Merchants Bancorp Reports Third Quarter 2025 Results

CARMEL, Ind., Oct. 28, 2025 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank, today reported third quarter 2025 net income of $54.7 million, or diluted earnings per common share of $0.97. This compared to $61.3 million, or diluted earnings per common share of $1.17 in the third quarter of 2024, and compared to $38.0 million, or diluted earnings per common share of $0.60 in the second quarter of 2025.

"We are pleased with the strong rebound in earnings this quarter, driven by improved credit quality and disciplined execution. We also continued our successful track record of implementing credit risk transfers, including a $557 million healthcare loan pool, which enhances capital efficiency and reduces risk exposure. In addition, the strong activity in gain on sale of loans this quarter underscores the resilience and strength of our core businesses," said Michael F. Petrie, Chairman and CEO of Merchants.

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Asset quality trends improved, with lower provision expenses and reduced criticized assets during the quarter. Combined with strong liquidity, core deposit growth, and effective capital management, we are confident in our ability to deliver sustainable performance and capitalize on additional market opportunities. These actions reinforce our commitment to long-term stability and shareholder value."

Net income of $54.7 million for the third quarter of 2025 increased by $16.7 million, or 44%, compared to the second quarter of 2025. The improvement was primarily driven by a $23.1 million, or 31%, increase in net interest income after provision for credit losses, reflecting lower provision expenses. The increase was partially offset by a $7.5 million, or 15%, decrease in noninterest income driven by lower other income as well as syndication and asset management fees.

Net income of $54.7 million for the third quarter of 2025 decreased by $6.6 million, or 11%, compared to the third quarter of 2024. The decline was primarily driven by a $27.1 million, or 22%, decrease in net interest income after provision for credit losses, reflecting higher provision expenses. This decline was nearly offset by a $26.3 million, or 157%, increase in noninterest income, driven by growth in gains on loan sales and loan servicing fees. Results also reflected a $15.9 million, or 26%, increase in noninterest expense, largely attributable to higher salaries and employee benefits, and a $10.2 million, or 51%, decrease in the provision for income taxes, which benefited from the utilization of tax credits.

Total Assets

Total assets of $19.4 billion at September 30, 2025 increased by $213.4 million, or 1%, compared to June 30, 2025, and $548.9 million, or 3%, compared to December 31, 2024. The increase compared to December 31, 2024 was primarily due to higher balances in the warehouse portfolios, which were partially offset by lower balances in the residential loan portfolio. 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 of the Company's loans to non-depository financial institutions.

Return on average assets was 1.16% for the third quarter of 2025 compared to 1.34% for the third quarter of 2024 and 0.80% for the second quarter of 2025.

Asset Quality

The allowance for credit losses on loans of $93.3 million, as of September 30, 2025, increased by $1.5 million, or 2%, compared to June 30, 2025, and increased by $8.9 million, or 11%, compared to December 31, 2024. The $1.5 million increase compared to June 30, 2025 was driven by $31.0 million in provision for credit losses on loans, which was partially offset by $29.5 million in loan charge-offs. The $31.0 million provision for credit losses on loans for the third quarter of 2025 declined 43% compared to $54.5 million during the second quarter of 2025.

The provision expense and charge-offs for both periods were primarily associated with declines on multi-family property values after receiving new appraisals and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. The increases were also 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 provision for credit losses as specific reserves or charged off.

The Company recorded charge-offs for nine relationships, primarily in the multi-family loan portfolio, totaling $29.5 million, and $23,000 in recoveries during the third quarter of 2025. This compares to $2.1 million in charge-offs and $7,000 in recoveries during the third quarter of 2024 and $46.1 million in charge-offs and no recoveries in the second quarter of 2025.

Loans receivable classified as special mention declined by 9% compared to June 30, 2025, falling to $155.7 million. This decline reinforces the view that the frequency of migration to criticized status would subside, driven by favorable market conditions and the Company's efforts with proactive portfolio management. Overall, criticized loans receivable of $582.2 million declined by 1% compared to June 30, 2025.

As of September 30, 2025, all substandard loans have been evaluated for impairment and these loans have specific reserves of $31.1 million, of which $0.3 million was added during the third quarter of 2025, net of charge-offs. The Company believes that the remaining loan portfolio remains well collateralized.

Non-performing loans increased during the quarter, primarily attributable to one multi-family relationship that was partially offset by charge-offs. As of September 30, 2025, non-performing loans were $298.3 million, or 2.81% of loans receivable, compared to $251.5 million, or 2.39%, as of June 30, 2025, and $279.7 million, or 2.68%, as of December 31, 2024. This same relationship drove the $57.2 million increase in total delinquent loans from $279.0 million as of June 30, 2025, to $336.2 as of September 30, 2025. Of the $336.2 million in delinquent loans, $45.7 million are partially protected under credit risk transfer transactions.

The Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019. Since 2023, the Company has strategically executed credit protection arrangements through a credit linked note and credit default swaps. At their inception, these credit protection arrangements addressed $4.2 billion in loans to reduce risk of losses, with coverage ranging from 13-15% of the unpaid principal balances for each arrangement. Despite having credit protection on these loans, the Company also continues to carry an allowance for credit losses on loans held for investment. As of September 30, 2025, the balance of loans subject to credit protection arrangements was $2.4 billion.

Total Deposits

Total deposits of $13.9 billion at September 30, 2025 increased by $1.2 billion, or 10%, compared to June 30, 2025, and increased by $2.0 billion, or 17%, compared to December 31, 2024. The increase compared to both periods was primarily due to growth in core demand deposits.

Core deposits of $12.8 billion at September 30, 2025 increased by $1.4 billion, or 12%, from June 30, 2025 and increased by $3.4 billion, or 36%, from December 31, 2024. The increases were attributable primarily to growth in custodial deposits from warehouse customers as well as strategic initiatives focused on delivering innovative liquidity solutions in expanded markets. Core deposits represented 92% of total deposits at September 30, 2025, 90% of total deposits at June 30, 2025, and 79% of total deposits at December 31, 2024.

Total brokered deposits of $1.1 billion at September 30, 2025 decreased $110.4 million, or 9%, from June 30, 2025 and decreased $1.4 billion, or 55%, from December 31, 2024. As of September 30, 2025, brokered certificates of deposit had a weighted average remaining duration of 49 days.

Liquidity

Cash balances of $598.0 million as of September 30, 2025 decreased by $49.1 million, or 8%, compared to June 30, 2025 and increased by $121.4 million, or 25%, compared to December 31, 2024. The Company continues to have significant borrowing capacity available, with unused lines of credit totaling $5.9 billion as of September 30, 2025 compared to $5.0 billion at June 30, 2025 and $4.3 billion at December 31, 2024. The Company's most liquid assets are in cash, 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. Taken together with its unused borrowing capacity of $5.9 billion described above, these totaled $12.6 billion, or 65%, of its $19.4 billion total assets at September 30, 2025.

This liquidity enhances the Company's ability to effectively manage interest expense and asset levels in the future. Additionally, the Company's business model is designed to continuously sell or securitize a significant portion of its loans, which provides flexibility in managing its liquidity.

Comparison of Operating Results for the Three Months Ended

September 30, 2025 and 2024

Net Interest Income of $128.1 million decreased 4% compared to $132.8 million, reflecting lower interest income partially offset by lower interest expense on deposits and borrowings.

Interest Income of $301.8 million decreased $37.1 million, or 11%, compared to $338.9 million. The decrease primarily reflected lower average yields on loans and loans held for sale, primarily in the warehouse portfolios.

Interest Expense of $173.7 million decreased $32.4 million, or 16%, compared to $206.1 million. 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.

Noninterest Income of $43.0 million increased $26.3 million, or 157%, compared to $16.7 million. The $26.3 million increase reflected a $9.5 million, or 629%, increase in loan servicing fees, a $7.9 million, or 47%, increase in gain on sale of loans, a $5.7 million, or 294%, increase in other income, and a $3.0 million, or 165%, increase in syndication and asset management fees.

Noninterest Expense of $77.3 million increased 26% compared to $61.3 million, primarily due to a $8.9 million, or 25%, increase in salaries and employee benefits that primarily reflected higher commissions on higher production volume and noninterest income, as well as $2.0 million for expenses associated with the addition of production staff, which is expected to continue to elevate production, gain on sale, and expenses in future quarters. Also contributing to the higher expenses during the quarter was a $3.6 million increase in other expenses primarily associated with taxes, insurance, property expenses, and legal fees for collateral preservation of nonperforming loans and a $2.1 million increase in credit risk transfer premium expense associated with credit default swaps.

Comparison of Operating Results for the Three Months Ended

September 30, 2025 and June 30, 2025

Net Interest Income of $128.1 million remained essentially unchanged.

Interest Income of $301.8 million decreased $2.6 million, or 1%, compared to $304.4 million, primarily reflecting a decrease in average balances on loans and loans held for sale, as well as lower average balances on securities held to maturity.

Interest Expense of $173.7 million decreased $2.0 million, or 1% compared to $175.7 million. The decrease was primarily driven by lower average balances on borrowings and certificates of deposit, partially offset by higher average balances on interest-bearing checking accounts.

Noninterest Income of $43.0 million decreased $7.5 million, or 15%, compared to $50.5 million. The decrease was primarily due to a $5.5 million, or 59%, decrease other income and a $4.8 million, or 50%, decrease in syndication and asset management fees, partially offset by a $1.8 million, or 30%, increase in loan servicing fees and a $1.3 million, or 6%, increase in gain on sale of loans.

Noninterest Expense of $77.3 million remained essentially unchanged, primarily reflecting a $2.8 million decrease in other expenses primarily associated with taxes, insurance, receiver expenses, and legal fees for the collateral preservation of nonperforming loans, partially offset by a $2.2 million increase in deposit insurance expenses due to elevated levels of criticized and underperforming assets.

About Merchants Bancorp

Ranked as a top performing U.S. public bank by S&P Global Market Intelligence, Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple segments, including Multi-family Mortgage Banking that primarily offers multi-family housing and healthcare facility financing and servicing (through this segment it also serves as a syndicator of low-income housing tax credit and debt funds); Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers retail and correspondent residential mortgage banking, agricultural lending, and traditional community banking. Merchants Bancorp, with $19.4 billion in assets and $13.9 billion in deposits as of September 30, 2025, conducts its business primarily through its direct and indirect subsidiaries, Merchants Bank of Indiana, Merchants Capital Corp., Merchants Capital Investments, LLC, Merchants Capital Servicing, LLC, Merchants Asset Management, LLC, and Merchants Mortgage, a division of Merchants Bank of Indiana. For more information and financial data, please visit Merchants' Investor Relations page at investors.merchantsbancorp.com.

Forward-Looking Statements

This press release contains forward-looking statements which reflect management's current views with respect to, among other things, future events and 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 the industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, management cautions 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 the Company believes 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 actual results to differ materially from those indicated in these forward-looking statements, including the impacts of factors identified in "Risk Factors" or "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

September 30,

June 30,

March 31,

December 31,

September 30,

2025

2024

Assets

Cash and due from banks

$ 11,566

$ 15,419

$ 15,609

$ 10,989

$ 12,214

Interest-earning demand accounts

586,470

631,746

505,687

465,621

589,692

Cash and cash equivalents

598,036

647,165

521,296

476,610

601,906

Securities purchased under agreements to resell

1,529

1,539

1,550

1,559

3,279

Mortgage loans in process of securitization

414,786

402,427

389,797

428,206

430,966

Securities available for sale ($591,379, $602,962, $626,271, $635,946 and $682,975 utilizing fair value option, respectively)

885,070

936,343

961,183

980,050

953,063

Securities held to maturity (fair value of $1,670,306, $1,547,525, $1,605,151, $1,664,674 and $1,756,203, respectively)

1,670,555

1,548,211

1,606,286

1,664,686

1,755,047

Federal Home Loan Bank (FHLB) stock and other equity securities

217,850

217,804

184,050

Loans held for sale (includes $112,832, $91,930, $75,920, $78,170 and $91,084 at fair value, respectively)

4,129,329

4,105,765

3,983,452

3,771,510

3,808,234

Loans receivable, net of allowance for credit losses on loans of $93,330, $91,811, $83,413, $84,386 and $84,549, respectively

10,515,221

10,432,117

10,343,724

10,354,002

10,261,890

Premises and equipment, net

75,148

71,050

67,787

58,617

53,161

Servicing rights

213,156

193,037

189,711

189,935

177,327

Interest receivable

82,445

82,391

82,811

83,409

86,612

Goodwill

8,014

Other assets and receivables

543,508

495,295

424,339

571,330

329,427

Total assets

$ 19,354,647

$ 19,141,204

$ 18,797,800

$ 18,805,732

$ 18,652,976

Liabilities and Shareholders' Equity

Liabilities

Deposits

Noninterest-bearing

$ 399,814

$ 315,523

$ 313,296

$ 239,005

$ 311,386

Interest-bearing

13,534,891

12,371,312

12,092,869

11,680,971

12,580,501

Total deposits

13,934,705

12,686,835

12,406,165

11,919,976

12,891,887

Borrowings

2,902,631

4,009,474

4,001,744

4,386,122

3,568,721

Deferred tax liabilities

28,973

29,228

35,740

25,289

19,530

Other liabilities

262,904

231,035

193,416

231,035

233,731

Total liabilities

17,129,213

16,956,572

16,637,065

16,562,422

16,713,869

Commitments and Contingencies

Shareholders' Equity

Common stock, without par value

Authorized - 75,000,000 shares

Issued and outstanding - 45,889,238 shares, 45,885,458 shares, 45,881,706 shares, 45,767,166 shares and 45,764,023 shares

242,371

241,452

240,512

240,313

239,448

Preferred stock, without par value - 5,000,000 total shares authorized

6% Series B Preferred stock - $1,000 per share liquidation preference

Authorized - no shares at September 30, 2025, June 30, 2025 and March 31, 2025, and 125,000 shares for all prior periods

Issued and outstanding - no shares at September 30, 2025, June 30, 2025 and March 31, 2025, and 125,000 shares for all prior periods presented (equivalent to 5,000,000 depositary shares)

—

120,844

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

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

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) at September 30, 2025, June 30, 2025, March 31, 2025 and December 31, 2024, and no shares for September 30, 2024.

222,748

—

Retained earnings

1,431,983

1,392,136

1,369,009

1,330,995

1,250,176

Accumulated other comprehensive (loss) income

(211)

(247)

(77)

(133)

Total shareholders' equity

2,225,434

2,184,632

2,160,735

2,243,310

1,939,107

Total liabilities and shareholders' equity

$ 19,354,647

$ 19,141,204

$ 18,797,800

$ 18,805,732

$ 18,652,976

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)

Three Months Ended

Change

September 30,

June 30,

September 30,

3Q25

2025

2024

vs. 2Q25

vs. 3Q24

Interest Income

Loans

254,101

255,641

290,259

-1 %

-12 %

Mortgage loans in process of securitization

5,308

5,304

4,062

—

31 %

Investment securities:

Available for sale

11,880

12,095

14,855

-2 %

-20 %

Held to maturity

22,427

23,166

22,081

-3 %

2 %

FHLB stock and other equity securities (dividends)

4,265

4,641

3,128

-8 %

36 %

Other

3,798

3,552

4,543

7 %

-16 %

Total interest income

301,779

304,399

338,928

-1 %

-11 %

Interest Expense

Deposits

139,744

131,375

165,675

6 %

-16 %

Short-term borrowings

25,926

36,981

31,601

-30 %

-18 %

Long-term borrowings

8,051

7,324

8,831

10 %

-9 %

Total interest expense

173,721

175,680

206,107

-1 %

-16 %

Net Interest Income

128,058

128,719

132,821

-1 %

-4 %

Provision for credit losses

29,239

53,027

6,898

-45 %

324 %

Net Interest Income After Provision for Credit Losses

98,819

75,692

125,923

31 %

-22 %

Noninterest Income

Gain on sale of loans

24,671

23,342

16,731

6 %

47 %

Loan servicing fees, net

7,986

6,138

(1,509)

30 %

629 %

Mortgage warehouse fees

1,736

2,039

1,620

-15 %

7 %

Syndication and asset management fees

4,864

9,707

1,834

-50 %

165 %

Other income

3,757

9,254

(1,934)

-59 %

294 %

Total noninterest income

43,014

50,480

16,742

-15 %

157 %

Noninterest Expense

Salaries and employee benefits

44,152

43,566

35,218

1 %

25 %

Loan expense

1,263

1,142

1,114

11 %

13 %

Occupancy and equipment

2,453

2,494

2,231

-2 %

10 %

Professional fees

3,371

3,159

3,439

7 %

-2 %

Deposit insurance expense

9,376

7,152

8,981

31 %

4 %

Technology expense

2,608

2,446

2,068

7 %

26 %

Credit risk transfer premium expense

4,194

4,767

2,079

-12 %

102 %

Other expense

9,833

12,611

6,188

-22 %

59 %

Total noninterest expense

77,250

77,337

61,318

—

26 %

Income Before Income Taxes

64,583

48,835

81,347

32 %

-21 %

Provision for income taxes

9,882

10,854

20,074

-9 %

-51 %

Net Income

54,701

37,981

61,273

44 %

-11 %

Dividends on preferred stock

(10,265)

(10,266)

(7,757)

—

32 %

Net Income Available to Common Shareholders

44,436

27,715

53,516

60 %

-17 %

Basic Earnings Per Share

0.97

0.60

1.17

62 %

-17 %

Diluted Earnings Per Share

0.97

0.60

1.17

62 %

-17 %

Weighted-Average Shares Outstanding

Basic

45,887,143

45,883,644

45,759,667

Diluted

45,950,216

45,929,563

45,910,052

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)

Nine Months Ended

September 30,

2025

2024

Change

Interest Income

Loans

749,022

846,678

-12 %

Mortgage loans in process of securitization

14,355

8,826

63 %

Investment securities:

Available for sale

36,333

44,027

-17 %

Held to maturity

69,951

62,402

12 %

FHLB stock and other equity securities (dividends)

13,278

5,249

153 %

Other

10,443

14,192

-26 %

Total interest income

893,382

981,374

-9 %

Interest Expense

Deposits

395,060

516,348

-23 %

Short-term borrowings

96,271

50,435

91 %

Long-term borrowings

23,078

26,595

-13 %

Total interest expense

514,409

593,378

-13 %

Net Interest Income

378,973

387,996

-2 %

Provision for credit losses

89,993

21,589

317 %

Net Interest Income After Provision for Credit Losses

288,980

366,407

-21 %

Noninterest Income

Gain on sale of loans

59,632

37,255

60 %

Loan servicing fees, net

18,134

28,720

-37 %

Mortgage warehouse fees

5,288

4,126

28 %

Loss on sale of investments available for sale (1)

—

(108)

100 %

Syndication and asset management fees

17,960

10,370

73 %

Other income

16,173

8,604

88 %

Total noninterest income

117,187

88,967

32 %

Noninterest Expense

Salaries and employee benefits

124,137

93,187

33 %

Loan expense

3,203

3,063

5 %

Occupancy and equipment

7,298

6,707

9 %

Professional fees

9,424

11,094

-15 %

Deposit insurance expense

23,756

19,685

21 %

Technology expense

7,428

5,781

28 %

Credit risk transfer premium expense

12,823

4,373

193 %

Other expense

28,182

16,720

69 %

Total noninterest expense

216,251

160,610

35 %

Income Before Income Taxes

189,916

294,764

-36 %

Provision for income taxes (2)

38,995

70,044

-44 %

Net Income

150,921

224,720

-33 %

Dividends on preferred stock

(30,796)

(24,181)

27 %

Impact of preferred stock redemption

(5,371)

(1,823)

195 %

Net Income Available to Common Shareholders

114,754

198,716

-42 %

Basic Earnings Per Share

2.50

4.46

-44 %

Diluted Earnings Per Share

2.50

4.45

-44 %

Weighted-Average Shares Outstanding

Basic

45,865,167

44,549,432

Diluted

45,931,518

44,696,107

(1) Includes $0 and $(108) respectively, related to accumulated other comprehensive earnings reclassifications.

(2) Includes $0 and $26 respectively, related to income tax benefit for reclassification items.

Key Operating Results

(Unaudited)

($ in thousands, except share data)

Three Months Ended

Change

September 30,

June 30,

September 30,

3Q25

2025

2024

vs. 2Q25

vs. 3Q24

Noninterest expense

$ 77,250

$ 77,337

$ 61,318

—

26 %

Net interest income (before provision for credit losses)

128,058

128,719

132,821

-1 %

-4 %

Noninterest income

43,014

50,480

16,742

-15 %

157 %

Total income

$ 171,072

$ 179,199

$ 149,563

-5 %

14 %

Efficiency ratio

45.16 %

43.16 %

41.00 %

200

bps

416

bps

Average assets

$ 18,813,165

$ 18,984,925

$ 18,311,393

-1 %

3 %

Net income

54,701

37,981

61,273

44 %

-11 %

Return on average assets before annualizing

0.29 %

0.20 %

0.33 %

Annualization factor

4.00

Return on average assets

1.16 %

0.80 %

1.34 %

bps

(18)

bps

Return on average tangible common shareholders' equity (1)

10.69 %

6.75 %

14.43 %

394

bps

(374)

bps

Tangible book value per common share (1)

$ 36.31

$ 35.42

$ 32.38

3 %

12 %

Tangible common shareholders' equity/tangible assets (1)

8.61 %

8.49 %

7.95 %

bps

Consolidated ratios

Total capital/risk-weighted assets (2)

13.6

13.4

12.2

Tier I capital/risk-weighted assets (2)

13.0

12.8

11.6

Common Equity Tier I capital/risk-weighted assets (2)

9.8

9.5

8.9

Tier I capital/average assets (2)

11.8

11.5

10.5

(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:

(2) As defined by regulatory agencies; September 30, 2025 shown as estimates and prior periods shown as reported.

Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations and cash flows computed in accordance with GAAP; however, they do have a number of limitations. As such, the reader should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. A reconciliation of GAAP to non-GAAP financial measures is below. Net Income Available to Common Shareholders excludes preferred stock dividends. Tangible common shareholders' equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total equity. Tangible Assets is calculated by excluding the balance of goodwill and intangible assets. Tangible book value per share is calculated by dividing tangible common shareholders' equity by the number of shares outstanding.

Three Months Ended

Change

September 30,

June 30,

September 30,

3Q25

2025

2024

vs. 2Q25

vs. 3Q24

Average shareholders' equity

$ 2,221,677

$ 2,201,836

$ 1,941,026

1 %

14 %

Less: average goodwill & intangibles

(8,059)

(8,065)

(8,092)

—

Less: average preferred stock

(551,291)

(551,290)

(449,387)

0 %

23 %

Average tangible common shareholders' equity

$ 1,662,327

$ 1,642,481

$ 1,483,547

1 %

12 %

Annualization factor

4.00

Return on average tangible common shareholders' equity

10.69 %

6.75 %

14.43 %

394

bps

(374)

bps

Total equity

$ 2,225,434

$ 2,184,632

$ 1,939,107

2 %

15 %

Less: goodwill and intangibles

(8,056)

(8,062)

(8,079)

—

Less: preferred stock

(551,291)

(449,387)

—

23 %

Tangible common shareholders' equity

$ 1,666,087

$ 1,625,279

$ 1,481,641

3 %

12 %

Assets

$ 19,354,647

$ 19,141,204

$ 18,652,976

1 %

4 %

Less: goodwill and intangibles

(8,056)

(8,062)

(8,079)

—

Tangible assets

$ 19,346,591

$ 19,133,142

$ 18,644,897

1 %

4 %

Ending common shares

45,889,238

45,885,458

45,764,023

Tangible book value per common share

$ 36.31

$ 35.42

$ 32.38

3 %

12 %

Tangible common shareholders' equity/tangible assets

8.61 %

8.49 %

7.95 %

bps

Key Operating Results

(Unaudited)

($ in thousands, except share data)

Nine Months Ended

September 30,

2025

2024

Change

Noninterest expense

$ 216,251

$ 160,610

35 %

Net interest income (before provision for credit losses)

378,973

387,996

-2 %

Noninterest income

117,187

88,967

32 %

Total income

$ 496,160

$ 476,963

4 %

Efficiency ratio

43.58 %

33.67 %

991

bps

Average assets

$ 18,546,941

$ 17,642,004

5 %

Net income

150,921

224,720

-33 %

Return on average assets before annualizing

0.81 %

1.27 %

Annualization factor

1.33

Return on average assets

1.08 %

1.69 %

(61)

bps

Return on average tangible common shareholders' equity (1)

9.33 %

19.39 %

(1,006)

bps

Tangible book value per common share (1)

$ 36.31

$ 32.38

12 %

Tangible common shareholders' equity/tangible assets (1)

8.61 %

7.95 %

bps

(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:

Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations and cash flows computed in accordance with GAAP; however, they do have a number of limitations. As such, the reader should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. A reconciliation of GAAP to non-GAAP financial measures is below. Net Income Available to Common Shareholders excludes preferred stock dividends. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total assets. Tangible Assets is calculated by excluding the balance of goodwill and intangible assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding.

Nine Months Ended

September 30,

2025

2024

Change

Average shareholders' equity

$ 2,194,786

$ 1,838,182

19 %

Less: average goodwill & intangibles

(8,065)

(8,906)

-9 %

Less: average preferred stock

(551,733)

(466,066)

18 %

Average tangible common shareholders' equity

$ 1,634,988

$ 1,363,210

20 %

Annualization factor

1.33

Return on average tangible common shareholders' equity

9.33 %

19.39 %

(1,006)

bps

Total equity

$ 2,225,434

$ 1,939,107

15 %

Less: goodwill and intangibles

(8,056)

(8,079)

—

Less: preferred stock

(551,291)

(449,387)

23 %

Tangible common shareholders' equity

$ 1,666,087

$ 1,481,641

12 %

Assets

$ 19,354,647

$ 18,652,976

4 %

Less: goodwill and intangibles

(8,056)

(8,079)

—

Tangible assets

$ 19,346,591

$ 18,644,897

4 %

Ending common shares

45,889,238

45,764,023

Tangible book value per common share

$ 36.31

$ 32.38

12 %

Tangible common shareholders' equity/tangible assets

8.61 %

7.95 %

bps

Merchants Bancorp

Average Balance Analysis

($ in thousands)

(Unaudited)

Three Months Ended

September 30, 2025

June 30, 2025

September 30, 2024

Average

Yield/

Average

Yield/

Average

Yield/

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Assets:

Interest-earning deposits, and other interest or dividends

$ 556,894

$ 8,063

5.74 %

$ 539,357

$ 8,193

6.09 %

$ 484,712

$ 7,671

6.30 %

Securities available for sale

923,603

11,880

5.10 %

955,186

12,095

5.08 %

1,011,146

14,855

5.84 %

Securities held to maturity

1,510,857

22,427

5.89 %

1,572,186

23,166

5.91 %

1,288,466

22,081

6.82 %

Mortgage loans in process of securitization

395,388

5,308

5.33 %

376,904

5,304

5.64 %

308,362

4,062

5.24 %

Loans and loans held for sale

14,654,535

254,101

6.88 %

14,826,151

255,641

6.92 %

14,603,750

290,259

7.91 %

Total interest-earning assets

18,041,277

301,779

6.64 %

18,269,784

304,399

6.68 %

17,696,436

338,928

7.62 %

Allowance for credit losses on loans

(105,347)

(90,860)

(81,178)

Noninterest-earning assets

877,235

806,001

696,135

Total assets

$ 18,813,165

$ 18,984,925

$ 18,311,393

Liabilities & Shareholders' Equity:

Interest-bearing checking

$ 7,451,868

75,415

4.02 %

$ 6,161,736

60,845

3.96 %

$ 5,297,908

62,603

4.70 %

Savings deposits

145,086

0.01 %

145,162

0.02 %

145,305

0.05 %

Money market

3,661,645

38,542

4.18 %

3,354,820

35,137

4.20 %

2,816,906

33,858

4.78 %

Certificates of deposit

2,238,401

25,782

4.57 %

3,090,250

35,385

4.59 %

5,032,159

69,197

5.47 %

Total interest-bearing deposits

13,497,000

139,744

4.11 %

12,751,968

131,375

4.13 %

13,292,278

165,675

4.96 %

Borrowings

2,476,365

33,977

5.44 %

3,453,960

44,305

5.15 %

2,518,405

40,432

6.39 %

Total interest-bearing liabilities

15,973,365

173,721

4.31 %

16,205,928

175,680

4.35 %

15,810,683

206,107

5.19 %

Noninterest-bearing deposits

392,569

376,217

327,930

Noninterest-bearing liabilities

225,554

200,944

231,754

Total liabilities

16,591,488

16,783,089

16,370,367

Shareholders' equity

2,221,677

2,201,836

1,941,026

Total liabilities and shareholders' equity

$ 18,813,165

$ 18,984,925

$ 18,311,393

Net interest income

$ 128,058

$ 128,719

$ 132,821

Net interest spread

2.33 %

2.43 %

Net interest-earning assets

$ 2,067,912

$ 2,063,856

$ 1,885,753

Net interest margin

2.82 %

2.83 %

2.99 %

Average interest-earning assets to average interest-bearing liabilities

112.95 %

112.74 %

111.93 %

Supplemental Results

(Unaudited)

($ in thousands)

Net Income

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2025

2024

2025

2024

Segment

Multi-family Mortgage Banking

$ 12,076

$ 9,269

$ 8,068

$ 24,758

$ 33,714

Mortgage Warehousing

23,564

22,986

15,940

61,948

58,400

Banking

29,551

14,574

44,983

91,232

153,786

Other

(10,490)

(8,848)

(7,718)

(27,017)

(21,180)

Total

$ 54,701

$ 37,981

$ 61,273

$ 150,921

$ 224,720

Total Assets

September 30, 2025

June 30, 2025

December 31, 2024

Amount

Segment

Multi-family Mortgage Banking

$ 513,039

2 %

$ 487,853

2 %

$ 479,099

2 %

Mortgage Warehousing

6,993,817

36 %

6,999,701

37 %

6,000,624

32 %

Banking

11,522,375

60 %

11,404,488

60 %

11,761,202

63 %

Other

325,416

2 %

249,162

1 %

564,807

3 %

Total

$ 19,354,647

100 %

$ 19,141,204

100 %

$ 18,805,732

100 %

Gain on Sale of Loans

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2025

2024

2025

2024

Loan Type

Multi-family

$ 22,458

$ 19,815

$ 15,302

$ 52,398

$ 32,808

Single-family

775

2,428

690

3,409

1,494

Small Business Association (SBA)

1,438

1,099

739

3,825

2,953

Total

$ 24,671

$ 23,342

$ 16,731

$ 59,632

$ 37,255

Servicing Rights

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2025

2024

2025

2024

Balance, beginning of period

$ 193,037

$ 189,711

$ 178,776

$ 189,935

$ 158,457

Additions

Purchased servicing

12,858

—

12,928

—

Originated servicing

7,588

5,244

7,370

16,170

13,297

Subtractions

Paydowns

(2,450)

(2,246)

(2,090)

(7,504)

(6,729)

Changes in fair value

2,123

258

(6,729)

1,627

12,302

Balance, end of period

$ 213,156

$ 193,037

$ 177,327

$ 213,156

$ 177,327

Supplemental Results

(Unaudited)

($ in thousands)

Loans Receivable and Loans Held for Sale

September 30,

June 30,

December 31,

2025

2024

Mortgage warehouse repurchase agreements (4)

$ 1,645,884

$ 1,843,742

$ 1,446,068

Residential real estate (1)

1,008,979

988,783

1,322,853

Multi-family financing

4,877,477

4,833,548

4,624,299

Healthcare financing

1,476,046

1,442,095

1,484,483

Commercial and commercial real estate (2)(3)(4)

1,514,445

1,328,765

1,476,211

Agricultural production and real estate

84,824

82,425

77,631

Consumer and margin loans

896

4,570

6,843

Loans receivable

10,608,551

10,523,928

10,438,388

Less: Allowance for credit losses on loans

93,330

91,811

84,386

Loans receivable, net

$ 10,515,221

$ 10,432,117

$ 10,354,002

Loans held for sale (4)

4,129,329

4,105,765

3,771,510

Total loans, net of allowance

$ 14,644,550

$ 14,537,882

$ 14,125,512

(1) Includes $0.8 billion, $0.8 billion and $1.2 billion of All-In-One © first-lien home equity lines of credit as of September 30, 2025, June 30, 2025 and December 31, 2024, respectively.

(2) Includes $0.9 billion, $0.8 billion and $0.9 billion of revolving lines of credit collateralized primarily by mortgage servicing rights as of September 30, 2025, June 30, 2025 and December 31, 2024, respectively.

(3) Includes only $19.6 million, $19.8 million and $18.7 million of non-owner occupied commercial real estate as of September 30, 2025, June 30, 2025 and December 31, 2024, respectively.

(4) 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 of the Company's loans to non-depository institutions.

Loan Credit Risk Profile

September 30, 2025

June 30, 2025

December 31, 2024

Amount

Pass

$ 10,026,354

94.5 %

$ 9,934,759

94.4 %

$ 9,741,087

93.4 %

Special mention

155,716

1.5 %

171,512

1.6 %

379,969

3.6 %

Substandard

426,481

4.0 %

417,657

4.0 %

317,332

3.0 %

Critcized loans

582,197

5.5 %

589,169

5.6 %

697,301

6.6 %

Total loans receivable

$ 10,608,551

100.0 %

$ 10,523,928

100.0 %

$ 10,438,388

100.0 %

Charge-offs (year-to-date)

$ 86,070

$ 56,570

$ 10,587

Recoveries (year-to-date)

$ 51

$ 28

$ 136

Nonperforming Loans

September 30,

June 30,

December 31,

2025

2024

Nonaccrual loans

$ 282,168

$ 250,818

$ 279,716

90 days past due and still accruing

16,100

714

Total nonperforming loans

$ 298,268

$ 251,532

$ 279,722

Other real estate owned

4,347

7,049

8,209

Total nonperforming assets

$ 302,615

$ 258,581

$ 287,931

Nonperforming loans to total loans receivable

2.81 %

2.39 %

2.68 %

Nonperforming assets to total assets

1.56 %

1.35 %

1.53 %

Delinquent Loans

September 30,

June 30,

December 31,

2025

2024

Delinquent loans:

Loans receivable

$ 324,580

$ 279,009

$ 292,263

Loans held for sale

11,665

—

32,343

Total delinquent loans

$ 336,245

$ 279,009

$ 324,606

Total loans receivable and loans held for sale

$ 14,737,880

$ 14,629,693

$ 14,209,898

Delinquent loans to total loans

2.28 %

1.91 %

2.28 %

Supplemental Results

(Unaudited)

($ in thousands)

Deposits

September 30,

June 30,

December 31,

2025

2024

Noninterest-bearing deposits

Core demand deposits

$ 399,814

$ 315,523

$ 239,005

Interest-bearing deposits

Demand deposits:

Core demand deposits

$ 7,681,422

$ 6,066,933

$ 4,319,512

Brokered demand deposits

—

250,000

—

Total interest-bearing demand deposits

7,681,422

6,316,933

4,319,512

Savings deposits:

Core savings deposits

3,788,707

3,703,270

3,442,111

Brokered savings deposits

660

358

859

Total savings deposits

3,789,367

3,703,628

3,442,970

Certificates of deposit:

Core certificates of deposits

920,689

1,346,630

1,385,270

Brokered certificates of deposits

1,143,413

1,004,121

2,533,219

Total certificates of deposits

2,064,102

2,350,751

3,918,489

Total interest-bearing deposits

13,534,891

12,371,312

11,680,971

Total deposits

$ 13,934,705

$ 12,686,835

$ 11,919,976

Total core deposits

$ 12,790,632

$ 11,432,356

$ 9,385,898

Total brokered deposits

$ 1,144,073

$ 1,254,479

$ 2,534,078

Total deposits

$ 13,934,705

$ 12,686,835

$ 11,919,976

SOURCE Merchants Bancorp