PART I – FINANCIAL INFORMATION Item 1. Financial Statements The unaudited statements show a significant net income decrease due to higher credit loss provisions, despite moderate asset growth Condensed Consolidated Balance Sheets Total assets grew to $19.14 billion, driven by loans, while shareholders' equity slightly decreased due to a preferred stock redemption Key Balance Sheet Items | Key Balance Sheet Items | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $19,141,204 | $18,805,732 | +1.8% | | Loans receivable, net | $10,432,117 | $10,354,002 | +0.8% | | Loans held for sale | $4,105,765 | $3,771,510 | +8.9% | | Total Liabilities | $16,956,572 | $16,562,422 | +2.4% | | Total Deposits | $12,686,835 | $11,919,976 | +6.4% | | Borrowings | $4,009,474 | $4,386,122 | -8.6% | | Total Shareholders' Equity | $2,184,632 | $2,243,310 | -2.6% | Condensed Consolidated Statements of Income Q2 net income fell 50% year-over-year to $38.0 million, primarily driven by a 432% surge in the provision for credit losses Three Months Ended June 30 | Metric (in thousands, except EPS) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $128,719 | $128,119 | +0.5% | | Provision for credit losses | $53,027 | $9,965 | +432.2% | | Noninterest Income | $50,480 | $31,351 | +61.0% | | Noninterest Expense | $77,337 | $50,380 | +53.5% | | Net Income | $37,981 | $76,393 | -50.3% | | Diluted EPS | $0.60 | $1.49 | -59.7% | Six Months Ended June 30 | Metric (in thousands, except EPS) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $250,915 | $255,175 | -1.7% | | Provision for credit losses | $60,754 | $14,691 | +313.5% | | Noninterest Income | $74,173 | $72,225 | +2.7% | | Noninterest Expense | $139,001 | $99,292 | +40.0% | | Net Income | $96,220 | $163,447 | -41.1% | | Diluted EPS | $1.53 | $3.29 | -53.5% | Notes to Condensed Consolidated Financial Statements Notes detail a higher Allowance for Credit Losses, two significant loan sales, a preferred stock redemption, and a new regulatory MOU - The Allowance for Credit Losses on Loans (ACL-Loans) increased to $91.8 million at June 30, 2025, from $84.4 million at year-end 2024, with a $64.0 million provision and $56.6 million in charge-offs for the six-month period96308 - The company completed a $373.3 million multi-family loan securitization and a $312.1 million sale of home equity lines of credit in Q2 2025134135 - All outstanding shares of 6% Series B Preferred Stock were redeemed on January 2, 2025, for $125.0 million233234 - The Bank entered into a confidential Memorandum of Understanding (MOU) with the FDIC and DFI on June 30, 2025, and was in compliance with its terms as of the report date268 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the net income decline from credit loss provisions, an improved funding mix, and a new regulatory MOU - The 50% decrease in Q2 2025 net income is directly attributed to a $43.1 million increase in the provision for credit losses, linked to multi-family property values and mortgage fraud investigations282325334 - The company's funding mix improved as core deposits grew by $2.0 billion (22%) since year-end 2024, while brokered deposits were reduced by $1.3 billion (50%)287315316 - A confidential MOU with the FDIC and DFI was executed on June 30, 2025, which may limit or delay future expansion plans, though the bank currently exceeds required capital levels280281 - Business volumes remain strong, with warehouse loan funding increasing 49% YoY to $16.3 billion and multi-family origination volume increasing 33% YoY to $1.4 billion in Q2287419425 - A strong liquidity position is maintained with $5.0 billion in unused borrowing capacity from the FHLB and Federal Reserve Discount Window282436 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with models showing an asset-sensitive position within policy limits Net Interest Income Sensitivity (12-Months Forward) | Net Interest Income Sensitivity (12-Months Forward) | -200 bps | -100 bps | +100 bps | +200 bps | | :--- | :--- | :--- | :--- | :--- | | Dollar Change (in thousands) | $(84,289) | $(44,357) | $42,895 | $85,982 | | Percent Change | (15.9)% | (8.3)% | 8.1% | 16.2% | Economic Value of Equity Sensitivity (Immediate Shock) | Economic Value of Equity Sensitivity (Immediate Shock) | -200 bps | -100 bps | +100 bps | +200 bps | | :--- | :--- | :--- | :--- | :--- | | Dollar Change (in thousands) | $54,849 | $36,112 | $2,604 | $4,897 | | Percent Change | 2.6% | 1.7% | 0.1% | 0.2% | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2025, the Company's disclosure controls and procedures were effective486 - No material changes to the Company's internal control over financial reporting occurred during the quarter487 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings for the period - None490 Item 1A. Risk Factors No material changes were reported from the risk factors previously disclosed in the 2024 Annual Report - No material changes from the risk factors disclosed in the 2024 Form 10-K491 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None492 Item 6. Exhibits This section lists filed exhibits, including Sarbanes-Oxley certifications and XBRL interactive data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, along with XBRL interactive data files497
MERCHANTS(MBINM) - 2025 Q2 - Quarterly Report