Basis of Presentation	9 Months Ended
Sep. 30, 2017
Basis of Presentation
Basis of Presentation	Note 1: Basis of Presentation The condensed consolidated financial statements include Merchants Bancorp, a registered bank holding company (“Bancorp” or the “Company”) and its wholly owned subsidiary, Merchants Bank of Indiana (the “Bank”) and the Bank’s subsidiaries, P/R Mortgage and Investment Corp. (“P/RMIC”), Ash Realty Holdings, LLC (“Ash Realty”), Natty Mac Funding, Inc. (“NMF”), and MBI Midtown West, LLC (“MMW”), and P/RMIC’s subsidiary RICHMAC Funding LLC (“Richmac”) (collectively referred to as the “Company”). The accompanying unaudited condensed consolidated balance sheet of the Company as of December 31, 2016, which has been derived from audited financial statements, and unaudited condensed consolidated financial statements of the Company as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016, 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 accounting principles generally accepted in the United States of America. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company as of and for the year ended December 31, 2016 included in the Company’s prospectus dated October 26, 2017 that was filed with the Securities and Exchange Commission on October 30, 2017 in connection with our initial public offering (the “Prospectus”). Reference is made to the accounting policies of the Company described in the Notes to the Financial Statements contained in the Form S‑1. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included to present fairly the financial position as of September 30, 2017 and the results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016. All interim amounts have not been audited and the results of operations for the three and nine months ended September 30, 2017, herein are not necessarily indicative of the results of operations to be expected for the entire year. Principles of Consolidation The consolidated financial statements as of and for the periods ended September 30, 2017 and 2016, include the Company and its wholly owned subsidiary, the Bank, and its wholly owned subsidiaries, P/RMIC, Ash Realty, NMF, MMW and Richmac. Intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of mortgage servicing rights and fair values of financial instruments. Stock Split On July 5, 2017, the Company’s shareholders approved an increase of authorized common shares to 50.0 million shares, and the Company declared a 2.5-for-1 stock split effective July 6, 2017. The presentation of authorized common shares has been retrospectively adjusted to give effect to the increase, and all share and per share amounts have been retrospectively adjusted to give effect to the stock split. Acquisitions Effective August 15, 2017, the Bank acquired 100% of the equity interests of RICHMAC Funding, LLC, (“Richmac”) a Delaware limited liability company, which is a national multifamily housing mortgage lender and servicer. The acquisition provides P/RMIC access to affordable multi-family finance programs through the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”), as well as servicing a portfolio of Government National Mortgage Association (“GNMA”), FNMA Delegated Underwriting and Servicing (“DUS”) and FHLMC loans. The acquisition allows P/RMIC to provide additional product offerings to current customers as well as broaden the origination network into attractive markets where the Bank did not previously have a presence. The purchase price was paid in shares of Company common stock with a value of $8.1 million. The Company recorded goodwill and intangible assets totaling $5.5 million and $1.6 million, respectively, in connection with the acquisition. The acquisition did not materially impact the Company’s' financial position, results of operations or cash flows. On October 31, 2016, the Company entered into an Agreement and Plan of Merger to acquire Joy State Bank (“JSB”), an Illinois chartered bank located in Joy, Illinois. Since the timing and approval of the transaction was uncertain due to the Company’s capital position at September 30, 2016, on December 22, 2016 the Agreement and Plan of Merger was amended and the parties agreed that two directors and senior executive officers of the Company, the Chairman and Chief Executive Officer and President and Chief Operating Officer, would acquire JSB. The acquisition of JSB by the Company’s two directors and senior executive officers received appropriate regulatory approvals and closed on April 3, 2017. On May 8, 2017, the Company entered into a Stock Purchase Agreement with the same two directors and senior executive officers to acquire JSB. The Company has agreed to pay a purchase price of approximately $5.4 million plus $16,403 for each 30 days after June 30, 2017, prorated to the closing date. The purchase price is equal to the price paid by the two directors and senior executive officers, plus expenses and a cost of funds equal to 3.75%. The acquisition has been approved by the Federal Reserve Bank of Chicago, but remains subject to the approval of the Illinois Department of Financial and Professional Regulation, Division of Banking. The Company expects to close this acquisition in the first quarter of 2018. Reclassifications Certain reclassifications have been made to the 2016 financial statements to conform to the financial statement presentation as of and for the three and nine months ended September 30, 2017. These reclassifications had no effect on net income.

Note 1: Basis of Presentation

The condensed consolidated financial statements include Merchants Bancorp, a registered bank holding company (“Bancorp” or the “Company”) and its wholly owned subsidiary, Merchants Bank of Indiana (the “Bank”) and the Bank’s subsidiaries, P/R Mortgage and Investment Corp. (“P/RMIC”), Ash Realty Holdings, LLC (“Ash Realty”), Natty Mac Funding, Inc. (“NMF”), and MBI Midtown West, LLC (“MMW”), and P/RMIC’s subsidiary RICHMAC Funding LLC (“Richmac”) (collectively referred to as the “Company”).

The accompanying unaudited condensed consolidated balance sheet of the Company as of December 31, 2016, which has been derived from audited financial statements, and unaudited condensed consolidated financial statements of the Company as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016, 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 accounting principles generally accepted in the United States of America. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company as of and for the year ended December 31, 2016 included in the Company’s prospectus dated October 26, 2017 that was filed with the Securities and Exchange Commission on October 30, 2017 in connection with our initial public offering (the “Prospectus”). Reference is made to the accounting policies of the Company described in the Notes to the Financial Statements contained in the Form S‑1.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included to present fairly the financial position as of September 30, 2017 and the results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016. All interim amounts have not been audited and the results of operations for the three and nine months ended September 30, 2017, herein are not necessarily indicative of the results of operations to be expected for the entire year.

Principles of Consolidation

The consolidated financial statements as of and for the periods ended September 30, 2017 and 2016, include the Company and its wholly owned subsidiary, the Bank, and its wholly owned subsidiaries, P/RMIC, Ash Realty, NMF, MMW and Richmac. Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of mortgage servicing rights and fair values of financial instruments.

Stock Split

On July 5, 2017, the Company’s shareholders approved an increase of authorized common shares to 50.0 million shares, and the Company declared a 2.5-for-1 stock split effective July 6, 2017. The presentation of authorized common shares has been retrospectively adjusted to give effect to the increase, and all share and per share amounts have been retrospectively adjusted to give effect to the stock split.

Acquisitions

Effective August 15, 2017, the Bank acquired 100% of the equity interests of RICHMAC Funding, LLC, (“Richmac”) a Delaware limited liability company, which is a national multifamily housing mortgage lender and servicer. The acquisition provides P/RMIC access to affordable multi-family finance programs through the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”), as well as servicing a portfolio of Government National Mortgage Association (“GNMA”), FNMA Delegated Underwriting and Servicing (“DUS”) and FHLMC loans. The acquisition allows P/RMIC to provide additional product offerings to current customers as well as broaden the origination network into attractive markets where the Bank did not previously have a presence. The purchase price was paid in shares of Company common stock with a value of $8.1 million. The Company recorded goodwill and intangible assets totaling $5.5 million and $1.6 million, respectively, in connection with the acquisition. The acquisition did not materially impact the Company’s' financial position, results of operations or cash flows.

On October 31, 2016, the Company entered into an Agreement and Plan of Merger to acquire Joy State Bank (“JSB”), an Illinois chartered bank located in Joy, Illinois. Since the timing and approval of the transaction was uncertain due to the Company’s capital position at September 30, 2016, on December 22, 2016 the Agreement and Plan of Merger was amended and the parties agreed that two directors and senior executive officers of the Company, the Chairman and Chief Executive Officer and President and Chief Operating Officer, would acquire JSB. The acquisition of JSB by the Company’s two directors and senior executive officers received appropriate regulatory approvals and closed on April 3, 2017. On May 8, 2017, the Company entered into a Stock Purchase Agreement with the same two directors and senior executive officers to acquire JSB. The Company has agreed to pay a purchase price of approximately $5.4 million plus $16,403 for each 30 days after June 30, 2017, prorated to the closing date. The purchase price is equal to the price paid by the two directors and senior executive officers, plus expenses and a cost of funds equal to 3.75%. The acquisition has been approved by the Federal Reserve Bank of Chicago, but remains subject to the approval of the Illinois Department of Financial and Professional Regulation, Division of Banking. The Company expects to close this acquisition in the first quarter of 2018.

Reclassifications

Certain reclassifications have been made to the 2016 financial statements to conform to the financial statement presentation as of and for the three and nine months ended September 30, 2017. These reclassifications had no effect on net income.