30](index=30&type=chunk) [Comparison for the Three Months Ended (Q4 2024 vs. Q3 2024)](index=7&type=section&id=Comparison%20for%20the%20Three%20Months%20Ended%20(Q4%202024%20vs.%20Q3%202024)) Q4 2024 net income surged **56%** sequentially to **$95.7 million**, primarily driven by a **253%** increase in noninterest income due to significant positive fair market value adjustments, with modest increases in net interest income and noninterest expense [Net Interest Income (QoQ)](index=7&type=section&id=Net%20Interest%20Income%20(QoQ)) Net interest income increased modestly by **1%** sequentially to **$134.6 million**, attributed to higher average borrowing balances at lower rates, with the net interest margin remaining flat at **2.99%** - Net interest income increased by **$1.8 million (1%)** compared to the third quarter, with the net interest margin remaining flat at **2.99%**[32](index=32&type=chunk) - Interest expense decreased by **9%** sequentially, driven by lower average balances and rates on certificates of deposit[35](index=35&type=chunk) [Noninterest Income (QoQ)](index=8&type=section&id=Noninterest%20Income%20(QoQ)) Noninterest income dramatically increased **253%** sequentially to **$59.1 million**, primarily due to significant positive fair market value adjustments in net loan servicing fees and other income, reversing prior quarter's negative adjustments - Noninterest income increased by **$42.4 million**, or **253%**, from Q3 2024, driven by increases in net loan servicing fees, other income, gain on sale of loans, and syndication fees[36](index=36&type=chunk) - Loan servicing fees included a **$10.4 million positive fair market value adjustment** to servicing rights, compared to a **$6.7 million negative adjustment** in Q3 2024[36](index=36&type=chunk) - Other income included a **$2.6 million positive fair market value adjustment** to derivatives, compared to a **$7.7 million negative adjustment** in Q3 2024[40](index=40&type=chunk) [Noninterest Expense (QoQ)](index=9&type=section&id=Noninterest%20Expense%20(QoQ)) Noninterest expense increased **3%** sequentially to **$63.2 million**, driven by higher salaries and professional fees, while the efficiency ratio significantly improved to **32.62%** due to the surge in income - Noninterest expense increased by **$1.9 million (3%)**, driven by a **$2.3 million (7%)** increase in salaries and employee benefits and a **49%** increase in professional fees[38](index=38&type=chunk) - The efficiency ratio improved dramatically, decreasing by **838 basis points** to **32.62%** from **41.00%** in Q3 2024[38](index=38&type=chunk) [Comparison for the Twelve Months Ended (FY 2024 vs. FY 2023)](index=14&type=section&id=Comparison%20for%20the%20Twelve%20Months%20Ended%20(FY%202024%20vs.%20FY%202023)) Full-year 2024 net income reached a record **$320.4 million**, a **15%** increase, driven by **17%** growth in net interest income and **29%** in noninterest income, alongside a **40%** decrease in provision for credit losses, despite a **28%** rise in noninterest expense Full Year 2024 vs. 2023 Income Statement Highlights | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $522.6 million | $448.1 million | ▲ 17% | | Provision for credit losses | $24.3 million | $40.2 million | ▼ 40% | | Noninterest Income | $148.1 million | $114.7 million | ▲ 29% | | Noninterest Expense | $223.8 million | $174.6 million | ▲ 28% | | Net Income | $320.4 million | $279.2 million | ▲ 15% | | Diluted EPS | $6.30 | $5.64 | ▲ 12% | [Supplemental Information](index=15&type=section&id=Supplemental%20Information) This section provides key operating and non-GAAP metrics, detailed segment performance, and an in-depth analysis of the loan portfolio and credit quality [Key Operating and Non-GAAP Metrics](index=15&type=section&id=Key%20Operating%20and%20Non-GAAP%20Metrics) Key operating metrics demonstrated strength in Q4 2024, with ROA at **2.07%**, ROATCE at **22.10%**, and tangible book value per share growing **25%** YoY to **$34.15**, alongside improved capital ratios including a **9.1%** CET1 ratio Key Performance Ratios | Metric | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Return on average assets | 2.07% | 1.34% | 1.86% | | Return on average tangible common equity | 22.10% | 14.43% | 23.60% | | Efficiency ratio | 32.62% | 41.00% | 33.11% | Capital and Value Metrics | Metric | Dec 31, 2024 | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Tangible book value per common share | $34.15 | $32.38 | $27.40 | | Common Equity Tier 1 capital ratio | 9.1% | 8.9% | 7.8% | | Total capital ratio | 13.6% | 12.2% | 11.6% | [Segment Performance](index=19&type=section&id=Segment%20Performance) All operating segments contributed positively to record 2024 earnings, with Banking as the largest contributor at **$210.1 million** net income and holding **63%** of total assets, followed by Mortgage Warehousing and Multi-family Mortgage Banking Net Income by Segment (Full Year) | Segment | FY 2024 Net Income | FY 2023 Net Income | | :--- | :--- | :--- | | Multi-family Mortgage Banking | $55.9 million | $36.5 million | | Mortgage Warehousing | $82.8 million | $73.5 million | | Banking | $210.1 million | $194.4 million | Total Assets by Segment (as of Dec 31, 2024) | Segment | Total Assets | % of Total | | :--- | :--- | :--- | | Multi-family Mortgage Banking | $479.1 million | 2% | | Mortgage Warehousing | $6.0 billion | 32% | | Banking | $11.8 billion | 63% | [Loan Portfolio and Credit Quality Details](index=20&type=section&id=Loan%20Portfolio%20and%20Credit%20Quality%20Details) The total loan portfolio was **$14.1 billion** at year-end 2024, with a shift in credit risk profile as 'Pass' rated loans decreased to **93.4%** and nonperforming loans rose to **2.68%**, though total delinquent loans decreased sequentially Loan Portfolio Composition (Dec 31, 2024) | Loan Type | Balance | | :--- | :--- | | Multi-family financing | $4.6 billion | | Healthcare financing | $1.5 billion | | Commercial and CRE | $1.5 billion | | Mortgage warehouse repurchase | $1.4 billion | | Residential real estate | $1.3 billion | Loan Credit Risk Profile (% of Loans Receivable) | Risk Rating | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Pass | 93.4% | 96.9% | | Special mention | 3.6% | 1.9% | | Substandard | 3.0% | 1.2% | Key Credit Quality Ratios | Metric | Dec 31, 2024 | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Nonperforming loans to total loans receivable | 2.68% | 2.04% | 0.80% | | Delinquent loans to total loans | 2.28% | 2.69% | 1.50% | [Consolidated Financial Statements](index=11&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited Consolidated Balance Sheets and Statements of Income, offering a comprehensive overview of the company's financial position and operational results [Consolidated Balance Sheets](index=11&type=section&id=Consolidated%20Balance%20Sheets) This section presents the unaudited Consolidated Balance Sheets, detailing the company's assets, liabilities, and shareholders' equity as of December 31, 2024, and for the four preceding quarters - The Consolidated Balance Sheets provide a detailed snapshot of the company's financial position at the end of each reported period[43](index=43&type=chunk) [Consolidated Statement of Income](index=13&type=section&id=Consolidated%20Statement%20of%20Income) This section presents the unaudited Consolidated Statement of Income, outlining revenues, expenses, and net income for Q4 and full-year 2024, with comparative periods - The Consolidated Statement of Income details the company's operational performance, including interest and noninterest income and expenses, leading to net income for the reported periods[46](index=46&type=chunk)[48](index=48&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 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) ...

Exhibit 99.1 PRESS RELEASE Merchants Bancorp Reports Third Quarter 2024 Results For Release October 28, 2024 · Third quarter 2024 net income of $61.3 million, decreased 25% compared to third quarter of 2023 and decreased 20% compared to the second quarter 2024, reflecting unfavorable fair market value adjustments to derivatives and servicing rights, and an increase in specific reserves on loans as part of the allowance for credit losses. · Third quarter 2024 diluted earnings per common share of $1.17 decrea ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1 Interim Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Interim%20Financial%20Statements%20(Unaudited)) Merchants Bancorp's unaudited condensed consolidated financial statements for Q2 and H1 2024 are presented, including detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $18,212,422 | $16,952,516 | | Total liabilities | $16,324,275 | $15,251,432 | | Total shareholders' equity | $1,888,147 | $1,701,084 | - **Total assets** increased by **$1.26 billion (7.4%)** from December 31, 2023, to June 30, 2024[10](index=10&type=chunk) - **Total shareholders' equity** increased by **$187.1 million (11.0%)** from December 31, 2023, to June 30, 2024[10](index=10&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :------------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Total interest income | $328,273 | $258,069 | $642,446 | $469,363 | | Total interest expense | $200,154 | $152,452 | $387,271 | $263,053 | | Net Interest Income | $128,119 | $105,617 | $255,175 | $206,310 | | Provision for credit losses | $9,965 | $22,603 | $14,691 | $29,470 | | Net Income | $76,393 | $65,302 | $163,447 | $120,257 | | Basic Earnings Per Share | $1.50 | $1.31 | $3.30 | $2.38 | | Diluted Earnings Per Share | $1.49 | $1.31 | $3.29 | $2.38 | - **Net income** for the three months ended June 30, 2024, increased by **$11.1 million (17.0%)** year-over-year[12](index=12&type=chunk) - **Net income** for the six months ended June 30, 2024, increased by **$43.2 million (35.9%)** year-over-year[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Net Income | $76,393 | $65,302 | $163,447 | $120,257 | | Other Comprehensive Income | $663 | $693 | $1,978 | $3,485 | | Comprehensive Income | $77,056 | $65,995 | $165,425 | $123,742 | - **Other comprehensive income** for the six months ended June 30, 2024, decreased by **$1.5 million (43.3%)** year-over-year[14](index=14&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Common Stock | $238,492 | $140,365 | | 7% Series A Preferred Stock | $0 | $50,221 | | 6% Series B Preferred Stock | $120,844 | $120,844 | | 6% Series C Preferred Stock | $191,084 | $191,084 | | 8.25% Series D Preferred Stock | $137,459 | $137,459 | | Retained earnings | $1,200,778 | $1,063,599 | | Accumulated other comprehensive loss | $(510) | $(2,488) | | Total shareholders' equity | $1,888,147 | $1,701,084 | - The Company redeemed all outstanding shares of **7% Series A Preferred Stock** on April 1, 2024, for **$50.2 million**[16](index=16&type=chunk) - **Common stock** increased significantly due to the issuance of **2,400,000 shares**, generating **$97.7 million** in net proceeds during the six months ended June 30, 2024[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash used in operating activities | $(332,653) | $(543,020) | | Net cash used in investing activities | $(1,012,173) | $(2,356,545) | | Net cash provided by financing activities | $1,301,286 | $3,050,711 | | Net Change in Cash and Cash Equivalents | $(43,540) | $151,146 | | Cash and Cash Equivalents, End of Period | $540,882 | $377,310 | - **Net cash used in operating activities** decreased by **$210.4 million (38.7%)** year-over-year[19](index=19&type=chunk) - **Net cash provided by financing activities** decreased by **$1.75 billion (57.3%)** year-over-year[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1: Basis of Presentation](index=10&type=section&id=Note%201%3A%20Basis%20of%20Presentation) This note outlines the basis for the unaudited condensed consolidated financial statements, including consolidated entities and the FMBI branch sale - The Company completed the sale of **Farmers-Merchants Bank of Illinois (FMBI) branches** on January 26, 2024, to focus on core single and multi-family mortgage lending[23](index=23&type=chunk)[24](index=24&type=chunk) **FMBI Branch Sale Impact (January 26, 2024):** | Metric | Amount (in thousands) | | :-------------------------------- | :-------------------- | | Deposits acquired by Bank of Pontiac | $164,800 | | Loans acquired by Bank of Pontiac | $19,200 | | Deposits acquired by CBI Bank & Trust | $65,100 | | Loans acquired by CBI Bank & Trust | $28,600 | | Total assets sold | $60,800 | | Total liabilities sold | $230,600 | | Net gain recognized | $715 | | Goodwill extinguished | $7,800 | | Intangibles extinguished | $500 | [Note 2: Investment Securities](index=14&type=section&id=Note%202%3A%20Investment%20Securities) This note details the Company's investment securities portfolio, including AFS and HTM securities, and the evaluation of unrealized losses **Investment Securities Summary (June 30, 2024 vs. December 31, 2023):** | Metric | June 30, 2024 (Fair Value, in thousands) | December 31, 2023 (Fair Value, in thousands) | | :------------------------------------- | :--------------------------------------- | :----------------------------------------- | | Securities available for sale | $1,017,019 | $1,113,687 | | Securities held to maturity | $1,291,960 | $1,203,535 | | Gross unrealized losses (AFS) | $683 | $3,317 | | Gross unrealized losses (HTM) | $1,547 | $1,655 | - **Securities available for sale** decreased by **$96.7 million (8.7%)** from December 31, 2023, to June 30, 2024[38](index=38&type=chunk)[40](index=40&type=chunk) - **Gross unrealized losses on available-for-sale securities** decreased by **$2.6 million (79.4%)** from December 31, 2023, to June 30, 2024, primarily due to non-credit related factors[38](index=38&type=chunk)[40](index=40&type=chunk)[49](index=49&type=chunk) [Note 3: Mortgage Loans in Process of Securitization](index=20&type=section&id=Note%203%3A%20Mortgage%20Loans%20in%20Process%20of%20Securitization) This note describes mortgage loans in process of securitization, recorded at fair value, primarily multi-family rental real estate **Mortgage Loans in Process of Securitization (in thousands):** | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------- | :------------ | :---------------- | | Aggregate fair value | $209,244 | $110,599 | | Aggregate fair value adjustment recorded | $500 | $800 | - The aggregate fair value of **mortgage loans in process of securitization** increased by **$98.6 million (89.2%)** from December 31, 2023, to June 30, 2024, indicating higher origination volume[51](index=51&type=chunk) [Note 4: Loans and Allowance for Credit Losses on Loans](index=20&type=section&id=Note%204%3A%20Loans%20and%20Allowance%20for%20Credit%20Losses%20on%20Loans) This note details the Company's loan portfolio, ACL-Loans methodology, and credit risk profile, noting increased nonperforming loans **Loans Receivable Summary (in thousands):** | Loan Type | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | Mortgage warehouse repurchase agreements | $1,369,965 | $752,468 | | Residential real estate | $1,345,656 | $1,324,305 | | Multi-family financing | $4,160,420 | $4,006,160 | | Healthcare financing | $2,495,910 | $2,356,689 | | Commercial and commercial real estate | $1,566,809 | $1,643,081 | | Agricultural production and real estate | $70,244 | $103,150 | | Consumer and margin loans | $5,213 | $13,700 | | Total Loans Receivable | $11,014,217 | $10,199,553 | | Less: ACL-Loans | $81,028 | $71,752 | | Loans Receivable, Net | $10,933,189 | $10,127,801 | **ACL-Loans Activity (Six Months Ended June 30, 2024 vs. 2023, in thousands):** | Metric | 2024 | 2023 | | :-------------------------------- | :--- | :--- | | Balance, beginning of period | $71,752 | $44,014 | | Provision for credit losses | $14,230 | $28,495 | | Loans charged to the allowance | $(4,377) | $(9,532) | | Recoveries of loans previously charged-off | $16 | $9 | | Balance, end of period | $81,028 | $62,986 | **Nonperforming Loans (in thousands):** | Loan Type | June 30, 2024 (Nonaccrual) | December 31, 2023 (Nonaccrual) | | :-------------------------------- | :------------------------- | :----------------------------- | | RES RE | $5,244 | $1,486 | | MF FIN | $86,284 | $39,608 | | HC FIN | $47,809 | $28,783 | | CML & CRE | $3,835 | $3,820 | | AG & AGRE | $147 | $147 | | CON & MAR | $0 | $3 | | Total Nonaccrual Loans | $143,319 | $73,847 | | Total Loans > 90 Days & Accruing | $133 | $8,168 | | Total Nonperforming Loans | $143,452 | $82,015 | [Note 5: Variable Interest Entities (VIEs)](index=38&type=section&id=Note%205%3A%20Variable%20Interest%20Entities%20(VIEs)) This note defines VIEs and details the Company's involvement in various financing and housing funds, generally without consolidation **Maximum Exposure to Loss from Unconsolidated VIEs (in thousands):** | VIE Type | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | Low-income housing tax credit investments | $259,292 | $351,148 | | Debt funds | $67,035 | $119,637 | | Off-balance-sheet REMIC trusts | $1,298,964 | $1,192,201 | | Total Unconsolidated VIEs | $1,625,291 | $1,662,986 | - The Company's **maximum exposure to loss from unconsolidated VIEs** decreased by **$37.7 million (2.3%)** from December 31, 2023, to June 30, 2024[111](index=111&type=chunk) [Note 6: Regulatory Matters](index=40&type=section&id=Note%206%3A%20Regulatory%20Matters) This note confirms Merchants Bancorp and Merchants Bank met all regulatory capital adequacy requirements and were 'well capitalized' **Company Capital Ratios (June 30, 2024):** | Capital Ratio | Actual Ratio | Minimum to be Well Capitalized with Basel III Buffer | Minimum to be Well Capitalized | | :------------------------------------- | :----------- | :----------------------------------- | :----------------------------- | | Total capital (to risk-weighted assets) | 12.0% | 10.5% | N/A | | Tier I capital (to risk-weighted assets) | 11.4% | 8.5% | N/A | | Common Equity Tier I capital (to risk-weighted assets) | 8.7% | 7.0% | N/A | | Tier I capital (to average assets) | 10.6% | 5.0% | N/A | - Both Merchants Bancorp and Merchants Bank were categorized as **'well capitalized'** by regulatory agencies as of June 30, 2024[116](index=116&type=chunk) [Note 7: Derivative Financial Instruments](index=42&type=section&id=Note%207%3A%20Derivative%20Financial%20Instruments) This note details the Company's use of non-hedging derivative financial instruments to manage interest rate and credit risk **Derivative Financial Instruments (June 30, 2024, in thousands):** | Instrument | Notional Amount | Fair Value Asset | Fair Value Liability | | :------------------------------------- | :-------------- | :--------------- | :----------------- | | 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 | | Total | | $50,632 | $215 | **Derivative Gain (Loss) in Income Statement (Six Months Ended June 30, 2024, in thousands):** | Category | Amount | | :------------------------------------- | :----- | | Net gain in gain on sale of loans | $1,908 | | Net gain in other income | $13,628 | - In March 2024, the Company purchased a **credit default swap** with a notional amount of **$76.1 million** to manage credit risk on specific multifamily mortgage loans[126](index=126&type=chunk)[129](index=129&type=chunk) [Note 8: Disclosures about Fair Value of Assets and Liabilities](index=47&type=section&id=Note%208%3A%20Disclosures%20about%20Fair%20Value%20of%20Assets%20and%20Liabilities) This note provides fair value measurements for assets and liabilities, categorized into Level 1, 2, and 3 based on input observability **Fair Value Measurements (June 30, 2024, in thousands):** | Asset/Liability | Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------- | :--------- | :------ | :------ | :------ | | Mortgage loans in process of securitization | $209,244 | $0 | $209,244 | $0 | | Securities available for sale | $1,017,019 | $109,079 | $445,313 | $462,627 | | Loans held for sale | $102,873 | $0 | $102,873 | $0 | | Servicing rights | $178,776 | $0 | $0 | $178,776 | | Derivative assets | $50,632 | $0 | $14,419 | $36,291 | | Derivative liabilities | $215 | $0 | $9,976 | $127 | | Collateral dependent loans (nonrecurring) | $29,732 | $0 | $0 | $29,732 | - **Servicing rights** and a significant portion of mortgage-backed securities are classified as **Level 3**, indicating reliance on unobservable inputs for valuation[136](index=136&type=chunk)[140](index=140&type=chunk) **Key Level 3 Unobservable Inputs (June 30, 2024):** | Asset/Liability | Unobservable Input | Range | Weighted Average | | :------------------------------------- | :----------------- | :---- | :--------------- | | Securities available for sale (Non-Agency residential) | Market credit spread | 3% | 3% | | Collateral dependent loans | Marketability discount | 0%-56% | 4% | | Servicing rights - Multi-family | Discount rate | 8%-13% | 9% | | Servicing rights - Multi-family | Constant prepayment rate | 0%-62% | 7% | | Interest rate lock commitments (assets/liabilities) | Loan closing rates | 57%-99% | 83% | [Note 9: Leases](index=60&type=section&id=Note%209%3A%20Leases) This note details the Company's operating leases, with right-of-use assets at $8.0 million and liabilities at $9.1 million **Operating Lease Information (in thousands):** | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------- | :------------ | :---------------- | | Operating lease right-of-use asset | $7,992 | $10,060 | | Operating lease liability | $9,098 | $11,251 | | Weighted average remaining lease term (years) | 4.7 | 6.0 | | Weighted average discount rate | 3.25% | 2.89% | | Operating lease cost (Six Months Ended) | $1,369 | $1,249 | | Operating cash flows from operating leases (Six Months Ended) | $1,220 | $886 | - **Operating lease right-of-use assets** decreased by **$2.1 million (20.6%)** from December 31, 2023, to June 30, 2024[167](index=167&type=chunk) [Note 10: Deposits](index=62&type=section&id=Note%2010%3A%20Deposits) This note details the Company's deposit composition, showing total deposits increased to **$14.9 billion**, driven by certificates of deposit **Deposit Composition (in thousands):** | Deposit Type | June 30, 2024 | December 31, 2023 | | :------------------------------------- | :------------ | :---------------- | | Noninterest-bearing deposits | $383,260 | $520,070 | | Interest-bearing deposits | $14,533,807 | $13,541,390 | | Total deposits | $14,917,067 | $14,061,460 | | Brokered certificates of deposit | $6,119,391 | $4,465,825 | | Brokered savings deposits | $948 | $589 | | Brokered deposit on demand accounts | $0 | $1,504,230 | | Total brokered deposits | $6,120,339 | $5,970,644 | - **Total deposits** increased by **$855.6 million (6.1%)** from December 31, 2023, to June 30, 2024[168](index=168&type=chunk) - **Brokered certificates of deposit** increased by **$1.65 billion (37.0%)** while brokered demand deposit accounts decreased by **$1.50 billion (100%)** over the same period[168](index=168&type=chunk) [Note 11: Borrowings](index=62&type=section&id=Note%2011%3A%20Borrowings) This note details the Company's borrowings, which increased to **$1.16 billion** at June 30, 2024, primarily due to FHLB advances **Borrowings Composition (in thousands):** | Borrowing Type | June 30, 2024 | December 31, 2023 | | :------------------------------------- | :------------ | :---------------- | | Short-term subordinated debt | $68,514 | $64,922 | | FHLB advances | $974,008 | $771,392 | | Credit linked notes, net | $108,750 | $119,879 | | Other borrowings | $7,934 | $7,934 | | Total borrowings | $1,159,206 | $964,127 | - **Total borrowings** increased by **$195.1 million (20.2%)** from December 31, 2023, to June 30, 2024[169](index=169&type=chunk) - A new **$500 million variable rate FHLB advance** was initiated on May 21, 2024, maturing August 19, 2024, at **5.48%** interest rate as of June 30, 2024[170](index=170&type=chunk) [Note 12: Earnings Per Share](index=63&type=section&id=Note%2012%3A%20Earnings%20Per%20Share) This note provides the calculation of basic and diluted earnings per share (EPS) for Q2 and H1 2024, showing significant year-over-year increases **Earnings Per Share (EPS):** | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common shareholders (in thousands) | $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 | | Weighted-Average Shares Outstanding (Basic) | 44,569,345 | 43,235,398 | 43,937,665 | 43,207,655 | | Weighted-Average Shares Outstanding (Diluted) | 44,698,324 | 43,309,393 | 44,082,485 | 43,300,240 | - **Basic EPS** increased by **$0.19 (14.5%)** for Q2 2024 and by **$0.92 (38.7%)** for H1 2024, compared to the prior year periods[171](index=171&type=chunk) [Note 13: Common Stock](index=63&type=section&id=Note%2013%3A%20Common%20Stock) This note reports on the Company's common stock activities, highlighting a May 2024 public offering that raised **$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 a public offering, generating **$97.7 million** in net proceeds after expenses[172](index=172&type=chunk) [Note 14: Preferred Stock](index=63&type=section&id=Note%2014%3A%20Preferred%20Stock) This note details the Company's preferred stock series, including Series A redemption, dividend payments, and the LIBOR to SOFR transition for Series B - The Company redeemed all outstanding shares of **7% Series A Preferred Stock** on April 1, 2024, for **$52 million** using cash on hand[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[177](index=177&type=chunk)[351](index=351&type=chunk) - The **6% Series C Preferred Stock** is redeemable on or after April 1, 2026, and the **8.25% Series D Preferred Stock** is redeemable on or after October 1, 2027[179](index=179&type=chunk)[182](index=182&type=chunk)[354](index=354&type=chunk)[358](index=358&type=chunk) [Note 15: Share-Based Payment Plans](index=67&type=section&id=Note%2015%3A%20Share-Based%20Payment%20Plans) This note describes the Company's share-based payment plans, including the 2017 Equity Incentive Plan, director restricted stock, and ESOP - **Non-executive directors** receive a portion of their annual fees in restricted common stock, with **2,849 shares** issued in Q2 2024 and **6,013 shares** issued in H1 2024[185](index=185&type=chunk) - The **ESOP** recognized expenses of **$573 thousand** for the six months ended June 30, 2024, and received **23,414 shares**[186](index=186&type=chunk) [Note 16: Segment Information](index=67&type=section&id=Note%2016%3A%20Segment%20Information) This note provides financial information for the Company's three primary business segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking **Net Income by Segment (in thousands):** | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 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 | - **Multi-family Mortgage Banking net income** decreased by **20%** in Q2 2024 YoY but increased by **94%** in H1 2024 YoY[189](index=189&type=chunk)[190](index=190&type=chunk) - **Mortgage Warehousing net income** increased by **20%** in Q2 2024 YoY and **56%** in H1 2024 YoY, driven by higher volumes[189](index=189&type=chunk)[190](index=190&type=chunk) [Note 17: Recent Accounting Pronouncements](index=69&type=section&id=Note%2017%3A%20Recent%20Accounting%20Pronouncements) This note discusses recent FASB ASUs on Segment Reporting and Income Taxes, which the Company is evaluating for potential impact - **FASB ASU 2023-07 (Segment Reporting)** requires additional disclosures on reportable segment expenses and profit/loss, effective for annual periods beginning after December 15, 2023[191](index=191&type=chunk)[192](index=192&type=chunk) - **FASB ASU 2023-09 (Income Taxes)** mandates tabular tax rate reconciliations and disaggregated income tax expense by jurisdiction, effective for annual periods beginning after December 15, 2024[195](index=195&type=chunk)[196](index=196&type=chunk) [Note 18: Subsequent Events](index=71&type=section&id=Note%2018%3A%20Subsequent%20Events) No material subsequent events were noted by the Company - No material events were noted subsequent to the reporting period[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) Management discusses Merchants Bancorp's financial condition and operating results for Q2 and H1 2024, highlighting key financial metrics, asset quality, and segment performance [Financial Highlights for the Three Months Ended June 30, 2024](index=75&type=section&id=Financial%20Highlights%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202024) **Key Financial Highlights (Three Months Ended June 30, 2024 vs. 2023):** | Metric | June 30, 2024 | June 30, 2023 | Change (%) | | :------------------------------------- | :------------ | :------------ | :--------- | | Net income | $76.4 million | $65.3 million | 17% | | Diluted earnings per share | $1.49 | $1.31 | 14% | | Tangible book value per common share | $31.27 | $24.14 | 30% | | Total assets (vs. Dec 31, 2023) | $18.2 billion | $17.0 billion | 7% | | Loans receivable, net (vs. Dec 31, 2023) | $10.9 billion | $10.1 billion | 8% | | Net interest margin | 2.99% | 2.97% | +2 bps | | Efficiency ratio | 31.59% | 32.71% | -1.12% | | Unused borrowing capacity | $7.0 billion | N/A | N/A | | Warehouse loans funded volume | $10.9 billion | $8.4 billion | 30% | - **Net income** increased by **$11.1 million (17%)** year-over-year, driven by a **$22.5 million (21%)** increase in net interest income and a **$12.6 million (56%)** decrease in provision for credit losses[207](index=207&type=chunk) - The Company's most liquid assets, combined with unused borrowing capacity, totaled **$12.6 billion**, representing **69% of total assets**, as of June 30, 2024[207](index=207&type=chunk) [Business Overview](index=77&type=section&id=Business%20Overview) Merchants Bancorp is a diversified bank holding company with three main segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking - The Company operates in **Multi-family Mortgage Banking, Mortgage Warehousing, and Banking segments**[209](index=209&type=chunk) - The core business strategy involves funding fixed-rate, low-risk loans for sale and retaining adjustable-rate loans for investment to manage interest rate risk[210](index=210&type=chunk) [Critical Accounting Policies and Estimates](index=77&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management's financial statement preparation involves significant estimates for credit losses and fair values, with no material policy changes since December 31, 2023 - Material estimates are susceptible to significant change, particularly for the **allowance for credit losses on loans** and **fair values of servicing rights and financial instruments**[34](index=34&type=chunk)[211](index=211&type=chunk) - No significant changes in critical accounting policies or assumptions have been reported since December 31, 2023[212](index=212&type=chunk) [Financial Condition](index=77&type=section&id=Financial%20Condition) As of June 30, 2024, Merchants Bancorp reported **$18.2 billion** in total assets, **$14.9 billion** in deposits, and **$1.9 billion** in total shareholders' equity **Financial Position (June 30, 2024, in billions):** | Metric | Amount | | :------------------------------------- | :----- | | Total assets | $18.2 | | Deposits | $14.9 | | Total shareholders' equity | $1.9 | | Cash and cash equivalents | $0.54 | | Loans held for sale | $3.5 | | Loans receivable, net | $10.9 | | Mortgage loans in process of securitization | $0.21 | | Securities held to maturity | $1.3 | | Securities available for sale | $1.0 | | Servicing rights | $0.18 | - The Company completed a **common stock offering of 2.4 million shares** on May 13, 2024, yielding **$97.7 million** in net proceeds, increasing the common equity tier I capital ratio to **8.7%**[214](index=214&type=chunk) - A **$324.6 million securitization of 13 multi-family mortgage loans** was completed on April 30, 2024, through a Freddie Mac-sponsored Q-Series transaction[214](index=214&type=chunk) [Comparison of Financial Condition at June 30, 2024 and December 31, 2023](index=79&type=section&id=Comparison%20of%20Financial%20Condition%20at%20June%2030%2C%202024%20and%20December%2031%2C%202023) Total assets increased by **7%** to **$18.2 billion**, deposits by **6%** to **$14.9 billion**, and shareholders' equity by **11%** to **$1.9 billion** **Financial Condition Changes (June 30, 2024 vs. December 31, 2023, in thousands):** | Metric | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Assets | $18,212,422 | $16,952,516 | $1,259,906 | 7% | | Cash and Cash Equivalents | $540,882 | $584,422 | $(43,540) | (7%) | | Mortgage Loans in Process of Securitization | $209,244 | $110,599 | $98,645 | 89% | | Securities Available for Sale | $1,017,019 | $1,113,687 | $(96,668) | (9%) | | Securities Held to Maturity | $1,291,110 | $1,204,217 | $86,893 | 7% | | Loans Held for Sale | $3,483,076 | $3,144,756 | $338,320 | 11% | | Loans Receivable, Net | $10,933,189 | $10,127,801 | $805,388 | 8% | | ACL-Loans | $81,028 | $71,752 | $9,276 | 13% | | Goodwill | $8,014 | $15,845 | $(7,831) | (49%) | | Servicing Rights | $178,776 | $158,457 | $20,319 | 13% | | Deposits | $14,917,067 | $14,061,460 | $855,607 | 6% | | Borrowings | $1,159,206 | $964,127 | $195,079 | 20% | | Total Shareholders' Equity | $1,888,147 | $1,701,084 | $187,063 | 11% | - **Loans receivable, net**, increased by **$805.4 million (8%)**, primarily driven by mortgage warehouse repurchase agreements (**82% increase**), multi-family financing (**4% increase**), and healthcare financing (**6% increase**)[225](index=225&type=chunk)[235](index=235&type=chunk) - **Goodwill** decreased by **$7.8 million (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 saw nonperforming loans increase to **$143.5 million (1.30%)** at June 30, 2024, primarily due to delinquent multi-family and healthcare loans **Nonperforming Loans (in thousands):** | Metric | June 30, 2024 | December 31, 2023 | June 30, 2023 | | :------------------------------------- | :------------ | :---------------- | :------------ | | Total nonperforming loans | $143,452 | $82,015 | $68,400 | | % of total loans | 1.30% | 0.80% | 0.69% | | ACL-Loans as % of nonperforming loans | 56% | 87% | 92% | | Loans > 30 days past due | $234,848 | $183,529 | $92,900 | | Special Mention loans | $244,000 | $191,267 | N/A | | Substandard loans | $246,839 | $128,577 | N/A | **Charge-offs and Recoveries (in thousands):** | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Charge-offs | $3,452 | $9,532 | $4,377 | $9,532 | | Recoveries | $15 | $2 | $16 | $9 | - The increase in **nonperforming loans** was primarily driven by multi-family and healthcare customers with delinquent payments on variable rate loans due to elevated interest rates[244](index=244&type=chunk)[248](index=248&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%2C%202024%20and%202023) Net income increased by **17%** to **$76.4 million** for Q2 2024, driven by higher net interest income and lower credit loss provision **Operating Results (Three Months Ended June 30, 2024 vs. 2023, in thousands):** | Metric | 2024 | 2023 | Change ($) | Change (%) | | :------------------------------------- | :----- | :----- | :--------- | :--------- | | Net income | $76,393 | $65,302 | $11,091 | 17% | | Net Interest Income | $128,119 | $105,617 | $22,502 | 21% | | Provision for Credit Losses | $9,965 | $22,603 | $(12,638) | (56%) | | Noninterest Income | $31,351 | $29,882 | $1,469 | 5% | | Noninterest Expense | $50,380 | $44,320 | $6,060 | 14% | | Income Tax Expense | $22,732 | $3,274 | $19,458 | 594% | | Net Interest Margin | 2.99% | 2.97% | +2 bps | N/A | | Efficiency Ratio | 31.59% | 32.71% | -1.12% | N/A | **Interest Income & Expense Changes (Three Months Ended June 30, 2024 vs. 2023, in thousands):** | Category | Interest Income | Interest Expense | | :------------------------------------- | :-------------- | :--------------- | | Total Interest Income | $328,273 (27% increase) | N/A | | Loans and loans held for sale | $284,421 (24% increase) | N/A | | Securities available for sale | $14,784 (166% increase) | N/A | | Securities held to maturity | $19,799 (14% increase) | N/A | | Total Interest Expense | N/A | $200,154 (31% increase) | | Deposits | N/A | $179,651 (30% increase) | | Borrowings | N/A | $20,503 (40% increase) | - The **effective tax rate** increased to **22.9%** from **4.8%** due to a **$13.0 million tax benefit** recorded in Q2 2023 related to tax refunds and state tax apportionment changes[280](index=280&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%2C%202024%20and%202023) Net income for H1 2024 increased by **36%** to **$163.4 million**, driven by higher net interest and noninterest income, and lower credit loss provision **Operating Results (Six Months Ended June 30, 2024 vs. 2023, in thousands):** | Metric | 2024 | 2023 | Change ($) | Change (%) | | :------------------------------------- | :----- | :----- | :--------- | :--------- | | Net income | $163,447 | $120,257 | $43,190 | 36% | | Net Interest Income | $255,175 | $206,310 | $48,865 | 24% | | Provision for Credit Losses | $14,691 | $29,470 | $(14,779) | (50%) | | Noninterest Income | $72,225 | $44,146 | $28,079 | 64% | | Noninterest Expense | $99,292 | $79,092 | $20,200 | 26% | | Income Tax Provision | $49,970 | $21,637 | $28,333 | 131% | | Net Interest Margin | 3.07% | 3.11% | -4 bps | N/A | | Efficiency Ratio | 30.33% | 31.58% | -1.25% | N/A | **Interest Income & Expense Changes (Six Months Ended June 30, 2024 vs. 2023, in thousands):** | Category | Interest Income | Interest Expense | | :------------------------------------- | :-------------- | :--------------- | | Total Interest Income | $642,446 (37% increase) | N/A | | Loans and loans held for sale | $556,419 (33% increase) | N/A | | Securities available for sale | $29,172 (273% increase) | N/A | | Securities held to maturity | $40,321 (22% increase) | N/A | | Total Interest Expense | N/A | $387,271 (47% increase) | | Deposits | N/A | $350,673 (45% increase) | | Borrowings | N/A | $36,598 (76% increase) | - **Noninterest income** increased by **$28.1 million (64%)**, primarily due to a **$19.3 million (175%)** increase in loan servicing fees and a **$4.5 million (73%)** increase in other income[303](index=303&type=chunk)[304](index=304&type=chunk) [Our Segments](index=100&type=section&id=Our%20Segments) The Company operates through three primary segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking, each contributing to diversified net income - The **Multi-family Mortgage Banking segment** originates and services government-sponsored mortgages for multi-family and healthcare facilities, and syndicates low-income housing tax credit and debt funds[309](index=309&type=chunk) - The **Mortgage Warehousing segment** funds agency-eligible residential loans for non-depository financial institutions, with volumes of **$18.8 billion** for the six months ended June 30, 2024[310](index=310&type=chunk) - The **Banking segment** offers retail banking, commercial lending, agricultural lending, and residential mortgage banking, primarily in Indiana[312](index=312&type=chunk) [Multi-family Mortgage Banking](index=102&type=section&id=Multi-family%20Mortgage%20Banking) The Multi-family Mortgage Banking segment reported a **20% decrease** in Q2 2024 net income YoY but a **94% increase** in H1 2024 YoY, driven by servicing fees **Multi-family Mortgage Banking Net Income (in thousands):** | Period | 2024 | 2023 | Change ($) | Change (%) | | :------------------------------------- | :----- | :----- | :--------- | :--------- | | Three Months Ended June 30 | $9,037 | $11,242 | $(2,205) | (20%) | | Six Months Ended June 30 | $25,646 | $13,208 | $12,438 | 94% | - **Loan servicing fees** for H1 2024 included a positive fair market value adjustment of **$17.7 million** on servicing rights, compared to a negative adjustment of **$0.1 million** in H1 2023[321](index=321&type=chunk) - The volume of loans originated and acquired for sale decreased by **49%** in Q2 2024 YoY and **24%** in H1 2024 YoY[319](index=319&type=chunk)[321](index=321&type=chunk) [Mortgage Warehousing](index=104&type=section&id=Mortgage%20Warehousing) The Mortgage Warehousing segment reported a **20% increase** in Q2 2024 net income YoY and a **56% increase** in H1 2024 YoY, driven by higher loan volumes **Mortgage Warehousing Net Income (in thousands):** | Period | 2024 | 2023 | Change ($) | Change (%) | | :------------------------------------- | :----- | :----- | :--------- | :--------- | | Three Months Ended June 30 | $22,270 | $18,596 | $3,674 | 20% | | Six Months Ended June 30 | $42,460 | $27,237 | $15,223 | 56% | - **Warehouse loan volume** increased by **30%** in Q2 2024 YoY (**$10.9 billion** vs. **$8.4 billion**) and **36%** in H1 2024 YoY (**$18.8 billion** vs. **$13.8 billion**), outperforming industry trends[323](index=323&type=chunk)[325](index=325&type=chunk) [Banking](index=104&type=section&id=Banking) The Banking segment's net income increased by **23%** for Q2 2024 YoY and **18%** for H1 2024 YoY, driven by higher net interest income **Banking Segment Net Income (in thousands):** | Period | 2024 | 2023 | Change ($) | Change (%) | | :------------------------------------- | :----- | :----- | :--------- | :--------- | | Three Months Ended June 30 | $52,378 | $42,650 | $9,728 | 23% | | Six Months Ended June 30 | $108,803 | $91,957 | $16,846 | 18% | - **Noninterest income** for H1 2024 included a positive fair market value adjustment of **$1.3 million** on single-family servicing rights, compared to **$0.6 million** in H1 2023[330](index=330&type=chunk) [Liquidity and Capital Resources](index=105&type=section&id=Liquidity%20and%20Capital%20Resources) The Company maintains strong liquidity and capital resources, with **$7.0 billion** in unused borrowing capacity and **$12.6 billion** in liquid assets - The Company had **$7.0 billion** in unused borrowing capacity with the FHLB and Federal Reserve discount window as of June 30, 2024[332](index=332&type=chunk) - Liquid assets combined with unused borrowing capacity totaled **$12.6 billion**, or **69% of total assets**, at June 30, 2024[333](index=333&type=chunk) - **Uninsured deposits** represented approximately **15% of total deposits**, with the Federal Reserve Board line of credit capable of funding **118%** of uninsured deposits[334](index=334&type=chunk) [Liquidity](index=105&type=section&id=Liquidity) The Company's liquidity is robust, supported by diverse funding, **$7.0 billion** in unused borrowing capacity, and **$12.6 billion** in highly liquid assets **Cash Flow Summary (Six Months Ended June 30, in thousands):** | Activity | 2024 | 2023 | | :------------------------------------- | :----- | :----- | | Net cash used in operating activities | $(332,653) | $(543,020) | | Net cash used in investing activities | $(1,012,173) | $(2,356,545) | | Net cash provided by financing activities | $1,301,286 | $3,050,711 | - **Certificates of deposit** maturing within one year totaled **$6.8 billion (98% of total CDs)** at June 30, 2024, with management anticipating substantial renewals[340](index=340&type=chunk) [Off-Balance Sheet Arrangements](index=107&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company engages in off-balance sheet arrangements, including loan commitments and letters of credit, totaling **$3.9 billion** subject to credit risk **Off-Balance Sheet Commitments (June 30, 2024, in billions):** | Commitment Type | Amount | | :------------------------------------- | :----- | | Outstanding commitments to extend credit (subject to credit risk) | $3.9 | | Outstanding commitments (subject to performance criteria/cancellation) | $3.7 | [Capital Resources](index=107&type=section&id=Capital%20Resources) The Company maintains a strong capital base, with shareholders' equity increasing by **11%** to **$1.9 billion**, exceeding 'well capitalized' thresholds **Shareholders' Equity Changes (June 30, 2024 vs. December 31, 2023, in millions):** | Metric | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Shareholders' Equity | $1,888.1 | $1,701.1 | $187.0 | 11% | | Net income contribution | $163.4 | N/A | N/A | N/A | | Common stock offering net proceeds | $97.7 | N/A | N/A | N/A | | Series A Preferred Stock redemption | $(52.0) | N/A | N/A | N/A | | Dividends paid | $(24.4) | N/A | N/A | N/A | **Company Capital Ratios (June 30, 2024):** | Capital Ratio | Actual Ratio | Minimum to be Well Capitalized | | :------------------------------------- | :----------- | :----------------------------- | | 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% | - The Company and Merchants Bank were both categorized as **'well capitalized'** by federal regulators as of June 30, 2024[116](index=116&type=chunk)[366](index=366&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=113&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company actively manages market risk, primarily interest rate risk, through its ALCO, using NII at Risk and EVE models to assess sensitivity - The Company's primary market risks 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, aiming to minimize the impact of changing rates on net interest income and economic values[373](index=373&type=chunk)[374](index=374&type=chunk) **Net Interest Income Sensitivity (Twelve Months Forward, June 30, 2024, in thousands):** | Rate Shift | Dollar Change | 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 (Immediate Shock, June 30, 2024, in thousands):** | Rate Shift | Dollar Change | 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)% | [Item 3 Quantitative and Qualitative Disclosures About Market Risk](index=116&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item refers to market risk disclosures provided in Item 2 under 'Liquidity and Capital Resources' and 'Interest Rate Risk' - The required information for market risk disclosures is included in Item 2, specifically under **"Liquidity and Capital Resources"** and **"Interest Rate Risk"**[384](index=384&type=chunk) [Item 4 Controls and Procedures](index=118&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded the Company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control - The Company's **disclosure controls and procedures** were deemed effective as of June 30, 2024[387](index=387&type=chunk) - No material changes in internal control over financial reporting occurred during the reporting period[388](index=388&type=chunk) [PART II – OTHER INFORMATION](index=119&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1 Legal Proceedings](index=119&type=section&id=Item%201%20Legal%20Proceedings) The Company reported no legal proceedings - No legal proceedings were reported[390](index=390&type=chunk) [Item 1A Risk Factors](index=119&type=section&id=Item%201A%20Risk%20Factors) No material changes to risk factors were reported since the Annual Report on Form 10-K for December 31, 2023 - No material changes to risk factors were reported since the Annual Report on Form 10-K for 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) The Company reported no unregistered sales of equity securities or use of proceeds - No unregistered sales of equity securities or 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) The Company reported no defaults upon senior securities - 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 to the registrant[394](index=394&type=chunk) [Item 5 Other Information](index=119&type=section&id=Item%205%20Other%20Information) The Company reported no other information - 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 organizational documents, certifications, and XBRL data files - Exhibits include organizational documents, **CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906)**, and **XBRL interactive data files**[396](index=396&type=chunk) [SIGNATURES](index=121&type=section&id=SIGNATURES) The report was signed by Michael F. Petrie, Chairman & CEO, and John F. Macke, CFO, on August 9, 2024 - The report was signed by **Michael F. Petrie, Chairman & CEO**, and **John F. Macke, CFO**, on August 9, 2024[400](index=400&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 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 ...

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, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 001-38258 MERCHANTS BANCORP (Exact name of Registrant as specified in its charter) | INDIANA | 20-57474 ...

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 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, 2023 MERCHANTS BANCORP (Exact name of registrant as specified in its charter) ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) (Exact name of registrant as specified in its charter) Indiana 20-5747400 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ...

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, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission File No. 001-38258 MERCHANTS BANCORP (Exact name of registrant as specified in its charter) Indi ...