MERCHANTS BANCORP_June 30, 2026

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	June 30, 2026


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

As of July 30, 2026, the latest practicable date, 45,938,075 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 June 30, 2026 and December 31, 2025	5

Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2026 and 2025	6

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2026 and 2025	7

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025	8

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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	58

Item 3 Quantitative and Qualitative Disclosures About Market Risk	88

Item 4 Controls and Procedures	88

PART II – OTHER INFORMATION	90

Item 1 Legal Proceedings	90

Item 1A Risk Factors	90

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	90

Item 3 Defaults Upon Senior Securities	90

Item 4 Mine Safety Disclosures	90

Item 5 Other Information	90

Item 6 Exhibits	91

SIGNATURES	92

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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 Condensed 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

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

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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 Treasury

VIE: variable interest entity

Table of Contents

Part I – Financial Information

Item 1. Financial Statements

Merchants Bancorp

Condensed Consolidated Balance Sheets

June 30, 2026 (Unaudited) and December 31, 2025

(In thousands, except share data)


		June 30,			December 31,
		2026			2025*
Assets
Cash and due from banks		$	17,875		$	15,844
Interest-earning demand accounts			296,828			196,358
Cash and cash equivalents			314,703			212,202
Securities purchased under agreements to resell			1,501			1,520
Mortgage loans in process of securitization			407,418			620,094
Securities available for sale (includes $527,676 and $571,314 at fair value)			820,105			865,058
Securities held to maturity (fair value of $1,353,543 and $1,543,554)			1,354,885			1,543,659
Federal Home Loan Bank (FHLB) stock and other equity securities			227,589			227,589
Loans held for sale (includes $148,368 and $76,980 at fair value)			4,615,894			3,873,012
Loans receivable (includes $46,024 and $47,318 at fair value), net of allowance for credit losses on loans of $75,803 and $83,301			12,262,800			10,951,381
Premises and equipment, net			74,664			73,929
Servicing rights			236,949			217,296
Interest receivable			82,078			81,807
Goodwill			8,014			8,014
Other real estate owned			72,389			60,145
Other assets and receivables			750,993			713,237
Total assets		$	21,229,982		$	19,448,943
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing		$	606,682		$	604,081
Interest-bearing			13,647,632			12,437,111
Total deposits			14,254,314			13,041,192
Borrowings			4,282,597			3,842,592
Deferred and current tax liabilities, net			50,140			33,900
Other liabilities			249,127			250,500
Total liabilities			18,836,178			17,168,184
Commitments and Contingencies
Shareholders' Equity
Common stock, without par value
Authorized - 75,000,000 shares
Issued and outstanding - 45,938,075 and 45,893,172 shares			244,345			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			1,599,367			1,486,191
Accumulated other comprehensive loss			(1,199)			(33)
Total shareholders' equity			2,393,804			2,280,759
Total liabilities and shareholders' equity		$	21,229,982		$	19,448,943

*Derived from audited consolidated financial statements

See notes to condensed consolidated financial statements.

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Merchants Bancorp

Condensed Consolidated Statements of Income (Unaudited)

For the Three and Six Months Ended June 30, 2026 and 2025

(In thousands, except share data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025
Interest Income
Loans	$	252,546	$	255,641	$	482,815	$	494,921
Mortgage loans in process of securitization		4,455		5,304		8,842		9,047
Investment securities:
Available for sale		9,562		12,095		19,504		24,453
Held to maturity		18,076		23,166		37,555		47,524
FHLB stock and other equity securities (dividends)		4,979		4,641		9,373		9,013
Other		4,454		3,552		6,494		6,645
Total interest income		294,072		304,399		564,583		591,603
Interest Expense
Deposits		116,839		131,375		226,688		255,316
Short-term borrowings		37,608		36,981		66,545		70,345
Long-term borrowings		3,089		7,324		6,166		15,027
Total interest expense		157,536		175,680		299,399		340,688
Net Interest Income		136,536		128,719		265,184		250,915
Provision for credit losses		9,184		53,027		24,483		60,754
Net Interest Income After Provision for Credit Losses		127,352		75,692		240,701		190,161
Noninterest Income
Gain on sale of loans		13,160		23,342		26,666		34,961
Loan servicing fees, net		11,992		6,138		27,091		10,148
Mortgage warehouse fees		1,857		2,039		3,477		3,552
Syndication and asset management fees		6,933		9,707		10,050		13,096
Other income		11,738		9,254		24,995		12,416
Total noninterest income		45,680		50,480		92,279		74,173
Noninterest Expense
Salaries and employee benefits		39,345		43,566		77,910		79,985
Loan expense		1,177		1,142		2,362		1,940
Occupancy and equipment		3,462		2,494		6,543		4,845
Professional fees		3,328		3,159		6,095		6,053
Deposit insurance expense		5,893		7,152		14,301		14,380
Technology expense		2,893		2,446		5,572		4,820
Credit risk transfer premium expense		6,100		4,767		11,864		8,629
Other expense		11,050		12,611		24,243		18,349
Total noninterest expense		73,248		77,337		148,890		139,001
Income Before Income Taxes		99,784		48,835		184,090		125,333
Provision for income taxes		21,481		10,854		38,055		29,113
Net Income	$	78,303	$	37,981	$	146,035	$	96,220
Dividends on preferred stock		(10,266)		(10,266)		(20,531)		(20,531)
Impact of preferred stock redemption		—		—		—		(5,371)
Net Income Allocated to Common Shareholders	$	68,037	$	27,715	$	125,504	$	70,318
Basic Earnings Per Share	$	1.48	$	0.60	$	2.73	$	1.53
Diluted Earnings Per Share	$	1.48	$	0.60	$	2.73	$	1.53
Weighted-Average Shares Outstanding
Basic		45,936,610		45,883,644		45,933,291		45,853,998
Diluted		46,005,938		45,929,563		46,001,859		45,921,988

See notes to condensed consolidated financial statements.

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Merchants Bancorp

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

For the Three and Six Months Ended June 30, 2026 and 2025

(In thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025
Net Income	$	78,303	$	37,981	$	146,035	$	96,220
Other Comprehensive Income:
Net unrealized losses on investment securities available for sale, net of tax benefit of $125, $53, $366 and $36		(395)		(170)		(1,166)		(114)
Other comprehensive loss for the period		(395)		(170)		(1,166)		(114)
Comprehensive Income	$	77,908	$	37,811	$	144,869	$	96,106

See notes to condensed consolidated financial statements.

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Merchants Bancorp

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

For the Three and Six Months Ended June 30, 2026 and 2025

(In thousands, except share data)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2026			2025			2026			2025
	Shares		Amount	Shares		Amount	Shares		Amount	Shares		Amount
Common Stock
Balance at beginning of period	45,935,408	$	243,433	45,881,706	$	240,512	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	2,667		912	3,752		940	74,199		322	87,490		15
Balance at end of period	45,938,075		244,345	45,885,458		241,452	45,938,075		244,345	45,885,458		241,452

6% Series B Preferred Stock
Balance at 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	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	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	230,000		222,748	230,000		222,748


Retained Earnings
Balance at beginning of period			1,536,383			1,369,009			1,486,191			1,330,995
Net income			78,303			37,981			146,035			96,220
Dividends on 6% Series C preferred stock, $60.00 per share, annually			(2,943)			(2,943)			(5,886)			(5,886)
Dividends on 8.25% Series D preferred stock, $82.50 per share, annually			(2,939)			(2,939)			(5,878)			(5,878)
Dividends on 7.625% Series E preferred stock, $76.25 per share, annually			(4,384)			(4,384)			(8,767)			(8,767)
Dividends on common stock, $0.44 per share, annually in 2026 and $0.40 per share, annually in 2025			(5,053)			(4,588)			(10,107)			(9,177)
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 at end of period			1,599,367			1,392,136			1,599,367			1,392,136

Accumulated Other Comprehensive Loss
Balance at beginning of period			(804)			(77)			(33)			(133)
Other comprehensive loss			(395)			(170)			(1,166)			(114)
Balance at end of period			(1,199)			(247)			(1,199)			(247)

Total shareholders' equity		$	2,393,804		$	2,184,632		$	2,393,804		$	2,184,632

See notes to condensed consolidated financial statements.

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Merchants Bancorp

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended June 30, 2026 and 2025

(In thousands)


	Six Months Ended
	June 30,
	2026		2025
Operating activities:
Net income	$	146,035	$	96,220
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		2,766		1,540
Provision for credit losses		24,483		60,754
Gain on sale of loans		(26,666)		(34,961)
Proceeds from sold loans and principal collected		28,036,517		18,150,631
Loans and participations originated and purchased for sale		(28,781,162)		(18,254,897)
Proceeds from sale of LIHTC projects		3,559		9,777
Purchases of LIHTC projects for sale		(17,105)		(22,987)
Purchases of other tax credits		(20,241)		—
Change in servicing rights for paydowns and fair value adjustments		(9,769)		5,550
Net change in:
Mortgage loans in process of securitization		212,676		25,779
Other assets and receivables		33,094		(14,219)
Other liabilities		1,173		(1,865)
Other		10,628		5,564
Net cash (used in) provided by operating activities		(384,012)		26,886
Investing activities:
Net change in securities purchased under agreements to resell		19		20
Purchases of securities available for sale		(260,372)		(344,503)
Purchases of mortgage servicing rights		(125)		(70)
Proceeds from calls, maturities and paydowns of securities available for sale		293,693		391,790
Proceeds from calls, maturities and paydowns of securities held to maturity		188,856		116,573
Purchases of loans		(39,349)		(30,408)
Net change in loans receivable		(1,340,264)		(503,358)
Proceeds from loans held for sale previously classified as loans receivable		55,570		386,604
Purchase of FHLB stock		—		(46)
Purchases of premises and equipment		(3,586)		(11,358)
Purchase of limited partnership interests		(3,749)		(35,210)
Other investing activities		5,113		2,737
Net cash used in investing activities		(1,104,194)		(27,229)
Financing activities:
Net change in deposits		1,184,342		577,652
Proceeds from borrowings		158,525,000		141,830,587
Repayment of borrowings		(158,084,995)		(142,197,028)
Payment of credit linked notes		—		(10,605)
Repurchase of common stock		(3,002)		—
Dividends		(30,638)		(29,708)
Net cash provided by financing activities		1,590,707		170,898
Net Change in Cash and Cash Equivalents		102,501		170,555
Cash and Cash Equivalents, Beginning of Period		212,202		476,610
Cash and Cash Equivalents, End of Period	$	314,703	$	647,165
Supplemental Cash Flows Information:
Interest paid	$	297,776	$	344,939
Income taxes (received) paid, net		(17,822)		41,093
Reduction in commitment payable for limited partnership interest of LLCs		—		2,752
Liabilities accrued for additions in premises and equipment		—		2,627
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 of Merchants Bancorp are collectively referred to as the “Company”.

The accompanying unaudited condensed consolidated balance sheet of the Company as of December 31, 2025, which has been derived from audited financial statements, and unaudited condensed consolidated financial statements of the Company as of June 30, 2026 and for the three and six months ended June 30, 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 consolidated 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 June 30, 2026, and the results of operations, cash flows and changes in shareholders’ equity for the three and six months ended June 30, 2026. All interim amounts have not been audited and the results of operations for the three and six months ended June 30, 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 June 30, 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 the significant liabilities in borrowings. Additionally, the Company has certain variable interest investments where it was not deemed to be the primary beneficiary of as of June 30, 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.

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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. The 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 and six months ended June 30, 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 may apply the ASU on a prospective basis to financial statements for annual periods beginning after the effective date. The Company is continuing to evaluate the impact of adopting this new guidance for our disclosures.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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:


	June 30, 2026
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In thousands)
Securities available for sale:
Treasury notes	$	30,462	$	—	$	67	$	30,395
Federal Agencies		259,999		—		1,503		258,496
Mortgage-backed - Agency ⁽¹⁾ - multi-family		3,544		—		6		3,538
Mortgage-backed - Non-Agency - residential - fair value option⁽²⁾		356,050		—		—		356,050
Mortgage-backed - Agency - residential - fair value option ⁽²⁾		171,626		—		—		171,626
Total securities available for sale	$	821,681	$	—	$	1,576	$	820,105
Securities held to maturity:
Mortgage-backed - Non-Agency - multi-family	$	375,441	$	—	$	2,422	$	373,019
Mortgage-backed - Non-Agency - residential		627,580		1,778		—		629,358
Mortgage-backed - Non-Agency - healthcare		340,267		—		—		340,267
Mortgage-backed - Agency - multi-family		11,597		—		698		10,899
Total securities held to maturity	$	1,354,885	$	1,778	$	3,120	$	1,353,543

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.

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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)

Accrued interest on securities available for sale totaled $5.1 million at June 30, 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 $4.1 million at June 30, 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 June 30, 2026 and December 31, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may

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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.


	June 30, 2026				December 31, 2025
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

	(In thousands)
Securities available for sale:
Within one year	$	30,462	$	30,395	$	85,226	$	85,292
After one through five years		259,999		258,496		205,000		204,896
		290,461		288,891		290,226		290,188
Mortgage-backed - Agency - multi-family		3,544		3,538		3,562		3,556
Mortgage-backed - Non-Agency residential - fair value option		356,050		356,050		385,460		385,460
Mortgage-backed - Agency - residential - fair value option		171,626		171,626		185,854		185,854
	$	821,681	$	820,105	$	865,102	$	865,058
Securities held to maturity:
Mortgage-backed - Non-Agency - multi-family	$	375,441	$	373,019	$	438,430	$	437,480
Mortgage-backed - Non-Agency - residential		627,580		629,358		699,957		701,485
Mortgage-backed - Non-Agency - healthcare		340,267		340,267		393,588		393,584
Mortgage-backed - Agency - multi-family		11,597		10,899		11,684		11,005
	$	1,354,885	$	1,353,543	$	1,543,659	$	1,543,554

During the three and six months ended June 30, 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 June 30, 2026 and December 31, 2025:


	June 30, 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:
Treasury notes	$	30,395	$	67	$	—	$	—	$	30,395	$	67
Federal Agencies		258,496		1,503		—		—		258,496		1,503
Mortgage-backed - Agency - multi-family		3,538		6		—		—		3,538		6
	$	292,429	$	1,576	$	—	$	—	$	292,429	$	1,576

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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 June 30, 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 $375.4 million and fair value of $373.0 million at June 30, 2026, acquired via a mortgage securitization transaction facilitated by the Company, which has experienced delinquencies in some of the underlying loans. As of June 30, 2026, 37% of the portfolio was delinquent. Additionally, the security is a senior tranche that has credit protection from the first 17.3% of losses. The Company continues to receive timely interest payments on this security, which is current as of June 30, 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 June 30, 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 June 30, 2026 and December 31, 2025. No allowance for credit losses was recorded for this, or any other non-Agency security, as of June 30, 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.

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

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 $4.0 million and $5.2 million as of June 30, 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.

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 $51.0 million and $51.4 million at June 30, 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 retail loans, which would be in the Banking segment, closed-end loans 120 days past due and open-end loans 180 days past due from the contractual due date are to be charged-off.

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. 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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Loan Portfolio Summary‌

Loans receivable at June 30, 2026 and December 31, 2025 include:


	June 30,		December 31,
	2026		2025

	(In thousands)
Mortgage warehouse repurchase agreements⁽¹⁾	$	2,168,175	$	1,600,285
Residential real estate⁽²⁾		1,078,358		1,018,780
Multi-family financing		5,855,477		5,332,680
Healthcare financing		1,303,597		1,385,359
Commercial and commercial real estate^(1)(3)(4)		1,837,427		1,603,551
Agricultural production and real estate		91,609		92,077
Consumer and margin loans		3,960		1,950
Loans Receivable		12,338,603		11,034,682
Less:
ACL-Loans		75,803		83,301

Loans Receivable, net	$	12,262,800	$	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 of the Company’s loans to non-depository institutions.

(2)

Includes $0.8 billion and $0.8 billion of All-in-One^© first-lien home equity lines of credit at June 30, 2026 and December 31, 2025, respectively.

(3)

Includes $1.2 billion and $0.9 billion of revolving lines of credit collateralized primarily by single-family mortgage servicing rights as of June 30, 2026 and December 31, 2025, respectively.

(4)

Includes only $19.0 million and $19.5 million of non-owner occupied commercial real estate as of June 30, 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-One^© first-

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

lien HELOC products that link 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.

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.

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

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 estimation 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.

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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 and six months ended June 30, 2026 and 2025:


	Three Months Ended June 30, 2026
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL

	(In thousands)
ACL-Loans
Balance, beginning of period	$	3,821	$	3,307	$	52,805	$	5,681	$	10,701	$	470	$	46	$	76,831
Provision for credit losses		583		616		9,361		(919)		1,053		5		16		10,715
Loans charged to the allowance		—		(217)		(15,717)		—		(598)		—		—		(16,532)
Recoveries of loans previously charged-off		—		—		2,338		2,451		—		—		—		4,789
Balance, end of period	$	4,404	$	3,706	$	48,787	$	7,213	$	11,156	$	475	$	62	$	75,803


	Three Months Ended June 30, 2025
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL

	(In thousands)
ACL-Loans
Balance, beginning of period	$	3,747	$	6,145	$	53,416	$	9,127	$	10,295	$	608	$	75	$	83,413
Provision for credit losses		1,167		(1,634)		48,364		4,714		1,822		29		(1)		54,461
Loans charged to the allowance		—		—		(38,309)		(7,497)		(257)		—		—		(46,063)
Recoveries of loans previously charged-off		—		—		—		—		—		—		—		—
Balance, end of period	$	4,914	$	4,511	$	63,471	$	6,344	$	11,860	$	637	$	74	$	91,811

The Company recorded a total provision for credit losses of $9.2 million for the three months ended June 30, 2026. The $9.2 million total provision for credit losses consisted of $10.7 million for the ACL-Loans as shown above, net of a $1.5 million release for the ACL-OBCE’s and net of a $6,000 release for the ACL-Guarantees, related to a loan securitization.

The Company recorded a total provision for credit losses of $53.0 million for the three months ended June 30, 2025. The $53.0 million total provision for credit losses consisted of $54.5 million for the ACL-Loans as shown above, net of a $1.1 million release for the ACL-OBCE’s and net of a $0.4 million release for the ACL-Guarantees, related to a loan securitization.


	Six Months Ended June 30, 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		135		(513)		28,988		(1,566)		(247)		(222)		33		26,608
Loans charged to the allowance		—		(453)		(26,193)		(12,267)		(598)		—		—		(39,511)
Recoveries of loans previously charged-off		—		—		2,951		2,451		3		—		—		5,405
Balance, end of period	$	4,404	$	3,706	$	48,787	$	7,213	$	11,156	$	475	$	62	$	75,803


	Six Months Ended June 30, 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		1,098		(1,431)		57,048		5,279		1,909		98		(34)		63,967
Loans charged to the allowance		—		—		(48,703)		(7,497)		(370)		—		—		(56,570)
Recoveries of loans previously charged-off		—		—		—		—		28		—		—		28
Balance, end of period	$	4,914	$	4,511	$	63,471	$	6,344	$	11,860	$	637	$	74	$	91,811

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company recorded a total provision for credit losses of $24.5 million for the six months ended June 30, 2026. The $24.5 million total provision for credit losses consisted of $26.6 million for the ACL-Loans as shown above, net of a $2.1 million release for the ACL-OBCE’s and net of a $13,000 release for the ACL-Guarantees, related to a loan securitization.

The Company recorded a total provision for credit losses of $60.8 million for the six months ended June 30, 2025. The $60.8 million total provision for credit losses consisted of $64.0 million for the ACL-Loans as shown above, net of a $2.8 million release for the ACL-OBCE’s and net of a $0.4 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

The table below presents the amortized cost basis and ACL-Loans allocated for collateral dependent loans, which are individually evaluated to determine expected credit losses as of June 30, 2026 and December 31, 2025:


	June 30, 2026
	Real Estate		Accounts Receivable / Equipment		Other		Total		ACL-Loans Allocation

	(In thousands)
RES RE	$	4,174	$	—	$	—	$	4,174	$	16
MF FIN		178,312		—		—		178,312		4,689
HC FIN		45,200		—		—		45,200		882
CML & CRE		1,715		—		361		2,076		52
AG & AGRE		181		—		—		181		1
Total collateral dependent loans	$	229,582	$	—	$	361	$	229,943	$	5,640

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

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 credit losses and future draws under the line of credit require the approval of a Senior Credit Officer or above.

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.

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 June 30, 2026 and December 31, 2025:


	June 30, 2026
	2026		2025		2024		2023		2022		Prior		Revolving Loans		TOTAL

	(In thousands)
MTG WHRA
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	2,168,175	$	2,168,175
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	2,168,175	$	2,168,175
RES RE
Pass	$	28,067	$	72,619	$	30,662	$	16,309	$	6,271	$	24,274	$	895,982	$	1,074,184
Substandard		—		—		140		436		—		—		3,598		4,174
Total	$	28,067	$	72,619	$	30,802	$	16,745	$	6,271	$	24,274	$	899,580	$	1,078,358
Charge-offs	$	—	$	—	$	431	$	—	$	22	$	—	$	—	$	453
MF FIN
Pass	$	873,562	$	852,539	$	496,617	$	246,372	$	227,015	$	21,409	$	2,770,251	$	5,487,765
Special Mention		18,053		59,518		34,162		48,083		25,785		—		3,799		189,400
Substandard		16,189		32,827		8,215		78,977		37,050		—		5,054		178,312
Total	$	907,804	$	944,884	$	538,994	$	373,432	$	289,850	$	21,409	$	2,779,104	$	5,855,477
Charge-offs	$	—	$	—	$	1,630	$	—	$	21,766	$	2,797	$	—	$	26,193
HC FIN
Pass	$	446,070	$	295,143	$	17,834	$	7,081	$	—	$	—	$	470,810	$	1,236,938
Special Mention		9,000		—		—		—		—		—		12,459		21,459
Substandard		—		32,050		—		—		—		8,050		5,100		45,200
Total	$	455,070	$	327,193	$	17,834	$	7,081	$	—	$	8,050	$	488,369	$	1,303,597
Charge-offs	$	—	$	—	$	—	$	—	$	—	$	12,267	$	—	$	12,267
CML & CRE
Pass	$	50,736	$	61,936	$	39,122	$	39,185	$	55,150	$	60,888	$	1,524,495	$	1,831,512
Special Mention		33		437		771		536		498		964		600		3,839
Substandard		—		—		175		115		569		1,217		—		2,076
Total	$	50,769	$	62,373	$	40,068	$	39,836	$	56,217	$	63,069	$	1,525,095	$	1,837,427
Charge-offs	$	—	$	—	$	—	$	—	$	—	$	598	$	—	$	598
AG & AGRE
Pass	$	8,564	$	12,587	$	14,262	$	5,919	$	3,692	$	21,017	$	25,299	$	91,340
Special Mention		—		88		—		—		—		—		—		88
Substandard		—		—		—		—		181		—		—		181
Total	$	8,564	$	12,675	$	14,262	$	5,919	$	3,873	$	21,017	$	25,299	$	91,609
CON & MAR
Pass	$	129	$	94	$	48	$	11	$	—	$	—	$	3,678	$	3,960
Total	$	129	$	94	$	48	$	11	$	—	$	—	$	3,678	$	3,960

Total Pass	$	1,407,128	$	1,294,918	$	598,545	$	314,877	$	292,128	$	127,588	$	7,858,690	$	11,893,874
Total Special Mention	$	27,086	$	60,043	$	34,933	$	48,619	$	26,283	$	964	$	16,858	$	214,786
Total Substandard	$	16,189	$	64,877	$	8,530	$	79,528	$	37,800	$	9,267	$	13,752	$	229,943
Total Loans	$	1,450,403	$	1,419,838	$	642,008	$	443,024	$	356,211	$	137,819	$	7,889,300	$	12,338,603
Total Charge-offs	$	—	$	—	$	2,061	$	—	$	21,788	$	15,662	$	—	$	39,511

In the charts above and on the next page, loans that have been renewed or extended are presented in the vintage year corresponding to the most recent renewal or extension date rather than the original origination year. Renewals and extensions represent modifications of existing loans and not new loan originations.

All loans held for sale were pass grade as of June 30, 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 June 30, 2026.

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.

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 June 30, 2026 and December 31, 2025.


	June 30, 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	$	—		$	—		$	—		$	—		$	2,168,175		$	2,168,175
RES RE		4,454			4,135			917			9,506			1,068,852			1,078,358
MF FIN		14,558			17,978			134,793			167,329			5,688,148			5,855,477
HC FIN		—			—			22,242			22,242			1,281,355			1,303,597
CML & CRE		—			—			2,076			2,076			1,835,351			1,837,427
AG & AGRE		—			6,460			87			6,547			85,062			91,609
CON & MAR		—			—			—			—			3,960			3,960
	$	19,012		$	28,573		$	160,115		$	207,700		$	12,130,903		$	12,338,603
		—	%		—	%		1	%		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 June 30, 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 and Assets

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 the three and six months ended June 30, 2026 and 2025.

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the Company’s nonperforming loans at June 30, 2026 and December 31, 2025.


	June 30, 2026				December 31, 2025
			Total Loans >				Total Loans >
			90 Days &				90 Days &
	Nonaccrual		Accruing		Nonaccrual		Accruing

	(In thousands)
RES RE	$	4,173	$	—	$	7,680	$	—
MF FIN		153,345		—		128,241		—
HC FIN		45,951		—		59,574		—
CML & CRE		2,076		—		2,313		—
AG & AGRE		—		87		4		—
	$	205,545	$	87	$	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 June 30, 2026 or December 31, 2025.

The Company did not have any nonaccrual loans without an estimated ACL at June 30, 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.

The following tables present the amortized cost basis of loans at June 30, 2026 and 2025 that were both experiencing financial difficulty and modified during the three and six months ended June 30, 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 financing receivable is also presented below.


	Three Months Ended June 30, 2026							Six Months Ended June 30, 2026
	Combination - Term Extension and Payment Delay		Total Class of Loans Receivable		% of Total Class of Loans Receivable			Combination - Term Extension and Payment Delay		Total Class of Financing Receivable		% of Total Class of Financing Receivable

	(In thousands)							(In thousands)

MF FIN	$	74,720	$	74,720		1	%	$	80,298	$	80,298		1	%
HC FIN		12,459		12,459		1	%		21,458		21,458		2	%
Total	$	87,179	$	87,179		1	%	$	101,756	$	101,756		1	%

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Three Months Ended June 30, 2025							Six Months Ended June 30, 2025
	Term Extension		Total Class of Loans Receivable		% of Total Class of Loans Receivable			Term Extension		Combination - Term Extension and Payment Delay		Total Class of Financing Receivable		% of Total Class of Financing Receivable

	(In thousands)							(In thousands)
MF FIN	$	25,425	$	25,425		1	%	$	25,425	$	40,361	$	65,786		1	%
CML & CRE		—		—		—	%		—		177		177		—
Total	$	25,425	$	25,425		1	%	$	25,425	$	40,538	$	65,963		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 classified as Substandard or worse were individually evaluated for credit losses and specific reserves were established, if applicable. During the three and six months ended June 30, 2026, there were no specific reserves recorded on troubled loan modifications disclosed above. As of June 30, 2026, there were no specific reserves were recorded on troubled loan modifications disclosed above. The Company had a commitment to lend $1.8 million and $0 as of June 30, 2026 and 2025, respectively, to the borrowers included in the tables above.


	Three Months Ended June 30, 2026
	Term Extension	Combination - Term Extension and Payment Delay
Loan Type	Financial Effect	Financial Effect
MF FIN		Added a weighted average of 3 months.
HC FIN		Added a weighted average of 3 months.

	Six Months Ended June 30, 2026
	Term Extension	Combination - Term Extension and Payment Delay
Loan Type	Financial Effect	Financial Effect
MF FIN		Added a weighted average of 3 months.
HC FIN		Added a weighted average of 5 months.


	Three Months Ended June 30, 2025
	Term Extension	Combination - Term Extension and Payment Delay
Loan Type	Financial Effect	Financial Effect
MF FIN	Added a weighted average of 7 months.

	Six Months Ended June 30, 2025
	Term Extension	Combination - Term Extension and Payment Delay
Loan Type	Financial Effect	Financial Effect
MF FIN	Added a weighted average of 7 months.	Added a weighted average of 6 months.
CML & CRE		Term extension added a weighted average of 61 months, and forbearance added a weighted average of 12 months.

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company closely monitors the performance of loans that were modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans as of June 30, 2026 and 2025 for loans modified within the twelve months preceding the respective reporting date.


	June 30, 2026
			30 - 89 Days		90+ Days		Total
	Current		Past Due		Past Due		Loans

	(In thousands)
MF FIN	$	109,783	$	—	$	11,540	$	121,323
HC FIN		58,228		—		8,342		66,570
CML & CRE		753		—		—		753
Total	$	168,764	$	—	$	19,882	$	188,646


	June 30, 2025
			30 - 89 Days		90+ Days		Total
	Current		Past Due		Past Due		Loans

	(In thousands)
MF FIN	$	58,088	$	—	$	7,698	$	65,786
HC FIN		—		—		9,649		9,649
CML & CRE		177		—		—		177
Total	$	58,265	$	—	$	17,347	$	75,612

During the six months ended June 30, 2026, one healthcare and two multi-family loans totaling $43.6 million defaulted after receiving payment delay and/or term extension modifications, within the previous twelve months, related to the borrowers’ financial difficulty. During the six months ended June 30, 2025, a multi-family loan totaling $9.6 million defaulted after receiving a payment delay modification, within the previous twelve months, related to the borrower’s financial difficulty.

Foreclosures

There were $0.8 million and $3.5 million of residential loans in process of foreclosure as of June 30, 2026 and December 31, 2025, respectively.

Loans Purchased

The Company purchased $39.3 million and $30.4 million of loans during the six months ended June 30, 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 June 30, 2026 and December 31, 2025 was $204.9 million and $186.5 million, respectively.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Supplemental Cash Flow Information

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


	Six Months Ended June 30,
	2026		2025

	(In thousands)
Cash Flow Statement
Supplemental cash flow information:
Investments received in securitization of loans sold	$	—	$	3,583
Transfer of loans to other real estate owned		4,378		—
Deposits received upon loan origination		—		189,206
Transfer of loans from loans held for sale to loans receivable		19,808		18,429
Transfer of loans from loans receivable to loans held for sale		55,570		386,604

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 of 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.


		June 30, 2026				December 31, 2025

		(In thousands)
Investment	Accounting Method	Investment		Unfunded Commitments		Investment		Unfunded Commitments
LIHTC	Proportional amortization	$	236,319	$	116,795	$	218,110	$	118,043
LIHTC⁽¹⁾	Proportional amortization		55,382		—		49,725		—
LIHTC subtotal		$	291,701	$	116,795	$	267,835	$	118,043
New Market Fund	Consolidated		10,916		—		10,903		—
Total		$	302,617	$	116,795	$	278,738	$	118,043

(1)

LIHTC projects held for future syndication.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table summarizes the amortization expense and tax credits recognized for the Company’s low-income housing investments for the three and six months ended June 30, 2026 and 2025.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025

	(In thousands)				(In thousands)
Amortization expense	$	6,685	$	3,784	$	12,972	$	7,559
Recognized tax credits	$	7,226	$	4,095	$	14,316	$	8,369

Variable Fees Subject to Revenue Recognition Constraints

The Company serves as a general partner for several syndicated LIHTC funds that are owned by the same 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 June 30, 2026 and 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 and six months ended June 30, 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 June 30, 2026 or December 31, 2025.

The Company has also advanced these LIHTC funds $82.8 million and $102.7 million as of June 30, 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 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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Supplemental Cash Flow Information

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


	Six Months Ended June 30,
	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		17,607		—
Deposits received upon reduction of funding commitments		18,854		—
Deposits received upon purchase of LIHTCs		9,926		—
Beneficial interests received in exchange for LIHTCs sold		7,836		4,227

Note 6: Leases

The Company has operating leases for various locations with terms ranging from one 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 June 30, 2026 and December 31, 2025:


		June 30, 2026		December 31, 2025

		(In thousands)
Balance Sheet
Operating lease ROU asset (in other assets)	$	13,803	$	6,006
Operating lease liability (in other liabilities)		15,199		7,264

Weighted average remaining lease term (years)		6.0		3.7
Weighted average discount rate		3.98%		3.44%

The table below presents the components of lease expenses for the three and six months ended June 30, 2026 and 2025. Operating lease expenses are included in occupancy and equipment expense on the unaudited condensed consolidated statements of income.


		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2026		2025		2026		2025

		(In thousands)				(In thousands)
Statement of Income
Components of lease expense:
Operating lease cost	$	919	$	738	$	1,558	$	1,432

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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


	June 30, 2026
		(In thousands)
Maturities of operating lease liabilities:
One year or less	$	2,891
Year two		3,090
Year three		3,001
Year four		2,431
Year five		2,076
Thereafter		3,798
Total future minimum lease payments		17,287
Less: imputed interest		2,088
Total	$	15,199


		Six Months Ended
		June 30,
		2026		2025

		(In thousands)
Cash Flow Statement
Supplemental cash flow information:
Operating cash flows for operating leases	$	1,062	$	1,133
ROU assets obtained in exchange for new operating lease liabilities		8,916		—

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 $175.5 million and $181.5 million as of June 30, 2026 and December 31, 2025, respectively. These receivables were primarily related to the acquisition of $22.0 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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Joint Ventures

The Company has investments in various joint ventures totaling $49.1 million and $47.0 million at June 30, 2026 and December 31, 2025, respectively. These investments are primarily made up of investments in debt funds totaling $32.6 million and $32.0 million at June 30, 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 as of June 30, 2026 and December 31, 2025. 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 is 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 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 June 30, 2026 and December 31, 2025, there were no CDS recovery assets established. The total loan pool balance was $1.2 billion and $2.0 billion as of June 30, 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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 June 30, 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 rights 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 reassessment.

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 June 30, 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. For more information about the mortgage-backed securitizations or LIHTC investments see Note 2: Securities and Note 5: Qualified Affordable Housing and Other Tax Credits.


	Investments		Loans		Securities		Maximum		Liabilities
Assets	in VIEs		to VIEs		for VIEs		Exposure to Loss		for VIEs

	(In thousands)
June 30, 2026
LIHTC investments	$	244,466	$	301,681	$	—	$	546,147	$	78,297
Debt funds		32,614		296,834		—		329,448		—
Mortgage-backed securitizations ⁽¹⁾		—		15,823		1,343,288		1,359,111		—
Total Unconsolidated VIEs	$	277,080	$	614,338	$	1,343,288	$	2,234,706	$	78,297
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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 9: Deposits

Deposits were comprised of the following at June 30, 2026 and December 31, 2025:



	June 30, 2026		December 31, 2025

	(In thousands)
Noninterest-bearing deposits
Core demand deposits	$	606,682	$	604,081

Interest-bearing deposits
Demand deposits:
Core demand deposits		7,820,104		6,207,814
Brokered demand deposits		503,257		600,000
Total interest-earning demand deposits		8,323,361		6,807,814
Money market/savings deposits:
Core money market/savings deposits		3,944,677		3,566,523
Brokered money market/savings deposits		2,912		201,010
Total money market/savings deposits		3,947,589		3,767,533
Certificates of deposit:
Core certificates of deposit		585,061		905,448
Brokered certificates of deposit		791,621		956,316
Total certificates of deposit		1,376,682		1,861,764
Total interest-bearing deposits		13,647,632		12,437,111
Total deposits	$	14,254,314	$	13,041,192

Total core deposits	$	12,956,524	$	11,283,866
Total brokered deposits	$	1,297,790	$	1,757,326
Total deposits	$	14,254,314	$	13,041,192

Maturities for certificates of deposit are as follows:


		June 30, 2026
		(In thousands)
Due within one year		$	1,336,726
Due in one year to two years			33,572
Due in two years to three years			6,384
Due in three years to four years			—
Due in four years to five years			—
Due in five years to six years			—
		$	1,376,682

Certificates of deposit of $250,000 or more totaled $329.9 million and $497.5 million at June 30, 2026 and December 31, 2025, respectively.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 10: Borrowings

Borrowings were comprised of the following at June 30, 2026 and December 31, 2025:


	June 30, 2026		December 31, 2025

	(In thousands)
Subordinated debt	$	71,800	$	71,800
FHLB advances		4,202,863		3,762,858
Other borrowings		7,934		7,934
Total borrowings	$	4,282,597	$	3,842,592

FHLB

On June 15, 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 June 30, 2026, and matures on September 14, 2026. The variable interest rate is based on the Federal Funds effective rate, plus 15 basis points, which was 3.78% on June 30, 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.

On June 30, 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 $2.2 billion as of June 30, 2026, and matures on September 28, 2026. The variable interest rate is based on the Federal Funds effective rate, plus 15 basis points, which was 3.78% on June 30, 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.

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

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Since 2024, the Company has executed 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 contracts, the Company will be compensated for certain credit-related losses on a pool of covered loans. As of June 30, 2026, the protection sellers have posted aggregate collateral of $142.5 million related to their obligations under the contracts. 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.

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 default swaps utilized by the Company at June 30, 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)
June 30, 2026
Interest rate lock commitments	$	218,622	Other assets/liabilities	$	505	$	230
Forward contracts		335,838	Other assets/liabilities		49		685
Interest rate swaps		49,152	Other assets		3,003		—
Put options		575,910	Other assets		48,234		—
Interest rate floors		1,065,460	Other assets		14,147		—
Credit default swaps		141,368	Other assets		2,149		—
				$	68,087	$	915

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)


		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

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 and six months ended June 30, 2026 and 2025.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025

	(In thousands)					(In thousands)
Derivative (loss) gain included in gain on sale of loans:
Interest rate lock commitments	$	1,307	$	224	$	155	$	408
Forward contracts (includes pair-off settlements)		(1,175)		(168)		160		(518)
Interest rate swaps		—		(438)		—		(1,280)
Net gain (loss)	$	132	$	(382)	$	315	$	(1,390)

Derivative gain included in other income:
Put options ⁽¹⁾	$	2,741	$	7,522	$	10,664	$	1,277
Interest rate floors		1,911		4,333		4,607		2,075
Interest rate swaps		561		—		909		—
Net gain	$	5,213	$	11,855	$	16,180	$	3,352

Derivative gain included in credit risk transfer premium expense:
Credit default swaps	$	2,218	$	—	$	2,149	$	—
Net gain	$	2,218	$	—	$	2,149	$	—

___________________________

(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 are recorded as a charge or credit to current earnings in other noninterest income, typically resulting in no net earnings impact.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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)
June 30, 2026	$	1,272,950	Other assets/liabilities	$	175	$	175
December 31, 2025	$	1,178,034	Other assets/liabilities	$	7,289	$	7,289

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025

	(In thousands)					(In thousands)
Gross IRRM derivative gains	$	5,022	$	5,162	$	7,464	$	9,706
Gross IRRM derivative losses		(5,022)		(5,162)		(7,464)		(9,706)
Net IRRM derivative gains (losses)	$	—	$	—	$	—	$	—

The Company pledged $10.1 million and $10.0 million in collateral to secure its obligations under IRRM contracts at June 30, 2026 and December 31, 2025, respectively.

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

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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 June 30, 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)
June 30, 2026
Mortgage loans in process of securitization	$	407,418	$	—	$	407,418	$	—
Securities available for sale:
Treasury notes		30,395		30,395		—		—
Federal Agencies		258,496		—		258,496		—
Mortgage-backed - Agency		3,538		—		3,538		—
Mortgage-backed - Non-Agency residential - fair value option		356,050		—		356,050		—
Mortgage-backed - Agency - fair value option		171,626		—		171,626		—
Loans held for sale		148,368		—		148,368		—
Loans receivable		46,024		—		46,024		—
Servicing rights		236,949		—		—		236,949
Derivative assets:
Interest rate lock commitments		505		—		—		505
Forward contracts		49		—		49		—
Interest rate swaps		3,003		—		3,003		—
Interest rate swaps, caps, and floors (back-to-back)		175		—		175		—
Put options		48,234		—		7,173		41,061
Interest rate floors		14,147		—		—		14,147
Credit default swap		2,149		—		—		2,149
Derivative liabilities:
Interest rate lock commitments		230		—		—		230
Forward contracts		685		—		685		—
Interest rate swaps, caps, and floors (back-to-back)		175		—		175		—


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		—

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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 six months ended June 30, 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

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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.

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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 June 30,						Six Months Ended June 30,
		2026			2025			2026			2025

		(In thousands)						(In thousands)
Servicing rights
Balance, beginning of period		$	229,576		$	189,711		$	217,296		$	189,935
Purchased servicing			—			70			125			70
Originated servicing			4,010			5,244			9,759			8,582
Paydowns			(2,652)			(2,246)			(5,184)			(5,054)
Gain (loss) recognized			6,015			258			14,953			(496)
Balance, end of period		$	236,949		$	193,037		$	236,949		$	193,037

Derivative assets - put options
Balance, beginning of period		$	38,877		$	28,295		$	31,930		$	31,296
Gain (loss) recognized			2,184			7,915			9,131			4,914
Balance, end of period		$	41,061		$	36,210		$	41,061		$	36,210

Derivative assets - interest rate floors
Balance, beginning of period		$	12,236		$	1,785		$	9,540		$	4,043
Gain (loss) recognized			1,911			4,333			4,607			2,075
Balance, end of period		$	14,147		$	6,118		$	14,147		$	6,118

Derivative assets - credit defaults swaps
Balance, beginning of period		$	—		$	—		$	—		$	—
Gain (loss) recognized			2,149			—			2,149			—
Balance, end of period		$	2,149		$	—		$	2,149		$	—

Derivative liabilities - credit defaults swaps
Balance, beginning of period		$	(69)		$	—		$	—		$	—
Gain (loss) recognized			69			—			—			—
Balance, end of period		$	—		$	—		$	—		$	—

Derivative assets - interest rate lock commitments
Balance, beginning of period		$	142		$	126		$	227		$	30
Gain (loss) recognized			363			144			278			240
Balance, end of period		$	505		$	270		$	505		$	270

Derivative liabilities - interest rate lock commitments
Balance, beginning of period		$	(1,174)		$	(88)		$	(107)		$	(176)
Gain (loss) recognized			944			80			(123)			168
Balance, end of period		$	(230)		$	(8)		$	(230)		$	(8)

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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 June 30, 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)
June 30, 2026
Collateral dependent loans	$	52,897	$	—	$	—	$	52,897
Other real estate owned		4,297		—		—		4,297

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.

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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 June 30, 2026:
Collateral dependent loans	$	52,897	Market comparable properties	Marketability discount and costs to sell	5% - 67%	35%
Other real estate owned		4,297	Market comparable properties	Marketability discount and costs to sell	22% - 34%	32%
Servicing rights - Multi-family		178,754	Discounted cash flow	Discount rate	8% - 15%	9%
				Constant prepayment rate	0% - 100%	8%
				Earnings rate on escrows	4%	4%
Servicing rights - Single-family		37,084	Discounted cash flow	Discount rate	9% - 12%	9%
				Constant prepayment rate	3% - 100%	7%
Servicing rights - Healthcare		15,590	Discounted cash flow	Discount rate	10% - 13%	11%
				Constant prepayment rate	1% - 19%	5%
				Earnings rate on escrows	4%	4%
Servicing rights - SBA		5,521	Discounted cash flow	Discount rate	16%	16%
				Constant prepayment rate	11% - 32%	14%
Derivative assets:
Interest rate lock commitments		505	Discounted cash flow	Loan closing rates	48% - 100%	88%
Put options		41,061	Intrinsic value	Market credit spread	4%	4%
Interest rate floors		14,147	Discounted cash flow	Discount rate	5% - 8%	7%
Credit default swaps		2,149	Discounted cash flow	Corporate default rate	1% - 7%	7%
				Market credit spread	11%	11%
Derivative liabilities:
Interest rate lock commitments		230	Discounted cash flow	Loan closing rates	48% - 100%	88%

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.

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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.

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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 June 30, 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)
June 30, 2026
Financial assets:
Cash and cash equivalents	$	314,703	$	314,703	$	314,703	$	—	$	—
Securities purchased under agreements to resell		1,501		1,501		—		1,501		—
Securities held to maturity		1,354,885		1,353,543		—		640,257		713,286
FHLB stock and other equity securities		227,589		227,589		—		196,391		31,198
Loans held for sale		4,467,526		4,467,526		—		4,467,526		—
Loans receivable, net		12,216,776		12,229,537		—		—		12,229,537
Interest receivable		82,078		82,078		—		82,078		—
Financial liabilities:
Deposits		14,254,314		14,253,378		12,877,632		1,375,746		—
Subordinated debt		71,800		71,800		—		71,800		—
FHLB advances		4,202,863		4,202,822		—		4,202,822		—
Other borrowing		7,934		7,934		—		7,934		—
Interest payable		26,968		26,968		—		26,968		—

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		—

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 13: Common Stock

Repurchase of Common Stock:

The Company did not repurchase any common stock during the three months ended June 30, 2026. During the six months ended June 30, 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 June 30, 2025. The following table presents our repurchase activity on a cash basis.


		Six Months Ended
		June 30,
		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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 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. 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.

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 did not issue any shares during the three months ended June 30, 2026 and 2025, respectively. The Company issued 68,893 and 80,875 shares during the six months ended June 30, 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 2,667 and 3,752 shares issued to non-executive directors during the three months ended June 30, 2026 and 2025, respectively and there were 5,306 and 6,615 shares issued to non-executive directors during the six months ended June 30, 2026 and 2025, respectively.

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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. There was no contribution to the ESOP during the three months ended June 30, 2026 and 2025. Expenses recognized for the contribution to the ESOP totaled $422,000 and $389,000 for the three months ended June 30, 2026 and 2025, respectively and totaled $836,000 and $726,000 for the six months ended June 30, 2026 and 2025, respectively. The Company contributed 43,868 shares and 30,802 shares to the ESOP for the six months ended June 30, 2026 and 2025, respectively.

Note 16: Earnings Per Share

Earnings per share were computed as follows for the three and six months ended June 30, 2026 and 2025:


	Three Months Ended June 30,
	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	$	78,303						$	37,981
Dividends on preferred stock		(10,266)							(10,266)
Net income allocated to common shareholders	$	68,037						$	27,715
Basic earnings per share			45,936,610		$	1.48				45,883,644		$	0.60
Effect of dilutive securities-restricted stock awards			69,328							45,919
Diluted earnings per share			46,005,938		$	1.48				45,929,563		$	0.60


	Six Months Ended June 30,
	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	$	146,035						$	96,220
Dividends on preferred stock		(20,531)							(20,531)
Impact of preferred stock redemption		—							(5,371)
Net income allocated to common shareholders	$	125,504						$	70,318
Basic earnings per share			45,933,291		$	2.73				45,853,998		$	1.53
Effect of dilutive securities-restricted stock awards			68,568							67,990
Diluted earnings per share			46,001,859		$	2.73				45,921,988		$	1.53

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.

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 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 complementary, 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, salaries 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 and six months ended June 30, 2026 and 2025.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)


		Multi-family
		Mortgage			Mortgage
		Banking			Warehousing		Banking		Other		Total

		(In thousands)
Three Months Ended June 30, 2026
Interest income		$	1,115		$	117,171	$	172,068	$	3,718	$	294,072
Interest expense			20			73,061		85,272		(817)		157,536
Net interest income			1,095			44,110		86,796		4,535		136,536
Provision for credit losses			(6)			855		8,335		—		9,184
Net interest income after provision for credit losses			1,101			43,255		78,461		4,535		127,352
Noninterest income			42,835			3,768		2,024		(2,947)		45,680
Noninterest expense
Salaries and employee benefits			22,252			2,282		5,376		9,435		39,345
Other noninterest expense			8,504			5,361		14,484		5,554		33,903
Total noninterest expense			30,756			7,643		19,860		14,989		73,248
Income (loss) before income taxes			13,180			39,380		60,625		(13,401)		99,784
Income taxes			2,844			8,781		13,288		(3,432)		21,481
Net income (loss)		$	10,336		$	30,599	$	47,337	$	(9,969)	$	78,303
Total assets		$	567,941		$	8,647,738	$	11,581,635	$	432,668	$	21,229,982

Significant non-cash items:
Included in other noninterest income:
Servicing rights fair value adjustments		$	4,607		$	—	$	1,408	$	—	$	6,015
Floor derivative fair value adjustments			—			1,911		—		—		1,911


		Multi-family
		Mortgage			Mortgage
		Banking			Warehousing		Banking		Other		Total

		(In thousands)
Three Months Ended June 30, 2025
Interest income		$	1,138		$	100,770	$	198,542	$	3,949	$	304,399
Interest expense			20			67,819		108,647		(806)		175,680
Net interest income			1,118			32,951		89,895		4,755		128,719
Provision for credit losses			(345)			1,785		51,587		—		53,027
Net interest income after provision for credit losses			1,463			31,166		38,308		4,755		75,692
Noninterest income			44,752			6,820		3,283		(4,375)		50,480
Noninterest expense
Salaries and employee benefits			28,727			1,608		6,076		7,155		43,566
Other noninterest expense			4,842			6,787		17,287		4,855		33,771
Total noninterest expense			33,569			8,395		23,363		12,010		77,337
Income (loss) before income taxes			12,646			29,591		18,228		(11,630)		48,835
Income taxes			3,377			6,605		3,654		(2,782)		10,854
Net income (loss)		$	9,269		$	22,986	$	14,574	$	(8,848)	$	37,981
Total assets		$	487,853		$	6,999,701	$	11,404,488	$	249,162	$	19,141,204

Significant non-cash items:
Included in other noninterest income:
Servicing rights fair value adjustments		$	745		$	—	$	(487)	$	—	$	258
Floor derivative fair value adjustments			—			4,333		—		—		4,333

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Notes to Condensed Consolidated Financial Statements

(Unaudited)


		Multi-family
		Mortgage			Mortgage
		Banking			Warehousing		Banking		Other		Total

		(In thousands)
Six Months Ended June 30, 2026
Interest income		$	2,177		$	217,817	$	337,226	$	7,363	$	564,583
Interest expense			40			135,140		165,798		(1,579)		299,399
Net interest income			2,137			82,677		171,428		8,942		265,184
Provision for credit losses			(13)			148		24,348		—		24,483
Net interest income after provision for credit losses			2,150			82,529		147,080		8,942		240,701
Noninterest income			81,924			8,089		8,306		(6,040)		92,279
Noninterest expense
Salaries and employee benefits			43,228			4,250		12,129		18,303		77,910
Other noninterest expense			13,156			11,279		35,480		11,065		70,980
Total noninterest expense			56,384			15,529		47,609		29,368		148,890
Income (loss) before income taxes			27,690			75,089		107,777		(26,466)		184,090
Income taxes			6,340			15,842		22,460		(6,587)		38,055
Net income (loss)		$	21,350		$	59,247	$	85,317	$	(19,879)	$	146,035
Total assets		$	567,941		$	8,647,738	$	11,581,635	$	432,668	$	21,229,982

Significant non-cash items:
Included in other noninterest income:
Servicing rights fair value adjustments		$	11,986		$	—	$	2,967	$	—	$	14,953
Floor derivative fair value adjustments			—			4,607		—		—		4,607


		Multi-family
		Mortgage			Mortgage
		Banking			Warehousing		Banking		Other			Total

		(In thousands)
Six Months Ended June 30, 2025
Interest income		$	2,318		$	186,887	$	394,586	$	7,812	$	591,603
Interest expense			40			125,488		216,754		(1,594)		340,688
Net interest income			2,278			61,399		177,832		9,406		250,915
Provision for credit losses			(393)			1,359		59,788		—		60,754
Net interest income after provision for credit losses			2,671			60,040		118,044		9,406		190,161
Noninterest income			73,648			6,080		2,216		(7,771)		74,173
Noninterest expense
Salaries and employee benefits			49,655			3,585		12,555		14,190		79,985
Other noninterest expense			8,474			12,831		28,118		9,593		59,016
Total noninterest expense			58,129			16,416		40,673		23,783		139,001
Income (loss) before income taxes			18,190			49,704		79,587		(22,148)		125,333
Income taxes			5,508			11,320		17,906		(5,621)		29,113
Net income (loss)		$	12,682		$	38,384	$	61,681	$	(16,527)	$	96,220
Total assets		$	487,853		$	6,999,701	$	11,404,488	$	249,162	$	19,141,204

Significant non-cash items:
Included in other noninterest income:
Servicing rights fair value adjustments		$	1,194		$	—	$	(1,690)	$	—	$	(496)
Floor derivative fair value adjustments			—			2,075		—		—		2,075

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 June 30, 2026 and December 31, 2025, the Company and Merchants Bank met all capital adequacy requirements.

As of June 30, 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.

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)
June 30, 2026
Total capital⁽¹⁾ (to risk-weighted assets)
Company	$	2,470,123	12.5	%	$	2,073,368	10.5	%	$	—	N/A	%
Merchants Bank		2,398,352	12.2	%		2,067,150	10.5	%		1,968,714	10.0	%
Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		2,386,160	12.1	%		1,678,441	8.5	%		—	N/A	%
Merchants Bank		2,314,389	11.8	%		1,673,407	8.5	%		1,574,971	8.0	%
Common Equity Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		1,834,870	9.3	%		1,382,245	7.0	%		—	N/A	%
Merchants Bank		2,314,389	11.8	%		1,378,100	7.0	%		1,279,664	6.5	%
Tier I capital⁽¹⁾ (to average assets)
Company		2,386,160	11.6	%		1,028,502	5.0	%		—	N/A	%
Merchants Bank		2,314,389	11.3	%		1,025,533	5.0	%		1,025,533	5.0	%

(1)

As defined by regulatory agencies.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)



					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.

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Merchants Bancorp

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,” “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;

●

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

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Merchants Bancorp

●

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

Management’s discussion and analysis of the financial condition at June 30, 2026 and results of operations for the three and six months ended June 30, 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 June 30, 2026

●

Net income of $78.3 million increased $40.3 million, or 106%, compared to the three months ended June 30, 2025.

●

Diluted earnings per share of $1.48 increased 147% compared to the three months ended June 30, 2025.

●

Total assets of $21.2 billion increased 4% compared to March 31, 2026 and $1.8 billion, or 9%, from December 31, 2025.

●

Tangible book value per common share of $39.93 increased 13% compared to $35.42 for the three months ended June 30, 2025. See Non-GAAP Financial Measures section at the end of Item 2.

●

Asset quality improved meaningfully, as criticized loans receivable of $444.7 million decreased $63.5 million, or 12%, from December 31, 2025.

●

The provision for credit losses of $9.2 million decreased 83% compared to the three months ended June 30, 2025 and decreased 40% compared to the three months ended March 31, 2026.

●

Capital ratios remained strong, with a total capital ratio of 12.5%, reflecting the Company’s continued emphasis on financial strength and balance sheet resilience.

●

Liquidity remained strong at $13.0 billion, or 61% of total assets, supported by $5.5 billion of unused borrowing capacity with the Federal Home Loan Bank and Federal Reserve Discount Window and a diversified mix of highly liquid assets, including cash and cash equivalents, short-term investments, mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit.

●

Loans receivable, net of allowance for credit losses, totaled $12.3 billion, increasing $862.9 million, or 8%, from March 31, 2026, and increased $1.3 billion, or 12%, from December 31, 2025.

●

Core deposits of $13.0 billion increased $891.3 million, or 7%, from March 31, 2026, and $1.7 billion, or 15%, from December 31, 2025. Core deposits now represent 91% of total deposits.

●

Brokered deposits of $1.3 billion increased $411.3 million, or 46%, compared to March 31, 2026, and decreased $459.5 million, or 26%, compared to December 31, 2025.

●

As of June 30, 2026, approximately 97% of loans reprice within three months, which reduces the risk of market rate increases.

●

Net interest margin was 2.81% compared to 2.83% for the three months ended June 30, 2025.

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●

Efficiency ratio was 40.20% compared to 43.16% for the three months ended June 30, 2025.

●

The Company executed a credit default swap on a $169.9 million pool of multi-family mortgage loans in June 2026, providing credit protection for the loan pool and reducing risk-based capital requirements.

●

The volume of warehouse loans funded during the three months ended June 30, 2026 amounted to $22.9 billion, an increase of $6.6 billion, or 41%, compared to the three months ended June 30, 2025. This compared to the 10% industry increase in single-family residential loan volumes for the three months ended June 30, 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 $1.5 billion, an increase of $99.8 million, or 7%, compared to $1.4 billion for the three months ended June 30, 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.

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 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.

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Financial Condition

As of June 30, 2026, we had approximately $21.2 billion in total assets, $14.3 billion in deposits, and $2.4 billion in total shareholders’ equity. Total assets as of June 30, 2026 included $12.3 billion of loans receivable, net of ACL-Loans, and $4.6 billion of loans held for sale. Assets also included $1.4 billion in securities held to maturity and $820.1 million in securities available for sale, the majority of which were acquired from a warehouse customer. Additionally, we had $407.4 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 $751.0 million, which primarily related to low-income housing tax credits, and $314.7 million of cash and cash equivalents. Servicing rights at June 30, 2026 were $236.9 million based on the fair value of the loan servicing, which primarily includes Ginnie Mae multi-family servicing rights with 10-year call protection at origination.

Comparison of Financial Condition at June 30, 2026 and December 31, 2025

Total Assets. Total assets of $21.2 billion at June 30, 2026 increased $1.8 billion, or 9%, 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 multi-family and warehouse portfolios, as well as revolving lines of credit collateralized by mortgage servicing rights that are included in the commercial and commercial real estate 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 $314.7 million at June 30, 2026 increased $102.5 million, or 48%, compared to $212.2 million at December 31, 2025. The increase was primarily to satisfy anticipated loan funding commitments.

Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $407.4 million at June 30, 2026 decreased $212.7 million, or 34%, 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 $820.1 million at June 30, 2026 decreased $45.0 million, or 5%, compared to $865.1 million at December 31, 2025. The decrease in securities available for sale was primarily due to $305.3 million in calls, maturities, repayments, and other adjustments, partially offset by purchases of $260.4 million during the period.

Included in securities available for sale were $527.7 million and $571.3 million of investments for which a fair value option was elected at June 30, 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 June 30, 2026, AOCL of $1.2 million, related to securities available for sale increased $1.2 million from December 31, 2025. The $1.2 million of AOCL as of June 30, 2026 represented less than 0.15% 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 June 30, 2026 decreased $188.8 million compared to $1.5 billion at December 31, 2025. The decrease was due to repayments, net of accretion.

Loans Held for Sale. Loans held for sale of $4.6 billion at June 30, 2026 increased $742.9 million, or 19%, compared to $3.9 billion at December 31, 2025. The increase in loans held for sale was due primarily to a significant

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increase in single-family warehouse participations, as we experienced higher volume. Loans held for sale are comprised 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 $12.3 billion at June 30, 2026, increased $1.3 billion, or 12%, compared to $11.0 billion at December 31, 2025. The increase in net loans was comprised primarily of:

●

an increase of $567.9 million, or 35%, in mortgage warehouse repurchase agreements, which totaled $2.2 billion at June 30, 2026, reflecting higher loan volume from increased sales efforts.

●

an increase of $522.8 million, or 10%, in multi-family financing loans, which totaled $5.9 billion at June 30, 2026, reflecting higher origination volume for construction and other 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 $233.9 million, or 15%, in commercial and commercial real estate loans, which totaled $1.8 billion at June 30, 2026, was related to an increase in revolving lines of credit collateralized by mortgage servicing rights.

As of June 30, 2026, approximately 97% of total loans reprice within three months, which reduces the risk of market rate increases.

The Company is a nationwide lender, especially in our multi-family and healthcare financing portfolios.

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


		June 30, 2026
		Multi-family					Healthcare
State		Amount		% of Total		State	Amount		% of Total

		(In thousands)						(In thousands)
Indiana		$	1,715,609	29	%	Michigan	$	274,951	21	%
New York			910,071	16		Georgia		148,530	12
Texas			285,762	5		Ohio		135,037	10
Florida			237,808	4		Texas		120,876	9
Georgia			224,938	4		Pennsylvania		95,461	7
Other states⁽¹⁾			2,481,289	42		Other states⁽¹⁾		528,742	41
Total		$	5,855,477	100	%		$	1,303,597	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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		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 $75.8 million at June 30, 2026 decreased $7.5 million, or 9%, compared to $83.3 million at December 31, 2025. The decrease compared to December 31, 2025 was driven by a $12.1 million decrease in specific reserves partially offset by a $4.6 million increase in the pooled loan reserve. For the six months ended June 30, 2026, $34.1 million of net charge-offs were partially offset by a $26.6 million in provision for credit losses on loans. Additional details are provided in the Asset Quality portion of the Comparison of Financial Condition at June 30, 2026 and December 31, 2025 and in Note 4: Loans and Allowance for Credit Losses on Loans.

Goodwill. Goodwill of $8.0 million at June 30, 2026 was unchanged compared to December 31, 2025.

Servicing Rights. Servicing rights of $236.9 million at June 30, 2026 increased $19.7 million, or 9%, compared to December 31, 2025. During the six months ended June 30, 2026, a positive fair market value adjustment of $15.0 million and originated or purchased servicing of $9.9 million were partially offset by paydowns of $5.2 million. The $15.0 million positive fair market value adjustment reflected a positive adjustment of $12.0 million for multi-family and healthcare mortgages and a positive adjustment of $3.0 million for single-family mortgages and SBA loans during the six months ended June 30, 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 six months ended June 30, 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 10-year interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates that are influenced by projected future interest rates on escrow deposits.

Other Real Estate Owned. Other real estate owned of $72.4 million at June 30, 2026 increased $12.2 million, or 20%, compared to December 31, 2025.

Other Assets and Receivables. Other assets and receivables of $751.0 million at June 30, 2026 increased $37.8 million, or 5%, compared to December 31, 2025. The increase was primarily due to an $11.8 million increase in LIHTC assets.

Deposits. Deposits of $14.3 billion at June 30, 2026 increased $1.2 billion, or 9%, compared to December 31, 2025. As of June 30, 2026, approximately 85% of the total deposits reprice within three months.

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A summary of deposits as of June 30, 2026 and December 31, 2025 is below.


	June 30, 2026				December 31, 2025				Change		Change
	Amount		%		Amount		%		Amount		%

		(In thousands)
Brokered deposits	$	1,297,790	9	%	$	1,757,326	13	%	$	(459,536)	(26)	%
Core deposits		12,956,524	91			11,283,866	87			1,672,658	15
Total	$	14,254,314	100	%	$	13,041,192	100	%	$	1,213,122	9	%

Core deposits increased by $1.7 billion, or 15%, to $13.0 billion at June 30, 2026 compared to $11.3 billion at December 31, 2025. Core deposits represented 91% of total deposits at June 30, 2026 compared to 87% of total deposits at December 31, 2025.

We have decreased our use of total brokered deposits by $459.5 million, or 26%, to $1.3 billion at June 30, 2026 compared to $1.8 billion at December 31, 2025. Brokered deposits represented 9% of total deposits at June 30, 2026 compared to 13% of total deposits at December 31, 2025. As of June 30, 2026, brokered certificates of deposit had a weighted average remaining duration of 51 days.

Interest-bearing deposits at June 30, 2026 increased $1.2 billion, or 10%, to $13.6 billion compared to $12.4 billion at December 31, 2025, and noninterest-bearing deposits increased $2.6 million, to $606.7 million at June 30, 2026 compared to $604.1 million at December 31, 2025. The increase in interest-bearing deposits is primarily related to custodial account relationships.

Uninsured deposits totaled approximately $4.2 billion as of June 30, 2026, representing 29% 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 $1.4 billion as of June 30, 2026 and December 31, 2025.

Borrowings. Borrowings of $4.3 billion at June 30, 2026 increased $440.0 million, or 11%, compared to December 31, 2025. The higher level of collateralized borrowing was 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 June 30, 2026, unused lines of credit totaled $5.5 billion, an increase of 4%, compared to $5.3 billion at December 31, 2025. The Company’s ratio of total collateralized borrowing capacity to total assets was 46% at June 30, 2026 compared to 47% at December 31, 2025.

Deferred and Current Tax Liabilities. Deferred and current tax liabilities at June 30, 2026 increased $16.2 million, or 48%, compared to $33.9 million at December 31, 2025. The increase is primarily due to growth in servicing assets and other derivative activity.

Other Liabilities. Other Liabilities of $249.1 million at June 30, 2026 decreased $1.4 million, or 1%, compared to $250.5 million at December 31, 2025. The decrease in other liabilities was primarily in accrued expenses.

Total Shareholders’ Equity. Total shareholders’ equity was $2.4 billion at June 30, 2026. The $113.0 million, or 5%, increase compared to December 31, 2025 resulted primarily from net income of $146.0 million for the six months ended June 30, 2026. The increase was partially offset by dividends paid on common and preferred shares of $30.6 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 $75.8 million, as of June 30, 2026, decreased by $7.5 million, or 9%, compared to $83.3 million as of December 31, 2025. The $7.5 million decrease compared to December 31, 2025 was driven by a $12.1 million decrease in specific reserves partially offset by a $4.6 million increase in the pooled loan reserve.

During the three months ended June 30, 2026, the Company recorded charge-offs across five relationships, primarily in the multi-family loan portfolio totaling $16.5 million and had $4.8 million of recoveries compared to $46.1 million of charge-offs and no recoveries for the three months ended June 30, 2025.

For the six months ended June 30, 2026, the Company recorded charge-offs totaling $39.5 million and had $5.4 million of recoveries compared to $56.6 million of charge-offs and $28,000 of recoveries for the six months ended June 30, 2025.

Overall criticized loans receivable of $444.7 million declined by $63.5 million, or 12%, compared to $508.2 million at December 31, 2025 and decreased $144.4 million, or 25%, compared to June 30, 2025. These declines are consistent with the Company’s expectation that migration to criticized status would stabilize and eventually subside, and workout efforts would yield an increase in resolutions. As of June 30, 2026, 6% of the criticized loans were covered by credit default swaps.

Loans receivable classified as Special Mention totaled $214.8 million at June 30, 2026, increased $9.9 million, or 5%, compared to $204.9 million at December 31, 2025, and increased $43.3 million, or 25%, compared to $171.5 million at June 30, 2025. Loans receivable classified as Substandard totaled $229.9 million at June 30, 2026, declining $73.3 million, or 24%, compared to December 31, 2025, and down $187.7 million, or 45%, from June 30, 2025.

As of June 30, 2026, all Substandard loans have been evaluated for impairment, and these loans have specific reserves of $3.9 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 $205.6 million, or 1.67%, of total loans receivable, at June 30, 2026, compared to $197.8 million, or 1.79%, at December 31, 2025 and $251.5 million, or 2.39%, at June 30, 2025.

Loans receivable greater than 30 days past due were $207.7 million at June 30, 2026, compared to $206.6 million at December 31, 2025, and $279.0 million at June 30, 2025. As of June 30, 2026, 10% of delinquent loans were covered by credit default swaps.

As a percentage of nonperforming loans, the ACL-Loans was 37% at June 30, 2026 compared to 42% at December 31, 2025 and 37% at June 30, 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 potential loss exposure, with coverage ranging from 13-15% of the unpaid principal balances for each arrangement. As of June 30, 2026, the unpaid principal balances of loans protected by credit default swaps was $2.2 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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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 301% from December 31, 2025 to June 30, 2026, respectively.

Comparison of Operating Results for the Three Months Ended June 30, 2026 and 2025

General. Net income of $78.3 million for the three months ended June 30, 2026 increased by $40.3 million, or 106%, compared to $38.0 million for the three months ended June 30, 2025. The increase was primarily driven by a $43.8 million, or 83%, decrease in the provision for credit losses, reflecting improved asset quality. The results were also favorably impacted by a $7.8 million increase in net interest income, and a $4.1 million decrease in noninterest expense, which were offset by a $10.6 million increase in the provision for income taxes, and a decrease of $4.8 million in noninterest income.

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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 June 30,
		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		$	689,479	$	9,433	5.49	%	$	539,357	$	8,193	6.09	%
Securities available for sale			832,715		9,562	4.61			955,186		12,095	5.08
Securities held to maturity			1,398,098		18,076	5.19			1,572,186		23,166	5.91
Mortgage loans in process of securitization			353,297		4,455	5.06			376,904		5,304	5.64
Loans and loans held for sale			16,185,486		252,546	6.26			14,826,151		255,641	6.92
Total interest-earning assets			19,459,075		294,072	6.06	%		18,269,784		304,399	6.68	%
Allowance for credit losses on loans			(80,566)						(90,860)
Noninterest-earning assets			1,200,366						806,001
Total assets		$	20,578,875					$	18,984,925
Liabilities/Shareholders' Equity:
Interest-bearing checking		$	7,891,368	$	67,395	3.43	%	$	6,161,736	$	60,845	3.96	%
Money market/savings deposits			4,117,113		36,120	3.52			3,499,982		35,145	4.03
Certificates of deposit			1,386,717		13,324	3.85			3,090,250		35,385	4.59
Total interest-bearing deposits			13,395,198		116,839	3.50			12,751,968		131,375	4.13
Borrowings			4,017,881		40,697	4.06			3,453,960		44,305	5.15
Total interest-bearing liabilities			17,413,079		157,536	3.63	%		16,205,928		175,680	4.35	%
Noninterest-bearing deposits			542,526						376,217
Noninterest-bearing liabilities			243,697						200,944
Total liabilities			18,199,302						16,783,089
Shareholders' equity			2,379,573						2,201,836
Total liabilities and shareholders' equity		$	20,578,875					$	18,984,925
Net interest income				$	136,536					$	128,719
Interest rate spread						2.43	%					2.33	%
Net interest-earning assets		$	2,045,996					$	2,063,856
Net interest margin						2.81	%					2.83	%
Average interest-earning assets to average interest-bearing liabilities						111.75	%					112.74	%

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 rates and volumes 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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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:


		Three Months Ended June 30, 2026
		compared to June 30, 2025
		Increase (Decrease)
		Due to
		Volume			Rate			Total

		(In thousands)
Interest income
Interest-earning deposits, and other interest or dividends		$	2,280		$	(1,040)		$	1,240
Securities available for sale			(1,551)			(982)			(2,533)
Securities held to maturity			(2,565)			(2,525)			(5,090)
Mortgage loans in process of securitization			(332)			(517)			(849)
Loans and loans held for sale			23,438			(26,533)			(3,095)
Total interest income			21,270			(31,597)			(10,327)
Interest expense
Deposits
Interest-bearing checking			17,080			(10,530)			6,550
Money market/savings deposits			6,197			(5,222)			975
Certificates of deposit			(19,506)			(2,555)			(22,061)
Total Deposits			3,771			(18,307)			(14,536)
Borrowings			7,234			(10,842)			(3,608)
Total interest expense			11,005			(29,149)			(18,144)
Net interest income		$	10,265		$	(2,448)		$	7,817

Net Interest Income. Net interest income of $136.5 million for the three months ended June 30, 2026 increased $7.8 million, or 6%, compared with $128.7 million for the three months ended June 30, 2025. The increase reflected lower interest expense on certificates of deposit, partially offset by higher interest expense on interest-bearing checking accounts and lower interest income on securities held to maturity.

●

The interest rate spread of 2.43% for the three months ended June 30, 2026 increased ten basis points compared to 2.33% for the three months ended June 30, 2025.

●

Our net interest margin decreased two basis points, to 2.81% for the three months ended June 30, 2026 compared to 2.83% for the three months ended June 30, 2025.

Interest Income. Interest income of $294.1 million for the three months ended June 30, 2026 decreased $10.3 million, or 3%, compared with $304.4 million for the three months ended June 30, 2025. The decrease was primarily attributable to lower average balances and yields on securities held to maturity, as well as lower average yields on higher average balances on loans and loans held for sale.

Interest income of $18.1 million on securities held to maturity for the three months ended June 30, 2026, decreased $5.1 million, or 22%, compared to $23.2 million for the three months ended June 30, 2025.

●

The average yield decreased 72 basis points to 5.19% for the three months ended June 30, 2026, compared to 5.91% for the three months ended June 30, 2025.

●

The average balance of securities held to maturity of $1.4 billion for the three months ended June 30, 2026 decreased $174.1 million, or 11%, compared to $1.6 billion for the three months ended June 30, 2025. The decrease in average balance was due to repayments.

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Interest income of $252.5 million on loans and loans held for sale for the three months ended June 30, 2026, decreased $3.1 million, or 1%, compared to $255.6 million for the three months ended June 30, 2025.

●

The average loan balance of $16.2 billion for the three months ended June 30, 2026 increased $1.4 billion compared to $14.8 billion for the three months ended June 30, 2025.

●

The average yield decreased 66 basis points, to 6.26% for the three months ended June 30, 2026, compared to 6.92% for the three months ended June 30, 2025.

Interest income of $9.6 million on securities available for sale for the three months ended June 30, 2026, decreased $2.5 million, or 21%, compared to $12.1 million for the three months ended June 30, 2025.

●

The average balance of $832.7 million decreased $122.5 million, or 13%, compared to $955.2 million for the three months ended June 30, 2025.

●

The average yield decreased 47 basis points, to 4.61% for the three months ended June 30, 2026, compared to 5.08% for the three months ended June 30, 2025.

Interest income of $4.5 million on mortgage loans in process of securitization for the three months ended June 30, 2026, decreased $0.8 million, or 16%, compared to $5.3 million for the three months ended June 30, 2025.

●

The average balance of $353.3 million decreased $23.6 million, or 6%, compared to $376.9 million for the three months ended June 30, 2025.

●

The average yield decreased 58 basis points, to 5.06% for the three months ended June 30, 2026, compared to 5.64% for the three months ended June 30, 2025.

Interest income of $9.4 million on interest-earning deposits, and other interest or dividends for the three months ended June 30, 2026, increased $1.2 million, or 15%, compared to $8.2 million for the three months ended June 30, 2025.

●

The average balance of $689.5 million increased $150.1 million, or 28%, compared to $539.4 million for the three months ended June 30, 2025.

●

The average yield decreased 60 basis points, to 5.49% for the three months ended June 30, 2026, compared to 6.09% for the three months ended June 30, 2025.

Interest Expense. Total interest expense of $157.5 million for the three months ended June 30, 2026, decreased $18.1 million, or 10%, compared to the three months ended June 30, 2025.

Interest expense on deposits of $116.8 million decreased $14.5 million, or 11%, for the three months ended June 30, 2026, compared to the three months ended June 30, 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 $13.3 million on certificates of deposit accounts for the three months ended June 30, 2026, decreased $22.1 million, or 62%, compared to $35.4 million for the three months ended June 30, 2025.

●

The average balance of $1.4 billion for the three months ended June 30, 2026, decreased $1.7 billion or 55%, compared to $3.1 billion for the three months ended June 30, 2025.

●

The average interest rate decreased 74 basis points, to 3.85%, for the three months ended June 30, 2026, compared to 4.59% for three months ended June 30, 2025.

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Interest expense of $67.4 million on interest-bearing checking accounts for the three months ended June 30, 2026, increased $6.6 million, or 11%, compared to $60.8 million for the three months ended June 30, 2025.

●

The average balance of $7.9 billion for the three months ended June 30, 2026, increased $1.7 billion, or 28%, compared to $6.2 billion for the three months ended June 30, 2025.

●

The average interest rate decreased 53 basis points to 3.43% for the three months ended June 30, 2026, compared to 3.96% for three months ended June 30, 2025.

Interest expense of $36.1 million for money market/savings accounts increased $1.0 million, or 3%, for the three months ended June 30, 2026, compared to $35.1 million for the three months ended June 30, 2025.

●

The average balance of money market/savings accounts of $4.1 billion for the three months ended June 30, 2026 increased $617.1 million, or 18%, compared to $3.5 billion for the three months ended June 30, 2025.

●

The average rate on money market/savings accounts was 3.52% for the three months ended June 30, 2026, which was a 51 basis point decrease compared to 4.03% for the three months ended June 30, 2025.

Interest expense of $40.7 million on borrowings for the three months ended June 30, 2026, decreased $3.6 million, or 8%, compared to $44.3 million for the three months ended June 30, 2025.

●

The average interest rate decreased 109 basis points to 4.06% for the three months ended June 30, 2026, compared to 5.15% for the three months ended June 30, 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 3.88% and 4.92%, to an effective rate of 4.06% and 5.15% for the three months ended June 30, 2026 and 2025, respectively.

Provision for Credit Losses. We recorded a provision for credit losses of $9.2 million for the three months ended June 30, 2026, a decrease of $43.8 million, or 83%, compared to $53.0 million for the three months ended June 30, 2025. The decrease reflected improved asset quality, including lower charge-offs and lower specific reserves, as well as higher recoveries.

The $9.2 million provision for credit losses consisted of $10.7 million for the ACL-Loans, net of a $1.5 million release for the ACL-OBCE’s and net of a $6,000 release for the ACL-Guarantees. Approximately half of the provision was associated with loan growth.

The ACL-Loans was $75.8 million, or 0.61% of total loans, at June 30, 2026, compared to $83.3 million, or 0.75% of total loans, at December 31, 2025, and $91.8 million, or 0.87%, at June 30, 2025. The decrease compared to December 31, 2025 and June 30, 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 June 30, 2026 and December 31, 2025 and in Note 4: Loans and Allowance for Credit Losses on Loans.

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Noninterest Income.


		Three Months Ended June 30,
		2026		2025		Change Amount	Change %

		(In thousands)
Noninterest income:
Gain on sale of loans	$	13,160	$	23,342	$	(10,182)	(44)	%
Loan servicing fees, net		11,992		6,138		5,854	95
Mortgage warehouse fees		1,857		2,039		(182)	(9)
Syndication and asset management fees		6,933		9,707		(2,774)	(29)
Other income		11,738		9,254		2,484	27
Total noninterest income	$	45,680	$	50,480	$	(4,800)	(10)	%

Noninterest income of $45.7 million for the three months ended June 30, 2026 decreased $4.8 million, or 10%, compared to $50.5 million for the three months ended June 30, 2025. The decline was primarily due to decreases of $10.2 million, or 44%, in gain on sale of loans, as well as $2.8 million, or 29%, in syndication and asset management fees. These decreases were offset by increases of $5.9 million, or 95%, in loan servicing fees, and $2.5 million in other noninterest income.

Gain on sale of loans of $13.2 million for the three months ended June 30, 2026 decreased $10.2 million, or 44%, compared to the three months ended June 30, 2025. The decrease was primarily due to higher 10-year interest rates, which delayed borrower decisions to transition to permanent fixed-rate loans.

A summary of the gain on sale of loans for the three months ended June 30, 2026 and 2025 is below:


		Gain on Sale of Loans
		Three Months Ended June 30,
		2026		2025		Change Amount	Change %

		(In thousands)
Loan Type:
Multi-family	$	11,755	$	19,815	$	(8,060)	(41)	%
Single-family		489		2,428		(1,939)	(80)
SBA		916		1,099		(183)	(17)
Total	$	13,160	$	23,342	$	(10,182)	(44)	%

Syndication and asset management fees of $6.9 million for the three months ended June 30, 2026, decreased $2.8 million, or 29%, compared to $9.7 million for the three months ended June 30, 2025. The decrease was attributable to less equity raised by our LIHTC syndication platform during the three months ended June 30, 2026 than the prior year.

Loan servicing fees of $12.0 million for the three months ended June 30, 2026 increased $5.9 million, or 95%, compared to $6.1 million for the three months ended June 30, 2025. Loan servicing fees included a $6.0 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2026, compared to a $0.3 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2025.

Other noninterest income of $11.7 million for the three months ended June 30, 2026 increased $2.5 million, or 27%, compared to $9.3 million for the three months ended June 30, 2025. Other noninterest income included increased operating income and gain on sale of other real estate owned partially offset by a lower positive fair market value adjustment on the floor derivatives.

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●

Other noninterest income included a $1.9 million positive adjustment to the fair value of floor derivatives for the three months ended June 30, 2026 compared to a $4.3 million positive fair value adjustment for the three months ended June 30, 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 June 30, 2026 there was a $4.8 million negative fair value adjustment on the securities that were offset by a $4.8 million positive fair value adjustment on the put options, hence having no net gain or loss recognized in noninterest income. Also see Note 2: Investment Securities, Note 11: Derivative Financial Instruments, and Note 12: Disclosures about Fair Value of Assets and Liabilities.

Noninterest Expense.


		Three Months Ended June 30,
		2026		2025		Change Amount	Change %

		(In thousands)
Noninterest expense:
Salaries and employee benefits	$	39,345	$	43,566	$	(4,221)	(10)	%
Loan expense		1,177		1,142		35	3
Occupancy and equipment		3,462		2,494		968	39
Professional fees		3,328		3,159		169	5
Deposit insurance expense		5,893		7,152		(1,259)	(18)
Technology expense		2,893		2,446		447	18
Credit risk transfer premium expense		6,100		4,767		1,333	28
Other expense		11,050		12,611		(1,561)	(12)
Total noninterest expense	$	73,248	$	77,337	$	(4,089)	(5)	%

Noninterest expense of $73.2 million for the three months ended June 30, 2026 decreased $4.1 million, or 5%, compared to the three months ended June 30, 2025. The lower expenses were primarily due to a $4.2 million decrease in salaries and employee benefits from lower commissions and bonuses.

The efficiency ratio was at 40.20% for the three months ended June 30, 2026, compared with 43.16% for the three months ended June 30, 2025.

Income Taxes. Income tax expense of $21.5 million for the three months ended June 30, 2026 increased $10.6 million, or 98%, compared to $10.9 million for the three months ended June 30, 2025. The effective tax rate was 21.5% for the three months ended June 30, 2026 and 22.2% for the three months ended June 30, 2025.

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Comparison of Operating Results for the Six Months Ended June 30, 2026 and 2025

General. Net income of $146.0 million for the six months ended June 30, 2026 increased $49.8 million, or 52%, compared to $96.2 million for the six months ended June 30, 2025. The increase was primarily driven by a $36.3 million, or 60%, decrease in the provision for credit losses, reflecting improved asset quality. Also benefiting income was a $14.3 million, or 6%, increase in net interest income and an $18.1 million, or 24%, increase in noninterest income. These were partially offset by a $9.9 million, or 7%, increase in noninterest expense and an $8.9 million, or 31%, increase in the provision for income taxes.

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		Six Months Ended June 30,
		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		$	562,100	$	15,867	5.69	%	$	525,295	$	15,658	6.01	%
Securities available for sale			844,714		19,504	4.66			958,109		24,453	5.15
Securities held to maturity			1,445,379		37,555	5.24			1,607,747		47,524	5.96
Mortgage loans in process of securitization			345,717		8,842	5.16			327,440		9,047	5.57
Loans and loans held for sale			15,467,385		482,815	6.29			14,291,643		494,921	6.98
Total interest-earning assets			18,665,295		564,583	6.10	%		17,710,234		591,603	6.74	%
Allowance for credit losses on loans			(82,883)						(88,797)
Noninterest-earning assets			1,187,991						790,186
Total assets		$	19,770,403					$	18,411,623

Liabilities/Shareholders' Equity:

Interest-bearing checking		$	7,547,266	$	128,158	3.42	%	$	5,644,414	$	111,454	3.98	%
Money market/savings deposits			4,021,750		70,120	3.52			3,522,281		69,666	3.99
Certificates of deposit			1,473,967		28,410	3.89			3,228,989		74,196	4.63
Total interest-bearing deposits			13,042,983		226,688	3.50			12,395,684		255,316	4.15
Borrowings			3,580,062		72,711	4.10			3,290,854		85,372	5.23
Total interest-bearing liabilities			16,623,045		299,399	3.63	%		15,686,538		340,688	4.38	%
Noninterest-bearing deposits			551,302						335,459
Noninterest-bearing liabilities			242,928						208,509
Total liabilities			17,417,275						16,230,506
Shareholders' equity			2,353,128						2,181,117
Total liabilities and shareholders' equity		$	19,770,403					$	18,411,623
Net interest income				$	265,184					$	250,915
Interest rate spread						2.47	%					2.36	%
Net interest-earning assets		$	2,042,250					$	2,023,696
Net interest margin						2.87	%					2.86	%
Average interest-earning assets to average interest-bearing liabilities						112.29	%					112.90	%

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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:


		Six Months Ended June 30, 2026
		compared to June 30, 2025
		Increase (Decrease)
		Due to
		Volume			Rate			Total

		(In thousands)
Interest income
Interest-earning deposits, and other interest or dividends		$	1,097		$	(888)		$	209
Securities available for sale			(2,894)			(2,055)			(4,949)
Securities held to maturity			(4,799)			(5,170)			(9,969)
Mortgage loans in process of securitization			505			(710)			(205)
Loans and loans held for sale			40,716			(52,822)			(12,106)
Total interest income			34,625			(61,645)			(27,020)
Interest expense
Deposits
Interest-bearing checking			37,574			(20,870)			16,704
Money market/savings deposits			9,879			(9,425)			454
Certificates of deposit			(40,327)			(5,459)			(45,786)
Total Deposits			7,126			(35,754)			(28,628)
Borrowings			7,503			(20,164)			(12,661)
Total interest expense			14,629			(55,918)			(41,289)
Net interest income		$	19,996		$	(5,727)		$	14,269

Net Interest Income. Net interest income of $265.2 million for the six months ended June 30, 2026 increased $14.3 million, or 6%, compared to $250.9 million for the six months ended June 30, 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 and securities, both held to maturity and available for sale.

●

The interest rate spread of 2.47% for the six months ended June 30, 2026, increased 11 basis points compared to 2.36% for the six months ended June 30, 2025.

●

Our net interest margin increased a basis point, to 2.87% for the six months ended June 30, 2026 compared to 2.86% for the six months ended June 30, 2025.

Interest Income. Interest income of $564.6 million for the six months ended June 30, 2026 decreased $27.0 million, or 5%, compared to $591.6 million for the six months ended June 30, 2025. This decrease was primarily attributable to lower average yields on higher average balances on loans and loans held for sale, and lower average yields on lower average balances on securities, both held to maturity and available for sale.

Interest income of $482.8 million on loans and loans held for sale for the six months ended June 30, 2026, decreased $12.1 million, or 2%, compared to $494.9 million for the six months ended June 30, 2025.

●

The average loan balance during the six months ended June 30, 2026 increased $1.2 billion, or 8%, to $15.5 billion compared to $14.3 billion for the six months ended June 30, 2025.

●

The average yield on loans decreased 69 basis points, to 6.29% for the six months ended June 30, 2026, compared to 6.98% for the six months ended June 30, 2025.

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Interest income of $37.6 million on securities held to maturity for the six months ended June 30, 2026, decreased $10.0 million, or 21%, compared to the six months ended June 30, 2025.

●

The average balance of securities held to maturity for the six months ended June 30, 2026 decreased $162.4 million, or 10%, to $1.4 billion compared to $1.6 billion for the six months ended June 30, 2025.

●

The average yield on securities held to maturity decreased 72 basis points, to 5.24%, for the six months ended June 30, 2026, compared to 5.96% for the six months ended June 30, 2025.

Interest income of $19.5 million on securities available for sale for the six months ended June 30, 2026, decreased $4.9 million, or 20%, compared to the six months ended June 30, 2025.

●

The average balance of securities available for sale decreased $113.4 million, or 12%, to $844.7 million compared to $958.1 million for the six months ended June 30, 2025.

●

The average yield decreased 49 basis points, to 4.66% for the six months ended June 30, 2026, compared to 5.15% for the six months ended June 30, 2025.

Interest Expense. Total interest expense of $299.4 million for the six months ended June 30, 2026, decreased $41.3 million, or 12%, compared to $340.7 million for the six months ended June 30, 2025, primarily due to lower average balances on certificates of deposits and lower average rates on deposits and borrowings.

Interest expense on deposits of $226.7 million decreased $28.6 million, or 11%, for the six months ended June 30, 2026, compared to $255.3 million for the six months ended June 30, 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 $28.4 million on certificates of deposit accounts for the six months ended June 30, 2026, decreased $45.8 million, or 62%, compared to $74.2 million for the six months ended June 30, 2025.

●

The average balance of $1.5 billion for the six months ended June 30, 2026, decreased $1.8 billion, or 54%, compared to $3.2 billion for the six months ended June 30, 2025.

●

The average rate on certificates of deposit accounts was 3.89% for the six months ended June 30, 2026, which was a 74 basis point decrease compared to 4.63% for the six months ended June 30, 2025. The decrease in certificates of deposit is primarily due to the decrease in use of brokered deposits.

Interest expense of $128.2 million on interest-bearing checking accounts for the six months ended June 30, 2026, increased $16.7 million, or 15%, compared to $111.5 million for the six months ended June 30, 2025.

●

The average balance of $7.5 billion for the six months ended June 30, 2026, increased $1.9 billion, or 34%, compared to $5.6 billion for the six months ended June 30, 2025.

●

The average rate on interest-bearing checking accounts was 3.42% for the six months ended June 30, 2026, which was a 56 basis point decrease compared to 3.98% for the six months ended June 30, 2025.

Interest expense on borrowings of $72.7 million for the six months ended June 30, 2026, decreased $12.7 million, or 15%, compared to $85.4 million for the six months ended June 30, 2025.

●

The decrease was due primarily to a 113 basis points reduction in average interest rates to 4.10% for the six months ended June 30, 2026, compared to 5.23% for the six months ended June 30, 2025.

●

This was partially offset by a $289.2 million, or 9%, increase in average borrowings, to $3.6 billion, for the six months ended June 30, 2026, compared to $3.3 billion for the six months ended June 30, 2025.

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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 3.89% and 5.00%, to an effective rate of 4.10% and 5.23% for the six months ended June 30, 2026 and 2025, respectively.

Provision for Credit Losses. We recorded a provision for credit losses of $24.5 million for the six months ended June 30, 2026, a decrease of $36.3 million, or 60%, compared to $60.8 million for the six months ended June 30, 2025. The decrease reflected improved asset quality, including lower charge-offs and lower specific reserves.

The $24.5 million provision for credit losses consisted of $26.6 million for the ACL-Loans, net of a $2.1 million release for the ACL-OBCE’s and net of a $13,000 release for the ACL-Guarantees, related to a loan securitization.

The ACL-Loans was $75.8 million, or 0.61% of total loans, at June 30, 2026, compared to $83.3 million, or 0.75% of total loans, at December 31, 2025, and $76.8 million, or 0.67%, at March 31, 2026. The decreases compared to both December 31, 2025 and March 31, 2026 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 June 30, 2026 and December 31, 2025 and in Note 4: Loans and Allowance for Credit Losses on Loans.

Noninterest Income.


		Six Months Ended June 30,
		2026		2025		Change Amount	Change %

		(In thousands)
Noninterest income:
Gain on sale of loans	$	26,666	$	34,961	$	(8,295)	(24)	%
Loan servicing fees, net		27,091		10,148		16,943	167
Mortgage warehouse fees		3,477		3,552		(75)	(2)
Syndication and asset management fees		10,050		13,096		(3,046)	(23)
Other income		24,995		12,416		12,579	101
Total noninterest income	$	92,279	$	74,173	$	18,106	24	%

Noninterest income of $92.3 million for the six months ended June 30, 2026 increased $18.1 million, or 24%, compared to $74.2 million for the six months ended June 30, 2025. The results reflected a $16.9 million, or 167%, increase in loan servicing fees and a $12.6 million, or 101%, increase in other noninterest income. These were partially offset by an $8.3 million, or 24% decrease in gain on sale of loans and a $3.0 million, or 23% decrease in syndication and asset management fees compared to the six months ended June 30, 2025.

Loan servicing fees of $27.1 million for the six months ended June 30, 2026 increased $16.9 million, or 167%, compared to the six months ended June 30, 2025. Loan servicing fees included a $15.0 million positive fair market value adjustment to servicing rights for the six months ended June 30, 2026, compared to a $0.5 million negative fair market value adjustment to servicing rights for the six months ended June 30, 2025.

Other noninterest income of $25.0 million for the six months ended June 30, 2026 increased $12.6 million, or 101%, compared to $12.4 million for the six months ended June 30, 2025. The results reflected higher operating income and gain on sale of other real estate owned, as well as gains on fair market value adjustments of derivatives discussed in more detail below.

●

Other noninterest income included a $4.6 million positive fair value adjustment to the floor derivatives for the six months ended June 30, 2026 compared to a $2.1 million positive fair value adjustment for the six

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months ended June 30, 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 six months ended June 30, 2026 there was a $10.7 million negative fair value adjustment on the securities that were offset by a $10.7 million positive fair value adjustment on the put options, hence having no net gain or loss recognized in other noninterest income. 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 $26.7 million for the six months ended June 30, 2026 decreased $8.3 million, or 24%, compared to $35.0 million for the six months ended June 30, 2025. The decrease in gain on sale of loans was primarily due to higher 10-year interest rates, which delayed borrower decisions to transition to permanent fixed-rate loans.

A summary of the gain on sale of loans for the six months ended June 30, 2026 and 2025 is below:


		Gain on Sale of Loans
		Six Months Ended June 30,
		2026		2025		Change Amount	Change %

		(In thousands)
Loan Type:
Multi-family	$	23,177	$	29,940	$	(6,763)	(23)	%
Single-family		877		2,634		(1,757)	(67)
SBA		2,612		2,387		225	9
Total	$	26,666	$	34,961	$	(8,295)	(24)	%

Syndication and asset management fees of $10.1 million for the six months ended June 30, 2026, decreased $3.0 million, or 23%, compared to $13.1 million for the six months ended June 30, 2025. The decrease was attributable to less equity raised by our LIHTC syndication platform during the six months ended June 30, 2026 than the prior year.

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Noninterest Expense.


		Six Months Ended June 30,
		2026		2025		Change Amount	Change %

		(In thousands)
Noninterest expense:
Salaries and employee benefits	$	77,910	$	79,985	$	(2,075)	(3)	%
Loan expense		2,362		1,940		422	22
Occupancy and equipment		6,543		4,845		1,698	35
Professional fees		6,095		6,053		42	1
Deposit insurance expense		14,301		14,380		(79)	(1)
Technology expense		5,572		4,820		752	16
Credit risk transfer premium expense		11,864		8,629		3,235	37
Other expense		24,243		18,349		5,894	32
Total noninterest expense	$	148,890	$	139,001	$	9,889	7	%

Noninterest expense of $148.9 million for the six months ended June 30, 2026 increased $9.9 million, or 7%, compared to $139.0 million for the six months ended June 30, 2025. The increase was due primarily to a $5.9 million increase in other noninterest expense, mainly related to higher other real estate owned expenses, and a $3.2 million increase in credit risk transfer premium expenses. The increase also reflects a rise in occupancy and equipment expenses. These were partially offset by a $2.1 million decrease in salaries and employee benefits from lower commissions and bonuses.

The efficiency ratio was at 41.65% for the six months ended June 30, 2026, compared with 42.76% for the six months ended June 30, 2025.

Income Taxes. Income tax expense of $38.1 million for the six months ended June 30, 2026 increased $8.9 million, or 31%, compared to the six months ended June 30, 2025. The effective tax rate was 20.7% and 23.2% for the six months ended June 30, 2026 and 2025, respectively. The decrease in effective tax rate reflected the utilization of originated and purchased tax credits.

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 June 30, 2026 the Company’s servicing portfolio included unpaid principal balance of loans serviced for others of $21.5 billion, loans sub-serviced for others of $4.3 billion and other servicing balances of $1.2 billion. The servicing

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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 $42.5 billion for the six months ended June 30, 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 three 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 June 30, 2026 and 2025, we had total net income of $78.3 million and $38.0 million, respectively. For the six months ended June 30, 2026 and 2025, we had total net income of $146.0 million and $96.2 million, respectively. Net income for our three segments for the respective periods was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025

	(In thousands)
Multi-family Mortgage Banking	$	10,336	$	9,269	$	21,350	$	12,682
Mortgage Warehousing		30,599		22,986		59,247		38,384
Banking		47,337		14,574		85,317		61,681
Other		(9,969)		(8,848)		(19,879)		(16,527)

Total	$	78,303	$	37,981	$	146,035	$	96,220

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Multi-family Mortgage Banking.

Comparison of results for the three months ended June 30, 2026 and 2025:

The Multi-family Mortgage Banking segment reported net income of $10.3 million for the three months ended June 30, 2026, an increase of $1.1 million, or 12%, compared to net income for the three months ended June 30, 2025. The results primarily reflect a decrease in noninterest expenses due to lower salaries and benefit expenses for commissions and bonuses.

Loan servicing fees included a $4.6 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2026 compared to a $0.7 million positive fair market value adjustment for the three months ended June 30, 2025.

The total volume of loans originated and acquired through our Multi-family business was $1.5 billion, an increase of $99.8 million, or 7%, compared to $1.4 billion for the three months ended June 30, 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 await conversion to permanent financing. It also includes loans originated and acquired for sale in the secondary market.

Comparison of results for the six months ended June 30, 2026 and 2025:

The Multi-family Mortgage Banking segment reported net income of $21.4 million for the six months ended June 30, 2026, an increase of $8.7 million, or 68%, compared to net income of $12.7 million for the six months ended June 30, 2025. The increase in net income was primarily due a $8.3 million increase in noninterest income driven by higher loan servicing fees.

Loan servicing fees included $12.0 million positive fair market value adjustment to servicing rights for the six months ended June 30, 2026, compared to $1.2 million positive fair market value adjustment of for the six months ended June 30, 2025.

The total volume of loans originated and acquired through our Multi-family business was $2.7 billion, an increase of $345.1 million, or 15%, compared to $2.4 billion for the six months ended June 30, 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 await conversion to permanent financing. It also includes loans originated and acquired for sale in the secondary market.

Mortgage Warehousing.

Comparison of results for the three months ended June 30, 2026 and 2025:

The Mortgage Warehousing segment reported net income of $30.6 million for the three months ended June 30, 2026, an increase of $7.6 million, or 33%, compared to $23.0 million for the three months ended June 30, 2025. The increase in net income reflected higher net interest income reflecting the growth in average balances for warehouse loans in both loans receivable and loans held for sale.

Noninterest income included a $1.9 million positive fair market value adjustment to derivatives for the three months ended June 30, 2026, compared to a $4.3 million positive fair market value adjustment to derivatives for the three months ended June 30, 2025.

The volume of loans funded during the three months ended June 30, 2026 amounted to $22.9 billion, an increase of $6.6 billion, or 41%, compared to $16.3 billion for the three months ended June 30, 2025. This compared to the 10% industry-wide increase in single-family residential loan volumes for the three months ended June 30, 2026

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compared to the same period in 2025, according to an estimate of industry volume by the Mortgage Bankers Association.

Comparison of results for the six months ended June 30, 2026 and 2025:

The Mortgage Warehousing segment reported net income of $59.2 million for the six months ended June 30, 2026, an increase of $20.9 million, or 54%, compared to the six months ended June 30, 2025. The increase in net income was primarily driven by an increase in net interest income, reflecting the increase in average balances for warehouse loans in both loans receivable and loans held for sale.

Noninterest income included a $4.6 million positive fair market value adjustment to derivatives for the six months ended June 30, 2026, compared to a $2.1 million positive fair market value adjustment to derivatives for the six months ended June 30, 2025.

The volume of loans funded during the six months ended June 30, 2026 amounted to $42.5 billion, an increase of $14.3 billion, or 51%, compared to the six months ended June 30, 2025. This compared to the 24% industry-wide increase in single-family residential loan volumes for the six months ended June 30, 2026 compared to the same period in 2025, according to an estimate of industry volume by the Mortgage Bankers Association.

Banking.

Comparison of results for the three months ended June 30, 2026 and 2025:

The Banking segment reported net income of $47.3 million for the three months ended June 30, 2026, an increase of $32.8 million, or 225%, compared to the three months ended June 30, 2025. The increase in net income was primarily due to the decrease in provision for credit losses.

Noninterest income included a $1.4 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2026, compared to a $0.5 million negative fair market value adjustment for the three months ended June 30, 2025.

Comparison of results for the six months ended June 30, 2026 and 2025:

The Banking segment reported net income of $85.3 million for the six months ended June 30, 2026, an increase of $23.6 million, or 38%, compared to $61.7 million for the six months ended June 30, 2025. The increase in net income was primarily due to the decrease in provision for credit losses.

Noninterest income included a $3.0 million positive fair market value adjustment to servicing rights for the six months ended June 30, 2026, compared to a $1.7 million negative fair market value adjustment for the six months ended June 30, 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.

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At June 30, 2026, based on pledged collateral, we had $5.5 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 of $220.0 million through our membership in the AFX and US Bank Federal Funds as of June 30, 2026. This liquidity enhances the ability to effectively manage interest expense and asset levels in the future.

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 $5.5 billion described above, these totaled $13.0 billion, or 61%, of its $21.2 billion total assets at June 30, 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 June 30, 2026, AOCL of $1.2 million, related to securities available for sale, increased $1.2 million, compared to AOCL as of December 31, 2025. The $1.2 million of AOCL as of June 30, 2026 represented less than 0.15% of total equity and total securities available for sale, reflecting our interest rate risk policy of maintaining short duration on assets and liabilities.

The 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. Additionally, while warehouse lines of credit represent a meaningful component of total assets, the underlying loans are generally short-term in nature and support significant funding volumes. During the six months ended June 30, 2026, warehouse funding volumes totaled $22.9 billion, exceeding the Company’s total assets of $21.2 billion. Accordingly, period-end balances represent a snapshot of assets that are continually funded and repaid in the normal course of business.

The following table and summary provide cash flow information for the six months ended June 30, 2026 compared to June 30, 2025.


		Six Months Ended June 30,
		2026		2025		Change

		(In thousands)
Cash flows from:
Operating activities	$	(384,012)	$	26,886	$	(410,898)
Investing activities		(1,104,194)		(27,229)		(1,076,965)
Financing activities		1,590,707		170,898		1,419,809

●

Cash flows from operating activities decreased $410.9 million primarily driven by an increase in cash outflows of $10.5 billion in loans originated and purchased for sale, partially offset by higher cash inflows of $9.9 billion from proceeds from sold loans and principal collected, as we increased production and sales volumes during the six months ended June 30, 2026 compared to the prior year.

●

Cash flows from investing activities decreased $1.1 billion primarily driven by a fluctuation in cash outflows of $836.9 million in net change in loans receivable due to increased loan growth.

●

Cash flows from financing activities increased $1.4 billion primarily driven by increased cash inflows due to higher FHLB borrowings and increased cash inflows due to deposit growth.

Certificates of deposit that are scheduled to mature in less than one year from June 30, 2026 totaled $1.3 billion, or 97%, of total certificates of deposit. Of the $1.4 billion in total certificates of deposit, including those that will mature

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in more than one year, there were $585.1 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.

At June 30, 2026, we had $4.3 billion in outstanding commitments to extend credit that are subject to credit risk and an additional $1.6 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

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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 six months ended June 30, 2026, totaled $20.5 million. For more information, see Note 14: Preferred Stock.

Common Shares/Dividends. As of June 30, 2026, the Company had 45,938,075 common shares issued and outstanding. The Board declared a quarterly dividend of $0.11 per share for the first two quarters 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 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.

The following table summarizes our share repurchase authorization and repurchase activity of our common stock during the six months ended June 30, 2026. There was no share repurchase activity during the three months ended June 30, 2026.


		Six Months Ended
		June 30, 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 June 30, 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.

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Capital Adequacy.

The following tables present the Company’s capital ratios at June 30, 2026 and December 31, 2025:


					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)
June 30, 2026
Total capital⁽¹⁾ (to risk-weighted assets)
Company	$	2,470,123	12.5	%	$	2,073,368	10.5	%	$	—	N/A	%
Merchants Bank		2,398,352	12.2	%		2,067,150	10.5	%		1,968,714	10.0	%
Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		2,386,160	12.1	%		1,678,441	8.5	%		—	N/A	%
Merchants Bank		2,314,389	11.8	%		1,673,407	8.5	%		1,574,971	8.0	%
Common Equity Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		1,834,870	9.3	%		1,382,245	7.0	%		—	N/A	%
Merchants Bank		2,314,389	11.8	%		1,378,100	7.0	%		1,279,664	6.5	%
Tier I capital⁽¹⁾ (to average assets)
Company		2,386,160	11.6	%		1,028,502	5.0	%		—	N/A	%
Merchants Bank		2,314,389	11.3	%		1,025,533	5.0	%		1,025,533	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.

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 June 30, 2026 and December 31, 2025, that the Company and Merchants Bank met all capital adequacy requirements to which they

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were subject. For additional information regarding dividend restrictions, see the Company’s 2025 Annual Report on Form 10–K.

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.

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 multi-family, residential, and SBA loans, as well as warehouse repurchase and participation 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

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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.

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 June 30, 2026 and December 31, 2025.


	Net Interest Income Sensitivity
	Twelve Months Forward
	- 200			- 100			+ 100			+ 200

	(Dollars in thousands)
June 30, 2026:
Dollar change	$	(96,309)		$	(50,562)		$	49,664		$	99,809
Percent change		(15.3)	%		(8.0)	%		7.9	%		15.8	%

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 June 30, 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)
June 30, 2026:
Dollar change	$	54,311		$	32,387		$	3,392		$	8,114
Percent change		2.3	%		1.4	%		0.1	%		0.3	%

December 31, 2025:
Dollar change	$	62,263		$	37,217		$	(4,649)		$	(8,900)
Percent change		2.8	%		1.7	%		(0.2)	%		(0.4)	%

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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 June 30, 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.

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.


		June 30,
		2026		2025

		(In thousands)
Total equity	$	2,393,804	$	2,184,632
Less: goodwill and intangibles		(8,040)		(8,062)
Less: preferred stock		(551,291)		(551,291)
Tangible common shareholders' equity	$	1,834,473	$	1,625,279

Assets	$	21,229,982	$	19,141,204
Less: goodwill and intangibles		(8,040)		(8,062)
Tangible assets	$	21,221,942	$	19,133,142

Ending common shares		45,938,075		45,885,458

Tangible book value per common share	$	39.93	$	35.42

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 June 30, 2026, the Company’s disclosure controls and procedures were effective.

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Merchants Bancorp

(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.

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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 June 30, 2026, the Company repurchased zero shares 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)

April 1 - April 30, 2026	—	$	—	—	$	96,998,378
May 1 - May 31, 2026	—	$	—	—	$	96,998,378
June 1 - June 30, 2026	—	$	—	—	$	96,998,378
Total	—	$	—	—

(1)

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

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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		XBRL Taxonomy Extension Presentation Linkbase Document

104		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:	August 7, 2026	By:	/s/ Michael F. Petrie
			Michael F. Petrie
			Chairman & Chief Executive Officer



Date:	August 7, 2026	By:	/s/ Sean A. Sievers
			Sean A. Sievers Chief Financial Officer
			(Principal Financial Officer)