Employee Relations and Engagement - As of December 31, 2024, the company had approximately 663 employees, with 388 located in Central Indiana[45] - The company achieved a turnover rate of only 9% in 2024, reflecting positive employee relations and engagement[46] - The company was recognized as one of the "Best Places to Work in Indiana" from 2016 to 2023 and as a "Top Workplace" by The Indianapolis Star in 2023 and 2024[46] - The company has established an Employee Stock Ownership Plan (ESOP) that includes a discretionary contribution equal to 3% of an employee's eligible compensation under the 401(k) plan[48] - The company continuously evaluates employee health and safety measures to ensure a productive work environment[48] Business Model and Growth Strategy - The company focuses on sustainable, long-term growth and value creation through its ESG initiatives, including investments in affordable housing projects[49][51] - The company is one of the largest government-sponsored entity multi-family lenders, emphasizing support for affordable housing and skilled nursing facilities[50] - The company has acquired private equity interests in affordable housing projects that generate low-income housing tax credits[51] - The company has a diversified business model that distinguishes it from competitors in the financial services sector[44] Regulatory Environment - The company is subject to extensive regulation under federal and state law, impacting its growth and earnings performance[55] - As of December 31, 2024, Merchants Bank was categorized as "well capitalized" with a total risk-based capital ratio of at least 10% and a Tier 1 risk-based capital ratio of at least 8%[85] - The FDIC's risk-based assessment system requires insured institutions to pay deposit insurance premiums based on the risk they pose to the Deposit Insurance Fund (DIF), with an increase in initial base deposit insurance assessment rates by two basis points starting in 2023[90][91] - Merchants Bank is not subject to the special assessment imposed by the FDIC on banks with assets over $5 billion, as it has less than $5 billion in uninsured deposits[93] - The Dodd-Frank Act imposed more stringent capital requirements on bank holding companies, affecting the operations of Merchants Bank, which had assets exceeding $10 billion for four consecutive quarters in 2023 and 2024[99][104] - The Simplification Rule raised the threshold for deducting servicing rights from Common Equity Tier 1 capital from 10% to 25% of common equity, effective January 1, 2020[88] - Merchants Bank must obtain approval from the Indiana Department of Financial Institutions prior to paying dividends that exceed the sum of its net income for the year to date combined with its retained net income for the previous two years[95] - The Community Reinvestment Act requires Merchants Bank to meet the credit needs of its local community, and the company is currently operating under an approved CRA strategic plan through 2025[98] Information Security - The company maintains a comprehensive information security program to protect customer information, including annual risk assessments and an Incident Response Plan[101] Capital Distribution and Compliance - The capital regulations limit Merchants Bank's ability to make capital distributions if it does not hold a capital conservation buffer of 2.5% above the required minimum risk-based capital ratios[97] - The company does not expect the CFPB's rules to have a significant impact on its operations, except for higher compliance costs related to mortgage lending regulations[105] - The CFPB's new rule on "qualified mortgages" removed the 43% debt-to-income ratio requirement, effective June 30, 2021, but most loans originated by Merchants Bank still qualify under the revised definition[107] - The CFPB's mortgage servicing rules have increased servicing costs across the industry since their implementation in 2014, impacting Merchants Bank's operations[108] - Merchants Bank has voluntarily adopted many servicing and foreclosure standards due to competitive pressures, despite not being a party to state agency settlements regarding foreclosure practices[109] Interest Rate Risk Management - The bank's interest rate risk management policy aims to limit changes in net interest income to 20% for a +/- 100 basis point move in interest rates and 30% for a +/- 200 basis point move[439] - As of December 31, 2024, the projected dollar change in net interest income for a +200 basis point shift is $68,263, reflecting a 13.1% increase[439] - The Economic Value of Equity (EVE) is projected to decrease by $2,990 for a +200 basis point shift in interest rates as of December 31, 2024[441] - The bank's EVE management policy limits changes to 15% for a +/- 100 basis point move and 20% for a +/- 200 basis point move, with compliance confirmed for all scenarios[441] - Interest rate risk is primarily managed through the Asset-Liability Committee (ALCO), which meets quarterly to monitor sensitivity and ensure compliance with risk limits[434] - The bank's loan portfolio includes low-risk multi-family, residential, and SBA loans, which are retained to mitigate interest rate risk[433] Forward-Looking Statements - The bank's forward-looking statements are subject to various risks and uncertainties that could materially affect actual results, including economic conditions and regulatory changes[115]
Merchants Bancorp(MBINL) - 2024 Q4 - Annual Report