Earnings climb at Merchants Bancorp (NASDAQ: MBIN) as loans and fees grow

Rhea-AI Filing Summary

Merchants Bancorp reported stronger quarterly results with net income of $67.7M for the three months ended March 31, 2026, up from $58.2M a year earlier. Net income allocated to common shareholders rose to $57.5M, with diluted EPS increasing to $1.25 from $0.93.

Total assets grew to $20.32B, driven by loan growth as loans receivable reached $11.40B and loans held for sale $4.71B. Deposits were $12.95B and borrowings increased to $4.77B. The allowance for credit losses on loans stood at $76.8M. Operating cash flow was negative $597.3M, reflecting heavy loan origination and sale activity.

Insights

Banking sector equity analyst

Merchants Bancorp grew earnings and loans, but with higher credit provisioning and reliance on wholesale funding.

Merchants Bancorp delivered quarterly net income of $67.7M, up from $58.2M, with net income to common shareholders rising to $57.5M and EPS at $1.25. Net interest income increased to $128.6M, while noninterest income nearly doubled to $46.6M helped by higher loan sales and servicing revenue.

Credit costs moved higher: the provision for credit losses was $15.3M versus $7.7M a year earlier, and the allowance for credit losses on loans ended at $76.8M. Noninterest expenses rose to $75.6M, with notable increases in deposit insurance and credit risk transfer premium expense, partly offsetting revenue gains.

Total assets expanded to $20.32B, with loans receivable at $11.40B and loans held for sale at $4.71B. Funding leaned more on borrowings, which climbed to $4.77B, while deposits were $12.95B. Operating cash flow was negative $597.3M due to strong loan origination and sale flows, a pattern typical for an active mortgage and multifamily lender but still dependent on continued market demand and secondary-market liquidity.

Key Figures

Total assets: $20.32B Loans receivable, net: $11.40B Total deposits: $12.95B +5 more

8 metrics

Total assets $20.32B As of March 31, 2026

Loans receivable, net $11.40B As of March 31, 2026

Total deposits $12.95B As of March 31, 2026

Net income $67.7M Three months ended March 31, 2026

Net income to common shareholders $57.5M Three months ended March 31, 2026

Diluted EPS $1.25 Three months ended March 31, 2026

Provision for credit losses $15.3M Three months ended March 31, 2026

Allowance for credit losses on loans $76.8M As of March 31, 2026

Key Terms

allowance for credit losses on loans, CECL, Special Mention, nonaccrual loans, +1 more

5 terms

allowance for credit losses on loans financial

"Loans receivable (includes $ 46,427 and $ 47,318 at fair value), net of allowance for credit losses on loans of $ 76,831 and $ 83,301"

A bank's allowance for credit losses on loans is a reserve of money set aside to cover loans the lender expects may not be repaid. Think of it as a rainy-day fund for a loan portfolio: larger allowances signal more expected losses and reduce reported profits and available capital, so investors watch it to judge a lender’s risk exposure, earnings quality, and financial strength.

CECL financial

"FASB ASU 2025-08 – Financial Instruments – Credit Losses – Purchased Loans"

An accounting standard that requires banks and other lenders to estimate and record expected credit losses for loans and similar financial assets up front, based on historical experience, current conditions and reasonable forecasts. It matters to investors because it changes how much a firm must set aside as a loss reserve, which directly affects reported profits, capital levels and perceived financial strength—think of it as stocking a reserve for future bad loans before the rain starts.

Special Mention financial

"the Company has classified the security as Special Mention as of March 31, 2026"

nonaccrual loans financial

"Nonaccrual loans, including modified loans to borrowers experiencing financial difficulty that have not met the six-month minimum performance criterion, are reported as nonperforming loans."

Nonaccrual loans are loans a lender has stopped counting toward interest income because the borrower is overdue or unlikely to pay; the lender only records cash payments received and may set aside extra funds to cover potential losses. For investors, a rising number or amount of nonaccrual loans signals weaker credit quality, lower future interest revenue and larger potential write-downs — similar to pausing expected subscription income when many customers stop paying.

low-income housing tax credits financial

"The primary purpose of these investments is to earn an adequate return on capital through the receipt of low-income housing tax credits."

A low-income housing tax credit is a government program that gives a steady, dollar-for-dollar reduction in federal tax bills to investors who finance or build rental housing reserved for lower-income tenants. Think of it as a long-term tax coupon paid to investors in exchange for keeping rents affordable; it matters to investors because it creates predictable tax savings, shapes expected cash flows and return timing, and reduces development risk by tying incentives to occupancy rules and compliance.

Earnings Snapshot

Net interest income: $128.6M

Q1 2026

Net interest income $128.6M

Total noninterest income $46.6M

Net income $67.7M

Diluted EPS $1.25

10-Q Quarterly Reports: What Changes Quarter to Quarter →

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Table of Contents

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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, 2026

​

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)	​

​

Indiana	​ ​ ​	20-5747400
(State or other jurisdiction of	​	(I.R.S. Employer
incorporation or organization)	​	Identification Number)
​	​	​
410 Monon Blvd. Carmel, Indiana	​	46032
(Address of principal	​	(Zip Code)
executive office)	​	​

​

(317) 569-7420

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

​

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  ☐ No

​

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
​	​	​	Emerging growth company ☐

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes ☐    No ☒

Securities registered pursuant to Section 12(b) of the Act:

​

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 C Preferred Stock, without par value Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock, without par value Depositary Shares, each representing a 1/40th interest in a share of Series E Preferred Stock, without par value	MBINN ​ MBINM ​ MBINL	NASDAQ ​ NASDAQ ​ NASDAQ

​

As of April 30, 2026, the latest practicable date, 45,935,408 shares of the registrant’s common stock, without par value, were issued and outstanding.

​

​

​

Table of Contents

Merchants Bancorp

Index to Quarterly Report on Form 10-Q

PART I – FINANCIAL INFORMATION	​
​	​
Item 1 Interim Financial Statements (Unaudited)	​
​	​
Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025	5
​	​
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2026 and 2025	6
​	​
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2026 and 2025	7
​	​
Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2026 and 2025	8
​	​
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025	9
​	​
Notes to Condensed Consolidated Financial Statements	10
​	​
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	56
​	​
Item 3 Quantitative and Qualitative Disclosures About Market Risk	78
​	​
Item 4 Controls and Procedures	78
​	​
PART II – OTHER INFORMATION	79
​	​
Item 1 Legal Proceedings	79
​	​
Item 1A Risk Factors	79
​	​
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	79
​	​
Item 3 Defaults Upon Senior Securities	79
​	​
Item 4 Mine Safety Disclosures	79
​	​
Item 5 Other Information	79
​	​
Item 6 Exhibits	80
​	​
SIGNATURES	81

​

​

​

​

​

​

​

​

​

​

​

​

2

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Glossary of Defined Terms

​

As used in this report, references to “Merchants” “the Company,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of Merchants Bancorp and its wholly owned subsidiaries. Merchants Bancorp refers solely to the parent holding company, and Merchants Bank refers to Merchants Bancorp’s bank subsidiary, Merchants Bank of Indiana.

​
The acronyms and abbreviations identified below are used throughout this report, including the Notes to Consolidated Financial Statements

​

ACL: allowance for credit losses

ACL-Guarantees: allowance for credit losses on guarantees

ACL-Loans: allowance for credit losses-loans

ACL-OBCE: allowance for credit losses-off-balance sheet credit exposures

AFX: American Financial Exchange

Agency: government sponsored entities, including Fannie Mae, Freddie Mac, Ginnie Mae, FHLB, and FCB

ALCO: Asset-Liability Committee

AI: Artificial Intelligence

AOCL: accumulated other comprehensive loss

ARM: adjustable-rate mortgage

ASC: FASB’s Accounting Standards Codification

ASU: FASB Accounting Standards Update

Board: Board of Directors of Merchants Bancorp

CCO: Chief Credit Officer

CDS: Credit Default Swap

CECL: FASB Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments adopted by the Corporation on January 1, 2022, as amended

CMT: constant maturity rate

CODM: chief operating decision maker

ESOP: Employee Stock Ownership Plan

Farmer Mac: Federal Agricultural Mortgage Corporation

Fannie Mae: Federal National Mortgage Association

FASB: Financial Accounting Standards Board

FCB: Federal Farm Credit Bank

FDIC: Federal Deposit Insurance Corporation

Federal Reserve: Board of Governors of the Federal Reserve System

FHA: Federal Housing Administration

FHLB: Federal Home Loan Bank

Freddie Mac: Federal Home Loan Mortgage Corporation

GAAP: United States generally accepted accounting principles

3

Table of Contents

Ginnie Mae: Government National Mortgage Association

GSE: government sponsored entities, including Fannie Mae and Freddie Mac

HELOC: home equity line of credit

HUD: Department of Housing and Urban Development

LIHTC: low-income housing tax credits

IDFI: Indiana Department of Financial Institutions

LLC: limited liability companies

MBA: Mortgage Bankers Association

MCC: Merchants Capital Corporation, a wholly owned subsidiary of Merchants Bank

MCI: Merchants Capital Investments, LLC, a wholly owned subsidiary of Merchants Bank

MCS: Merchants Capital Servicing, LLC, a wholly owned subsidiary of Merchants Bank

Merchants Bank: Merchants Bank of Indiana

MIP: Merchants Investment Partners, LLC, formerly known as Merchants Asset Management, LLC, a wholly owned subsidiary of Merchants Bancorp

MOU: Memorandum of Understanding

N/A: not applicable

NASDAQ: NASDAQ Capital Market

PCAOB: Public Company Accounting Oversight Board

REMIC: real estate mortgage investment conduit

ROU: Right of use

SBA: Small Business Administration

SEC: Securities and Exchange Commission

SOFR: Secured Overnight Financing Rate

Treasury: US Department of the Treasury

VIE: variable interest entity

​

​

​

4

Table of Contents

Part I – Financial Information

Item 1. Financial Statements

Merchants Bancorp

Condensed Consolidated Balance Sheets

March 31, 2026 (Unaudited) and December 31, 2025

(In thousands, except share data)

​	​	​	​	​	​	​
​	​	March 31,		​	December 31,
​	​ ​ ​	2026		​ ​ ​	2025*
Assets		​	​		​	​
Cash and due from banks	​	$	19,642	​	$	15,844
Interest-earning demand accounts	​		63,573	​		196,358
Cash and cash equivalents	​		83,215	​		212,202
Securities purchased under agreements to resell	​		1,511	​		1,520
Mortgage loans in process of securitization	​		437,001	​		620,094
Securities available for sale (includes $550,207 and $571,314 at fair value)	​		843,896	​		865,058
Securities held to maturity (fair value of $1,426,444 and $1,543,554)	​	​	1,425,982	​	​	1,543,659
Federal Home Loan Bank (FHLB) stock and other equity securities	​		227,589	​		227,589
Loans held for sale (includes $163,426 and $76,980 at fair value)	​		4,709,688	​		3,873,012
Loans receivable (includes $46,427 and $47,318 at fair value), net of allowance for credit losses on loans of $76,831 and $83,301	​		11,399,882	​		10,951,381
Premises and equipment, net	​		73,695	​		73,929
Servicing rights	​		229,576	​		217,296
Interest receivable	​		77,326	​		81,807
Goodwill	​		8,014	​		8,014
Other real estate owned	​	​	60,226	​	​	60,145
Other assets and receivables	​		744,181	​		713,237
Total assets	​	$	20,321,782	​	$	19,448,943
Liabilities and Shareholders' Equity	​		​	​		​
Liabilities	​		​	​		​
Deposits	​		​	​		​
Noninterest-bearing	​	$	501,864	​	$	604,081
Interest-bearing	​		12,449,889	​		12,437,111
Total deposits	​		12,951,753	​		13,041,192
Borrowings	​		4,773,490	​		3,842,592
Deferred and current tax liabilities, net	​		46,403	​		33,900
Other liabilities	​		219,833	​		250,500
Total liabilities	​		17,991,479	​		17,168,184
Commitments and Contingencies	​		​	​		​
Shareholders' Equity	​		​	​		​
Common stock, without par value	​		​	​		​
Authorized - 75,000,000 shares	​		​	​		​
Issued and outstanding - 45,935,408 and 45,893,172 shares	​		243,433	​		243,310
Preferred stock, without par value - 5,000,000 total shares authorized	​	​	​	​	​	​
6% Series C Preferred stock - $1,000 per share liquidation preference	​	​	​	​	​	​
Authorized - 200,000 shares	​	​	​	​	​	​
Issued and outstanding - 196,181 shares (equivalent to 7,847,233 depositary shares)	​	​	191,084	​	​	191,084
8.25% Series D Preferred stock - $1,000 per share liquidation preference	​	​	​	​	​	​
Authorized - 300,000 shares	​	​	​	​	​	​
Issued and outstanding - 142,500 shares (equivalent to 5,700,000 depositary shares)	​	​	137,459	​	​	137,459
7.625% Series E Preferred stock - $1,000 per share liquidation preference	​	​	​	​	​	​
Authorized - 230,000 shares	​	​	​	​	​	​
Issued and outstanding - 230,000 shares (equivalent to 9,200,000 depositary shares)	​	​	222,748	​	​	222,748
Retained earnings	​		1,536,383	​		1,486,191
Accumulated other comprehensive loss	​		(804)	​		(33)
Total shareholders' equity	​		2,330,303	​		2,280,759
Total liabilities and shareholders' equity	​	$	20,321,782	​	$	19,448,943

​

* Derived from audited consolidated financial statements.

​

See notes to condensed consolidated financial statements.

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Table of Contents

Merchants Bancorp

Condensed Consolidated Statements of Income (Unaudited)

For the Three Months Ended March 31, 2026 and 2025

(In thousands, except share data)

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​ ​ ​	2026		​ ​ ​	2025
Interest Income		​	​		​	​
Loans	​	$	230,269	​	$	239,280
Mortgage loans in process of securitization	​		4,387	​		3,743
Investment securities:	​		​	​		​
Available for sale	​		9,942	​		12,358
Held to maturity	​	​	19,479	​	​	24,358
FHLB stock and other equity securities (dividends)	​		4,394	​		4,372
Other	​		2,040	​		3,093
Total interest income	​		270,511	​		287,204
Interest Expense	​		​	​		​
Deposits	​		109,849	​		123,941
Short-term borrowings	​	​	28,937	​		33,364
Long-term borrowings	​		3,077	​		7,703
Total interest expense	​		141,863	​		165,008
Net Interest Income	​		128,648	​		122,196
Provision for credit losses	​		15,299	​		7,727
Net Interest Income After Provision for Credit Losses	​		113,349	​		114,469
Noninterest Income	​		​	​		​
Gain on sale of loans	​		13,506	​		11,619
Loan servicing fees, net	​		15,099	​		4,010
Mortgage warehouse fees	​		1,620	​		1,513
Syndication and asset management fees	​	​	3,117	​	​	3,389
Other income	​		13,257	​		3,162
Total noninterest income	​		46,599	​		23,693
Noninterest Expense	​		​	​		​
Salaries and employee benefits	​		38,565	​		36,419
Loan expense	​		1,185	​		798
Occupancy and equipment	​		3,081	​		2,351
Professional fees	​		2,767	​		2,894
Deposit insurance expense	​		8,408	​		7,228
Technology expense	​		2,679	​		2,374
Credit risk transfer premium expense	​	​	5,764	​	​	3,862
Other expense	​		13,193	​		5,738
Total noninterest expense	​		75,642	​		61,664
Income Before Income Taxes	​		84,306	​		76,498
Provision for income taxes	​		16,574	​		18,259
Net Income	​	$	67,732	​	$	58,239
Dividends on preferred stock	​	​	(10,265)	​	​	(10,265)
Impact of preferred stock redemption	​	​	—	​	​	(5,371)
Net Income Allocated to Common Shareholders	​	​	57,467	​	​	42,603
Basic Earnings Per Share	​	$	1.25	​	$	0.93
Diluted Earnings Per Share	​	$	1.25	​	$	0.93
Weighted-Average Shares Outstanding	​		​	​		​
Basic	​		45,929,936	​		45,824,022
Diluted	​		45,997,744	​		45,914,083

​

​

See notes to condensed consolidated financial statements.

​

​

​

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Merchants Bancorp

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

For the Three Months Ended March 31, 2026 and 2025

(In thousands)

​

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​ ​ ​	2026		​ ​ ​	2025
Net Income	​	$	67,732	​	$	58,239
Other Comprehensive Income:	​		​	​		​
Net unrealized (losses) gains on investment securities available for sale, net of tax benefit (expense) of $241 and $(17)	​		(771)	​		56
Other comprehensive (loss) income for the period	​		(771)	​		56
Comprehensive Income	​	$	66,961	​	$	58,295

​

​

See notes to condensed consolidated financial statements.

​

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Merchants Bancorp

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

For the Three Months Ended March 31, 2026 and 2025

(In thousands, except share data)

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended									​
​	​	March 31,									​
​	​ ​ ​	2026				​ ​ ​	2025				​
​	​	Shares	​	​	Amount	​	Shares	​	​	Amount	​
Common Stock		​	​	​	​		​	​	​	​	​
Balance beginning of period	​	45,893,172	​	$	243,310	​	45,767,166	​	$	240,313	​
Repurchase of common stock	​	(73,164)	​	​	(781)	​	—	​	​	—	​
Distribution to employee stock ownership plan	​	43,868	​	​	1,494	​	30,802	​	​	1,124	​
Shares issued for stock compensation plans, net of taxes withheld to satisfy tax obligations	​	71,532	​	​	(590)	​	83,738	​	​	(925)	​
Balance end of period	​	45,935,408	​	​	243,433	​	45,881,706	​	​	240,512	​
​	​	​	​	​	​	​	​	​	​	​	​
6% Series B Preferred Stock	​	​	​	​	​	​	​	​	​	​	​
Balance beginning of period	​	—	​	​	—	​	125,000	​	​	120,844	​
Redemption of 6% Series B preferred stock	​	—	​	​	—	​	(125,000)	​	​	(120,844)	​
Balance at end of period	​	—	​	​	—	​	—	​	​	—	​
​	​	​	​	​	​	​	​	​	​	​	​
6% Series C Preferred Stock	​	​	​	​	​	​	​	​	​	​	​
Balance at beginning and end of period	​	196,181	​	​	191,084	​	196,181	​	​	191,084	​
​	​	​	​	​	​	​	​	​	​	​	​
8.25% Series D Preferred Stock	​	​	​	​	​	​	​	​	​	​	​
Balance at beginning and end of period	​	142,500	​	​	137,459	​	142,500	​	​	137,459	​
​	​	​	​	​	​	​	​	​	​	​	​
7.625% Series E Preferred Stock	​	​	​	​	​	​	​	​	​	​	​
Balance at beginning and end of period	​	230,000	​	​	222,748	​	230,000	​	​	222,748	​
​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​
Retained Earnings	​	​	​	​	​	​	​	​	​	​	​
Balance beginning of period	​	​	​	​	1,486,191	​	​	​	​	1,330,995	​
Net income	​	​	​	​	67,732	​	​	​	​	58,239	​
Dividends on 6% Series C preferred stock, $60.00 per share, annually	​	​	​	​	(2,943)	​	​	​	​	(2,943)	​
Dividends on 8.25% Series D preferred stock, $82.50 per share, annually	​	​	​	​	(2,939)	​	​	​	​	(2,939)	​
Dividends on 7.625% Series E preferred stock, $76.25 per share, annually	​	​	​	​	(4,383)	​	​	​	​	(4,383)	​
Dividends on common stock, $0.44 per share, annually in 2026 and $0.40 per share, annually in 2025	​	​	​	​	(5,054)	​	​	​	​	(4,589)	​
Impact of 6% Series B preferred stock redemption	​	​	​	​	—	​	​	​	​	(4,156)	​
Excise tax on preferred stock redemption	​	​	​	​	—	​	​	​	​	(1,215)	​
Repurchase of common stock	​	​	​	​	(2,221)	​	​	​	​	—	​
Balance end of period	​	​	​	​	1,536,383	​	​	​	​	1,369,009	​
​	​	​	​	​	​	​	​	​	​	​	​
Accumulated Other Comprehensive Loss	​	​	​	​	​	​	​	​	​	​	​
Balance beginning of period	​	​	​	​	(33)	​	​	​	​	(133)	​
Other comprehensive (loss) income	​	​	​	​	(771)	​	​	​	​	56	​
Balance end of period	​	​	​	​	(804)	​	​	​	​	(77)	​
​	​	​	​	​	​	​	​	​	​	​	​
Total shareholders' equity	​	​	​	$	2,330,303	​	​	​	$	2,160,735	​

​

​

See notes to condensed consolidated financial statements.

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Merchants Bancorp

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31, 2026 and 2025

(In thousands)

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​ ​ ​	2026		​ ​ ​	2025
Operating activities:		​	​		​	​
Net income	​	$	67,732	​	$	58,239
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	​		​	​		​
Depreciation	​		1,370	​		770
Provision for credit losses	​		15,299	​		7,727
Gain on sale of loans	​		(13,506)	​		(11,619)
Proceeds from sold loans and principal collected	​		12,525,217	​		8,012,025
Loans and participations originated and purchased for sale	​		(13,353,384)	​		(7,948,208)
Proceeds from sale of low-income housing tax credits	​	​	1	​	​	410
Purchases of low-income housing tax credits for sale	​	​	(6,803)	​	​	(7,305)
Purchases of other tax credits	​	​	(18,168)	​	​	—
Change in servicing rights for paydowns and fair value adjustments	​		(6,406)	​		3,562
Net change in:	​		​	​		​
Mortgage loans in process of securitization	​		183,093	​		38,409
Other assets and receivables	​		22,261	​		11,660
Other liabilities	​		(15,051)	​		(16,017)
Other	​		1,021	​		(1,615)
Net cash (used in) provided by operating activities	​		(597,324)	​		148,038
Investing activities:	​		​	​		​
Net change in securities purchased under agreements to resell	​		9	​		9
Purchases of securities available for sale	​		(204,335)	​		(162,999)
Purchases of mortgage servicing rights	​	​	(125)	​	​	—
Proceeds from calls, maturities and paydowns of securities available for sale	​		216,893	​		189,000
Proceeds from calls, maturities and paydowns of securities held to maturity	​	​	117,721	​	​	58,453
Purchases of loans	​		(27,330)	​		(19,871)
Net change in loans receivable	​		(492,763)	​		(40,937)
Proceeds from loans held for sale previously classified as loans receivable	​		55,570	​		—
Purchase of FHLB stock	​		—	​		(46)
Purchases of premises and equipment	​		(1,146)	​		(6,859)
Purchase of limited partnership interests	​	​	(974)	​	​	(19,427)
Other investing activities	​		1,223	​	​	1,774
Net cash used in investing activities	​		(335,257)	​		(903)
Financing activities:	​		​	​		​
Net change in deposits	​		(108,984)	​		296,982
Proceeds from borrowings	​		69,470,000	​		58,640,042
Repayment of borrowings	​		(68,539,101)	​		(59,014,014)
Payment of credit linked notes	​		—	​		(10,605)
Repurchase of common stock	​		(3,002)	​		—
Dividends	​	​	(15,319)	​	​	(14,854)
Net cash provided by (used in) financing activities	​		803,594	​		(102,449)
Net Change in Cash and Cash Equivalents	​		(128,987)	​		44,686
Cash and Cash Equivalents, Beginning of Period	​		212,202	​		476,610
Cash and Cash Equivalents, End of Period	​	$	83,215	​	$	521,296
Supplemental Cash Flows Information:	​		​	​		​
Interest paid	​	$	142,692	​	$	169,563
Income taxes paid, net of refunds	​		2,301	​		3,176
Reduction in commitment payable for limited partnership interest of LLCs	​	​	—	​	​	2,752
Liabilities accrued for additions in premises and equipment	​	​	—	​	​	3,081
Liabilities accrued for excise tax on preferred stock repurchase	​	​	—	​	​	1,215
Change in prepaid assets for preferred stock repurchase	​	​	—	​	​	125,000

​

​

See notes to condensed consolidated financial statements.

​

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Note 1:   Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Merchants Bancorp, a registered bank holding company (the “Company”) and its wholly owned subsidiaries, Merchants Bank and MIP. Merchants Bank’s primary operating subsidiaries include MCC, MCS, and MCI. All directly and indirectly owned subsidiaries owned by Merchants Bancorp are collectively referred to as the “Company”.

The accompanying unaudited condensed consolidated balance sheets of the Company as of December 31, 2025, which have been derived from audited financial statements, and unaudited condensed consolidated financial statements of the Company as of March 31, 2026 and for the three months ended March 31, 2026 and 2025, were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with GAAP. Accordingly, these unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company as of and for the year ended December 31, 2025 in its Annual Report on Form 10-K. Reference is made to the accounting policies of the Company described in the Notes to the Financial Statements contained in the Annual Report on Form 10-K.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included to present fairly the financial position as of March 31, 2026 and the results of operations, cash flows, and changes in shareholders’ equity for the three months ended March 31, 2026 and 2025. All interim amounts have not been audited and the results of operations for the three months ended March 31, 2026, herein are not necessarily indicative of the results of operations to be expected for the entire year.

Principles of Consolidation

The unaudited condensed consolidated financial statements as of and for the period ended March 31, 2026 and 2025 include results from the Company, and its wholly owned subsidiaries, Merchants Bank and MIP. Also included are Merchants Bank’s primary operating subsidiaries, MCC, MCS and MCI, as well as all direct and indirectly owned subsidiaries owned by Merchants Bancorp.

The results of Merchants Foundation, Inc., a nonprofit corporation, are consolidated with the Company’s unaudited condensed consolidated financial statements in all periods presented.

In addition, when the Company makes an equity investment in or has a relationship with an entity for which it holds a variable interest, it is evaluated for consolidation requirements under ASC Topic 810. Accordingly, the Company assesses the entities for potential consolidation as a VIE and would only consolidate those entities for which it is the primary beneficiary. A primary beneficiary is defined as the party that has both the power to direct the activities that most significantly impact the entity, and an interest with significant exposure to the entity’s economics. To determine if an interest could be significant to the entity, both qualitative and quantitative factors regarding the nature, size and form of the Company’s involvement with the entity are evaluated. Alternatively, under the voting interest model, it would only consolidate those entities for which it has a controlling interest.

​

The Company holds a variable interest in an investment for which it is the primary beneficiary, and its results have been consolidated in all periods presented. The investment is recorded on the unaudited condensed consolidated balance sheets in other assets and its significant liabilities in borrowings. Additionally, the Company has certain variable interest investments where it was not deemed to be a primary beneficiary of as of March 31, 2026 and December 31, 2025. These VIEs are not consolidated and the equity method or proportional amortization method of accounting has been applied. The Company will analyze whether the primary beneficiary designation has changed through triggering events on a prospective basis. Changes in facts and circumstances occurring since the previous primary beneficiary determination will be considered as part of this ongoing assessment. See Note 8: Variable Interest Entities (VIEs) for additional information about VIEs.

10

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and use judgements that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the current circumstances. These estimates form the basis for making judgements about the carrying value of certain assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates under different assumptions or conditions.

​

Material estimates that are particularly 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.

Significant Accounting Policies

The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. For additional information regarding significant accounting policies, see the Company’s 2025 Annual Report on Form 10–K.

Reclassifications

​

Certain reclassifications have been made in the 2025 footnotes to the unaudited condensed consolidated financial statements to conform to the footnotes to the unaudited condensed consolidated financial statement presentation as of and for the three months ended March 31, 2026. These reclassifications had no effect on the unaudited condensed consolidated financial statements as a whole nor on net income.

​

Other

​

The Company and its subsidiaries can be parties to various claims and proceedings arising in the normal course of business. Management, after consultation with legal counsel, believes that the contingent liabilities, if any, arising from such proceedings and claims will not be material to the Company’s consolidated financial position or results of operations.

New Accounting Pronouncements Not Yet Adopted

​

The Company continually monitors potential FASB accounting pronouncement and SEC release changes. The following pronouncements and releases have been deemed to have the most applicability to the Company’s financial statements:

FASB ASU 2024-03 - Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses

​

In November 2024, the FASB issued an ASU which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the face of our unaudited condensed consolidated statements of income.

​

The updates in ASU 2024-03 are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. An entity shall apply the ASU on a prospective basis to financial

11

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

statements for annual periods beginning after the effective date. The Company is continuing to evaluate the impact of adopting this new guidance on our disclosures.

​

FASB ASU 2025-08 – Financial Instruments – Credit Losses – Purchased Loans

​

In November 2025, the FASB issued an ASU to simplify and enhance comparability in the accounting for purchased loans under CECL. This update will require updates to CECL models and accounting processes for the new category of certain acquired loans.

​

The updates in ASU 2025-08 are effective for fiscal periods beginning after December 15, 2026, including interim periods. An entity shall apply the ASU on a prospective basis to financial statements for annual periods beginning after the effective date. Early adoption is permitted. The Company is continuing to evaluate the impact of adopting this new guidance.

​

​

Note 2:   Investment Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities available for sale and held to maturity were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

​

​

​

​

Gross

​

Gross

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

​

​ ​ ​

Cost

​ ​ ​

Gains

​ ​ ​

Losses

​ ​ ​

Value

​

​

(In thousands)

Securities available for sale:

​

​

​

​

​

​

​

​

Treasury notes

​

$

31,327

​

$

13

​

$

—

​

$

31,340

Federal Agencies

​

259,865

​

4

​

1,067

​

258,802

Mortgage-backed - Agency (1) - multi-family

​

​

3,553

​

​

—

​

​

6

​

​

3,547

Mortgage-backed - Non-Agency - residential - fair value option (2)

​

​

371,222

​

​

—

​

​

—

​

​

371,222

Mortgage-backed - Agency - residential - fair value option (2)

​

​

178,985

​

​

—

​

​

—

​

​

178,985

Total securities available for sale

​

$

844,952

​

$

17

​

$

1,073

​

$

843,896

Securities held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

Mortgage-backed - Non-Agency - multi-family

​

$

394,844

​

$

—

​

$

892

​

$

393,952

Mortgage-backed - Non-Agency - residential

​

​

663,192

​

​

2,014

​

​

—

​

​

665,206

Mortgage-backed - Non-Agency - healthcare

​

​

356,306

​

​

—

​

​

3

​

​

356,303

Mortgage-backed - Agency - multi-family

​

​

11,640

​

​

—

​

​

657

​

​

10,983

Total securities held to maturity

​

$

1,425,982

​

$

2,014

​

$

1,552

​

$

1,426,444

​

​

​

​

​

​

​

​

​

​

​

​

​

FHLB and other equity securities (3)

​

$

227,589

​

​

​

​

​

​

​

​

​

(1) Agency includes government sponsored entities, such as Fannie Mae, Freddie Mac, Ginnie Mae, FHLB and FCB.

(2) Fair value option securities represent securities which the Company has elected to carry at fair value with changes in the fair value recognized in earnings as they occur.

(3) The Company reports the carrying value utilizing the measurement alternative election, reflecting any impairments or other adjustments if observable price changes occur for identical or similar investments of the same issuer.

​

​

​

12

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

​

​

Gross

​

Gross

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

​

​ ​ ​

Cost

​ ​ ​

Gains

​ ​ ​

Losses

​ ​ ​

Value

​

​

(In thousands)

Securities available for sale:

​

​

​

​

​

​

​

​

Treasury notes

​

$

30,635

​

$

45

​

$

—

​

$

30,680

Federal Agencies

​

259,591

​

21

​

104

​

259,508

Mortgage-backed - Agency (1) - multi-family

​

​

3,562

​

​

—

​

​

6

​

​

3,556

Mortgage-backed - Non-Agency - residential - fair value option (2)

​

​

385,460

​

​

—

​

​

—

​

​

385,460

Mortgage-backed - Agency - residential - fair value option (2)

​

​

185,854

​

​

—

​

​

—

​

​

185,854

Total securities available for sale

​

$

865,102

​

$

66

​

$

110

​

$

865,058

Securities held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

Mortgage-backed - Non-Agency - multi-family

​

$

438,430

​

$

—

​

$

950

​

$

437,480

Mortgage-backed - Non-Agency - residential

​

​

699,957

​

​

1,655

​

​

127

​

​

701,485

Mortgage-backed - Non-Agency - healthcare

​

​

393,588

​

​

—

​

​

4

​

​

393,584

Mortgage-backed - Agency - multi-family

​

​

11,684

​

​

—

​

​

679

​

​

11,005

Total securities held to maturity

​

$

1,543,659

​

$

1,655

​

$

1,760

​

$

1,543,554

​

​

​

​

​

​

​

​

​

​

​

​

​

FHLB and other equity securities (3)

​

$

227,589

​

​

​

​

​

​

​

​

​

(1) Agency includes government sponsored entities, such as Fannie Mae, Freddie Mac, Ginnie Mae, FHLB and FCB.

(2) Fair value option securities represent securities which the Company has elected to carry at fair value with changes in the fair value recognized in earnings as they occur.

(3) The Company reports the carrying value utilizing the measurement alternative election, reflecting any impairments or other adjustments if observable price changes occur for identical or similar investments of the same issuer.

Accrued interest on securities available for sale totaled $4.3 million at March 31, 2026 and $3.8 million at December 31, 2025, and is excluded from the estimate of credit losses.

Accrued interest on securities held to maturity totaled $4.5 million at March 31, 2026 and $5.0 million at December 31, 2025, and is excluded from the estimate of credit losses.

The amortized cost and fair value of securities available for sale at March 31, 2026 and December 31, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may

13

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

December 31, 2025

​

​

Amortized

​

Fair

​

Amortized

​

Fair

​

​ ​ ​

Cost

​ ​ ​

Value

​ ​ ​

Cost

​ ​ ​

Value

​

​

(In thousands)

Securities available for sale:

​

​

Within one year

​

$

61,194

​

$

61,210

​

$

85,226

​

$

85,292

After one through five years

​

229,998

​

228,932

​

205,000

​

204,896

​

​

291,192

​

290,142

​

290,226

​

290,188

Mortgage-backed - Agency - multi-family

​

​

3,553

​

​

3,547

​

​

3,562

​

​

3,556

Mortgage-backed - Non-Agency residential - fair value option

​

​

371,222

​

​

371,222

​

​

385,460

​

​

385,460

Mortgage-backed - Agency - residential - fair value option

​

​

178,985

​

​

178,985

​

​

185,854

​

​

185,854

​

​

$

844,952

​

$

843,896

​

$

865,102

​

$

865,058

Securities held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

Mortgage-backed - Non-Agency - multi-family

​

$

394,844

​

$

393,952

​

$

438,430

​

$

437,480

Mortgage-backed - Non-Agency - residential

​

​

663,192

​

​

665,206

​

​

699,957

​

​

701,485

Mortgage-backed - Non-Agency - healthcare

​

​

356,306

​

​

356,303

​

​

393,588

​

​

393,584

Mortgage-backed - Agency - multi-family

​

​

11,640

​

​

10,983

​

11,684

​

11,005

​

​

$

1,425,982

​

$

1,426,444

​

$

1,543,659

​

$

1,543,554

​

During the three months ended March 31, 2026 and 2025, no securities available for sale were sold.

​

The following tables show the Company’s gross unrealized losses and fair value of the Company’s investment securities with unrealized losses, for which an ACL has not been recorded, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

​

​

​

​

​

​

​

12 Months or

​

​

​

​

​

​

​

​

Less than 12 Months

​

Longer

​

Total

​

​

​

​

​

Gross

​

​

​

​

Gross

​

​

​

​

Gross

​

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

​ ​ ​

Value

​ ​ ​

Losses

​ ​ ​

Value

​ ​ ​

Losses

​ ​ ​

Value

​ ​ ​

Losses

​

​

(In thousands)

Securities available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

Federal Agencies

​

$

228,932

​

$

1,067

​

$

—

​

$

—

​

$

228,932

​

$

1,067

Mortgage-backed - Agency - multi-family

​

​

3,547

​

​

6

​

​

—

​

​

—

​

​

3,547

​

​

6

​

​

$

232,479

​

$

1,073

​

$

—

​

$

—

​

$

232,479

​

$

1,073

​

​

14

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

​

​

​

​

​

12 Months or

​

​

​

​

​

​

​

​

Less than 12 Months

​

Longer

​

Total

​

​ ​ ​

​

​

​ ​ ​

Gross

​ ​ ​

​

​

​ ​ ​

Gross

​ ​ ​

​

​

​ ​ ​

Gross

​

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

​

Value

​

Losses

​

Value

​

Losses

​

Value

​

Losses

​

​

(In thousands)

Securities available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

Federal Agencies

​

$

204,896

​

$

104

​

$

—

​

$

—

​

$

204,896

​

$

104

Mortgage-backed - Agency - multi-family

​

​

3,556

​

​

6

​

​

—

​

​

—

​

​

3,556

​

​

6

​

​

$

208,452

​

$

110

​

$

—

​

$

—

​

$

208,452

​

$

110

​

      ​

Allowance for Credit Losses

There were no credit-related factors underlying unrealized losses on available for sale securities at March 31, 2026 and December 31, 2025, accordingly no allowance for credit losses has been recorded. Furthermore, unrealized losses on the Company’s investment securities portfolio have not been recognized as an expense because the securities are of high credit quality, and the decline in fair values is attributable to changes in the prevailing interest rate environment since the purchase date. Fair value is expected to recover as securities reach maturity and/or the interest rate environment returns to conditions similar to when these securities were purchased.

​

Securities held to maturity are primarily comprised of non-Agency mortgage-backed senior securities secured by multi-family, single-family or healthcare properties, and Agency mortgage-backed securities secured by multi-family properties. The Agency securities held to maturity are Ginnie Mae mortgage-backed securities and backed by the full faith and credit of the U.S. government and have an implicit or explicit government guarantee. Accordingly, no allowance for credit losses has been recorded for these securities.

​

For non-Agency mortgage-backed senior securities, qualitative factors are evaluated, including the timeliness of principal and interest payments under the contractual terms of the securities, as well as the investment ratings assigned to the securities by third parties and their qualification to be pledged to FHLB as collateral. In the event credit stress in the underlying loans is identified in any single security, risk grades and collateral values are evaluated to determine whether Merchants Bank has exposure to credit losses.

​

The Company has a held to maturity, non-Agency, mortgage-backed security with an amortized cost value of $394.8 million and fair value of $394.0 million at March 31, 2026, acquired via a mortgage securitization transaction facilitated by the Company, which has experienced delinquencies in some of the underlying loans. As of March 31, 2026, 36% of the portfolio was delinquent. Additionally, the security is a senior tranche that has credit protection from the first 17.9% of losses. The Company continues to receive timely interest payments on this security, which was current as of March 31, 2026. The Company is not expected to have credit losses based on the loan-to-value of the underlying loans, its credit protection and expected cash flows. However, given the delinquencies on some of the underlying loans, the Company has classified the security as Special Mention as of March 31, 2026. This same security had an amortized cost value of $438.4 million and fair value of $437.5 million and was also classified as Special Mention at December 31, 2025. All other securities held to maturity were classified as Pass as of March 31, 2026 and December 31, 2025. No allowance for credit losses were recorded for this, or any other non-Agency security, as of March 31, 2026 and December 31, 2025. See Note 4: Loans and Allowance for Credit Losses on Loans for more information on the definitions of risk classifications for both loans and securities.

​

​

​

​

​

​

15

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Note 3:   Mortgage Loans in Process of Securitization

Mortgage loans in process of securitization are recorded at fair value with changes in fair value recorded in earnings. These include multi-family rental real estate loan originations to be sold as Ginnie Mae mortgage-backed securities and Fannie Mae and Freddie Mac participation certificates, all of which are pending settlements with firm investor commitments to purchase the securities, typically occurring within 30 days. The aggregate positive fair value adjustment recorded in mortgage loans in process of securitization was $0.4 million and $5.2 million as of March 31, 2026 and December 31, 2025, respectively.

Note 4:   Loans and Allowance for Credit Losses on Loans

Most loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost at their outstanding principal balances adjusted for charge-offs, the ACL-Loans, and deferred fees or costs, including premiums or discounts on purchased loans.

Certain loans receivable are measured at fair value. These loans were previously designated as held for sale and measured at fair value and continue to be measured at fair value as loans receivable (held for investment) in accordance with the Company’s valuation election.

For loans receivable held at amortized cost or fair value, interest income is accrued based on the unpaid principal balance.

The Company has made a policy election to exclude accrued interest from the amortized cost basis of loans and reports accrued interest separately from the related loan balance on the unaudited condensed consolidated balance sheets. Accrued interest on loans totaled $48.1 million and $51.4 million at March 31, 2026 and December 31, 2025, respectively.

The Company also elected not to measure an allowance for credit losses for accrued interest receivables. The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past-due status is based on contractual terms of the loan. Loans may be placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest subsequently collected on these loans is applied to the principal balance until the loan can be returned to an accrual status, which is no less than six months. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

For all loan portfolio segments, the Company charges off loans, or portions thereof, when available information confirms that specific loans are uncollectable based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations.

For loan modifications, interest income is recognized on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms.

The Company offers mortgage warehouse repurchase agreements to third parties to fund mortgage loans held for sale from closing until sale to an investor. Under a warehousing arrangement, the Company funds a mortgage loan as secured financing. The warehousing arrangement is secured by the underlying mortgages and a combination of deposits, personal guarantees, and advance rates, and may be cross-collateralized with other loans. The Company typically holds the collateral until it is sent under a bailee arrangement instructing the investor to send proceeds to the Company.

16

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Typical investors are large financial institutions or government agencies. Interest earned from the time of funding to the time of sale is recognized as interest income as accrued. Warehouse fees are accrued as noninterest income.

Loan Portfolio Summary

Loans receivable at March 31, 2026 and December 31, 2025 include:

​

​	​	​	​	​	​	​
​	​	March 31,		​	December 31,
​	​ ​ ​	2026		​ ​ ​	2025
​	​	(In thousands)
Mortgage warehouse repurchase agreements(1)	​	$	1,982,411	​	$	1,600,285
Residential real estate(2)	​		1,038,724	​		1,018,780
Multi-family financing	​		5,537,711	​		5,332,680
Healthcare financing	​	​	1,260,821	​	​	1,385,359
Commercial and commercial real estate(1)(3)(4)	​		1,560,788	​		1,603,551
Agricultural production and real estate	​		92,527	​		92,077
Consumer and margin loans	​		3,731	​		1,950
Loans Receivable	​		11,476,713	​		11,034,682
Less:	​		​	​		​
ACL-Loans	​		76,831	​		83,301
​	​	​	​	​	​	​
Loans Receivable, net	​	$	11,399,882	​	$	10,951,381

(1) The warehouse portfolio is exclusively made up of loans to residential and multi-family mortgage bankers that are funding agency-eligible mortgages and commercial loans, which represent all the Company’s loans to non-depository institutions.

(2) Includes $833.1 million and $832.2 million of All-in-One© first-lien home equity lines of credit at March 31, 2026 and December 31, 2025, respectively.

(3) Includes $921.3 million and $944.3 million of revolving lines of credit collateralized primarily by servicing rights as of March 31, 2026 and December 31, 2025, respectively.

(4) Includes only $19.7 million and $19.5 million of non-owner occupied commercial real estate as of March 31, 2026 and December 31, 2025, respectively.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Mortgage Warehouse Repurchase Agreements (MTG WHRA): Under its warehouse program, the Company provides warehouse financing arrangements to approved mortgage companies for their origination and sale of residential mortgage and multi-family loans. Loans secured by mortgages placed on existing one-to-four family dwellings may be originated or purchased and placed through each mortgage warehouse facility.

As a secured repurchase agreement, collateral pledged to the Company secures each individual mortgage until the mortgage company sells the loan in the secondary market. Traditional secured warehouse repurchase agreements and participation agreements typically carry a base interest rate of SOFR plus a margin, or the mortgage note rate.

Risk is evident if there is a change in the fair value of mortgage loans originated by mortgage companies in warehouse, the sale of which is the expected source of repayment under a warehouse facility. However, the warehouse customers are required to hedge the change in value of these loans to mitigate the risk, typically through forward sales contracts.

Residential Real Estate Loans (RES RE): Real estate loans are secured by owner-occupied one-to-four family residences. Repayment of residential real estate loans is primarily dependent on the personal income and assets of the borrowers. Credit risk for these loans is driven by those factors, as well as the credit rating of the borrowers and property values. In addition to loans originated for sale, and some loans receivable, included in this segment are All-in-

17

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

One© first-lien HELOC products that integrate a borrower’s mortgage and deposit account into a single facility and have typically carried a base interest rate of One-Year CMT, plus a margin. Originations since March 2025 are tied to 30-day SOFR, plus a margin.

​

Multi-family Financing (MF FIN): The Company specializes in originating multi-family financing that can be Market Rate or Affordable. The portfolio includes loans for construction, acquisition, refinance, or permanent financing. Loans are typically secured by real estate mortgages, assignment of LIHTCs, and/or equity interest in the underlying properties. All loans are assessed and reviewed at a minimum based on borrower strength/experience, historical property performance, market trends, projected financial performance with regards to intended strategy, and source of repayment. Independent third-party reports are used to ensure legal conformity and support valuations of the assets. Exit strategies and sources of repayment are provided through the secondary market via governmental programs, strategic refinances, LIHTC equity installments, and cashflow from the properties. Repayment of these loans may include refinancing to a permanent loan or sale of the property, as well as successful operation of a business or property and the borrower’s cash flows. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economy in the related market area. Interest rate risk is mitigated by borrower purchased rate caps, interest reserves, liquidity covenants, and forward commitments from GSEs. These loans are well-collateralized and underwritten to agency guidelines. Loans included in this segment typically carry a base rate of 30-day SOFR, that adjusts on a monthly basis, and a margin. The Company focuses on loan classes that are underwritten to FHA or GSE guidelines or can be sold in the secondary market.

​

Healthcare Financing (HC FIN): The healthcare financing portfolio includes customized loan products for need-based, independent living, assisted living, memory care and skilled nursing projects. A variety of loan products are available to accommodate rehabilitation, acquisition, and refinancing of healthcare properties. Credit risk in these loans is primarily driven by local demographics and the expertise of the operators of the facilities. Repayment of these loans may include refinancing to a permanent loan or sale of the property, as well as successful operation of a business or property and the borrower’s cash flows. These loans are well-collateralized and underwritten to agency guidelines. Loans included in this segment typically carry a base rate of 30-day SOFR that adjusts on a monthly basis, plus a margin. The Company focuses on loan classes that are underwritten to FHA guidelines or can be sold in the secondary market.

​

Commercial Lending and Commercial Real Estate Loans (CML & CRE): The commercial lending and commercial real estate portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions, as well as loans to commercial customers to finance land and improvements. It also includes lines of credit collateralized by servicing rights that are assessed for fair value quarterly at the Company’s request. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. SBA loans are included in this category. An immaterial portion of commercial and commercial real estate loans are typically made up of non-owner occupied commercial real estate loans.

​

Agricultural Production and Real Estate Loans (AG & AGRE): Agricultural production loans are generally comprised of seasonal operating lines of credit to grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. The Company also offers long-term financing to purchase agricultural real estate. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating-year based on industry-developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary. The Company is approved to sell agricultural loans in the secondary market through Farmer Mac and uses this relationship to manage interest rate risk within the portfolio. Agricultural real estate loans included in this segment are typically structured with a one-year ARM, three-year ARM or five-year ARM indexed to CMT, plus a margin. Agriculture production, livestock, and equipment loans are structured with variable rates that are indexed to prime or fixed for terms not exceeding five years.

​

18

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Consumer and Margin Loans (CON & MAR): Consumer loans are those loans secured by household assets. Margin loans are those loans secured by marketable securities. The term and maximum amount for these loans are determined by considering the purpose of the loan, the margin (advance percentage against value) in all collateral, the primary source of repayment, and the borrower’s other related cash flow.

ACL-Loans

The ACL-Loans is the Company’s estimate of current expected life of loan credit losses. Loans receivable is presented net of the allowance to reflect the principal balance expected to be collected over the contractual term of the loans. This life of loan allowance is established through a provision for credit losses included in net interest income after provision for credit losses as loans are recorded in the unaudited condensed consolidated financial statements. The provision for a reporting period also reflects increases or decreases in the allowance related to changes in credit loss expectations. Actual credit losses are charged against the allowance when management believes the loan balance, or a portion thereof, is uncollectible. Subsequent recoveries, if any, are credited to the allowance.

The ACL-Loans is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans considering relevant available information from internal and external sources, including historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. The allowance also incorporates reasonable and supportable forecasts. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The level of the ACL-Loans is believed to be adequate to absorb expected future losses in the loan portfolio as of the measurement date.

The ACL-Loans consists of individually evaluated loans and pooled loan components. The Company’s primary portfolio segmentation is by loans with similar risk characteristics. Loans risk graded substandard and worse are individually evaluated for expected credit losses. For individually evaluated loans that are collateral dependent, the Company may use the fair value of the collateral, less estimated costs to sell, as a practical expedient as of the reporting date to determine the carrying amount of an asset and the allowance for credit losses, as applicable. A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or the sale of the collateral when the borrower is experiencing financial difficulty as of the reporting date.

To calculate the ACL-Loans, the portfolio is segmented by loans with similar risk characteristics.

​

Loan Portfolio Segment	​	ACL-Loans Methodology
​		​
Mortgage warehouse repurchase agreements	​	Remaining Life Method
Residential real estate loans	​	Discounted Cash Flow
Multi-family financing	​	Discounted Cash Flow
Healthcare financing	​	Discounted Cash Flow
Commercial and commercial real estate	​	Discounted Cash Flow
Agricultural production and real estate	​	Remaining Life Method
Consumer and margin loans	​	Remaining Life Method

​

​ ​ ​

​

Loan characteristics used in determining the segmentation include the underlying collateral, type or purpose of the loan, and expected credit loss patterns. The initial estimate of expected credit losses for each segment is based on historical credit loss experience and management’s judgement. Given the Company’s historical credit loss experience, peer and industry data was also incorporated into the measurement. Expected life of loan credit losses are quantified using discounted cash flows and remaining life methodologies.

19

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Model results are supplemented by qualitative adjustments for risk factors relevant in assessing the expected credit losses within the portfolio segments. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor.

The models utilized and the applicable qualitative adjustments require assumptions and management judgement that can be subjective in nature. The above measurement approach is also used to estimate the expected credit losses associated with unfunded loan commitments, which also incorporates expected utilization rates.

The following tables present, by loan portfolio segment, the activity in the ACL-Loans for the three months ended March 31, 2026 and 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended March 31, 2026

​

MTG WHRA

RES RE

MF FIN

HC FIN

​

CML & CRE

AG & AGRE

CON & MAR

TOTAL

​

​

(In thousands)

ACL-Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning of period

​

$

4,269

​

$

4,672

​

$

43,041

​

$

18,595

​

$

11,998

​

$

697

​

$

29

​

$

83,301

Provision for credit losses

​

(448)

​

(1,129)

​

19,627

​

​

(647)

​

(1,300)

​

(227)

​

17

​

15,893

Loans charged to the allowance

​

—

​

(236)

​

(10,476)

​

​

(12,267)

​

—

​

—

​

—

​

(22,979)

Recoveries of loans previously charged-off

​

—

​

—

​

613

​

​

—

​

3

​

—

​

—

​

616

Balance, end of period

​

$

3,821

​

$

3,307

​

$

52,805

​

$

5,681

​

$

10,701

​

$

470

​

$

46

​

$

76,831

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended March 31, 2025

​

MTG WHRA

RES RE

MF FIN

HC FIN

​

CML & CRE

AG & AGRE

CON & MAR

TOTAL

​

​

(In thousands)

ACL-Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning of period

​

$

3,816

​

$

5,942

$

55,126

​

$

8,562

​

$

10,293

​

$

539

​

$

108

​

$

84,386

Provision for credit losses

​

(69)

​

203

​

8,684

​

​

565

​

87

​

69

​

(33)

​

9,506

Loans charged to the allowance

​

—

​

—

​

(10,394)

​

​

—

​

(113)

​

—

​

—

​

(10,507)

Recoveries of loans previously charged-off

​

—

​

—

​

—

​

​

—

​

28

​

—

​

—

​

28

Balance, end of period

​

$

3,747

​

$

6,145

​

$

53,416

​

$

9,127

​

$

10,295

​

$

608

​

$

75

​

$

83,413

​

The Company recorded a total provision for credit losses of $15.3 million for the three months ended March 31, 2026. The $15.3 million total provision for credit losses consisted of $15.9 million for the ACL-Loans as shown above, net of $0.6 million release for the ACL-OBCE’s and net of a $7,000 release for the ACL-Guarantees, related to a loan securitization.

The Company recorded a total provision for credit losses of $7.7 million for the three months ended March 31, 2025. The $7.7 million total provision for credit losses consisted of $9.5 million for the ACL-Loans as shown above, net of $1.7 million release for the ACL-OBCE’s and $0.1 million release for the ACL-guarantees, related to a loan securitization.

The following table presents, by loan portfolio segment, the activity in the ACL-Loans for the year ended December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Year Ended December 31, 2025

​

MTG WHRA

RES RE

MF FIN

HC FIN

​

CML & CRE

AG & AGRE

CON & MAR

TOTAL

​

​

(In thousands)

ACL-Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning of period

​

$

3,816

​

$

5,942

$

55,126

​

$

8,562

​

$

10,293

​

$

539

​

$

108

​

$

84,386

Provision for credit losses

​

453

​

(1,270)

​

102,147

​

​

17,530

​

3,965

​

158

​

(79)

​

122,904

Loans charged to the allowance

​

—

​

—

​

(114,281)

​

​

(7,497)

​

(2,338)

​

—

​

—

​

(124,116)

Recoveries of loans previously charged-off

​

—

​

—

​

49

​

​

—

​

78

​

—

​

—

​

127

Balance, end of period

​

$

4,269

​

$

4,672

​

$

43,041

​

$

18,595

​

$

11,998

​

$

697

​

$

29

​

$

83,301

​

​

20

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The below table presents the amortized cost basis and ACL-Loans allocated for collateral dependent loans, which are individually evaluated to determine expected credit losses as of March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

​ ​ ​

Real Estate

​ ​ ​

Accounts Receivable / Equipment

​ ​ ​

Other

​ ​ ​

Total

​ ​ ​

ACL-Loans Allocation

​

​

(In thousands)

RES RE

​

$

7,317

​

$

—

​

$

—

​

$

7,317

​

$

26

MF FIN

​

​

191,053

​

​

—

​

​

—

​

​

191,053

​

​

13,007

HC FIN

​

60,771

​

—

​

—

​

60,771

​

274

CML & CRE

​

11,302

​

—

​

557

​

11,859

​

183

AG & AGRE

​

181

​

3

​

—

​

184

​

1

Total collateral dependent loans

​

$

270,624

​

$

3

​

$

557

​

$

271,184

​

$

13,491

​

There were no significant changes to the types of collateral securing the Company’s collateral dependent loans compared to December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​ ​ ​

Real Estate

​ ​ ​

Accounts Receivable / Equipment

​ ​ ​

Other

​ ​ ​

Total

​ ​ ​

ACL-Loans Allocation

​

​

(In thousands)

RES RE

​

$

7,681

​

$

—

​

$

—

​

$

7,681

​

$

39

MF FIN

​

​

213,289

​

​

—

​

​

—

​

​

213,289

​

​

5,618

HC FIN

​

​

72,825

​

​

—

​

​

—

​

​

72,825

​

​

12,515

CML & CRE

​

8,725

​

—

​

566

​

9,291

​

270

AG & AGRE

​

181

​

4

​

—

​

185

​

2

Total collateral dependent loans

​

$

302,701

​

$

4

​

$

566

​

$

303,271

​

$

18,444

​

Internal Risk Categories

The Company evaluates the loan risk grading system definitions and ACL-Loans methodology on an ongoing basis. In adherence with policy, the Company uses the following internal risk grading categories and definitions for loans:

Pass - Loans that are considered to be of acceptable credit quality, and not classified as Special Mention, Substandard, or Doubtful. Also included are loans classified as Watch loans, which represent loans that remain sound and collectible but exhibit characteristics that warrant closer ongoing monitoring by management.

Special Mention – Loans classified as Special Mention have potential weaknesses that deserve management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not warrant adverse classification. Loans with questions or concerns regarding collateral, adverse market conditions impacting future performance, and declining financial trends would be considered for Special Mention.

Substandard - Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. When a loan in the form of a line of credit is downgraded to Substandard, it is evaluated for impairment and future draws under the line of credit require the approval of an officer of Senior Credit Officer or above.

21

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Doubtful - Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following tables present the credit risk profile of the Company’s loan receivable portfolio based on internal risk rating category and origination or extension year as of March 31, 2026 and December 31, 2025.

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	March 31, 2026
​	​ ​ ​	2026		​ ​ ​	2025		​ ​ ​	2024		​	2023		​ ​ ​	2022		​ ​ ​	Prior		​ ​ ​	Revolving Loans		​ ​ ​	TOTAL
​	​	(In thousands)
MTG WHRA	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	1,982,411	​	$	1,982,411
Total	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	1,982,411	​	$	1,982,411
RES RE	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	6,033	​	$	68,856	​	$	31,693	​	$	18,899	​	$	6,304	​	$	25,844	​	$	873,778	​	$	1,031,407
Substandard	​	​	—	​	​	—	​	​	—	​	​	431	​	​	—	​	​	—	​	​	6,886	​	​	7,317
Total	​	$	6,033	​	$	68,856	​	$	31,693	​	$	19,330	​	$	6,304	​	$	25,844	​	$	880,664	​	$	1,038,724
Charge-offs	​	$	—	​	$	—	​	$	214	​	$	—	​	$	22	​	$	—	​	$	—	​	$	236
MF FIN	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	488,177	​	$	1,013,792	​	$	533,632	​	$	288,552	​	$	169,055	​	$	24,499	​	$	2,629,984	​	$	5,147,691
Special Mention	​	​	5,875	​	​	57,092	​	​	34,210	​	​	48,161	​	​	49,600	​	​	—	​	​	4,029	​	​	198,967
Substandard	​	​	8,854	​	​	37,296	​	​	16,517	​	​	79,259	​	​	44,470	​	​	—	​	​	4,657	​	​	191,053
Total	​	$	502,906	​	$	1,108,180	​	$	584,359	​	$	415,972	​	$	263,125	​	$	24,499	​	$	2,638,670	​	$	5,537,711
Charge-offs	​	$	—	​	$	—	​	$	1,052	​	$	—	​	$	6,627	​	$	2,797	​	$	—	​	$	10,476
HC FIN	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	237,948	​	$	509,013	​	$	378	​	$	7,081	​	$	—	​	$	4,197	​	$	410,345	​	$	1,168,962
Special Mention	​	​	—	​	​	13,460	​	​	17,628	​	​	—	​	​	—	​	​	—	​	​	—	​	​	31,088
Substandard	​	​	9,000	​	​	32,771	​	​	—	​	​	—	​	​	—	​	​	8,050	​	​	10,950	​	​	60,771
Total	​	$	246,948	​	$	555,244	​	$	18,006	​	$	7,081	​	$	—	​	$	12,247	​	$	421,295	​	$	1,260,821
Charge-offs	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	12,267	​	$	—	​	$	12,267
CML & CRE	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	16,747	​	$	63,526	​	$	45,854	​	$	41,647	​	$	56,618	​	$	63,401	​	$	1,256,934	​	$	1,544,727
Special Mention	​	​	35	​	​	750	​	​	773	​	​	548	​	​	500	​	​	996	​	​	600	​	​	4,202
Substandard	​	​	—	​	​	2,593	​	​	209	​	​	121	​	​	587	​	​	8,349	​	​	—	​	​	11,859
Total	​	$	16,782	​	$	66,869	​	$	46,836	​	$	42,316	​	$	57,705	​	$	72,746	​	$	1,257,534	​	$	1,560,788
AG & AGRE	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	7,647	​	$	13,514	​	$	14,684	​	$	6,478	​	$	4,004	​	$	21,799	​	$	24,128	​	$	92,254
Special Mention	​	​	—	​	​	89	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	89
Substandard	​	​	—	​	​	—	​	​	—	​	​	3	​	​	181	​	​	—	​	​	—	​	​	184
Total	​	$	7,647	​	$	13,603	​	$	14,684	​	$	6,481	​	$	4,185	​	$	21,799	​	$	24,128	​	$	92,527
CON & MAR	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	17	​	$	120	​	$	63	​	$	13	​	$	1	​	$	—	​	$	3,517	​	$	3,731
Total	​	$	17	​	$	120	​	$	63	​	$	13	​	$	1	​	$	—	​	$	3,517	​	$	3,731
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Pass	​	$	756,569	​	$	1,668,821	​	$	626,304	​	$	362,670	​	$	235,982	​	$	139,740	​	$	7,181,097	​	$	10,971,183
Total Special Mention	​	$	5,910	​	$	71,391	​	$	52,611	​	$	48,709	​	$	50,100	​	$	996	​	$	4,629	​	$	234,346
Total Substandard	​	$	17,854	​	$	72,660	​	$	16,726	​	$	79,814	​	$	45,238	​	$	16,399	​	$	22,493	​	$	271,184
Total Loans	​	$	780,333	​	$	1,812,872	​	$	695,641	​	$	491,193	​	$	331,320	​	$	157,135	​	$	7,208,219	​	$	11,476,713
Total Charge-offs	​	$	—	​	$	—	​	$	1,266	​	$	—	​	$	6,649	​	$	15,064	​	$	—	​	$	22,979

​

All loans held for sale were pass grade as of March 31, 2026 and are not included in the table above. The Company did not have any material revolving loans converted to term loans that were not re-underwritten at March 31, 2026.

​

22

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2025
​	​ ​ ​	2025		​ ​ ​	2024		​ ​ ​	2023		​ ​ ​	2022		​ ​ ​	2021		​ ​ ​	Prior		​ ​ ​	Revolving Loans		​ ​ ​	TOTAL
​	​	(In thousands)
MTG WHRA	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	1,600,285	​	$	1,600,285
Total	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	—	​	$	1,600,285	​	$	1,600,285
RES RE	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	66,511	​	$	33,386	​	$	21,645	​	$	6,378	​	$	4,608	​	$	21,283	​	$	857,288	​	$	1,011,099
Substandard	​	​	—	​	​	—	​	​	431	​	​	22	​	​	—	​	​	129	​	​	7,099	​	​	7,681
Total	​	$	66,511	​	$	33,386	​	$	22,076	​	$	6,400	​	$	4,608	​	$	21,412	​	$	864,387	​	$	1,018,780
MF FIN	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	1,193,011	​	$	650,672	​	$	348,888	​	$	189,881	​	$	22,868	​	$	9,291	​	$	2,539,144	​	$	4,953,755
Special Mention	​	​	70,127	​	​	71,723	​	​	—	​	​	21,924	​	​	—	​	​	232	​	​	1,630	​	​	165,636
Substandard	​	​	39,936	​	​	8,302	​	​	79,463	​	​	74,992	​	​	—	​	​	—	​	​	10,596	​	​	213,289
Total	​	$	1,303,074	​	$	730,697	​	$	428,351	​	$	286,797	​	$	22,868	​	$	9,523	​	$	2,551,370	​	$	5,332,680
Charge-offs	​	$	—	​	$	—	​	$	42,884	​	$	65,405	​	$	—	​	$	5,992	​	$	—	​	$	114,281
HC FIN	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	693,986	​	$	6,922	​	$	32,305	​	$	—	​	$	—	​	$	—	​	$	548,130	​	$	1,281,343
Special Mention	​	​	13,503	​	​	17,688	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	31,191
Substandard	​	​	21,967	​	​	—	​	​	24,691	​	​	—	​	​	20,317	​	​	—	​	​	5,850	​	​	72,825
Total	​	$	729,456	​	$	24,610	​	$	56,996	​	$	—	​	$	20,317	​	$	—	​	$	553,980	​	$	1,385,359
Charge-offs	​	$	—	​	$	—	​	$	—	​	$	—	​	$	5,296	​	$	2,201	​	$	—	​	$	7,497
CML & CRE	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	65,578	​	$	48,115	​	$	43,092	​	$	59,178	​	$	35,950	​	$	30,767	​	$	1,303,578	​	$	1,586,258
Special Mention	​	​	5,123	​	​	116	​	​	561	​	​	502	​	​	883	​	​	142	​	​	675	​	​	8,002
Substandard	​	​	—	​	​	213	​	​	128	​	​	600	​	​	8,330	​	​	20	​	​	—	​	​	9,291
Total	​	$	70,701	​	$	48,444	​	$	43,781	​	$	60,280	​	$	45,163	​	$	30,929	​	$	1,304,253	​	$	1,603,551
Charge-offs	​	$	—	​	$	302	​	$	316	​	$	160	​	$	1,560	​	$	—	​	$	—	​	$	2,338
AG & AGRE	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	14,702	​	$	15,457	​	$	7,007	​	$	4,386	​	$	2,807	​	$	19,840	​	$	27,604	​	$	91,803
Special Mention	​	​	89	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	89
Substandard	​	​	—	​	​	—	​	​	4	​	​	181	​	​	—	​	​	—	​	​	—	​	​	185
Total	​	$	14,791	​	$	15,457	​	$	7,011	​	$	4,567	​	$	2,807	​	$	19,840	​	$	27,604	​	$	92,077
CON & MAR	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pass	​	$	133	​	$	108	​	$	15	​	$	2	​	$	—	​	$	—	​	$	1,692	​	$	1,950
Total	​	$	133	​	$	108	​	$	15	​	$	2	​	$	—	​	$	—	​	$	1,692	​	$	1,950
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Pass	​	$	2,033,921	​	$	754,660	​	$	452,952	​	$	259,825	​	$	66,233	​	$	81,181	​	$	6,877,721	​	$	10,526,493
Total Special Mention	​	$	88,842	​	$	89,527	​	$	561	​	$	22,426	​	$	883	​	$	374	​	$	2,305	​	$	204,918
Total Substandard	​	$	61,903	​	$	8,515	​	$	104,717	​	$	75,795	​	$	28,647	​	$	149	​	$	23,545	​	$	303,271
Total Loans	​	$	2,184,666	​	$	852,702	​	$	558,230	​	$	358,046	​	$	95,763	​	$	81,704	​	$	6,903,571	​	$	11,034,682
Total Charge-offs	​	$	—	​	$	302	​	$	43,200	​	$	65,565	​	$	6,856	​	$	8,193	​	$	—	​	$	124,116

​

All loans held for sale were pass grade as of December 31, 2025 and are not included in the table above. The Company did not have any material revolving loans converted to term loans that were not re-underwritten at December 31, 2025.

​

​

​

​

​

23

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Delinquent Loans

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

​

​ ​ ​

30-59 Days

​

​ ​ ​

60-89 Days

​

​ ​ ​

90+ Days

​

​ ​ ​

Total

​

​ ​ ​

​

​

​ ​ ​

Total

​

​

​

Past Due

​

​

Past Due

​

​

Past Due

​

​

Past Due

​

​

Current

​

​

Loans

​

​

​

(In thousands)

​

MTG WHRA

​

$

—

​

​

$

—

​

​

$

—

​

​

$

—

​

​

$

1,982,411

​

​

$

1,982,411

​

RES RE

​

​

9,454

​

​

​

850

​

​

3,184

​

​

13,488

​

​

1,025,236

​

​

1,038,724

​

MF FIN

​

​

32,866

​

​

​

—

​

​

155,957

​

​

188,823

​

​

5,348,888

​

​

5,537,711

​

HC FIN

​

​

—

​

​

​

8,633

​

​

​

18,152

​

​

​

26,785

​

​

​

1,234,036

​

​

​

1,260,821

​

CML & CRE

​

​

10,717

​

​

​

108

​

​

2,257

​

​

13,082

​

​

1,547,706

​

​

1,560,788

​

AG & AGRE

​

​

90

​

​

​

—

​

​

3

​

​

93

​

​

92,434

​

​

92,527

​

CON & MAR

​

​

—

​

​

​

—

​

​

—

​

​

—

​

​

3,731

​

​

3,731

​

​

​

$

53,127

​

​

$

9,591

​

​

$

179,553

​

​

$

242,271

​

​

$

11,234,442

​

​

$

11,476,713

​

​

​

​

—

%

​

​

—

%

​

​

2

%

​

​

2

%

​

​

98

%

​

​

100

%

​

The table above excludes one residential loan of $0.3 million, 60-89 days past due, classified as held for sale at March 31, 2026.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​ ​ ​

30-59 Days

​

​ ​ ​

60-89 Days

​

​ ​ ​

90+ Days

​

​ ​ ​

Total

​

​ ​ ​

​

​

​ ​ ​

Total

​

​

​

Past Due

​

​

Past Due

​

​

Past Due

​

​

Past Due

​

​

Current

​

​

Loans

​

​

​

(In thousands)

​

MTG WHRA

​

$

—

​

$

—

​

​

$

—

​

​

$

—

​

​

$

1,600,285

​

​

$

1,600,285

​

RES RE

​

​

5,077

​

​

2,430

​

​

3,479

​

​

10,986

​

​

1,007,794

​

​

1,018,780

​

MF FIN

​

​

—

​

​

47,475

​

​

111,348

​

​

158,823

​

​

5,173,857

​

​

5,332,680

​

HC FIN

​

​

—

​

​

​

—

​

​

​

26,167

​

​

​

26,167

​

​

​

1,359,192

​

​

​

1,385,359

​

CML & CRE

​

​

7,517

​

​

659

​

​

2,280

​

​

10,456

​

​

1,593,095

​

​

1,603,551

​

AG & AGRE

​

​

—

​

​

125

​

​

4

​

​

129

​

​

91,948

​

​

92,077

​

CON & MAR

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1,950

​

​

1,950

​

​

​

$

12,594

​

​

$

50,689

​

​

$

143,278

​

​

$

206,561

​

​

$

10,828,121

​

​

$

11,034,682

​

​

​

​

—

%

​

​

—

%

​

​

1

%

​

​

2

%

​

​

98

%

​

​

100

%

​

The table above excludes one multi-family loan of $0.3 million, 30-59 days past due, classified as held for sale that was past due as of December 31, 2025.

Nonperforming Loans

Nonaccrual loans, including modified loans to borrowers experiencing financial difficulty that have not met the six-month minimum performance criterion, are reported as nonperforming loans. For all loan classes, it is the Company’s policy to have any modified loans which are on nonaccrual status prior to being modified, remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider its return to accrual status. A loan is generally classified as nonaccrual when the Company believes that receipt of principal and interest is doubtful under the terms of the loan agreement. Generally, this is at 90 days or more past due. The amount of interest income recognized on nonaccrual financial assets was inconsequential for both the three months ended March 31, 2026 and 2025.

24

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The following table presents the Company’s nonperforming loans at March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

December 31, 2025

​

​

​

​

​

Total Loans >

​

​

​

​

Total Loans >

​

​

​

​

​

90 Days &

​

​

​

​

90 Days &

​

​

Nonaccrual

​

Accruing

​

Nonaccrual

​

Accruing

​

​

(In thousands)

RES RE

​

$

7,218

​

$

69

​

$

7,680

​

$

—

MF FIN

​

175,950

​

​

4,029

​

128,241

​

—

HC FIN

​

​

46,671

​

​

4,252

​

​

59,574

​

​

—

CML & CRE

​

​

9,266

​

​

—

​

​

2,313

​

​

—

AG & AGRE

​

​

3

​

​

—

​

​

4

​

​

—

​

​

$

239,108

​

$

8,350

​

$

197,812

​

$

—

​

The Company did not have any loans classified as held for sale on nonaccrual or 90 days past due and accruing as of March 31, 2026 or December 31, 2025.

​

The Company did not have any nonaccrual loans without an estimated ACL at March 31, 2026 or December 31, 2025.

​

Modifications to Borrowers Experiencing Financial Difficulty

​

Occasionally, the Company modifies loans to borrowers in financial difficulty by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction. In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted, but is rare.

​

The following tables present the amortized cost basis of loans at March 31, 2026 and 2025 that were both experiencing financial difficulty and modified during the three months ended March 31, 2026 and 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of loans receivable is also presented below:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended March 31, 2026

​

​

​

​

​

Combination - Term Extension and Payment Delay

​

Total Class of Loans Receivable

​

% of Total Class of Loans Receivable

​

​

​

​

​

​

(In thousands)

​

MF FIN

​

​

​

​

$

25,687

​

$

25,687

​

​

—

%

HC FIN

​

​

​

​

​

9,000

​

​

9,000

​

​

—

%

Total

​

​

​

​

$

34,687

​

$

34,687

​

​

—

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended March 31, 2025

​

​

Term Extension

​

Combination - Term Extension and Payment Delay

​

Total Class of Loans Receivable

​

% of Total Class of Loans Receivable

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

MF FIN

​

$

4,290

​

$

51,349

​

$

55,639

​

​

1

%

CML & CRE

​

​

​

​

​

177

​

​

177

​

​

—

%

Total

​

$

4,290

​

$

51,526

​

$

55,816

​

​

1

%

​

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty. Loans with risk classifications of Pass and Special Mention were part of the pooled loan ACL analysis. Loans

25

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

classified as Substandard or worse were individually evaluated for credit losses and specific reserves were established, if applicable. During the three months ended March 31, 2026, there were no specific reserves recorded on troubled loan modifications disclosed above. As of March 31, 2025, $5.8 million in specific reserves were recorded on troubled loan modifications disclosed above. The Company had a commitment to lend $0.2 million and $0 as of March 31, 2026 and 2025, respectively, to the borrowers included in the tables above.

​

​	​	​	​	​
​	​	​	​	Three Months Ended March 31, 2026
​	​	​	​	Combination - Term Extension and Payment Delay
​	​	​	​	Financial Effect
MF FIN	​	​	​	Added a weighted average of 4 months.
HC FIN	​	​	​	Added a weighted average of 12 months.

​

​

​	​	​	​	​
​	​	Three Months Ended March 31, 2025
​	​	Term Extension	​	Combination - Term Extension and Payment Delay
​	​	Financial Effect	​	Financial Effect
MF FIN	​	Added a weighted average of 1 month.	​	Added a weighted average of 5 months.
CML & CRE	​	​	​	Term extension added a weighted average of 61 months and payment delay added a weighted average of 12 months.

​

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that were modified in the twelve months following modification.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

​

​

​

30 - 89 Days

​ ​ ​

90+ Days

​ ​ ​

Total

​

​

Current

​

Past Due

​

Past Due

​

Loans

​

​

(In thousands)

MF FIN

​

$

69,854

​

$

—

​

$

11,540

​

$

81,394

HC FIN

​

​

59,659

​

​

8,633

​

​

4,252

​

​

72,544

CML & CRE

​

​

761

​

​

—

​

​

—

​

​

761

Total

​

$

130,274

​

$

8,633

​

$

15,792

​

$

154,699

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2025

​

​

​

​

30 - 89 Days

​ ​ ​

90+ Days

​ ​ ​

Total

​

​

Current

​

Past Due

​

Past Due

​

Loans

​

​

(In thousands)

MF FIN

​

$

89,507

​

$

4,290

​

$

17,031

​

$

110,828

HC FIN

​

​

4,211

​

​

9,649

​

​

—

​

​

13,860

CML & CRE

​

​

177

​

​

—

​

​

—

​

​

177

Total

​

$

93,895

​

$

13,939

​

$

17,031

​

$

124,865

​

​

During the three months ended March 31, 2026, there were three loan defaults totaling $24.4 million to a borrower whose loans were modified due to financial difficulties within the previous twelve months. During the three months ended March 31, 2025, there was a default on an $23.3 million loan to a borrower whose loan was modified due to financial difficulties within the previous twelve months.

​

Foreclosures

​

There were $3.4 million in process of foreclosure as of March 31, 2026 and there were $3.5 million in process of foreclosure as of December 31, 2025.

26

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

Loans Purchased

The Company purchased $27.3 million and $19.9 million of loans during the three months ended March 31, 2026 and 2025, respectively.

​

Standby Letters of Credit

The Company issues instruments, in the normal course of business with customers, that are considered financial guarantees. Standby letters of credit guarantees are issued in connection with agreements made by customers to counterparties. Standby letters of credit are contingent upon failure of the customer to perform the terms of the underlying contract. Although credit risk associated with the standby letters of credit is essentially the same as that associated with extending loans to customers and is subject to normal credit policies, the Company has never had to fund a standby letter of credit. The terms of these standby letters of credit range from less than one to ten years. These commitments are not recorded in the unaudited condensed consolidated financial statements. The total for these guarantees at March 31, 2026 and December 31, 2025 was $213.6 million and $186.5 million, respectively.

Supplemental Cash Flow Information

Supplemental cash flow information related to loans is presented in the table below.

​

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	​ ​ ​	2026		​	2025
​	​	(In thousands)
Cash Flow Statement	​	​	​	​	​	​
Supplemental cash flow information:	​	​	​	​	​	​
Transfer of loans to other real estate owned	​	$	81	​	$	—
Deposits received upon loan origination	​		—	​		189,206
Transfer of loans from loans held for sale to loans receivable	​	​	—	​	​	1,029
Transfer of loans from loans receivable to loans held for sale	​		55,570	​		74,462

​

​

​

​

Note 5: Qualified Affordable Housing and Other Tax Credits

The Company invests in LIHTC limited liability partnerships and LLCs. The primary purpose of these investments is to earn an adequate return on capital through the receipt of low-income housing tax credits. Those investments are recorded at cost and then amortized using the proportional amortization method. The investments are included in other assets on the unaudited condensed consolidated balance sheets, with any unfunded commitments included in other liabilities. The investments are amortized as a component of income tax expense. The tax credits recognized reduced income tax expense for the period.

​

The Company also has a pool of investments that are held for sale and are accounted for at the lower of cost or market. These investments include projects that are awaiting syndication in LIHTC funds through our MCI subsidiary. The investments are included in other assets on the unaudited condensed consolidated balance sheets.

​

The Company is the primary beneficiary in one of its joint venture investments, therefore the results of this entity are consolidated, and the benefits of the new market fund are recognized through tax credits as a component of income tax expense. The Company consolidates this joint venture because it has the power to direct the activities that most significantly impacts the entity’s economic performance and has an obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

​

27

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

December 31, 2025

​

​

​

(In thousands)

Investment

Accounting Method

​

Investment

​

Unfunded Commitments

​

Investment

​

Unfunded Commitments

LIHTC

Proportional amortization

​

$

222,381

​

$

107,135

​

$

218,110

​

$

118,043

LIHTC (1)

Proportional amortization

​

​

55,237

​

​

—

​

​

49,725

​

​

—

LIHTC subtotal

​

​

$

277,618

​

$

107,135

​

$

267,835

​

$

118,043

New Market Fund

Consolidated

​

​

10,916

​

​

—

​

​

10,903

​

​

—

Total

​

​

$

288,534

​

$

107,135

​

$

278,738

​

$

118,043

(1) LIHTC projects held for future syndication.

​

The following table summarizes the amortization expense and tax credits recognized for the Company’s low-income housing investments for the three months ended March 31, 2026 and 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

March 31,

​

​

​

​

​

​

​

2026

​

2025

​

​

​

​

​

(In thousands)

Amortization expense

​

​

​

​

​

​

​

​

$

6,287

​

$

3,775

Expected tax credits

​

​

​

​

​

​

​

​

$

7,090

​

$

4,274

​

​

​

Variable Fees Subject to Revenue Recognition Constraints

The Company serves as a general partner for several syndicated LIHTC funds that are owned by one investor, holding 85.00-99.99% of the funds, as a limited partner. The Company, as general partner, provides services including fund formation and the identification and acquisition of qualifying investments. Although some of these activities occur earlier in the arrangements, those activities do not provide a distinct benefit on their own and represent inputs to a single integrated service of managing the funds and delivering tax credits over the life of the arrangements. Accordingly, the services are accounted for as a single combined performance obligation that is satisfied over time.

​

The Company is entitled to future fees of up to approximately $33.4 million; however, substantially all consideration is variable and contingent upon the achievement of future performance milestones, including the stabilization of the underlying properties and the delivery of tax credits to the limited partner. These contingencies may extend out until 2043.

​

Due to the significant uncertainty associated with the achievement of these milestones, the extended duration of the agreements, and the potential for a significant reversal of revenue if the milestones are not achieved, the Company has fully constrained variable consideration as of March 31, 2026 and December 31, 2025. Accordingly, no revenue has been recognized to date. Revenue will be recognized only if, and when, the applicable performance milestones are achieved and constraint on variable consideration is lifted. The Company continually reassesses the constraint on variable consideration as facts and circumstances evolve. There were no changes in the Company’s conclusions during the three months ended March 31, 2026. 

​

Because the Company’s right to consideration is contingent upon future performance and is not unconditional or enforceable until the underlying properties are stabilized and the delivery of tax credits is complete, no contract asset was recorded as of March 31, 2026 or December 31, 2025.

​

The Company has also advanced these LIHTC funds $85.2 million and $102.7 million as of March 31, 2026 and December 31, 2025, respectively, to acquire its LIHTC investment projects. These advances represent long-term funding provided to the funds and are expected to be repaid over a similar period. Repayment of the advances is not contingent upon the achievement of performance milestones related to the Company’s general partner services and does

28

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

not arise from contracts with customers. Accordingly, the advances are not within the scope of ASC 606 and do not represent contract assets. These advances have been recorded in other assets on the unaudited condensed consolidated balance sheets. Repayment of the advances is expected to occur through capital contributions from the limited partner, and the advances are periodically assessed for recoverability.

​

Supplemental Cash Flow Information

​

The following table presents noncash and supplemental information related to the Company’s qualified affordable housing investments.

​

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	​ ​ ​	2026		​	2025
​	​	(In thousands)
Cash Flow Statement	​	​	​	​	​	​
Supplemental cash flow information:	​	​	​	​	​	​
Loans provided for sale of LIHTCs	​	$	153	​	$	—
Qualified affordable housing investments obtained in exchange for funding commitments	​	​	1,607	​	​	—
Deposits received upon reduction of funding commitments	​	​	12,514	​	​	—
Deposits received upon purchase of LIHTCs	​	​	7,031	​	​	—
Beneficial interests received in exchange for LIHTC's sold	​		—	​		3,118

​

​

​

Note 6: Leases

The Company has operating leases for various locations with terms ranging from two to ten years. Some operating leases include options to extend. The extensions were included in the ROU asset if the likelihood of extension was reasonably certain. The Company elected not to separate non-lease components from lease components for its operating leases.

Supplemental balance sheet information related to leases is presented in the table below as of March 31, 2026 and December 31, 2025:

​

​	​	​	​	​	​
​	​	March 31, 2026	​	​	December 31, 2025
​	​	(In thousands)
Balance Sheet	​	​
Operating lease ROU asset (in other assets)	$	13,370	​	$	6,006
Operating lease liability (in other liabilities)	​	14,482	​	​	7,264
​	​	​	​	​	​
Weighted average remaining lease term (years)	​	6.0	​	​	3.7
Weighted average discount rate	​	3.90%	​	​	3.44%

​

​

​

​

29

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The table below presents the components of lease expenses for the three months ended March 31, 2026 and 2025. Operating lease expenses are included in occupancy and equipment expense on the unaudited condensed income statements.

​

​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​	2026	​	​	2025
​	​	(In thousands)
Statement of Income	​	​
Components of lease expense:	​	​	​	​	​
Operating lease cost	$	639	​	$	694

​

As of March 31, 2026, the Company has a forward-starting lease with total net future minimum lease payments of $1.3 million. The lease commences on April 1, 2026, and obligates the Company to use and pay for space over ten years upon commencement. No ROU asset or lease liability has been recorded as of March 31, 2026 because the lease has not commenced.

Supplemental cash flow information related to leases is presented in the tables below.

​

​	​	​	​	​	​
​	​	​	​	March 31, 2026
​	​	​	​	​	(In thousands)
Maturities of operating lease liabilities:	​	​	​	​	​
One year or less	​	​	​	$	2,398
Year two	​	​	​	​	3,051
Year three	​	​	​	​	2,906
Year four	​	​	​	​	2,492
Year five	​	​	​	​	2,010
Thereafter	​	​	​	​	3,598
Total future minimum lease payments	​	​	​	​	16,455
Less: imputed interest	​	​	​	​	1,973
Total	​	​	​	$	14,482

​

​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​	2026	​	​	2025
​	​	(In thousands)
Cash Flow Statement	​	​	​	​	​
Supplemental cash flow information:	​	​	​	​	​
Operating cash flows for operating leases	$	605	​	$	560
ROU assets obtained in exchange for new operating lease liabilities	​	7,893	​	​	—

​

​

​

​

​

​

​

​

​

​

​

​

30

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Note 7: Other Assets and Receivables

The following items are included in other assets and receivables on the unaudited condensed consolidated balance sheets.

Qualified Affordable Housing

Information regarding qualified affordable housing investments is disclosed elsewhere in Note 5: Qualified Affordable Housing and Other Tax Credits.

Income Tax Receivable

The Company had federal and state income tax receivables of $204.5 million and $181.5 million as of March 31, 2026 and December 31, 2025, respectively. These receivables were primarily related to the acquisition of $19.7 million and $151.3 million of transferable tax credits by the Company in 2026 and 2025, respectively, and the amounts due from the Internal Revenue Service claimed on federal income tax returns for which refunds had not been received as of the respective balance sheet dates. The Company evaluates the collectability of the federal income tax receivable at each reporting date. Based on management’s assessment, including consideration of amounts, and applicable statutory refund provisions, the Company believes the receivable is collectible. The balance will be reduced upon receipt of the related cash refunds

​

Joint Ventures

The Company has investments in various joint ventures totaling $48.7 million and $47.0 million at March 31, 2026 and December 31, 2025, respectively. These investments are primarily made up of investments in debt funds totaling $32.9 million and $32.0 million at March 31, 2026 and December 31, 2025, respectively. The Company was not a primary beneficiary in any of these joint venture investments. Results from the entities are not required to be consolidated and are accounted for under the equity method of accounting. The Company is obligated to make additional investments over the next several years. There was an obligation of $8.4 million and $8.4 million as of March 31, 2026 and December 31, 2025, respectively. See Note 8: Variable Interest Entities (VIEs) for additional information about VIE’s.

Freestanding Credit Enhancements

In December 2024, the Company executed a CDS on a reference pool of warehouse loans with an initial principal balance of $1.2 billion. The initial pool consists of warehouse participation certificates, classified as loans held for sale, but could in the future also include warehouse repurchase agreements, classified as loans receivable. The CDS covers a protected tranche of the first 12.5% of losses on the notional amount. Annual CDS premium payments equal 0.8% of the portfolio notional amount and be recorded as noninterest expense. Merchants will continually replenish maturing or non-renewing loans with substantially similar loans subject to mutual agreement of buyer and seller during a replenishment period, subject to a minimum balance of $1.2 billion and a maximum balance of $2.0 billion. The risk transfer agreement has a replenishment period of 36 months but can be extended to a maximum of 48 months.

​

The CDS is not accounted for as a derivative. The derivative scope exception for certain financial guarantees is utilized, as recovery payments are contingent on the failure of the debtor to pay their past due obligations, which are preconditions to the guarantee. Accordingly, the CDS has been accounted for as a freestanding credit enhancement and does not offset the Company’s estimate of expected credit losses. Therefore, the ACL-loans will continue to be recorded without considering potential recoveries from freestanding credit enhancement contracts. Upon initial execution, there was no CDS recovery asset established because the loans in the pool were participation certificates that were classified as loans held for sale and carry no ACL-loans. When repurchase agreements are in the pool, they are classified as loans

31

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

receivable, and a CDS recovery asset would be established in other assets, with an equal benefit to CDS recovery income in other noninterest income.

​

As of March 31, 2026 and December 31, 2025, there was no CDS recovery assets established. The total loan pool balance was $1.6 billion and $2.0 billion as of March 31, 2026 and December 31, 2025, respectively.

​

Leases and Other Items

Other items included in other assets and receivables on the unaudited condensed consolidated balance sheets are disclosed elsewhere or are not individually significant. See Note 11: Derivative Financial Instruments and Note 6: Leases for further information.

​

​

​

​

Note 8: Variable Interest Entities

A VIE is a corporation, partnership, limited liability company, or any other legal structure used to conduct activities or hold assets generally that either:

​

• Does not have equity investors with voting rights that can directly or indirectly make decisions about the entity’s activities through those voting rights or similar rights; or

​

• Has equity investors that do not provide sufficient equity for the entity to finance its activities without additional subordinated financial support.

​

The Company has invested in single-family, multi-family, and healthcare debt financing entities, as well as low-income housing syndicated funds that are deemed to be VIEs. The Company also has deemed certain mortgage backed securitizations (REMIC trusts) as VIEs that were established in conjunction with multi-family and healthcare loan sales and securitization transactions. Accordingly, the entities were assessed for potential consolidation under the VIE model that requires primary beneficiaries to consolidate the entity’s results. A primary beneficiary is defined as the party that meets both of the following conditions: (i) the power to direct the activities that most significantly impact the economic performance of the entity, and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. To determine if an interest has significant exposure to the entity’s economics, both qualitative and quantitative factors regarding the nature, size and form of involvement with the entity are evaluated.

​

At March 31, 2026 the Company determined it was not the primary beneficiary for most of its VIEs, largely because it does not have the power to direct the activities that most significantly impact the economic performance of the entity or the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Evaluation and assessment of VIEs for consolidation is performed on an ongoing basis by management. Any changes in facts and circumstances occurring since the previous primary beneficiary determination will be considered as part of this ongoing assessment.

​

The table below reflects the investments in the VIEs, as well as the maximum exposure to loss in connection with unconsolidated VIEs and liabilities for binding, unfunded commitments at March 31, 2026 and December 31, 2025. The Company’s maximum exposure to loss associated with its unconsolidated VIEs consists of the capital invested plus any unfunded equity commitments. These investments and unfunded liabilities for VIEs are recorded in other assets and other liabilities, respectively, on the unaudited condensed consolidated balance sheets. Also included in the maximum loss exposure are loans to VIEs that are included in loans receivable. Although the REMIC trusts are not recognized on the balance sheet, the maximum exposure to loss is the carrying value of the securities acquired as part of the securitization transactions, as well as a loan to a third party of the REMIC trust.

​

32

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Investments

​

Loans

​

Securities

​

Maximum

​

Liabilities

Assets

​ ​ ​

in VIEs

​ ​ ​

to VIEs

​

for VIEs

​

Exposure to Loss

​

for VIEs

​

​

(In thousands)

March 31, 2026

​

​

​

​

​

​

​

​

​

​

​

​

LIHTC investments

​

$

228,340

​

$

245,276

​

$

—

​

$

473,616

​

$

63,886

Debt funds

​

​

32,897

​

​

150,973

​

​

—

​

​

183,870

​

​

—

Mortgage-backed securitizations (1)

​

​

—

​

​

18,448

​

​

1,414,342

​

​

1,432,790

​

​

—

Total Unconsolidated VIEs

​

$

261,237

​

$

414,697

​

$

1,414,342

​

$

2,090,276

​

$

63,886

December 31, 2025

​

​

​

​

​

​

​

​

​

​

LIHTC investments

​

$

239,698

​

$

284,391

​

$

—

​

$

524,089

​

$

88,708

Debt funds

​

​

32,038

​

​

82,955

​

​

—

​

​

114,993

​

​

—

Mortgage-backed securitizations (1)

​

​

—

​

​

24,750

​

​

1,531,975

​

​

1,556,725

​

​

—

Total Unconsolidated VIEs

​

$

271,736

​

$

392,096

​

$

1,531,975

​

$

2,195,807

​

$

88,708

​

​

​

​

(1) Amounts include involvement with securitization SPEs where the Company transferred to and/or service loans for an SPE and hold securities issued by that SPE. Values disclosed in the table above represent the Company’s maximum exposure to loss for those securities’ holdings.

​

​

​

​

​

​

​

Note 9: Deposits

Deposits were comprised of the following at March 31, 2026 and December 31, 2025:

​

​	​	​	​	​	​	​
​	​	​		​	​
​	​ ​ ​	March 31, 2026		​ ​ ​	December 31, 2025
​	​	(In thousands)
Noninterest-bearing deposits	​	​	​	​	​	​
Core demand deposits	​	$	501,864	​	$	604,081
​	​	​	​	​	​	​
Interest-bearing deposits	​	​	​	​	​	​
Demand deposits:	​	​	​	​	​	​
Core demand deposits	​	​	6,949,611	​	​	6,207,814
Brokered demand deposits	​	​	301,111	​	​	600,000
Total interest-earning demand deposits	​	​	7,250,722	​	​	6,807,814
Money market/savings deposits:	​		​	​		​
Core money market/savings deposits	​	​	3,872,344	​	​	3,566,523
Brokered money market/savings deposits	​	​	200,867	​	​	201,010
Total money market/savings deposits	​	​	4,073,211	​	​	3,767,533
Certificates of deposit:	​		​	​		​
Core certificates of deposits	​	​	741,452	​	​	905,448
Brokered certificates of deposits	​	​	384,504	​	​	956,316
Total certificates of deposits	​	​	1,125,956	​	​	1,861,764
Total interest-bearing deposits	​	​	12,449,889	​	​	12,437,111
Total deposits	​	$	12,951,753	​	$	13,041,192
​	​	​	​	​	​	​
Total core deposits	​	$	12,065,271	​	$	11,283,866
Total brokered deposits	​	$	886,482	​	$	1,757,326
Total deposits	​	$	12,951,753	​	$	13,041,192

​

​

​

​

33

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Maturities for certificates of deposit are as follows:

​

​	​	​	​
​	​ ​ ​	March 31, 2026
​	​	(In thousands)
Due within one year	​	$	1,078,802
Due in one year to two years	​		39,872
Due in two years to three years	​		7,282
Due in three years to four years	​		—
Due in four years to five years	​	​	—
Due in five years to six years	​		—
​	​	$	1,125,956

​

Certificates of deposit of $250,000 or more totaled $431.8 million and $497.5 million at March 31, 2026 and December 31, 2025, respectively.

​

​

​

Note 10: Borrowings

Borrowings were comprised of the following at March 31, 2026 and December 31, 2025:

​

​	​	​	​	​	​	​
​	​ ​ ​	March 31, 2026		​ ​ ​	December 31, 2025
​	​	(In thousands)
Federal Reserve discount window borrowings	​	$	140,000	​	$	—
Subordinated debt	​		71,800	​		71,800
FHLB advances	​	​	4,358,756	​	​	3,762,858
American Financial Exchange borrowing	​	​	195,000	​	​	—
Other borrowings	​		7,934	​		7,934
Total borrowings	​	$	4,773,490	​	$	3,842,592

​

FHLB

On February 13, 2026, the Company entered into a new variable-rate debt agreement with the FHLB for an advance that has put and call options attached to it. The balance of the advance was $2.0 billion as of March 31, 2026, and matures on May 14, 2026. The variable interest rate is based on the Federal Funds effective rate, plus 15 basis points, which was 3.79% on March 31, 2025. The FHLB has a put option to cancel the agreement 60 days after the initial execution date and the Company has a call option to cancel the agreement at any time, with one day’s notice.

On March 31, 2026, the Company entered into a new variable-rate debt agreement with the FHLB for an advance that has put and call options attached to it. The balance of the advance was $2.4 billion as of March 31, 2026, and matures on June 29, 2026. The variable interest rate is based on the Federal Funds effective rate, plus 15 basis points, which was 3.79% on March 31, 2026. The FHLB has a put option to cancel the agreement 60 days after the initial execution date and the Company has a call option to cancel the agreement at any time, with one day’s notice.

AFX

During the three months ended March 31, 2026, the Company utilized unsecured overnight lending arrangements to borrow from other AFX members through extensions of credit. At March 31, 2026, members of the AFX offered a combined borrowing limit, but availability fluctuates daily. As of March 31, 2026, the outstanding balance was $195.0 million with a weighted average rate of 3.69%.  Rates are set daily by participating members and may vary by lending member.

34

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

​

Note 11:    Derivative Financial Instruments

​

The Company uses non-hedging designated derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities.

Internal Interest Rate Risk Management

The Company enters into interest rate lock commitments with potential borrowers to fund specific mortgage loans that will be sold into the secondary market and enters into forward contracts for the future delivery of mortgage loans to third party investors. The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans. Forward contracts and interest rate lock agreements are accounted for as derivatives at fair value with changes in fair value reflected in other noninterest income on the unaudited condensed consolidated statements of income.

Interest rate swaps may also be used by the Company to reduce the risk that significant increases in interest rates may have on the value of certain fixed-rate loans and the respective loan payments received from borrowers. All changes in the fair market value of these interest rate swaps and associated loans have been included in gain on sale of loans. Any difference between the fixed and floating interest rate components of these transactions have also been included in gain on sale of loans.

​

The Company entered into a contract containing put options and interest rate floors on securities it acquired from a warehouse customer. These provide protection and offset losses in value of certain securities accounted for under the fair value option. The gain (loss) on the put options is substantially equal and offsetting to the fair market value adjustment of securities available for sale, resulting in an inconsequential net gain or loss in other noninterest income. This helps mitigate interest rate risk and minimizes impacts of market fluctuations on the securities available for sale that the Company elected to account for under the fair value option with changes in fair value reflected in earnings. The Company also entered into interest rate floor contracts with two warehouse loan customers to minimize interest rate risk. All changes in the fair market value of these options and floors have been included in other noninterest income.

​

Credit Risk Management

In 2025 and 2024, the Company entered into contracts as the buyer of credit protection through the credit default swap market. These contracts were purchased to manage credit risk associated with specific multi-family and healthcare mortgage loans. Under the terms of the contract, the Company will be compensated for certain credit-related losses on pools of covered loans. As of March 31, 2026, the protection sellers have posted aggregate collateral of $127.2 million related to their obligations under the contract. The collateral is not included on the Company’s unaudited condensed consolidated balance sheets.

​

A CDS is considered a derivative, but is not designated as an accounting hedge, and is recorded at fair value, with changes in fair value reflected in credit risk transfer premium expense on the unaudited condensed consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in other assets while derivative instruments with a negative fair value are reported in other liabilities on the unaudited condensed consolidated balance sheets.

​

35

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The following table presents the notional amount and fair value of interest rate locks, forward contracts, interest rate swaps, put options, interest rate floors, and credit defaults swaps utilized by the Company at March 31, 2026 and December 31, 2025. These tables exclude the fair market value adjustment on loans commonly hedged with these derivatives.

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	Notional	​	​	​	​	​	Fair Value
​	​	Amount		​	Balance Sheet Location		​	Asset		​	Liability
​	​	(In thousands)
March 31, 2026	​	​
Interest rate lock commitments	$	195,628	​	​	Other assets/liabilities	​	$	142	​	$	1,174
Forward contracts	​	304,907	​	​	Other assets/liabilities	​	​	1,023	​	​	121
Interest rate swaps	​	49,323	​	​	Other assets	​	​	2,565	​	​	—
Put options	​	595,701	​	​	Other assets	​	​	45,494	​	​	—
Interest rate floors	​	1,055,586	​	​	Other assets	​		12,236	​	​	—
Credit default swaps	​	123,959	​	​	Other liabilities	​	​	—	​	​	69
​	​	​	​	​	​	​	$	61,460	​	$	1,364

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	Notional	​	​	​	​	​	Fair Value
​	​	Amount		​	Balance Sheet Location		​	Asset		​	Liability
​	​	(In thousands)
December 31, 2025	​	​
Interest rate lock commitments	$	142,540	​	​	Other assets/liabilities	​	$	227	​	$	107
Forward contracts	​	146,452	​	​	Other assets/liabilities	​	​	2	​	​	467
Interest rate swaps	​	49,480	​	​	Other assets	​	​	2,354	​	​	—
Put options	​	608,885	​	​	Other assets	​	​	37,570	​	​	—
Interest rate floors	​	1,089,679	​	​	Other assets	​	​	9,540	​	​	—
Credit default swaps	​	123,222	​	​	​	​	​	—	​	​	—
​	​	​	​	​	​	​	$	49,693	​	$	574

​

​

​

​

​

​

​

​

​

36

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The following table summarizes the periodic changes in the fair value of the above derivative financial instruments on the unaudited condensed consolidated statements of income for the three months ended March 31, 2026 and 2025.

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​ ​ ​	2026		​ ​ ​	2025
​	​	(In thousands)
Derivative (loss) gain included in gain on sale of loans:	​	​	​	​	​	​
Interest rate lock commitments	​	$	(1,152)	​	$	184
Forward contracts (includes pair-off settlements)	​	​	1,335	​	​	(350)
Interest rate swaps	​	​	—	​	​	(842)
Net gain (loss)	​	$	183	​	$	(1,008)
​	​	​	​	​	​	​
Derivative (loss) gain included in other income:	​	​	​	​	​	​
Put options (1)	​	​	7,923	​	​	(6,245)
Interest rate floors	​	​	2,696	​	​	(2,258)
Interest rate swaps	​	​	348	​	​	—
Net gain (loss)	​	$	10,967	​	$	(8,503)
​	​	​	​	​	​	​
Derivative (loss) gain included in credit risk transfer premium expense:	​	​	​	​	​	​
Credit default swaps	​	​	(69)	​	​	—
Net (loss) gain	​	$	(69)	​	$	—

(1) The put option gain (loss) reflects an adjustment to the fair value of the derivative that is substantially equal and offset by an adjustment to the fair value of its related securities available for sale for which the Company elected to account for under the fair value option with changes in fair value reflected in earnings. The combination of these adjustments is designed to result in an inconsequential net gain or loss in other noninterest income.

​

​

​

​

​

​

​

​

​

​

Derivatives on Behalf of Customers

The Company offers derivative contracts to some customers in connection with their Interest Rate Risk Management (“IRRM”) needs. These derivatives include back-to-back interest rate swap, cap, and floor arrangements. The Company manages the risk associated with these contracts by entering into an equal and offsetting derivative with a third-party dealer. These derivatives generally work together as an economically neutral interest rate position to assist the customer, but the Company does not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred, typically resulting in no net earnings impact.

The fair values of IRRM derivative assets and liabilities related to back-to-back derivatives on behalf of customers with back-to-back interest rate swap, cap or floor arrangements were recorded on the unaudited condensed consolidated balance sheets as follows:

​

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	Notional	​	​	​	​	​	Fair Value
​	​	Amount		​	Balance Sheet Location		​	Asset		​	Liability
​	​	(In thousands)
March 31, 2026	$	1,274,996	​	​	Other assets/liabilities	​	$	4,847	​	$	4,847
December 31, 2025	$	1,178,034	​	​	Other assets/liabilities	​	$	7,289	​	$	7,289

​

​

​

37

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The gross gains and losses on these derivative assets and liabilities were recorded in other noninterest income and other noninterest expense in the unaudited condensed consolidated statements of income as follows:

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​ ​ ​	2026		​ ​ ​	2025
​	​	(In thousands)
Gross IRRM derivative gains	​	$	2,442	​	$	4,544
Gross IRRM derivative losses	​	​	2,442	​	​	4,544
Net IRRM derivative gains	​	$	—	​	$	—
​	​	​	​	​	​	​

​

The Company pledged $10.0 million in collateral to secure its obligations under IRRM contracts at both March 31, 2026 and December 31, 2025.

​

Note 12:    Disclosures about Fair Value of Assets and Liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1    Quoted prices in active markets for identical assets or liabilities

Level 2    Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3    Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities

​

​

​

​

38

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Recurring Measurements

The following tables present the fair value measurements of assets and liabilities recognized on the accompanying unaudited condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements Using

​

​

​

​

​

Quoted Prices in

​

Significant

​

​

​

​

​

​

​

Active Markets

​

Other

​

Significant

​

​

​

​

​

for Identical

​

Observable

​

Unobservable

​

​

Fair

​

Assets

​

Inputs

​

Inputs

Assets

​ ​ ​

Value

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

​

​

(In thousands)

March 31, 2026

​

​

​

​

​

​

​

​

​

​

​

​

Mortgage loans in process of securitization

​

$

437,001

​

$

—

​

$

437,001

​

$

—

Securities available for sale:

​

​

​

​

​

​

​

​

Treasury notes

​

31,340

​

31,340

​

—

​

—

Federal Agencies

​

258,802

​

—

​

258,802

​

—

Mortgage-backed - Agency

​

​

3,547

​

​

—

​

3,547

​

—

Mortgage-backed - Non-Agency residential - fair value option

​

​

371,222

​

​

—

​

371,222

​

—

Mortgage-backed - Agency - fair value option

​

178,985

​

—

​

178,985

​

—

Loans held for sale

​

163,426

​

—

​

163,426

​

—

Loans receivable

​

​

46,427

​

​

—

​

​

46,427

​

​

—

Servicing rights

​

229,576

​

—

​

—

​

229,576

Derivative assets:

​

​

​

​

​

​

​

​

​

​

​

Interest rate lock commitments

​

142

​

—

​

—

​

142

Forward contracts

​

​

1,023

​

—

​

1,023

​

—

Interest rate swaps

​

​

2,565

​

​

—

​

​

2,565

​

​

—

Interest rate swaps, caps and floors (back-to-back)

​

​

4,847

​

​

—

​

​

4,847

​

​

—

Put options

​

​

45,494

​

​

—

​

​

6,617

​

​

38,877

Interest rate floors

​

​

12,236

​

​

—

​

​

—

​

​

12,236

Derivative liabilities:

​

​

​

​

​

​

​

​

​

​

​

Interest rate lock commitments

​

1,174

​

​

—

​

​

—

​

​

1,174

Forward contracts

​

121

​

​

—

​

​

121

​

​

—

Credit default swaps

​

69

​

​

—

​

​

—

​

​

69

Interest rate swaps, caps and floors (back-to-back)

​

4,847

​

​

—

​

​

4,847

​

​

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

​

​

​

​

​

​

​

​

Mortgage loans in process of securitization

​

$

620,094

​

$

—

​

$

620,094

​

$

—

Securities available for sale:

​

​

​

​

​

​

​

​

Treasury notes

​

30,680

​

30,680

​

—

​

—

Federal Agencies

​

259,508

​

—

​

259,508

​

—

Mortgage-backed - Agency

​

​

3,556

​

​

—

​

3,556

​

—

Mortgage-backed - Non-Agency residential - fair value option

​

​

385,460

​

​

—

​

385,460

​

—

Mortgage-backed - Agency - fair value option

​

185,854

​

—

​

185,854

​

—

Loans held for sale

​

76,980

​

—

​

76,980

​

—

Loans receivable

​

​

47,318

​

​

—

​

47,318

​

—

Servicing rights

​

217,296

​

—

​

—

​

217,296

Derivative assets:

​

​

​

​

​

​

​

​

​

​

​

Interest rate lock commitments

​

227

​

—

​

—

​

227

Forward contracts

​

​

2

​

—

​

2

​

—

Interest rate swaps

​

​

2,354

​

​

—

​

​

2,354

​

​

—

Interest rate swaps, caps and floors (back-to-back)

​

​

7,289

​

​

—

​

​

7,289

​

​

—

Put options

​

​

37,570

​

​

—

​

​

5,640

​

​

31,930

Interest rate floors

​

​

9,540

​

​

—

​

​

—

​

​

9,540

Derivative liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate lock commitments

​

​

107

​

​

—

​

​

—

​

​

107

Forward contracts

​

​

467

​

​

—

​

​

467

​

​

—

Interest rate swaps, caps and floors (back-to-back)

​

​

7,289

​

​

—

​

​

7,289

​

​

—

​

​

39

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized on the accompanying unaudited condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the three months ended March 31, 2026 and the year ended December 31, 2025. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

The Company values its assets and liabilities in the principal market where it sells the particular asset or transfers the liability with the greatest volume and level of activity. In the absence of an active market, the value is based on the most advantageous market for the asset or liability.

Mortgage Loans in Process of Securitization, Securities Available for Sale, and Securities with a Fair Value Option Election

Where quoted market prices are available in an active market, securities such as U.S. Treasuries are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy including Federal agencies, mortgage-backed securities, municipal securities and FHA participation certificates. In certain cases, if Level 1 or Level 2 inputs are not available, securities would be classified within Level 3 of the hierarchy.

Loans Held for Sale

Certain loans held for sale at fair value are saleable into the secondary mortgage markets and their fair values are estimated using observable quoted market or contracted prices, or market price equivalents, which would be used by other market participants. These saleable loans are considered Level 2.

Loans Receivable

Certain loans receivable are measured at fair value. These loans were previously designated as held for sale and measured at fair value and continue to be measured at fair value as loans receivable (held for investment) in accordance with the Company’s valuation election. The fair values of these loans are estimated using observable quoted market or contracted prices, or market price equivalents, which would be used by other market participants. These loans are considered Level 2.

Servicing Rights

Servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed, cost of servicing, interest rates, and default rate. Due to the nature of the valuation inputs, servicing rights are classified within Level 3 of the hierarchy.

The Chief Financial Officer’s (CFO) office contracts with an independent pricing specialist to generate fair value estimates on a quarterly basis. The CFO’s office challenges the reasonableness of the assumptions used and reviews the methodology to ensure the estimated fair value complies with GAAP.

Derivative Financial Instruments

Interest rate lock commitments - The Company estimates the fair value of interest rate lock commitments based on the value of the underlying mortgage loan, quoted mortgage-backed security prices, estimates of the fair value of the

40

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the interest rate lock commitment, net of expenses. With respect to its interest rate lock commitments, management determined that a Level 3 classification was most appropriate based on the various significant unobservable inputs utilized in estimating the fair value of its interest rate lock commitments.

Forward contracts - The Company estimates the fair value of forward sales commitments based on market quotes of mortgage-backed security prices for securities similar to the ones used, which are considered Level 2.

Interest rate swaps – The Company estimates the fair value of interest rate swaps based on prices that are obtained from a third party that uses observable market inputs, thereby supporting a Level 2 classification.

Interest rate swaps, caps, and floors (back-to-back) – The Company estimates the fair value of these derivatives made in relation to specific contracts with customers based on prices that are obtained from a third party that uses observable market inputs, thereby supporting a Level 2 classification.

Put options - The fair value of put options is linked to securities available for sale that are accounted for using the fair value option and are classified as either Level 2 or Level 3 on the hierarchy. The put options are classified as Level 2 or Level 3 in the hierarchy, depending upon the magnitude of observable inputs in the valuation of the securities. These valuations are estimated by a third party.

Interest rate floors - The fair value of certain interest rate floors is linked to securities available for sale that are accounted for using the fair value option. Other interest rate floors are linked to loans with warehouse customers. The value of the interest rate floors is based on estimated discounted cash flows that are based on inputs that are not readily observable and, thus, are classified as Level 3 on the hierarchy. These valuations are estimated by a third party.

Credit default swaps – The Company estimates the fair value of credit default swaps based on estimated discounted cash flows derived from inputs, including corporate default rate assumptions and market credit spreads that are not readily observable. Management determined that a Level 3 classification was most appropriate based on the significant unobservable inputs utilized in estimating fair value. These valuations are estimated by a third party.

​

41

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized on the accompanying unaudited condensed consolidated balance sheets using significant unobservable (Level 3) inputs.

​

​	​	​	​	​	​	​	​
​	​	Three Months Ended March 31,					​
​	​ ​ ​	2026		​ ​ ​	2025		​ ​ ​
​	​	(In thousands)					​
Servicing rights	​	​	​	​	​	​	​
Balance, beginning of period	​	$	217,296	​	$	189,935	​
Purchased servicing	​	​	125	​	​	—	​
Originated servicing	​		5,749	​		3,338	​
Paydowns	​		(2,532)	​		(2,808)	​
Gain (loss) recognized	​		8,938	​		(754)	​
Balance, end of period	​	$	229,576	​	$	189,711	​
​	​	​	​	​	​	​	​
Derivative assets - put options	​	​	​	​	​	​	​
Balance, beginning of period	​	$	31,930	​	$	31,296	​
Gain (loss) recognized	​		6,947	​		(3,001)	​
Balance, end of period	​	$	38,877	​	$	28,295	​
​	​	​	​	​	​	​	​
Derivative assets - interest rate floors	​	​	​	​	​	​	​
Balance, beginning of period	​	$	9,540	​	$	4,043	​
Gain (loss) recognized	​		2,696	​		(2,258)	​
Balance, end of period	​	$	12,236	​	$	1,785	​
​	​	​	​	​	​	​	​
Derivative liabilities - credit defaults swaps	​	​	​	​	​	​	​
Balance, beginning of period	​	$	—	​	$	—	​
Gain (loss) recognized	​		(69)	​		—	​
Balance, end of period	​	$	(69)	​	$	—	​
​	​	​	​	​	​	​	​
Derivative assets - interest rate lock commitments	​	​	​	​	​	​	​
Balance, beginning of period	​	$	227	​	$	30	​
Gain (loss) recognized	​		(85)	​		96	​
Balance, end of period	​	$	142	​	$	126	​
​	​	​	​	​	​	​	​
Derivative liabilities - interest rate lock commitments	​	​	​	​	​	​	​
Balance, beginning of period	​	$	(107)	​	$	(176)	​
Gain (loss) recognized	​		(1,067)	​		88	​
Balance, end of period	​	$	(1,174)	​	$	(88)	​

​

​

42

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements Using

​

​

​

​

​

Quoted Prices in

​

Significant

​

Significant

​

​

​

​

​

Active Markets for

​

Other Observable

​

Unobservable

​

​

Fair

​

Identical Assets

​

Inputs

​

Inputs

Assets

​

Value

​

(Level 1)

​

(Level 2)

​

(Level 3)

​

​

(In thousands)

March 31, 2026

​

​

​

​

​

​

​

​

Collateral dependent loans

​

$

45,278

​

$

—

​

$

—

​

$

45,278

Other real estate owned

​

​

81

​

​

—

​

​

—

​

​

81

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

​

​

​

​

​

Collateral dependent loans

​

$

143,771

​

$

—

​

$

—

​

$

143,771

Other real estate owned

​

​

60,145

​

​

—

​

​

—

​

​

60,145

​

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized on the accompanying unaudited condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral Dependent Loans, Net of ACL-Loans

The estimated fair value of collateral dependent loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral dependent loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be classified as substandard, collateral-dependent and subsequently as deemed necessary by the CCO’s office. Appraisals and evaluations are reviewed for accuracy and consistency by the CCO’s office. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the CCO’s office by comparison to historical results.

Other Real Estate Owned

The estimated fair value of other real estate owned is usually based on the appraised fair value of the collateral or in certain circumstances on sales agreements, and in all cases net of estimated cost to sell. Other real estate owned is classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying other real estate owned are obtained when the loan is in the process of foreclosure and subsequently as deemed necessary by the CCO’s office. Appraisals and evaluations are reviewed for accuracy and consistency by the CCO’s office. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated costs to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the CCO’s office by comparison to historical results.

43

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Unobservable (Level 3) Inputs:

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill.

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Valuation	​	​	​	​	​	Weighted
​	​ ​ ​	Fair Value		​ ​ ​	Technique	​ ​ ​	Unobservable Inputs	​	Range	​ ​ ​	Average Rate
​	​	(In thousands)
At March 31, 2026:		​	​		​	​	​	​	​		​
Collateral dependent loans	​	$	45,278		Market comparable properties		Marketability discount and costs to sell	​	5% - 93%		44%
Other real estate owned	​	​	81	​	Market comparable properties	​	Marketability discount and costs to sell	​	15%	​	15%
Servicing rights - Multi-family	​	​	173,922		Discounted cash flow		Discount rate	​	8% - 15%		9%
​	​	​	​	​	​	​	Constant prepayment rate	​	0% - 100%		8%
​	​	​	​	​	​	​	Earnings rate on escrows	​	4%	​	4%
Servicing rights - Single-family	​	​	34,393		Discounted cash flow		Discount rate	​	9% - 12%	​	9%
​	​	​	​	​	​	​	Constant prepayment rate	​	3% - 100%	​	8%
Servicing rights - Healthcare	​	​	15,899		Discounted cash flow		Discount rate	​	10% - 13%		11%
​	​	​	​	​	​	​	Constant prepayment rate	​	1% - 100%		6%
​	​	​	​	​	​	​	Earnings rate on escrows	​	4%	​	4%
Servicing rights - SBA	​	​	5,362		Discounted cash flow		Discount rate	​	16%		16%
​	​	​	​	​	​	​	Constant prepayment rate	​	11% - 33%	​	14%
Derivative assets:	​	​	​	​	​	​	​	​	​	​	​
Interest rate lock commitments	​	​	142		Discounted cash flow		Loan closing rates	​	51% - 99%		84%
Put options	​	​	38,877	​	Intrinsic value	​	Market credit spread	​	4%	​	4%
Interest rate floors	​	​	12,236	​	Discounted cash flow	​	Discount rate	​	5% - 7%	​	7%
Derivative liabilities:	​	​	​	​	​	​	​	​	​	​	​
Interest rate lock commitments	​	​	1,174		Discounted cash flow		Loan closing rates	​	51% - 99%		84%
Credit default swaps	​	​	69	​	Discounted cash flow		Corporate default rate	​	0% - 7%	​	4%
​	​	​	​	​	​	​	Market credit spread	​	13%	​	13%
​	​	​	​	​	​	​	​	​	​	​	​
At December 31, 2025:	​		​		​	​	​	​	​		​
Collateral dependent loans	​	$	143,771		Market comparable properties		Marketability discount and costs to sell	​	12% - 70%		31%
Other real estate owned	​	​	60,145	​	Market comparable properties	​	Marketability discount and costs to sell	​	6% - 9%	​	9%
Servicing rights - Multi-family	​	​	164,224		Discounted cash flow		Discount rate	​	8% - 15%		9%
​	​	​	​	​	​	​	Constant prepayment rate	​	0% - 100%		8%
​	​	​	​	​	​	​	Earnings rate on escrows	​	3%	​	3%
Servicing rights - Single-family	​	​	33,151		Discounted cash flow		Discount rate	​	9% - 12%	​	9%
​	​	​	​	​	​	​	Constant prepayment rate	​	3% - 53%	​	9%
Servicing rights - Healthcare	​	​	15,105		Discounted cash flow		Discount rate	​	8% - 13%		11%
​	​	​	​	​	​	​	Constant prepayment rate	​	1% - 100%		7%
​	​	​	​	​	​	​	Earnings rate on escrows	​	3%	​	3%
Servicing rights - SBA	​	​	4,816		Discounted cash flow		Discount rate	​	16%	​	16%
​	​	​	​	​	​	​	Constant prepayment rate	​	10% - 31%	​	16%
Derivative assets:	​	​	​	​	​	​	​	​	​	​	​
Interest rate lock commitments	​	​	227		Discounted cash flow		Loan closing rates	​	45% - 99%		99%
Put options	​	​	31,930	​	Intrinsic value	​	Market credit spread	​	4%	​	4%
Interest rate floors	​	​	9,540	​	Discounted cash flow	​	Discount rate	​	5% - 7%	​	6%
Derivative liabilities - interest rate lock commitments	​	​	107		Discounted cash flow		Loan closing rates	​	45% - 99%		99%

​

Sensitivity of Significant Unobservable Inputs

The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement, and of how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

​

44

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Collateral Dependent Loans and Other Real Estate Owned

The significant unobservable inputs used in the fair value measurement of the Company’s collateral dependent loans and other real estate owned is based on liquidation amounts of the underlying collateral using the most recently available appraisals with adjustments made for a marketability discount and costs to sell.

Servicing Rights

The significant unobservable inputs used in the fair value measurement of the Company’s servicing rights are discount rates and constant prepayment rates. These two inputs can drive a significant amount of a market participant’s valuation of servicing rights. Significant increases (decreases) in the discount rate or assumed constant prepayment rates used to value servicing rights would decrease (increase) the value derived. Additionally, the earnings rate on escrow balances can influence the fair value of servicing rights because higher (lower) expected interest income earned on custodial escrow deposits increases (decreases) the net economic benefit a market participant would attribute to the servicing asset.

Derivative Financial Instruments

The significant unobservable input used in the fair value measurement of certain put options include market credit spreads that can be impacted by market conditions and drive a significant amount of a market participant’s valuation of the put option and its related security. The impact of changes to the unobservable inputs for the put option is mitigated by changes to the observable inputs for the related security, which are valued in opposite directions, so as to minimize the financial impact to the Company.

The significant unobservable input used in the fair value measurement of interest rate floor derivatives associated with certain securities available for sale and loans include the discount rate that can have a significant impact on the value of the derivative. Another variable that affects the floor value is the forward interest curve, which is observable, but changes with market conditions as interest rates and future interest rate expectations change.

For interest rate lock commitments, the loan closing rate represents a significant unobservable input, as higher (lower) expected pull-through or closing probabilities increase (decrease) the likelihood that the commitment will convert into a funded loan, thereby impacting the fair value attributed to the derivative.

The significant unobservable inputs used in the fair value measurement of the Company’s credit default swaps primarily include corporate default rate assumptions and market credit spreads. Increases (decreases) in assumptions for corporate default rates indicate higher (lower) expected credit risk and result in increases (decreases) in the fair value of credit default swaps. Increases (decreases) in market credit spreads result in corresponding increases (decreases) in the fair value of credit default swaps. Due to the lack of observable market inputs, changes in these unobservable inputs can have a significant impact on the estimated fair value of credit default swaps.

45

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Fair Value of Financial Instruments

The following table presents the carrying amount and estimated fair values of the Company’s financial instruments not carried at fair value and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements Using

​

​

​

​

​

​

​

​

Quoted Prices in

​

Significant

​

​

​

​

​

​

​

​

​

​

Active Markets

​

Other

​

Significant

​

​

​

​

​

​

​

​

for Identical

​

Observable

​

Unobservable

​

​

Carrying

​

Fair

​

Assets

​

Inputs

​

Inputs

​

​ ​ ​

Value

​ ​ ​

Value

​ ​ ​

(Level 1)

​ ​ ​

(Level 2)

​ ​ ​

(Level 3)

​

​

(In thousands)

March 31, 2026

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Financial assets:

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

83,215

​

$

83,215

​

$

83,215

​

$

—

​

$

—

Securities purchased under agreements to resell

​

1,511

​

1,511

​

—

​

1,511

​

—

Securities held to maturity

​

1,425,982

​

1,426,444

​

—

​

676,189

​

750,255

FHLB stock and other equity securities

​

227,589

​

227,589

​

—

​

196,391

​

31,198

Loans held for sale

​

4,546,262

​

4,546,262

​

—

​

4,546,262

​

—

Loans receivable, net

​

11,399,882

​

11,410,486

​

—

​

—

​

11,410,486

Interest receivable

​

77,326

​

77,326

​

—

​

77,326

​

—

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

Deposits

​

12,951,753

​

12,951,958

​

11,825,797

​

1,126,161

​

—

Subordinated debt

​

71,800

​

71,800

​

—

​

71,800

​

—

FHLB advances

​

4,358,756

​

4,358,387

​

—

​

4,358,387

​

—

Other borrowing

​

​

342,934

​

​

342,934

​

​

—

​

​

342,934

​

​

—

Interest payable

​

24,516

​

24,516

​

—

​

24,516

​

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​

​

​

​

​

​

​

​

Financial assets:

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

212,202

​

$

212,202

​

$

212,202

​

$

—

​

$

—

Securities purchased under agreements to resell

​

1,520

​

1,520

​

—

​

1,520

​

—

Securities held to maturity

​

​

1,543,659

​

​

1,543,554

​

—

​

712,490

​

831,064

FHLB stock and other equity securities

​

227,589

​

227,589

​

—

​

196,391

​

31,198

Loans held for sale

​

3,796,032

​

3,796,032

​

—

​

3,796,032

​

—

Loans receivable, net

​

10,904,063

​

10,950,634

​

—

​

—

​

10,950,634

Interest receivable

​

81,807

​

81,807

​

—

​

81,807

​

—

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

Deposits

​

13,041,192

​

13,041,901

​

11,179,428

​

1,862,473

​

—

Subordinated debt

​

71,800

​

71,800

​

—

​

71,800

​

—

FHLB advances

​

3,762,858

​

3,762,110

​

—

​

3,762,110

​

—

Other borrowing

​

​

7,934

​

​

7,934

​

​

—

​

​

7,934

​

​

—

Interest payable

​

25,345

​

25,345

​

—

​

25,345

​

—

​

​

​

46

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Note 13:   Common Stock

Repurchase of Common Stock:

During the three months ended March 31, 2026, the Company repurchased 73,164 shares for $3.0 million at an average price of $41.03 per share of common stock. The Company did not repurchase any common stock during the three months ended March 31, 2025. The following table presents our repurchase activity on a cash basis.

​

​	​	​	​
​	​	​	Three Months Ended
​	​	​	March 31,
​	​	​	2026
Dollar value of shares repurchased	​	$	3,001,622
Shares repurchased(1)	​	​	73,164
Average price paid per share	​	$	41.03

​

(1) On January 28, 2026, the Company announced a stock repurchase program, up to $100,000,000 of common stock, expiring December 31, 2027. On February 26, 2026, the Company entered into a Rule 10b5-1 plan (the “10b5-1 Plan”) with a broker for the repurchase of shares of its common stock commencing on March 3, 2026.

​

​

​

​

Note 14:   Preferred Stock

Public Offerings of Preferred Stock:

Series B Preferred Stock – On August 19, 2019, the Company issued 5,000,000 depositary shares, each representing a 1/40th interest in a share of its 6.00% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $125.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $4.2 million paid to third parties, the Company received total net proceeds of $120.8 million.

The Company redeemed all outstanding shares of the Series B Preferred Stock on January 2, 2025, at a price equal to the liquidation preference of $1,000 per share (equivalent to $25 per depositary share), or $125.0 million. The cash to redeem the shares was delivered to the Company’s transfer agent on December 31, 2024, resulting in a prepaid asset reported in other assets that was reversed upon redemption. As of the redemption date, the Series B Preferred Stock did not have any accrued, but unpaid dividends. The $4.2 million of expenses associated with the original issuance, which were capitalized in 2019, were recognized through retained earnings upon redemption, thus reducing net income available to common shareholders.

Series C Preferred Stock – On March 23, 2021, the Company issued 6,000,000 depositary shares, each representing a 1/40th interest in a share of its 6.00% Fixed Rate Series C Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $150.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $5.1 million paid to third parties, the Company received total net proceeds of $144.9 million.

On May 6, 2021 the Company completed a private offering of 46,181 shares (1,847,233 depositary shares), which were also issued at a price of $25 per depositary share. The total capital raised from the private offering was $46.2 million, net of $23,000 in expenses.

The Series C Preferred Stock has no voting rights with respect to matters that generally require the approval of common shareholders. Dividends on the Series C Preferred Stock, to the extent declared by the Board, are payable

47

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

quarterly. The Company may redeem the Series C Preferred Stock, in whole or in part, at its option, on any dividend payment date on or after April 1, 2026, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption.

Series D Preferred Stock – On September 27, 2022, the Company issued 5,200,000 depositary shares, each representing a 1/40th interest in a share of its 8.25% Fixed Rate Reset Series D Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $130.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $4.6 million paid to third parties, the Company received total net proceeds of $125.4 million. On September 30, 2022, the Company issued an additional 500,000 depositary shares of Series D Preferred Stock to the underwriters related to their exercise of an option to purchase additional shares under the associated underwriting agreement, resulting in an additional $12.1 million in net proceeds, after deducting $0.4 million in underwriting discounts.

The Series D Preferred Stock has no voting rights with respect to matters that generally require the approval of common shareholders. Dividends on the Series D Preferred Stock, to the extent declared by the Board, are payable quarterly. The Company may redeem the Series D Preferred Stock, in whole or in part, at its option, on any dividend payment date on or after October 1, 2027, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption.

Series E Preferred Stock – On November 25, 2024, the Company issued 9,200,000 depositary shares, each representing a 1/40th interest in a share of its 7.625% Fixed Rate Series E Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $230.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $7.3 million paid to third parties, the Company received total net proceeds of $222.7 million.

The Series E Preferred Stock has no voting rights with respect to matters that generally require the approval of common shareholders. Dividends on the Series E Preferred Stock, to the extent declared by the Board, are payable quarterly. The Company may redeem the Series E Preferred Stock, in whole or in part, at its option, on any dividend payment date on or after January 1, 2030, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption.

Note 15:   Share-Based Payment Plans

Equity-based incentive awards for Company officers are currently issued pursuant to the 2017 Equity Incentive Plan. The Company issued 68,893 and 80,875 shares during the three months ended March 31, 2026 and 2025, respectively.

The Compensation Committee of the Board of Directors also approved a plan for non-executive directors to receive a portion of their annual retainer fees in the form of shares of common stock. They are to receive a portion of their annual fees, issued quarterly, in the form of restricted common stock equal to $70,000 per member, rounded up to the nearest whole share. Accordingly, there were 2,639 and 2,863 shares, issued to non-executive directors during the three months ended March 31, 2026 and 2025, respectively.

48

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The Company also established an ESOP to provide shares of stock for all employees who meet certain requirements. Expense recognized for the contribution to the ESOP totaled $414,000 and $337,000 for the three months ended March 31, 2026 and 2025, respectively. The Company contributed 43,868 shares and 30,802 shares to the ESOP for the three months ended March 31, 2026 and 2025, respectively.

Note 16:   Earnings Per Share

Earnings per share were computed as follows for the three months ended March 31, 2026 and 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended March 31,

​

​

2026

​

2025

​

​

​

​

​

Weighted-

​

Per

​

​

​

​

Weighted-

​

Per

​

​

Net

​

Average

​

Share

​

Net

​

Average

​

Share

​

​ ​ ​

Income

​ ​ ​

Shares

​ ​ ​

Amount

​ ​ ​

Income

​ ​ ​

Shares

​ ​ ​

Amount

​

​

(In thousands, except share data)

Net income

​

$

67,732

​

​

​

​

$

58,239

​

​

​

Dividends on preferred stock

​

​

(10,265)

​

​

​

​

​

​

​

(10,265)

​

​

​

​

​

Impact of preferred stock redemption

​

—

​

​

​

​

(5,371)

​

​

​

Net income allocated to common shareholders

​

$

57,467

​

​

​

​

$

42,603

​

​

​

Basic earnings per share

​

​

45,929,936

​

$

1.25

​

​

45,824,022

​

$

0.93

Effect of dilutive securities-restricted stock awards

​

​

67,808

​

​

​

​

90,061

​

​

Diluted earnings per share

​

​

45,997,744

​

$

1.25

​

​

45,914,083

​

$

0.93

​

​

Note 17:   Segment Information

The Company’s three reportable business segments are defined as Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The reportable business segments are consistent with the internal reporting and evaluation of the principal lines of business of the Company. The Multi-family Mortgage Banking segment originates and services government sponsored mortgages for multi-family and healthcare facilities. It is also a fully integrated syndicator of low-income housing tax credit and debt funds. The Mortgage Warehousing segment funds agency eligible residential loans from the date of origination or purchase, until the date of sale in the secondary market, as well as commercial loans to non-depository financial institutions. The Banking segment provides a wide range of financial products and services to consumers and businesses, including retail banking, commercial, jumbo, and agricultural lending, retail and correspondent residential mortgage banking, and SBA lending. The Other segment includes general and administrative expenses that provide services to all segments; internal funds transfer pricing offsets resulting from allocations to/from the other segments, certain elimination entries and investments in qualified affordable housing limited partnerships or LLCs and certain debt funds. All operations are domestic.

Transactions between segments consist primarily of borrowed funds and overhead expense sharing. Intersegment interest expense is allocated to the Mortgage Warehousing and Banking segments based on Merchants Bank’s cost of funds. The provision for credit losses is allocated based on information included in our ACL-Loans analysis and specific loan data for each segment.

The Company’s segments diversify the net income of Merchants Bank and provide synergies across the segments. Strategic opportunities come from MCC and MCS, where loans are funded by the Banking segment and the Banking segment provides Ginnie Mae custodial services to MCC and MCS. Low-income tax credit syndication and debt fund offerings complement the lending activities of new and existing multi-family mortgage customers. The securities available for sale and held to maturity funded by MCC custodial deposits or purchases of securitized loans originated by MCC are pledged to the FHLB to provide borrowing capacity during periods of high residential loan volume for Mortgage Warehousing. Mortgage Warehousing provides leads to Correspondent Lending in the Banking segment. Retail and commercial customers provide cross selling opportunities within the Banking segment. Merchants Mortgage is a risk mitigant to Mortgage Warehousing because it provides the Company with a ready platform to sell or

49

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

refinance the underlying collateral to secure repayment. These and other synergies form a part of the Company’s strategic plan.

The reportable business segments are strategic business units that offer distinct, but complimentary, products and services. Due to the specialized nature of each segment and different resource requirements, they are managed separately. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. See Note 1: Basis of Presentation.

The Company’s CODM is the president and chief operating officer. The CODM evaluates performance for all reportable segments based on net interest income, noninterest income, noninterest expense, salary and employee benefits, and net income (loss). The CODM uses the above-mentioned metrics, along with total assets, in deciding how to allocate capital as well as human and financial resources among the segments. Major decisions are also made with input from segment leadership, the Board, and various management committees, as appropriate.

The tables below present selected business segment financial information for the three months ended March 31, 2026 and 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Multi-family

​

​

​

​

​

​

​

​

​

​

​ ​ ​

​

​

Mortgage

​

Mortgage

​

​

​

​

​

​

​

​

​

​ ​ ​

Banking

​ ​ ​

Warehousing

​ ​ ​

Banking

​ ​ ​

Other

​ ​ ​

Total

​

​

(In thousands)

Three Months Ended March 31, 2026

​

​

Interest income

​

$

1,062

​

$

100,646

​

$

165,158

​

$

3,645

$

270,511

Interest expense

​

20

​

62,079

​

80,526

​

(762)

141,863

Net interest income

​

1,042

​

38,567

​

84,632

​

4,407

128,648

Provision for credit losses

​

(7)

​

(707)

​

16,013

​

—

15,299

Net interest income after provision for credit losses

​

1,049

​

39,274

​

68,619

​

4,407

113,349

Noninterest income

​

39,089

​

4,321

​

6,282

​

(3,093)

46,599

Noninterest expense

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Salaries and employee benefits

​

20,976

​

1,968

​

​

6,753

​

8,868

38,565

Other noninterest expense

​

4,652

​

5,918

​

20,996

​

5,511

37,077

Total noninterest expense

​

25,628

​

7,886

​

27,749

​

14,379

75,642

Income (loss) before income taxes

​

14,510

​

35,709

​

47,152

​

(13,065)

84,306

Income taxes

​

3,496

​

7,061

​

9,172

​

(3,155)

16,574

Net income (loss)

​

$

11,014

​

$

28,648

​

$

37,980

​

$

(9,910)

$

67,732

Total assets

​

$

522,976

​

$

8,544,107

​

$

10,850,657

​

$

404,042

$

20,321,782

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Significant non-cash items:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Included in other noninterest income:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Servicing rights fair value adjustments

​

$

7,379

​

$

—

​

$

1,559

​

$

—

$

8,938

Derivative fair value adjustments

​

​

—

​

​

2,696

​

​

—

​

​

—

​

​

2,696

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Multi-family

​

​

​

​

​

​

​

​

​

​

​

​

​

Mortgage

​

Mortgage

​

​

​

​

​

​

​

​

​

​ ​ ​

Banking

​ ​ ​

Warehousing

​ ​ ​

Banking

​ ​ ​

Other

​ ​ ​

Total

​

​

(In thousands)

Three Months Ended March 31, 2025

​

​

Interest income

​

$

1,180

​

$

86,117

​

$

196,044

​

$

3,863

$

287,204

Interest expense

​

20

​

57,669

​

108,107

​

(788)

165,008

Net interest income

​

1,160

​

28,448

​

87,937

​

4,651

122,196

Provision for credit losses

​

(48)

​

(426)

​

8,201

​

—

7,727

Net interest income after provision for credit losses

​

1,208

​

28,874

​

79,736

​

4,651

114,469

Noninterest income

​

28,896

​

(740)

​

(1,067)

​

(3,396)

23,693

Noninterest expense

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Salaries and employee benefits

​

20,928

​

1,977

​

6,479

​

7,035

36,419

Other noninterest expense

​

3,632

​

6,044

​

10,831

​

4,738

25,245

Total noninterest expense

​

24,560

​

8,021

​

17,310

​

11,773

61,664

Income (loss) before income taxes

​

5,544

​

20,113

​

61,359

​

(10,518)

76,498

Income taxes

​

2,131

​

4,715

​

14,252

​

(2,839)

18,259

Net income (loss)

​

$

3,413

​

$

15,398

​

$

47,107

​

$

(7,679)

$

58,239

Total assets

​

$

460,441

​

$

5,902,165

​

$

12,002,564

​

$

432,630

$

18,797,800

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Significant non-cash items:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Included in other noninterest income:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Servicing rights fair value adjustments

​

$

449

​

$

—

​

$

(1,203)

​

$

—

$

(754)

Derivative fair value adjustments

​

​

—

​

​

(2,258)

​

​

—

​

​

—

​

​

(2,258)

​

​

​

Note 18:   Regulatory Matters

The Company and Merchants Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by federal and state banking regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Merchants Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Merchants Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Merchants Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, and other factors. Furthermore, the Company’s and Merchants Bank’s regulators could require adjustments to regulatory capital not reflected in these unaudited condensed consolidated financial statements.

​

Quantitative measures established by regulation to ensure capital adequacy require the Company and Merchants Bank to maintain minimum amounts and ratios (set forth in the table below). Management believes that, as of March 31, 2026 and December 31, 2025, the Company and Merchants Bank met all capital adequacy requirements.

As of March 31, 2026 and December 31, 2025, the most recent notifications from the Federal Reserve categorized the Company as well capitalized and most recent notifications from the FDIC categorized Merchants Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Company’s or Merchants Bank’s category.

​

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

The Company’s and Merchants Bank’s actual capital amounts and ratios are presented in the following tables.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

​

​

​

​

​

​

​

​

Amount to be Well

​

Minimum Amount

​

​

​

​

​

​

​

​

Capitalized with

​

To Be Well

​

​

​

Actual

​

Basel III Buffer(1)

​

Capitalized(1)

​

​

​ ​ ​

Amount

​ ​ ​

Ratio

​ ​ ​

Amount

​ ​ ​

Ratio

​

Amount

​ ​ ​

Ratio

​ ​ ​

​

​

(Dollars in thousands)

​

March 31, 2026

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

Company

​

$

2,408,656

12.8

%

$

1,980,993

10.5

%

$

—

N/A

%

Merchants Bank

​

​

2,335,139

12.4

%

1,979,758

10.5

%

1,885,483

10.0

%

Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,322,134

12.3

%

1,603,661

8.5

%

—

N/A

%

Merchants Bank

​

​

2,248,617

11.9

%

1,602,661

8.5

%

1,508,387

8.0

%

Common Equity Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

1,770,844

9.4

%

1,320,662

7.0

%

—

N/A

%

Merchants Bank

​

​

2,248,617

11.9

%

1,319,838

7.0

%

1,225,564

6.5

%

Tier I capital(1) (to average assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,322,134

12.3

%

947,199

5.0

%

—

N/A

%

Merchants Bank

​

​

2,248,617

11.9

%

944,081

5.0

%

944,081

5.0

%

(1) As defined by regulatory agencies.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

​

​

​

​

​

​

​

​

Amount to be Well

​

Minimum Amount

​

​

​

​

​

​

​

​

Capitalized with

​

To Be Well

​

​

​

Actual

​

Basel III Buffer(1)

​

Capitalized(1)

​

​

​ ​ ​

Amount

​ ​ ​

Ratio

​ ​ ​

Amount

​ ​ ​

Ratio

​

Amount

​

Ratio

​

​

​

(Dollars in thousands)

​

December 31, 2025

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

Company

​

$

2,365,600

13.6

%

$

1,822,759

10.5

%

$

—

N/A

%

Merchants Bank

​

​

2,320,227

13.4

%

1,821,535

10.5

%

1,734,795

10.0

%

Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,272,014

13.1

%

1,475,567

8.5

%

—

N/A

%

Merchants Bank

​

​

2,226,641

12.8

%

1,474,576

8.5

%

1,387,836

8.0

%

Common Equity Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

1,720,724

9.9

%

1,215,172

7.0

%

—

N/A

%

Merchants Bank

​

​

2,226,641

12.8

%

1,214,357

7.0

%

1,127,617

6.5

%

Tier I capital(1) (to average assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,272,014

11.5

%

990,358

5.0

%

—

N/A

%

Merchants Bank

​

​

2,226,641

11.3

%

987,284

5.0

%

987,284

5.0

%

​

(1) As defined by regulatory agencies.

Memorandum of Understanding

On June 30, 2025, Merchants Bank entered into a confidential MOU with the FDIC and IDFI. While the contents of the MOU were confidential under IDFI and FDIC regulations, certain provisions, with the authorization of the IDFI and FDIC, are summarized below. The MOU was an informal administrative agreement among Merchants

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Bank, FDIC, and IDFI pursuant to which Merchants Bank agreed to take various actions and enhance specific areas of Merchants Bank’s operations. In particular, Merchants Bank agreed to maintain certain capital thresholds, manage asset concentrations, and implement certain plans regarding Merchants Bank’s operations and strategy to mitigate risk of certain assets, which it implemented. As of December 31, 2025, and as of each of the reporting periods beginning on or after December 31, 2024, Merchants Bank’s capital exceeded the levels agreed to in its MOU and Merchants Bank was within the asset concentration limits agreed to in the MOU.

​

Additionally, under its MOU, if Merchants Bank’s capital ratios fell below the minimums agreed to, Merchants Bank was not permitted to pay dividends without the FDIC and IDFI’s prior consent.

​

During the three months ended March 31, 2026, the MOU was terminated, following progress made by management in addressing the MOU provisions.

​

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

Forward-Looking Statements

Certain statements in this Form 10-Q, including, but not limited to, statements within Management’s Discussion and Analysis of Financial Condition and Results of Operations, are “forward-looking statements” within the meaning of the rules and regulations of the SEC. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized,” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2025 or “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q or the following:

● business and economic conditions, particularly those affecting the financial services industry and our primary market areas;

● our ability to successfully manage our credit risk and the sufficiency of our allowance for loan loss;

● factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;

● liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary;

● compliance with governmental and regulatory requirements, relating to banking, consumer protection, securities, and tax matters;

● our ability to maintain licenses required in connection with residential and multi-family mortgage origination, sale, and servicing operations;

● our ability to identify and address cyber-security risks, fraud, and systems errors;

● our ability to effectively execute our strategic plan and manage our growth;

● changes in our senior management team and our ability to attract, motivate, and retain qualified personnel;

● governmental monetary and fiscal policies, and changes in market interest rates;

● effects of competition from a wide variety of local, regional, national, and other providers of financial, investment and insurance services;

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

● the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; and

● changes in federal tax law or policy.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Form 10-Q. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise.

​

​

​

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Merchants Bancorp

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of the financial condition at March 31, 2026 and results of operations for the three months ended March 31, 2026 and 2025, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto, appearing in Part I, Item 1 of this Form 10-Q.

The words “the Company,” “we,” “our,” and “us” refer to Merchants Bancorp and its consolidated subsidiaries, unless we indicate otherwise.

​

Financial Highlights for the Three Months Ended March 31, 2026

​

● Net income of $67.7 million increased $9.5 million compared to the three months ended March 31, 2025.

● Diluted earnings per share of $1.25 increased 34% compared to the three months ended March 31, 2025.

● Total assets of $20.3 billion reflected the highest level ever reported by the Company, increasing 8% compared to March 31, 2025, and 4% from December 31, 2025.

● Tangible book value per common share of $38.55 increased 10% compared to $34.90 for the three months ended March 31, 2025. See Non-GAAP Financial Measures section at the end of Item 2.

● Liquidity remained strong, with $11.1 billion, or 55% of total assets, comprising of unused borrowing capacity of $3.9 billion through the Federal Home Loan Bank and the Federal Reserve Discount Window, as well as cash and cash equivalents, short-term investments (including interest-earning demand deposits), mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit included in loans receivable.

● Loans receivable, net of allowance for credit losses, totaled $11.4 billion, increasing $1.1 billion, or 10%, from March 31, 2025, and $448.5 million, or 4%, from December 31, 2025.

● Asset quality continued to stabilize, as criticized loans receivable of $505.5 million decreased by 1% from December 31, 2025.

● Core deposits of $12.1 billion reflected increases of $1.4 billion, or 13%, from March 31, 2025 and $781.4 million, or 7%, from December 31, 2025. Core deposits now represent 93% of total deposits, reaching the highest level the Company has reported since March 2022.

● Brokered deposits of $886.5 million decreased $831.9 million, or 48%, compared to March 31, 2025 and $870.8 million, or 50%, compared to December 31, 2025.

● As of March 31, 2026, approximately 97% of loans reprice within three months, which reduces the risk of market rate increases.

● Net interest margin was 2.92% compared to 2.89% for the three months ended March 31, 2025.

● Efficiency ratio was 43.16% compared to 42.27% for the three months ended March 31, 2025. See Non-GAAP Financial Measures section at the end of Item 2.

● The Company repurchased 73,164 shares of common stock for $3.0 million, pursuant to its previously authorized share repurchase program.

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● The volume of warehouse loans funded during the three months ended March 31, 2026 amounted to $19.6 billion, an increase of $7.7 billion, or 65% compared to the three months ended March 31, 2025. This compared to the 43% industry-wide increase in single-family residential loan volumes for the three months ended March 31, 2026 compared to the same period in 2025, according to an estimate of industry volume by the Mortgage Bankers Association.

● The total volume of loans originated and acquired through our Multi-family business was $1.2 billion, an increase of $245.3 million, or 26%, compared to $934.4 million for the three months ended March 31, 2025. It included construction loans coupled with agreements for future permanent loan refinancing, as well as bridge loans housed in our Banking segment, while borrowers awaited conversion to permanent financing. It also included loans originated and acquired for sale in the secondary market.

● During the quarter, the Company was released from its mid-2025 Memorandum of Understanding with the FDIC, following progress made by management in addressing the MOU provisions.

Business Overview

​

We are a diversified bank holding company headquartered in Carmel, Indiana and registered under the Bank Holding Company Act of 1956, as amended. We currently operate in multiple business segments, including Multi-family Mortgage Banking that offers multi-family housing and healthcare facility financing and servicing, as well as syndicated low-income housing tax credit and debt funds; Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers portfolio lending for multi-family and healthcare facility loans, retail and correspondent residential mortgage banking, jumbo lending, agricultural lending, SBA lending, and traditional community banking.

​

Our business consists of funding low risk, multi-family, residential, and SBA loans meeting underwriting standards of government programs under an originate to sell model, and retaining adjustable-rate loans as held for investment to reduce interest rate risk. The gain on sale of these loans and servicing fees contribute to noninterest income. The funding source is primarily from mortgage custodial, retail, commercial, brokered deposits, and short-term borrowings. We believe that the combination of net interest income and noninterest income from the sale of low risk profile assets has traditionally resulted in lower than industry charge-offs and a lower expense base, which serves to maximize net income and higher than industry shareholder return.

​

Critical Accounting Policies and Estimates

The preparation of our unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the current circumstances. These estimates and assumptions form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The estimates and judgments that management believes have the most effect on its reported financial position and results of operations are set forth within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no significant changes in critical accounting policies or the assumptions and judgments utilized in applying these policies since those reported for the year ended December 31, 2025.

Financial Condition

As of March 31, 2026, we had approximately $20.3 billion in total assets, $13.0 billion in deposits, and $2.3 billion in total shareholders’ equity. Total assets as of March 31, 2026 included $11.4 billion of loans receivable, net of

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ACL-Loans and $4.7 billion of loans held for sale. Assets also included $1.4 billion in securities held to maturity and $843.9 million in securities available for sale, the majority of which were acquired from a warehouse customer. There are some restrictions on the types of securities we hold, particularly for those that are funded by certain multi-family custodial deposits where we set the cost of deposits based on the yield of the related security. Additionally, we had $437.0 million of mortgage loans in process of securitization that represent pre-sold multi-family rental real estate loan originations in primarily Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities pending settlements that typically occur within 30 days, as well as other assets of $744.2 million, which primarily related to low-income housing tax credits, and $83.2 million of cash and cash equivalents. Servicing rights at March 31, 2026 were $229.6 million based on the fair value of the loan servicing, which primarily includes Ginnie Mae multi-family servicing rights with 10-year call protection.

Comparison of Financial Condition at March 31, 2026 and December 31, 2025

Total Assets. Total assets of $20.3 billion at March 31, 2026 increased $872.8 million, or 4%, compared to $19.4 billion at December 31, 2025. The increase was due primarily to growth in loans and loans held for sale, specifically in the warehouse and multi-family loan portfolios, which were partially offset by lower balances in the healthcare loan portfolio. Warehouse loans, including loans held for sale and loans receivable, are exclusively made up of loans to residential and multi-family mortgage bankers that are funding agency-eligible mortgages and commercial loans, which represent all of the Company’s loans to non-depository institutions.

Cash and Cash Equivalents. Cash and cash equivalents of $83.2 million at March 31, 2026 decreased $129.0 million, or 61%, compared to $212.2 million at December 31, 2025. The decrease was primarily attributable to growth in the loan portfolio.

Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $437.0 million at March 31, 2026 decreased $183.1 million, or 30%, compared to $620.1 million at December 31, 2025. These represent loans that our banking subsidiary, Merchants Bank, has funded and are held in the loan portfolio pending settlement, as primarily Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities with a firm investor commitment to purchase the securities.

Securities Available for Sale. Securities available for sale of $843.9 million at March 31, 2026 decreased $21.2 million, or 2%, compared to $865.1 million at December 31, 2025. The decrease in securities available for sale was primarily due to $225.5 million in calls, maturities, repayments, sales and other adjustments, partially offset by purchases of $204.3 million during the period.

Included in securities available for sale were $550.2 million and $571.3 million of investments for which a fair value option was elected at March 31, 2026 and December 31, 2025, respectively. Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the unaudited condensed consolidated balance sheets with changes in the fair value recognized in earnings as they occur. 

As of March 31, 2026, AOCL of $0.8 million, related to securities available for sale increased $771,000 from December 31, 2025. The $0.8 million of AOCL as of March 31, 2026 represented less than 0.001% of total equity and total securities available for sale, reflecting our interest rate risk policy of maintaining short duration on assets and liabilities.

Securities Held to Maturity. Securities held to maturity of $1.4 billion at March 31, 2026 decreased $117.7 million, or 8%, compared to $1.5 billion at December 31, 2025. The decrease was due to repayments and amortization of securities totaling $117.7 million during the period.

Loans Held for Sale. Loans held for sale of $4.7 billion at March 31, 2026 increased $836.7 million, or 22%, compared to $3.9 billion at December 31, 2025. The increase in loans held for sale was due primarily to a significant increase in single-family warehouse participations, as we experienced higher volume. Loans held for sale are comprised

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Merchants Bancorp

primarily of single-family residential real estate loan participations that meet Fannie Mae, Freddie Mac, or Ginnie Mae eligibility. Loans held for sale also includes single-family, SBA, and multi-family loans that are expected to be sold or securitized in the future.

Loans Receivable, Net. Loans receivable, net of ACL-Loans, of $11.4 billion at March 31, 2026, increased $448.5 million compared to $11.0 billion at December 31, 2025. The increase in net loans was comprised primarily of:

● an increase of $382.1 million, or 24%, in mortgage warehouse repurchase agreements, to $2.0 billion at March 31, 2026, reflecting higher loan volume from increased sales efforts and market exits or reductions of competitors,

● an increase of $205.0 million, or 4%, in multi-family financing loans, to $5.5 billion at March 31, 2026, reflecting higher origination volume for loans generated through multi-family segment that will remain on our balance sheet until they convert to permanent financing or are otherwise paid off over an average of one to three years,

● an increase of $19.9 million, or 2%, in residential real estate loans, to $1.0 billion at March 31, 2026,

● a decrease of $124.5 million, or 9%, in healthcare financing loans, to $1.3 billion at March 31, 2026, and

● a decrease of $42.8 million, or 3%, in commercial and commercial real estate loans, to $1.6 billion at March 31, 2026.

As of March 31, 2026, approximately 97% of total loans reprice within three months, which reduces the risk of market rate fluctuations.

The Company is a nationwide lender, especially in our largest portfolios of multi-family, mortgage warehouse repurchase agreements, and healthcare financing.

The tables below provide loans receivable for multi-family and healthcare portfolios, including the five highest geographic concentrations.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

​

​ ​ ​

Multi-family

​

​

​

Healthcare

​

State

​

Amount

​

% of Total

​

​

State

​

Amount

​

% of Total

​

​

​

(In thousands)

​

​

​

​

​

(In thousands)

​

Indiana

​

$

1,598,267

​

29

%

​

Michigan

​

$

272,552

​

22

%

New York

​

781,423

​

14

%

​

Georgia

​

149,470

​

12

%

Texas

​

291,847

​

5

%

​

Ohio

​

142,097

​

11

%

California

​

​

232,837

​

4

%

​

Texas

​

​

120,876

​

10

%

Georgia

​

​

206,977

​

4

%

​

Pennsylvania

​

​

95,461

​

7

%

Other states (1)

​

2,426,360

​

44

%

​

Other states (1)

​

480,365

​

38

%

Total

​

$

5,537,711

​

100

%

​

​

​

$

1,260,821

​

100

%

(1) No state included in the “Other states” group has an individual percentage more than the next highest concentration percentage for the specific portfolio of loans.

​

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Merchants Bancorp

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025

​

​

​ ​ ​

Multi-family

​

​

​

Healthcare

​

State

​

Amount

​

% of Total

​

​

State

​

Amount

​

% of Total

​

​

​

(In thousands)

​

​

​

​

(In thousands)

​

Indiana

​

$

1,563,073

​

29

%

​

Michigan

​

$

343,872

​

25

%

New York

​

778,137

​

15

%

​

Ohio

​

205,880

​

15

%

Texas

​

286,403

​

5

%

​

Texas

​

108,626

​

8

%

California

​

​

238,116

​

4

%

​

South Carolina

​

​

102,500

​

7

%

Georgia

​

​

189,404

​

4

%

​

Pennsylvania

​

​

96,537

​

7

%

Other states (1)

​

2,277,547

​

43

%

​

Other states (1)

​

527,944

​

38

%

Total

​

$

5,332,680

​

100

%

​

​

​

$

1,385,359

​

100

%

(1) No state included in the “Other states” group has an individual percentage more than the next highest concentration percentage for the specific portfolio of loans.

ACL-Loans. The ACL-Loans of $76.8 million at March 31, 2026 decreased $6.5 million, or 8%, compared to $83.3 million at December 31, 2025. The decrease compared to December 31, 2025 was driven by $23.0 million in charge-offs that were partially offset by a $15.9 million increase in provision expense on loans. The latter was primarily associated with declines on certain multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud, and loan growth. Additionally, the changes were attributable to certain types of subordinated loans that the Company no longer offers to borrowers. Losses on underperforming loans have been largely identified and have either been included in ACL-Loans as specific reserves or charged-off. Additional details are provided in the Asset Quality portion of the Comparison of Financial Condition at March 31, 2026 and December 31, 2025 and in Note 4: Loans and Allowance for Credit Losses on Loans.

​

Goodwill. Goodwill of $8.0 million at March 31, 2026 was unchanged compared to December 31, 2025.

Servicing Rights. Servicing rights of $229.6 million at March 31, 2026 increased $12.3 million compared to $217.3 million at December 31, 2025. During the three months ended March 31, 2026, a positive fair market value adjustment of $8.9 million and originated or purchased servicing of $5.9 million were partially offset by paydowns of $2.5 million. The $8.9 million positive fair market value adjustment reflected a positive adjustment of $7.4 million for multi-family and healthcare mortgages and $1.6 million for single-family mortgages and SBA loans during the three months ended March 31, 2026.

Servicing rights are recognized in connection with sales of loans when we retain servicing of the sold loans. The servicing rights are recorded and carried at fair value based on the expected future cash flows. The fair value increase recorded during the three months ended March 31, 2026 was driven by higher escrow earnings rates in the multi-family and healthcare servicing portfolios, which increased the expected cash flows from servicing activities. Lower prepayment assumptions in the single-family and healthcare portfolios also contributed to the higher servicing values. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments.

Other Real Estate Owned. Other real estate owned of $60.2 million at March 31, 2026 increased $0.1 million compared to December 31, 2025.

Other Assets and Receivables. Other assets and receivables of $744.2 million at March 31, 2026 increased by $30.9 million, or 4%, compared to December 31, 2025. The increase was primarily due to a $22.9 million increase in income tax receivable primarily related to tax credits purchased during the period.

​

Deposits. Deposits of $13.0 billion at March 31, 2026 decreased $89.4 million, or 1%, compared to December 31, 2025. As of March 31, 2026, approximately 83% of the total deposits reprice within three months.

​

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A summary of deposits as of March 31, 2026 and December 31, 2025 is below.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2026

​

December 31, 2025

​

Change Amount

​

Change %

​

​

Amount

​

%

​

Amount

​

%

​

​

​

​

​

​

(In thousands)

Brokered deposits

​

$ 886,482

​

7%

​

$ 1,757,326

​

13%

​

($ 870,844)

​

(50)%

Core deposits

​

12,065,271

​

93%

​

11,283,866

​

87%

​

781,405

​

7%

Total

​

$ 12,951,753

​

100%

​

$ 13,041,192

​

100%

​

($ 89,439)

​

(1)%

​

Core deposits increased by $781.4 million, or 7%, to $12.1 billion at March 31, 2026 compared to $11.3 billion at December 31, 2025. Core deposits represented 93% of total deposits at March 31, 2026 compared to 87% of total deposits at December 31, 2025.

We have decreased our use of total brokered deposits by $870.8 million, or 50%, to $886.5 million at March 31, 2026, compared to $1.8 billion at December 31, 2025. Brokered deposits represented 7% of total deposits at March 31, 2026, compared to 13% of total deposits at December 31, 2025. As of March 31, 2026, brokered certificates of deposit had a weighted average remaining duration of 88 days.

Interest-bearing deposits at March 31, 2026 increased $12.8 million, to $12.4 billion compared to December 31, 2025, and noninterest-bearing deposits decreased $102.2 million, or 17%, to $501.9 million at March 31, 2026 compared to December 31, 2025.

Uninsured deposits totaled approximately $3.5 billion as of March 31, 2026, representing 27% of total deposits. Since 2018, the Company has offered its customers an opportunity to insure balances in excess of $250,000 through our insured cash sweep program that extends FDIC protection up to $100 million. The balance of deposits in this program was $1.5 billion and $1.4 billion as of March 31, 2026 and December 31, 2025, respectively.

Borrowings. Borrowings of $4.8 billion at March 31, 2026 increased $930.9 million, or 24%, compared to December 31, 2025. The higher level of collateralized borrowing was primarily due to increased borrowings at FHLB. The Company primarily utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, AFX, and Federal Funds, using the most cost-effective options available. See Note 10: Borrowings for further information.

The Company continues to have significant borrowing capacity based on available collateral. As of March 31, 2026, unused lines of credit totaled $3.9 billion, compared to $5.3 billion at December 31, 2025. The Company’s ratio of total collateralized borrowing capacity to total assets was 42% at March 31, 2026, compared to 47% as of December 31, 2025.

Other Liabilities. Other liabilities of $219.8 million at March 31, 2026 decreased $30.7 million, or 12%, compared to $250.5 million at December 31, 2025. The decrease in other liabilities was primarily in accrued expenses and unfunded commitments for low-income housing credit investments.

Total Shareholders’ Equity. Total shareholders’ equity was $2.3 billion as of March 31, 2026. The $49.5 million, or 2%, increase compared to December 31, 2025 resulted from net income of $67.7 million for the three months ended March 31, 2026. The increase was partially offset by dividends paid on common and preferred shares of $15.3 million during the period as well as repurchases of common stock totaling $2.2 million. See Note 13: Common Stock for more details on the common stock repurchases.

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Asset Quality

Loans are generally underwritten to strict Freddie Mac, Fannie Mae, HUD, or other agency guidelines. We continually strive to strengthen our various levels of credit and risk management.

The ACL-Loans of $76.8 million, as of March 31, 2026, decreased by $6.5 million, or 8%, compared to $83.3 million as of December 31, 2025. The $6.5 million decrease compared to December 31, 2025 was driven by $23.0 million in charge-offs, partially offset by $15.9 million in provision expense. The latter was primarily associated with declines on certain multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. Additionally, the changes were attributable to certain types of subordinated loans that the Company no longer offers to borrowers. These underperforming loans have been largely identified and evaluated for potential losses that have either been included in the ACL-Loans as specific reserves or charged-off.

​

During the three months ended March 31, 2026, the Company recorded charge-offs across seven relationships, primarily in the healthcare and multi-family loan portfolios totaling $23.0 million and had $616,000 of recoveries compared to $10.5 million of charge-offs and $28,000 of recoveries for the three months ended March 31, 2025. Nearly 75% of the charge-offs for the three months ended March 31, 2026 were related to two relationships.

Overall criticized loans receivable of $505.5 million declined by $2.7 million, or 1%, compared to December 31, 2025 and $226.0 million, or 31%, compared to March 31, 2025. These declines reinforce the view that the frequency of migration to criticized status would stabilize and eventually subside, driven by favorable market conditions and our efforts with proactive portfolio management.

Loans receivable classified as Special Mention totaled $234.3 million at March 31, 2026, compared to $204.9 million at December 31, 2025 and $407.9 million at March 31, 2025. Loans receivable classified as Substandard totaled $271.2 million at March 31, 2026, compared to $303.3 million at December 31, 2025 and $323.6 million at March 31, 2025.

As of March 31, 2026, all Substandard loans have been evaluated for impairment, and these loans have specific reserves of $11.7 million. The Company believes that the remaining loans are well collateralized.

Total nonperforming loans (nonaccrual and greater than 90 days late but still accruing) were $247.5 million, or 2.16% of total loans receivable, at March 31, 2026, compared to $197.8 million, or 1.79%, of total loans receivable at December 31, 2025 and $284.6 million, or 2.73%, at March 31, 2025.

Loans receivable greater than 30 days past due were $242.3 million at March 31, 2026 compared to $206.6 million at December 31, 2025 and $304.6 million at March 31, 2025. As of March 31, 2026, 11% of the delinquent loans were covered by credit default swaps.

As a percentage of nonperforming loans, the ACL-Loans was 31% at March 31, 2026 compared to 42% at December 31, 2025 and 29% at March 31, 2025. The changes in percentage was primarily due to fluctuations in nonperforming loans.

The Company continues to reduce its credit risk through loan sales and securitization activities. Since 2024, the Company has strategically executed credit protection arrangements through credit default swaps to reduce risk of losses. The coverage ranges from 13-15% of the unpaid principal balances for each arrangement. As of March 31, 2026, the unpaid principal balance of loans protected by credit default swaps was $2.5 billion, compared to $2.8 billion as of December 31, 2025. Despite having credit protection on these loans, the Company is required to carry an allowance for credit losses on loans receivable. For additional information see Note 11: Derivative Financial Instruments and the Company’s 2025 Annual Report on Form 10–K.

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Merchants Bancorp

The percentage of commercial real estate loans as a percentage of total Tier I risk-based capital, including the ACL-Loans, has declined from 324% to 309% from December 31, 2025 to March 31, 2026, respectively.

Comparison of Operating Results for the Three Months Ended March 31, 2026 and 2025

General. Net income of $67.7 million for the three months ended March 31, 2026 increased by $9.5 million, or 16%, compared with the three months ended March 31, 2025. The improvement was primarily attributable to a $22.9 million, or 97%, increase in noninterest income driven principally by higher positive fair value adjustments to mortgage servicing rights and certain derivatives. Net income also benefited from a $6.5 million, or 5%, increase in net interest income. These increases were partially offset by a $14.0 million, or 23%, increase in noninterest expense and a $7.6 million increase in the provision for credit losses.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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Merchants Bancorp

The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Yields have been calculated on a pre-tax basis. Nonaccrual loans are included in loans and loans held for sale.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended March 31,

​

​

2026

​

2025

​

​

​ ​ ​

​

​

Interest

​

​ ​ ​

​

​ ​ ​

​

​

Interest

​

​

​

​

Average

​

Income/

​

Yield/

​

Average

​

Income/

​

Yield/

​

​ ​ ​

Balance

​ ​ ​

Expense

​ ​ ​

Rate

​ ​ ​

Balance

​ ​ ​

Expense

​ ​ ​

Rate

​

​

(Dollars in thousands)

​

Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-earning deposits, and other interest or dividends

​

$

433,306

​

$

6,434

6.02

%

$

511,077

​

$

7,465

5.92

%

Securities available for sale

​

856,846

​

9,942

4.71

%

961,065

​

12,358

5.21

%

Securities held to maturity

​

​

1,493,185

​

​

19,479

​

5.29

%

​

1,643,703

​

24,358

6.01

%

Mortgage loans in process of securitization

​

338,052

​

4,387

5.26

%

277,426

​

3,743

5.47

%

Loans and loans held for sale

​

14,741,304

​

230,269

6.34

%

13,751,197

​

239,280

7.06

%

Total interest-earning assets

​

17,862,693

​

270,511

6.14

%

17,144,468

​

287,204

6.79

%

Allowance for credit losses on loans

​

(85,226)

​

​

​

​

(86,711)

​

​

​

​

Noninterest-earning assets

​

1,175,481

​

​

​

​

774,193

​

​

​

​

Total assets

​

$

18,952,948

​

​

​

​

$

17,831,950

​

​

​

​

Liabilities/Shareholders' Equity:

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing checking

​

$

7,199,340

​

$

60,763

3.42

%

$

5,121,343

​

$

50,609

4.01

%

Money market/savings deposits

​

3,925,326

​

34,000

3.51

%

3,544,828

​

34,521

3.95

%

Certificates of deposit

​

1,562,186

​

15,086

3.92

%

3,369,269

​

38,811

4.67

%

Total interest-bearing deposits

​

12,686,852

​

109,849

3.51

%

12,035,440

​

123,941

4.18

%

Borrowings

​

3,137,379

​

32,014

4.14

%

3,125,935

​

41,067

5.33

%

Total interest-bearing liabilities

​

15,824,231

​

141,863

3.64

%

15,161,375

​

165,008

4.41

%

Noninterest-bearing deposits

​

560,176

​

​

​

​

294,248

​

​

​

​

Noninterest-bearing liabilities

​

242,151

​

​

​

​

216,158

​

​

​

​

Total liabilities

​

16,626,558

​

​

​

​

15,671,781

​

​

​

​

Shareholders' equity

​

2,326,390

​

​

​

​

2,160,169

​

​

​

​

Total liabilities and shareholders' equity

​

$

18,952,948

​

​

​

​

$

17,831,950

​

​

​

​

Net interest income

​

​

​

$

128,648

​

​

​

​

$

122,196

​

​

Interest rate spread

​

​

​

​

2.50

%

​

​

​

2.38

%

Net interest-earning assets

​

$

2,038,462

​

​

​

​

$

1,983,093

​

​

​

​

Net interest margin

​

​

​

​

2.92

%

​

​

​

2.89

%

Average interest-earning assets to average interest-bearing liabilities

​

​

​

​

112.88

%

​

​

​

113.08

%

​

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in weighted average interest rates (rate). The following table sets forth the effects of changing volumes and rates on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Yields have been calculated on a pre-tax basis.

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Merchants Bancorp

The following table summarizes the increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates (rate).

​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended March 31, 2026
​	​	compared to March 31, 2025
​	​	Increase (Decrease)					​	​
​	​	Due to					​	​
​	​ ​ ​	Volume		​ ​ ​	Rate		​ ​ ​	Total
​	​	(In thousands)
Interest income		​	​		​	​		​	​
Interest-earning deposits, and other interest or dividends	​	$	(1,136)	​	$	105	​	$	(1,031)
Securities available for sale	​		(1,340)	​		(1,076)	​		(2,416)
Securities held to maturity	​	​	(2,231)	​	​	(2,648)	​	​	(4,879)
Mortgage loans in process of securitization	​		818	​		(174)	​		644
Loans and loans held for sale	​		17,229	​		(26,240)	​		(9,011)
Total interest income	​		13,340	​		(30,033)	​		(16,693)
Interest expense	​		​	​		​	​		​
Deposits	​		​	​		​	​		​
Interest-bearing checking	​		20,535	​		(10,381)	​		10,154
Money market/savings deposits	​		3,705	​		(4,226)	​		(521)
Certificates of deposit	​		(20,816)	​		(2,909)	​		(23,725)
Total Deposits	​		3,424	​		(17,516)	​		(14,092)
Borrowings	​		150	​		(9,203)	​		(9,053)
Total interest expense	​		3,574	​		(26,719)	​		(23,145)
Net interest income	​	$	9,766	​	$	(3,314)	​	$	6,452

​

Net Interest Income. Net interest income of $128.6 million for the three months ended March 31, 2026 increased $6.5 million, or 5%, compared with the three months ended March 31, 2025. The increase reflected lower interest expense on certificates of deposits and borrowings, partially offset by higher interest expense on interest-bearing checking accounts and lower interest income on loans and loans held for sale.

The interest rate spread of 2.50% for the three months ended March 31, 2026 increased 12 basis points compared to 2.38% for the three months ended March 31, 2025. Our net interest margin increased three basis points, to 2.92%, for the three months ended March 31, 2026 compared to 2.89% for the three months ended March 31, 2025. The increase in net interest margin was primarily attributable to the repayment of credit-linked notes in December 2025.

Interest Income. Interest income of $270.5 million for the three months ended March 31, 2026, decreased $16.7 million, or 6%, compared with $287.2 million for the three months ended March 31, 2025. This decrease was primarily attributable to lower average yields on higher average balances on loans and loans held for sale, as well as lower average yields on lower average balances on securities held to maturity.

Interest income of $230.3 million on loans and loans held for sale for the three months ended March 31, 2026, decreased $9.0 million, or 4%, compared to $239.3 million for the three months ended March 31, 2025. The average yield on loans decreased 72 basis points to 6.34%, for the three months ended March 31, 2026, compared to 7.06% for the three months ended March 31, 2025. The average balance of loans and loans held for sale of $14.7 billion for the three months ended March 31, 2026 increased $990.1 million, or 7%, compared to the three months ended March 31, 2025.

Interest income of $19.5 million on securities held to maturity for the three months ended March 31, 2026, decreased $4.9 million, or 20%, compared to $24.4 million for the three months ended March 31, 2025. The average yield decreased 72 basis points to 5.29% for the three months ended March 31, 2026, compared to 6.01% for the three months ended March 31, 2025. The average balance of securities held to maturity of $1.5 billion for the three months

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ended March 31, 2026 decreased $150.5 million, or 9%, compared to $1.6 billion for the three months ended March 31, 2025. The decrease in average balance was primarily due to repayments.

Interest income of $9.9 million on securities available for sale for the three months ended March 31, 2026, decreased $2.4 million, or 20%, compared to the three months ended March 31, 2025. The average balance of securities available for sale of $856.8 million for the three months ended March 31, 2026 decreased $104.2 million, or 11%, compared to the three months ended March 31, 2025. The average yield decreased 50 basis points to 4.71%, for the three months ended March 31, 2026, compared to 5.21% for the three months ended March 31, 2025. The decrease in average balance of securities available for sale was primarily due to maturities and repayments, as well as fair value adjustments, that were partially offset by purchases.

Interest income of $6.4 million on interest-earning deposits, and other interest or dividends for the three months ended March 31, 2026, decreased $1.0 million, or 14%, compared to the three months ended March 31, 2025. The average balance of interest-earning deposits, and other interest or dividends of $433.3 million for the three months ended March 31, 2026 decreased $77.8 million, or 15%, compared to $511.1 million for the three months ended March 31, 2025. The average yield increased 10 basis points, to 6.02% for the three months ended March 31, 2026, compared to 5.92% for the three months ended March 31, 2025. The decrease in average balances reflected the utilization of cash to fund loan growth.

Interest income of $4.4 million on mortgage loans in process of securitization for the three months ended March 31, 2026, increased $0.6 million, or 17%, compared to the three months ended March 31, 2025. The average balance of mortgage loans in process of securitization of $338.1 million increased $60.6 million, or 22%, compared to the three months ended March 31, 2025. The average yield decreased 21 basis points, to 5.26% for the three months ended March 31, 2026, compared to 5.47% for the three months ended March 31, 2025. The increase in average balance was primarily due to a higher origination volume of loans pending settlement for sale on the secondary market.

Interest Expense. Total interest expense of $141.9 million for three months ended March 31, 2026, decreased $23.1 million, or 14%, compared with $165.0 million for the three months ended March 31, 2025.

Interest expense on deposits of $109.8 million decreased $14.1 million, or 11%, for the three months ended March 31, 2026, compared to $123.9 million for the three months ended March 31, 2025. The decrease reflected lower average balances at lower average rates on certificates of deposit, which were partially offset by higher average balances at lower average rates on interest-bearing checking accounts.

Interest expense of $15.1 million on certificate of deposit accounts for the three months ended March 31, 2026, decreased $23.7 million, or 61%, compared to $38.8 million for the three months ended March 31, 2025. The average balance of $1.6 billion for the three months ended March 31, 2026, decreased $1.8 billion, or 54%, compared to $3.4 billion the three months ended March 31, 2025. The average rate on certificates of deposit was 3.92% for the three months ended March 31, 2026, which was a 75 basis points decrease compared to 4.67% for the three months ended March 31, 2025. The decrease in certificates of deposit is primarily due to the decrease in use of brokered deposits.

Interest expense of $60.8 million on interest-bearing checking accounts for the three months ended March 31, 2026, increased $10.2 million, or 20%, compared to $50.6 million the three months ended March 31, 2025. The average balance of $7.2 billion for the three months ended March 31, 2026, increased $2.1 billion, or 41%, compared to $5.1 billion the three months ended March 31, 2025. The average rate on interest-bearing checking accounts was 3.42% for the three months ended March 31, 2026, which was a 59 basis points decrease compared to 4.01% for the three months ended March 31, 2025.

Interest expense of $34.0 million for money market/savings accounts decreased $0.5 million, or 2%, for the three months ended March 31, 2026, compared to $34.5 million for the three months ended March 31, 2025. The average balance of money market/savings accounts of $3.9 billion for the three months ended March 31, 2026 increased $380.5 million, or 11%, compared to $3.5 billion for the three months ended March 31, 2025. The average rate on

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money market/savings accounts was 3.51% for the three months ended March 31, 2026, which was a 44 basis point decrease compared to 3.95% for the three months ended March 31, 2025.

Interest expense on borrowings of $32.0 million for the three months ended March 31, 2026, decreased $9.1 million, or 22%, compared to $41.1 million the three months ended March 31, 2025. The decrease was due primarily to a 119 basis points reduction in average interest rates, to 4.14%, for the three months ended March 31, 2026, compared to 5.33% for the three months ended March 31, 2025. This was partially offset by an $11.4 million increase in average borrowings, to $3.1 billion, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Included in interest expense on borrowings, our warehouse structured financing agreements provide for an additional interest payment for a portion of the earnings generated. As a result, the cost of borrowings increased from a base rate of 3.90% and 5.08%, to an effective rate of 4.14% and 5.33% for the three months ended March 31, 2026 and 2025, respectively.

Provision for Credit Losses. We recorded a provision for credit losses of $15.3 million for the three months ended March 31, 2026, an increase of $7.6 million, or 98%, compared to the three months ended March 31, 2025.

The $15.3 million provision for credit losses consisted of $15.9 million for the ACL-Loans, net of a $0.6 million release for the ACL-OBCE’s and net of a $7,000 release for the ACL-Guarantees, related to a loan securitization.

The ACL-Loans was $76.8 million, or 0.67% of total loans, at March 31, 2026, compared to $83.3 million, or 0.75% of total loans, at December 31, 2025, and $83.4 million, or 0.80%, at March 31, 2025. The decreases compared to both December 31, 2025 and March 31, 2025 was primarily related to charge-offs on loans with specific reserves. Additional details are provided in the Asset Quality portion of the Comparison of Financial Condition at March 31, 2026 and December 31, 2025 and in Note 4: Loans and Allowance for Credit Losses on Loans.

​

Noninterest Income.

​

​	​	​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	​	2026	​	2025	​	Change Amount	​	Change %
​	​	(In thousands)
Noninterest income:	​	​	​	​	​	​	​	​
Gain on sale of loans	​	$ 13,506	​	$ 11,619	​	$ 1,887	​	16%
Loan servicing fees, net	​	15,099	​	4,010	​	11,089	​	277%
Mortgage warehouse fees	​	1,620	​	1,513	​	107	​	7%
Syndication and asset management fees	​	3,117	​	3,389	​	(272)	​	(8)%
Other income	​	13,257	​	3,162	​	10,095	​	319%
Total noninterest income	​	$ 46,599	​	$ 23,693	​	$ 22,906	​	97%

​

Noninterest income of $46.6 million for the three months ended March 31, 2026 increased $22.9 million, or 97%, compared to $23.7 million for the three months ended March 31, 2025. Results reflected a $11.1 million, or 277%, increase in loan servicing fees, $10.1 million, or 319%, increase in other income, and a $1.9 million, or 16%, increase in gain on sale of loans.

​

Loan servicing fees of $15.1 million for the three months ended March 31, 2026 increased $11.1 million, or 277%, compared to $4.0 million for the three months ended March 31, 2025. Loan servicing fees included an $8.9 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2026, compared to a $0.8 million negative fair market value adjustment to servicing rights for the three months ended March 31, 2025.

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Other noninterest income of $13.3 million for the three months ended March 31, 2026 increased $10.1 million, or 319%, compared to $3.2 million for the three months ended March 31, 2025. Other noninterest income included a $2.7 million positive adjustment to the fair value of floor derivatives for the three months ended March 31, 2026 compared to a $2.3 million negative fair value adjustment for the three months ended March 31, 2025. The floor derivatives are associated with arrangements whereby there is a guaranteed minimum interest rate the Company will receive on certain assets bearing variable interest rates. The change in value was driven largely by the change in market interest rates during the period.

Also included in other noninterest income were changes in fair value on certain securities available for sale that the Company elected to account for under the fair value option, with changes in fair value reflected in earnings. The Company also has put options associated with these securities that provide protection against any change in value. By design, the fair value adjustments of the securities and the put options should be substantially equal and offsetting. For the three months ended March 31, 2026 there was a $7.9 million negative fair value adjustment on the securities that were offset by a $7.9 million positive fair value adjustment on the put options, hence having no net gain or loss recognized. Also see Note 2: Investment Securities, Note 11: Derivative Financial Instruments, and Note 12: Disclosures about Fair Value of Assets and Liabilities.

Gain on sale of loans of $13.5 million for the three months ended March 31, 2026 increased $1.9 million, or 16%, compared to $11.6 million for the three months ended March 31, 2025. The increase in gain on sale of loans resulted primarily from higher volume in the multi-family loan portfolio.

A summary of the gain on sale of loans for the three months ended March 31, 2026 and 2025 is below:

​	​	​	​	​	​	​	​	​	​	​
​	​	Gain on Sale of Loans
​	​	Three Months Ended March 31,
​	​	2026	​	​	2025	​	​	Change Amount	​	Change %
​	​	(In thousands)
Loan Type:	​	​	​	​	​	​	​	​	​	​
Multi-family	$	11,422	​	$	10,125	​	$	1,297	​	13%
Single-family	​	388	​	​	206	​	​	182	​	88%
SBA	​	1,696	​	​	1,288	​	​	408	​	32%
Total	$	13,506	​	$	11,619	​	$	1,887	​	16%

​

Syndication and asset management fees of $3.1 million for the three months ended March 31, 2026, decreased $0.3 million, or 8%, compared to $3.4 million for the three months ended March 31, 2025. The decrease was attributable to less equity raised by our LIHTC syndication platform during the three months ended March 31, 2026 than the prior year.

​

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Noninterest Expense.

​

​	​	​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	​	2026	​	2025	​	Change Amount	​	Change %
​	​	(In thousands)
Noninterest expense:	​	​	​	​	​	​	​	​
Salaries and employee benefits	​	$ 38,565	​	$ 36,419	​	$ 2,146	​	6%
Loan expense	​	1,185	​	798	​	387	​	48%
Occupancy and equipment	​	3,081	​	2,351	​	730	​	31%
Professional fees	​	2,767	​	2,894	​	(127)	​	(4)%
Deposit insurance expense	​	8,408	​	7,228	​	1,180	​	16%
Technology expense	​	2,679	​	2,374	​	305	​	13%
Credit risk transfer premium expense	​	5,764	​	3,862	​	1,902	​	49%
Other expense	​	13,193	​	5,738	​	7,455	​	130%
Total noninterest expense	​	$ 75,642	​	$ 61,664	​	$ 13,978	​	23%

​

​

Noninterest expense of $75.6 million for the three months ended March 31, 2026 increased $14.0 million, or 23%, compared to the three months ended March 31, 2025. Results reflected a $7.5 million increase in other noninterest expense that included $3.1 million in collateral preservation expenses associated with taxes, insurance, property expenses, and legal fees related to nonperforming assets. The increase also reflects a $2.1 million, or 6%, increase in salaries and employee benefits to support business growth, a $1.9 million increase in credit risk transfer premium expense associated with credit default swaps, as well as $1.2 million, or 16%, increase in deposit insurance expense primarily associated with asset quality.

​

The efficiency ratio was at 43.16% for the three months ended March 31, 2026, compared with 42.27% for the three months ended March 31, 2025.

​

Income Taxes. Income tax expense of $16.6 million for the three months ended March 31, 2026 decreased $1.7 million, or 9%, compared to $18.3 million for the three months ended March 31, 2025. The effective tax rate was 19.7% and 23.9% for the three months ended March 31, 2026 and 2025, respectively.

Our Segments

We operate in three primary segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The reportable segments are consistent with the internal reporting and evaluation of the principal lines of business of the Company.

The Multi-family Mortgage Banking segment originates, and services government sponsored mortgages for multi-family and healthcare facilities. It is also a fully integrated syndicator of low-income housing tax credit and debt funds. Consistently one of the top ranked agency affordable lenders in the nation, our licenses with FHA, Fannie Mae, and Freddie Mac, coupled with our bank financing products, and tax credit syndication platform, provide sponsors with custom beginning-to-end financing solutions that adapt to an ever-changing market. We also offer customized loan products for need-based skilled nursing facilities, including independent living, assisted living, and memory care. A variety of loan products are available to accommodate acquisition, rehabilitation, and refinancing of healthcare properties throughout the country. These loans are underwritten with the intent to convert to FHA permanent loans within three years.

We are also one of the largest Ginnie Mae servicers in the country based on aggregate unpaid principal balance. As of March 31, 2026 the Company’s servicing portfolio included unpaid principal balance of loans serviced for others of $21.3 billion, loans sub-serviced for others of $4.1 billion and other servicing balances of $680.8 million. The

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servicing portfolio is primarily Ginnie Mae, Fannie Mae, and Freddie Mac loans and is a significant source of our noninterest income and deposits.

Our Mortgage Warehousing segment funds agency eligible loans for non-depository financial institutions from the date of origination or purchase until the date of sale to an investor, which typically takes less than 30 days and is a significant source of our net interest income, loans, and deposits. Mortgage Warehousing has grown to fund $45.6 billion in 2024, $66.3 billion in 2025, and $19.6 billion for the three months ended March 31, 2026. Mortgage Warehousing also provides commercial loans and collects deposits related to the mortgage escrow accounts of its customers.

The Banking segment includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and SBA lending. Banking operates primarily in Indiana, except for correspondent mortgage banking which, like Multi-family Mortgage Banking and Mortgage Warehousing, is a national business. The Banking segment has a well-diversified customer and borrower base and has experienced significant growth over the past several years.

Our segment financial information was compiled utilizing the policies described in Note 17: Segment Information included elsewhere in this report. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes, if any, in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data.

Our segments diversify the net income of Merchants Bank and provide synergies across the segments. Strategic opportunities come from MCC and MCS, where loans are funded by the Banking segment and the Banking segment provides Ginnie Mae custodial services to MCC and MCS. LIHTC syndication and debt fund offerings complement the lending activities of new and existing multi-family mortgage customers. The securities available for sale and held to maturity funded by MCC custodial deposits or purchases of securitized loans originated by MCC are pledged to FHLB to provide advance capacity during periods of high residential loan volume for Mortgage Warehousing. Mortgage Warehousing provides leads to Correspondent Lending in the Banking segment. Retail and commercial customers provide cross selling opportunities within the Banking segment. Merchants Mortgage is a risk mitigant to Mortgage Warehousing because it provides us with a ready platform to sell the underlying collateral to secure repayment. These and other synergies form a part of our strategic plan.

The Other segment presented below, in Note 17: Segment Information, and elsewhere in this report includes general and administrative expenses for provision of services to all segments, internal funds transfer pricing offsets resulting from allocations to or from the other segments, certain elimination entries, and investments in low-income housing tax credit limited partnerships or LLC.

For the three months ended March 31, 2026 and 2025, we had total net income of $67.7 million and $58.2 million, respectively. Net income for our three segments for the respective periods was as follows:

​	​	​	​	​	​	​	​
​	​	Three Months Ended					​
​	​	March 31,					​
​	​ ​ ​	2026		​ ​ ​	2025		​ ​ ​
​	​	(In thousands)
Multi-family Mortgage Banking	​	$	11,014	​	$	3,413	​
Mortgage Warehousing	​		28,648	​		15,398	​
Banking	​		37,980	​		47,107	​
Other	​		(9,910)	​		(7,679)	​
​	​	​	​	​	​	​	​
Total	​	$	67,732	​	$	58,239	​

​

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Multi-family Mortgage Banking. The Multi-family Mortgage Banking segment reported net income of $11.0 million for the three months ended March 31, 2026, an increase of $7.6 million, or 223%, compared to net income of $3.4 million for the three months ended March 31, 2025. The rise in net income was primarily due to increases of $7.6 million in loan servicing fees and $2.1 million in gain on sale of loans, which was partially offset by an increase in income tax expense of $1.4 million.

Loan servicing fees included $7.4 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2026, compared to a $0.4 million positive fair market value adjustment for the three months ended March 31, 2025.

The total volume of loans originated and acquired through our Multi-family business was $1.2 billion, an increase of $245.3 million, or 26%, compared to $934.4 million for the three months ended March 31, 2025. It includes construction loans coupled with agreements for future permanent loan refinancing, as well as bridge loans housed in our Banking segment while borrowers await conversion to permanent financing. It also includes loans originated and acquired for sale in the secondary market.

Mortgage Warehousing. The Mortgage Warehousing segment reported net income of $28.6 million for the three months ended March 31, 2026, an increase of $13.3 million, or 86%, compared to the three months ended March 31, 2025. The rise in net income reflected increases of $10.1 million in net interest income and $5.0 million in other noninterest income, which was partially offset by an increase in income tax expense of $2.3 million.

Noninterest income included a $2.7 million positive fair market value adjustment to derivatives for the three months ended March 31, 2026, compared to a $2.3 million negative fair market value adjustment to derivatives for the three months ended March 31, 2025.

The volume of loans funded during the three months ended March 31, 2026 amounted to $19.6 billion, an increase of $7.7 billion, or 65%, compared to the three months ended March 31, 2025. This compared to the 43% industry-wide increase in single-family residential loan volumes for the three months ended March 31, 2026 compared to the same period in 2025, according to an estimate of industry volume by the Mortgage Bankers Association.

Banking. The Banking segment reported net income of $38.0 million for the three months ended March 31, 2026, a decrease of $9.1 million, or 19%, compared to $47.1 million for the three months ended March 31, 2025. The decrease in net income was primarily due to lower net interest income after provision for credit losses.

Noninterest income included a $1.6 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2026, compared to a $1.2 million negative fair market value adjustment to servicing rights for the three months ended March 31, 2025.

Liquidity and Capital Resources

Liquidity.

Our primary sources of funds are business and consumer deposits, escrow and custodial deposits, borrowings, brokered deposits, principal and interest payments on loans, principal and interest on investment securities, and proceeds from sale of loans. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, economic conditions, and competition.

At March 31, 2026, based on pledged collateral, we had $3.9 billion in available unused borrowing capacity with the FHLB and the Federal Reserve discount window. This compared to $5.3 billion at December 31, 2025. While the amounts available fluctuate daily, we also had available capacity lines through our membership in the AFX and US Bank Federal Funds. This liquidity enhances the ability to effectively manage interest expense and asset levels in the future.

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The Company’s most liquid assets are in cash, short-term investments, including interest-bearing demand deposits, mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit included in loans receivable. Taken together with its unused borrowing capacity of $3.9 billion described above, these totaled $11.1 billion, or 55%, of its $20.3 billion total assets at March 31, 2026. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

The Company’s investment portfolio has minimal levels of unrealized losses and management does not anticipate a need to sell securities for liquidity purposes at a loss. As of March 31, 2026, AOCL of $0.8 million, related to securities available for sale, increased $771,000 compared to AOCL as of December 31, 2025. The $0.8 million of AOCL as of March 31, 2026 represented less than 0.001% of total equity and total securities available for sale, reflecting our interest rate risk policy of maintaining short duration on assets and liabilities.

Most common recurring variability within our cash flows comes from loan growth and sale activity. As discussed in detail throughout this section and Capital Resources, the Company has numerous funding sources to cover volatility in cash flows for operating and financing needs through our cash, investments, borrowing capacity, deposit base and capital resources.

The following table and summary provide cash flow information for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

​	​	​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	​	2026	​	​	2025	​	​	Change
​	​	(In thousands)
Cash flows from:	​	​	​	​	​	​	​	​
Operating activities	$	(597,324)	​	$	148,038	​	$	(745,362)
Investing activities	​	(335,257)	​	​	(903)	​	​	(334,354)
Financing activities	​	803,594	​	​	(102,449)	​	​	906,043

​

● Cash flows from operating activities decreased $745.4 million primarily driven by an increase in cash outflows of $5.4 billion in loans originated and purchased for sale, partially offset by an increase cash inflow of $4.5 billion from proceeds from sold loans and principal collected, as we increased production and sales volumes during the quarter.

● Cash flows from investing activities decreased $334.4 million primarily driven by a fluctuation in cash outflows of $451.8 million in net change in loans receivable due to increased loan growth.

● Cash flows from financing activities increased $906.0 million primarily driven by increased cash inflows due to higher FHLB borrowings, partially offset by increased cash outflows due to lower deposit growth.

Certificates of deposit that are scheduled to mature in less than one year from March 31, 2026 totaled $1.1 billion, or 96% of total certificates of deposit. Of the $1.1 billion in total, including those that will mature in more than one year, there were $741.5 million classified as core deposits. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may decide to utilize FHLB advances, the Federal Reserve discount window, brokered deposits, or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Off-Balance Sheet Arrangements.

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded in our unaudited condensed consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, lines of credit and standby letters of credit.

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At March 31, 2026, we had $3.9 billion in outstanding commitments to extend credit that are subject to credit risk and $1.5 billion in outstanding commitments subject to certain performance criteria and cancellation by the Company. These commitments include funding commitments for approved loans, unfunded construction draws, standby letters of credit and certain unfunded warehouse repurchase agreements. The Company does not expect that all such commitments will be funded and believes it has sufficient liquidity to meet current loan origination commitments should funding occur. Additionally, the Company’s business model is designed to continuously sell a significant portion of its loans, which provides flexibility in managing its liquidity.

Capital Resources.

The access to and cost of funding new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends, the level of deposit insurance costs and the level and nature of regulatory oversight depend, in part, on our capital position. The Company filed a shelf registration statement on Form S-3 with the SEC on May 23, 2025, which was declared effective on June 4, 2025, under which we can issue up to $500 million aggregate offering amount of registered securities to finance our growth objectives. The Company has demonstrated its ability to raise capital or utilize securitization transactions to free up capital as needed.

The assessment of capital adequacy depends on a number of factors, including asset quality, liquidity, earnings performance, changing competitive conditions and economic forces. We seek to maintain a strong capital base to support our growth and expansion activities, to provide stability to our current operations and to promote public confidence in our Company.

Preferred Stock/Dividends.

6% Series C Preferred Stock. Dividends on the Series C Preferred Stock, to the extent declared by the Board, are payable quarterly. The Company may redeem the Series C Preferred Stock, in whole or in part, at our option, on any dividend payment date on or after April 1, 2026, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption.

​

8.25% Series D Preferred Stock. Dividends on the Series D Preferred Stock, to the extent declared by the Board are payable quarterly. The Company may redeem the Series D Preferred Stock, in whole or in part, at our option, on any dividend payment date on or after October 1, 2027, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption. If the Series D Preferred Stock remains outstanding on October 1, 2027, its dividend rate would reset to the 5-year Treasury rate, plus 4.34% and would remain at that level for an additional 5 years.

​

7.625% Series E Preferred Stock. Dividends on the Series E Preferred Stock, to the extent declared by the Board, are payable quarterly. The Company may redeem the Series E Preferred Stock, in whole or in part, at its option, on any dividend payment date on or after January 1, 2030, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption.

​

Dividends declared to preferred shareholders for the three months ended March 31, 2026, totaled $10.3 million. For more information, see Note 14: Preferred Stock.

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Common Shares/Dividends. As of March 31, 2026, the Company had 45,935,408 common shares issued and outstanding. The Board declared a quarterly dividend of $0.11 per share for the first quarter of 2026.

On January 28, 2026, the Company announced a stock repurchase program, up to $100,000,000 of common stock, expiring December 31, 2027. On February 26, 2026, the Company entered into a Rule 10b5-1 plan (the “10b5-1

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Plan”) with a broker for the repurchase of shares of its common stock commencing on March 3, 2026. The details of this repurchase plan were provided in a press release issued by the Company on January 28, 2026.

The following table summarizes our share repurchase authorization and repurchase activity of our common stock during the three months ended March 31, 2026.

​	​	​	​
​	​	​	Three Months Ended
​	​	​	March 31,
​	​	​	2026
Remaining authorization at January 31, 2026	​	$	100,000,000
Dollar value of shares repurchased	​	$	3,001,622
Shares repurchased	​	​	73,164
Average price paid per share	​	$	41.03
Remaining authorization at March 31, 2026	​	$	96,998,378

​

The timing and actual number of additional shares repurchased will depend on a variety of factors, including cash requirements to meet the operating needs of the business, legal requirements, as well as the share price and economic and market conditions.

Capital Adequacy.

The following tables present the Company’s capital ratios at March 31, 2026 and December 31, 2025.

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​

Amount

​ ​ ​

Ratio

​ ​ ​

​

​

(Dollars in thousands)

​

March 31, 2026

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

Company

​

$

2,408,656

12.8

%

$

1,980,993

10.5

%

$

—

N/A

%

Merchants Bank

​

​

2,335,139

12.4

%

1,979,758

10.5

%

1,885,483

10.0

%

Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,322,134

12.3

%

1,603,661

8.5

%

—

N/A

%

Merchants Bank

​

​

2,248,617

11.9

%

1,602,661

8.5

%

1,508,387

8.0

%

Common Equity Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

1,770,844

9.4

%

1,320,662

7.0

%

—

N/A

%

Merchants Bank

​

​

2,248,617

11.9

%

1,319,838

7.0

%

1,225,564

6.5

%

Tier I capital(1) (to average assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,322,134

12.3

%

947,199

5.0

%

—

N/A

%

Merchants Bank

​

​

2,248,617

11.9

%

944,081

5.0

%

944,081

5.0

%

(1) As defined by regulatory agencies.

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Merchants Bancorp

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

​

​

​

​

​

​

​

​

Amount to be Well

​

Minimum Amount

​

​

​

​

​

​

​

​

Capitalized with

​

To Be Well

​

​

​

Actual

​

Basel III Buffer(1)

​

Capitalized(1)

​

​

​ ​ ​

Amount

​ ​ ​

Ratio

​ ​ ​

Amount

​ ​ ​

Ratio

​

Amount

​

Ratio

​

​

​

(Dollars in thousands)

​

December 31, 2025

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

Company

​

$

2,365,600

13.6

%

$

1,822,759

10.5

%

$

—

N/A

%

Merchants Bank

​

​

2,320,227

13.4

%

1,821,535

10.5

%

1,734,795

10.0

%

Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,272,014

13.1

%

1,475,567

8.5

%

—

N/A

%

Merchants Bank

​

​

2,226,641

12.8

%

1,474,576

8.5

%

1,387,836

8.0

%

Common Equity Tier I capital(1) (to risk-weighted assets)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company

​

1,720,724

9.9

%

1,215,172

7.0

%

—

N/A

%

Merchants Bank

​

​

2,226,641

12.8

%

1,214,357

7.0

%

1,127,617

6.5

%

Tier I capital(1) (to average assets)

​

​

​

​

​

​

​

​

​

​

Company

​

2,272,014

11.5

%

990,358

5.0

%

—

N/A

%

Merchants Bank

​

​

2,226,641

11.3

%

987,284

5.0

%

987,284

5.0

%

​

(1) As defined by regulatory agencies.

​

Quantitative measures established by regulation to ensure capital adequacy require the Company and Merchants Bank to maintain minimum amounts and ratios (set forth in the table above). Management believes, as of March 31, 2026 and December 31, 2025, that the Company and Merchants Bank met all capital adequacy requirements to which they were subject. For additional information regarding dividend restrictions, see the Company’s 2025 Annual Report on Form 10–K.

As of March 31, 2026 and December 31, 2025, the most recent notifications from the Federal Reserve categorized the Company as well capitalized and most recent notifications from the FDIC categorized Merchants Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes has changed the Company’s or Merchants Bank’s category.

The Company’s principal source of funds for dividend payments to shareholders is dividends received from Merchants Bank. Banking statutes and regulations limit the maximum amount of dividends that a bank may pay without requesting prior approval of regulatory agencies. Under Indiana law, Merchants Bank may not pay a dividend if such dividend would be greater than retained net income (as defined) for the current year plus those for the previous two years.

During the three months ended March 31, 2026, the Company’s MOU from mid-2025 with the FDIC and DFI was terminated, following progress made by management in addressing the MOU provisions. As a result, the Company is no longer subject to any dividend or capital restrictions beyond those applicable to institutions that are considered well-capitalized under applicable regulatory guidelines.

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Merchants Bancorp

Quantitative and Qualitative Disclosures About Market Risk

Market Risk. Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified two primary sources of market risk: interest rate risk and price risk related to market demand.

Interest Rate Risk

Overview. Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and

interest-bearing liabilities (reprice risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries or SOFR.

​

Our business consists of funding low risk, multi-family, residential, and SBA loans, as well as warehouse repurchase agreements, meeting underwriting standards of government programs under an originate to sell model, and retaining adjustable-rate loans as held for investment to reduce interest rate risk.

​

Our Asset-Liability Committee, or ALCO, is a management committee that manages our interest rate risk within policy limits established by our Board. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. Our ALCO meets quarterly, at a minimum, to monitor the level of interest rate risk sensitivity to ensure compliance with the Board’s approved risk limits. Additionally, the Risk Committee of our Board meets quarterly, in conjunction with Board meetings, to assess risks associated with interest rate sensitivity.

​

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.

Income Simulation and Economic Value Analysis. Interest rate risk measurement is calculated and reported to the ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

We use two approaches to model interest rate risk: Net Interest Income at Risk (NII at Risk) and Economic Value of Equity (“EVE”). Under NII at Risk, net interest income is modeled for a twelve month period utilizing various assumptions for assets, liabilities, and derivatives and excludes non-interest income. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

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Merchants Bancorp

We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities. The NII at Risk results reflect the analysis used quarterly by management. It models gradual -200,
-100, +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year period.

The following table presents NII at Risk for Merchants Bank as of March 31, 2026 and December 31, 2025.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net Interest Income Sensitivity

​

Twelve Months Forward

​

- 200

​ ​ ​

- 100

​ ​ ​

+ 100

​ ​ ​

+ 200

​

(Dollars in thousands)

March 31, 2026:

​

​

​

​

​

​

​

​

​

Dollar change

$

(72,556)

​

$

(38,982)

​

$

36,757

​

$

73,717

​

Percent change

(12.5)

%

(6.7)

%

6.3

%

12.7

%

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025:

​

​

​

​

​

​

​

​

Dollar change

$

(86,677)

​

$

(45,885)

​

$

39,011

​

$

78,102

​

Percent change

(14.7)

%

(7.8)

%

6.6

%

13.2

%

​

Our interest rate risk management policy objective is to limit the change in our net interest income to 20% for a +/-100 basis point move in interest rates, and 30% for a +/-200 basis point move in rates. At March 31, 2026 we estimated that we were within policy limits set by our Board for the -200, -100, +100, and +200 basis point scenarios.

The EVE results for Merchants Bank included in the following table reflect the analysis used quarterly by management. It models immediate -200, -100, +100 and +200 basis point parallel shifts in market interest rates.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Economic Value of Equity

​

Sensitivity (Shock)

​

Immediate Change in Rates

​

- 200

​ ​ ​

- 100

​ ​ ​

+ 100

​ ​ ​

+ 200

​

(Dollars in thousands)

March 31, 2026:

​

​

​

​

​

​

​

​

​

Dollar change

$

65,852

​

$

37,799

​

$

(6,262)

​

$

(11,235)

​

Percent change

2.9

%

1.6

%

(0.3)

%

(0.5)

%

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2025:

​

​

​

​

​

​

​

​

Dollar change

$

62,263

​

$

37,217

​

$

(4,649)

​

$

(8,900)

​

Percent change

2.8

%

1.7

%

(0.2)

%

(0.4)

%

​

Our interest rate risk management policy objective is to limit the change in our EVE to 15% for a +/-100 basis point move in interest rates, and 20% for a +/-200 basis point move in rates. We are within policy limits set by our Board for the -200, -100, +100 and +200 basis point scenarios. The EVE reported at March 31, 2026 projects that as interest rates increase (decrease) immediately, the economic value of equity position will be expected to decrease (increase). When interest rates rise, fixed rate assets generally lose economic value; the longer the duration, the greater the value lost. The opposite is true when interest rates fall.

Non-GAAP Financial Measures

​

The Company’s accounting and reporting policies conform to GAAP and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist users of the financial information in assessing the Company’s operating performance. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the following table.

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Merchants Bancorp

​

Although intended to enhance understanding of the Company’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance.

​

​	​	​	​	​	​	​
​	​	​	March 31,
​	​	​	2026	​	​	2025
​	​	​	(In thousands)
Total equity	​	$	2,330,303	​	$	2,160,735
Less: goodwill and intangibles	​	​	(8,045)	​	​	(8,068)
Less: preferred stock	​	​	(551,291)	​	​	(551,291)
Tangible common shareholders' equity	​	$	1,770,967	​	$	1,601,376
​	​	​	​	​	​	​
Assets	​	$	20,321,782	​	$	18,797,800
Less: goodwill and intangibles	​	​	(8,045)	​	​	(8,068)
Tangible assets	​	$	20,313,737	​	$	18,789,732
​	​	​	​	​	​	​
Ending common shares	​	​	45,935,408	​	​	45,881,706
​	​	​	​	​	​	​
Tangible book value per common share	​	$	38.55	​	$	34.90

​

​

ITEM 3        Quantitative and Qualitative Disclosures About Market Risk

The information required under this item is included as part of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q under the headings “Liquidity and Capital Resources” and “Interest Rate Risk.”

ITEM 4        Controls and Procedures

(a)        Evaluation of disclosure controls and procedures.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2026, the Company’s disclosure controls and procedures were effective.

(b)        Changes in internal control.

There have been no changes in the Company's internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

​

78

Table of Contents

Merchants Bancorp

Part II

Other Information

ITEM 1.     Legal Proceedings

None.

ITEM 1A.  Risk Factors

There have been no material changes from the risk factors previously disclosed in the “Risk Factors” section included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended March 31, 2026, the Company repurchased 73,164 shares for $3.0 million at an average price of $41.03 per share of common stock. The following table presents our repurchase activity on a cash basis.

​	​	​	​	​	​	​	​	​	​	​
Period	​	(a) Total number of shares (or units) purchased	​	​	(b) Average price paid per share (or unit)	​	(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	​	​	(d) Maximum number (or approximate dollar value) of shares (or units) that may yet to be purchased under the plans or programs (1)
​	​	​	​	​	​	​	​	​	​	​
January 1 - January 31, 2026	​	—	​	$	—	​	—	​	$	100,000,000
February 1 - February 28, 2026	​	—	​	$	—	​	—	​	$	100,000,000
March 1 - March 31, 2026	​	73,164	​	$	41.03	​	73,164	​	$	96,998,378
Total	​	73,164	​	$	41.03	​	73,164	​	​	​

(1) On January 28, 2026, the Company announced a stock repurchase program, up to $100,000,000 of common stock, expiring December 31, 2027. On February 26, 2026, the Company entered into a Rule 10b5-1 plan (the “10b5-1 Plan”) with a broker for the repurchase of shares of its common stock commencing on March 3, 2026. The details of this repurchase plan were provided in a press release issued by the Company on January 28, 2026.

​

ITEM 3.     Defaults Upon Senior Securities

None.

ITEM 4.     Mine Safety Disclosures

Not applicable.

ITEM 5.     Other Information

None.

79

Table of Contents

ITEM 6.     Exhibits

Exhibit	​ ​ ​
Number		Description
3.1	​	Second Amended and Restated Articles of Incorporation of Merchants Bancorp (incorporated by reference to Exhibit 3.1 of Form 8-K, filed on May 24, 2022).
​	​	​
3.2	​	Articles of Amendment to the Second Amended and Restated Articles of Incorporation dated September 27, 2022 designating the 8.25% Fixed Rate Reset Series D Non-Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.2 of Form 8-A filed on September 27, 2022).
​	​	​
3.3	​	Articles of Amendment to the Second Amended and Restated Articles of Incorporation dated November 25, 2024 designating the 7.625% Fixed Rate Series E Non-Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.2 of Form 8-A filed on November 25, 2024). ​
3.4	​	Second Amended and Restated By-Laws of Merchants Bancorp (incorporated by reference to Exhibit 3.1 of Form 8-K, filed on November 20, 2017).
​	​	​
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
​	​	​
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
​	​	​
32		Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ​ ​
101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
​	​	​
101.SCH		XBRL Taxonomy Extension Schema Document
​	​	​
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
​	​	​
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
​	​	​
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
​	​	​
101.PRE ​ 104	​ ​ ​	XBRL Taxonomy Extension Presentation Linkbase Document ​ Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

​

​

​

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Merchants Bancorp

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

​	​		​
​	​	​ ​ ​	​	Merchants Bancorp
​	​	​	​	​
Date:	May 7, 2026	​	By:	/s/ Michael F. Petrie
				Michael F. Petrie
				Chairman & Chief Executive Officer ​ ​ ​
Date:	May 7, 2026		By:	/s/ Sean A. Sievers
				Sean A. Sievers Chief Financial & Accounting Officer
				(Principal Financial Officer)

​

​

​

​

​

81

FAQ

How did Merchants Bancorp (MBIN) perform financially in Q1 2026?

Merchants Bancorp earned net income of $67.7 million in Q1 2026, up from $58.2 million a year earlier. Net income allocated to common shareholders was $57.5 million, and diluted EPS rose to $1.25 versus $0.93, reflecting higher net interest and noninterest income.

What were Merchants Bancorp (MBIN) key revenue and expense drivers in Q1 2026?

Net interest income reached $128.6 million and noninterest income was $46.6 million in Q1 2026. Noninterest income benefited from higher gains on loan sales and servicing fees, while noninterest expenses increased to $75.6 million, driven by higher salaries, deposit insurance, and credit risk transfer premium expense.

How did Merchants Bancorp’s (MBIN) loan portfolio and credit losses change in Q1 2026?

Loans receivable grew to $11.40 billion, with an allowance for credit losses of $76.8 million. The provision for credit losses was $15.3 million, up from $7.7 million a year earlier, reflecting updated expectations for lifetime credit losses across mortgage, multifamily, healthcare, and commercial portfolios.

What is Merchants Bancorp’s (MBIN) balance sheet size and funding mix as of March 31, 2026?

Total assets were $20.32 billion at March 31, 2026, with deposits of $12.95 billion and borrowings of $4.77 billion. Growth in loans and securities was primarily funded by a combination of customer deposits and wholesale borrowings, while preferred equity remained outstanding in Series C, D, and E.

How did cash flows from operations and investing look for Merchants Bancorp (MBIN) in Q1 2026?

Net cash used in operating activities was $597.3 million, while investing activities used $335.3 million. Operating cash flow reflected large volumes of loans originated and sold, and investing cash flow was affected by securities purchases, loan portfolio growth, and paydowns on securities.

What were Merchants Bancorp (MBIN) earnings per share and share count in Q1 2026?

Diluted earnings per share were $1.25 in Q1 2026, based on 45,997,744 diluted shares. Basic EPS was also $1.25. The company had 45,935,408 common shares issued and outstanding as of April 30, 2026, slightly above the prior year’s level.