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, 2025

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _______________

Commission File No. 001-38258

MERCHANTS BANCORP

(Exact name of registrant as specified in its charter)

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

(317) 569-7420

(Registrant’s telephone number, including area code)

N/A

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

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

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

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

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

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

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, without par value	MBIN	NASDAQ
Depositary Shares, each representing a 1/40th interest in a share of Series C Preferred Stock, without par value	MBINN	NASDAQ
Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock, without par value	MBINM	NASDAQ
Depositary Shares, each representing a 1/40th interest in a share of Series E Preferred Stock, without par value	MBINL	NASDAQ

As of August 1, 2025, the latest practicable date, 45,885,458 shares of the registrant’s common stock, without par value, were issued and outstanding.

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, 2025 and December 31, 2024	5
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2025 and 2024	6
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024	7
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024	8
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024	9
Notes to Condensed Consolidated Financial Statements	10
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	57
Item 3 Quantitative and Qualitative Disclosures About Market Risk	86
Item 4 Controls and Procedures	86
PART II – OTHER INFORMATION	87
Item 1 Legal Proceedings	87
Item 1A Risk Factors	87
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3 Defaults Upon Senior Securities	87
Item 4 Mine Safety Disclosures	87
Item 5 Other Information	87
Item 6 Exhibits	88
SIGNATURES	89

2

Glossary of Defined Terms

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

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

ACL: allowance for credit losses

ACL-Guarantees: allowance for credit losses on guarantees

ACL-Loans: allowance for credit losses-loans

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

AFX: American Financial Exchange

Agency: government agency

AOCL: accumulated other comprehensive loss

ARM: adjustable-rate mortgage

ASC: Accounting Standards Codification

ASU: Accounting Standards Update

Bank: Merchants Bank of Indiana

CCO: Chief Credit Officer

CDS: credit default swap

CMT: constant maturity rate

CODM: chief operating decision maker

Company: Merchants Bancorp

DFI: Indiana Department of Financial Institutions

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 Authority

FHLB: Federal Home Loan Bank

3

FMBI: Farmers-Merchants Bank of Illinois, a wholly owned subsidiary of Merchants Bancorp until all branches were sold and the charter collapsed into Merchants Bank in January 2024

Freddie Mac: Federal Home Loan Mortgage Corporation

GAAP: United States generally accepted accounting principles

Ginnie Mae: Government National Mortgage Association

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

HUD: Department of Housing and Urban Development

LIHTC: low-income housing tax credits

LLC: limited liability companies

MAM: Merchants Asset Management, LLC, a wholly owned subsidiary of Merchants Bancorp

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

MOU: Memorandum of Understanding

N/A: not applicable

NASDAQ: NASDAQ Capital Market

REMIC: real estate mortgage investment conduit

ROU: right of use

SBA: Small Business Administration

SEC: Securities and Exchange Commission

SOFR: Secured Overnight Financing Rate

SPE: Special Purpose Entity

Treasury: US Department of Treasury

TLM: troubled loan modification

VIE: variable interest entity

4

Part I – Financial Information

Item 1. Financial Statements

Merchants Bancorp

Condensed Consolidated Balance Sheets

June 30, 2025 (Unaudited) and December 31, 2024

(In thousands, except share data)

	June 30,		December 31,
	2025		2024*
Assets
Cash and due from banks	$	15,419	$	10,989
Interest-earning demand accounts		631,746		465,621
Cash and cash equivalents		647,165		476,610
Securities purchased under agreements to resell		1,539		1,559
Mortgage loans in process of securitization		402,427		428,206
Securities available for sale ($602,962 and $635,946 utilizing fair value option, respectively)		936,343		980,050
Securities held to maturity ($1,547,525 and $1,664,674 at fair value, respectively)		1,548,211		1,664,686
Federal Home Loan Bank (FHLB) stock and other equity securities		217,850		217,804
Loans held for sale (includes $91,930 and $78,170 at fair value, respectively)		4,105,765		3,771,510
Loans receivable, net of allowance for credit losses on loans of $91,811 and $84,386, respectively		10,432,117		10,354,002
Premises and equipment, net		71,050		58,617
Servicing rights		193,037		189,935
Interest receivable		82,391		83,409
Goodwill		8,014		8,014
Other assets and receivables		495,295		571,330
Total assets	$	19,141,204	$	18,805,732
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	315,523	$	239,005
Interest-bearing		12,371,312		11,680,971
Total deposits		12,686,835		11,919,976
Borrowings		4,009,474		4,386,122
Deferred tax liabilities		29,228		25,289
Other liabilities		231,035		231,035
Total liabilities		16,956,572		16,562,422
Commitments and Contingencies
Shareholders' Equity
Common stock, without par value
Authorized - 75,000,000 shares
Issued and outstanding - 45,885,458 shares at June 30, 2025 and 45,767,166 shares at December 31, 2024		241,452		240,313
Preferred stock, without par value - 5,000,000 total shares authorized
6% Series B Preferred stock - $1,000 per share liquidation preference
Authorized - no shares at June 30, 2025 and 125,000 shares at December 31, 2024
Issued and outstanding - no shares at June 30, 2025 and 125,000 shares (equivalent to 5,000,000 depositary shares) at December 31, 2024		—		120,844
6% Series C Preferred stock - $1,000 per share liquidation preference
Authorized - 200,000 shares
Issued and outstanding - 196,181 shares (equivalent to 7,847,233 depositary shares)		191,084		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		1,392,136		1,330,995
Accumulated other comprehensive loss		(247)		(133)
Total shareholders' equity		2,184,632		2,243,310
Total liabilities and shareholders' equity	$	19,141,204	$	18,805,732

*Derived from audited consolidated financial statements

See notes to condensed consolidated financial statements.

5

Merchants Bancorp

Condensed Consolidated Statements of Income (Unaudited)

For the Three and Six Months Ended June 30, 2025 and 2024

(In thousands, except share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Interest Income
Loans	$	255,641	$	284,421	$	494,921	$	556,419
Mortgage loans in process of securitization		5,304		3,044		9,047		4,764
Investment securities:
Available for sale		12,095		14,784		24,453		29,172
Held to maturity		23,166		19,799		47,524		40,321
FHLB stock and other equity securities (dividends)		4,641		1,277		9,013		2,121
Other		3,552		4,948		6,645		9,649
Total interest income		304,399		328,273		591,603		642,446
Interest Expense
Deposits		131,375		179,651		255,316		350,673
Short-term borrowings		36,981		11,612		70,345		18,834
Long-term borrowings		7,324		8,891		15,027		17,764
Total interest expense		175,680		200,154		340,688		387,271
Net Interest Income		128,719		128,119		250,915		255,175
Provision for credit losses		53,027		9,965		60,754		14,691
Net Interest Income After Provision for Credit Losses		75,692		118,154		190,161		240,484
Noninterest Income
Gain on sale of loans		23,342		11,168		34,961		20,524
Loan servicing fees, net		6,138		10,827		10,148		30,229
Mortgage warehouse fees		2,039		1,524		3,552		2,506
Losses on sale of investments available for sale (includes $0, $0, $0 and $(108), respectively, related to accumulated other comprehensive loss reclassifications)		—		—		—		(108)
Syndication and asset management fees		9,707		3,233		13,096		8,536
Other income		9,254		4,599		12,416		10,538
Total noninterest income		50,480		31,351		74,173		72,225
Noninterest Expense
Salaries and employee benefits		43,566		28,373		79,985		57,969
Loan expense		1,142		993		1,940		1,949
Occupancy and equipment		2,494		2,239		4,845		4,476
Professional fees		3,159		3,556		6,053		7,655
Deposit insurance expense		7,152		5,579		14,380		10,704
Technology expense		2,446		1,859		4,820		3,713
Credit risk transfer premium expense		4,767		2,294		8,629		2,294
Other expense		12,611		5,487		18,349		10,532
Total noninterest expense		77,337		50,380		139,001		99,292
Income Before Income Taxes		48,835		99,125		125,333		213,417
Provision for income taxes (includes $0, $0, $0 and $26, respectively, of income tax benefit related to accumulated other comprehensive loss reclassifications)		10,854		22,732		29,113		49,970
Net Income	$	37,981	$	76,393	$	96,220	$	163,447
Dividends on preferred stock		(10,266)		(7,757)		(20,531)		(16,424)
Impact of preferred stock redemption		—		(1,823)		(5,371)		(1,823)
Net Income Allocated to Common Shareholders		27,715		66,813		70,318		145,200
Basic Earnings Per Share	$	0.60	$	1.50	$	1.53	$	3.30
Diluted Earnings Per Share	$	0.60	$	1.49	$	1.53	$	3.29
Weighted-Average Shares Outstanding
Basic		45,883,644		44,569,345		45,853,998		43,937,665
Diluted		45,929,563		44,698,324		45,921,988		44,082,485

See notes to condensed consolidated financial statements.

6

Merchants Bancorp

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

For the Three and Six Months Ended June 30, 2025 and 2024

(In thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Net Income	$	37,981	$	76,393	$	96,220	$	163,447
Other Comprehensive Income:
Net unrealized (losses) gains on investment securities available for sale, net of tax (benefit) expense of $53, $(209), $36 and $(593), respectively		(170)		663		(114)		1,896
Add: Reclassification adjustment for losses included in net income, net of tax benefit of $0, $0, $0 and $26, respectively		—		—		—		82
Other comprehensive (loss) income for the period		(170)		663		(114)		1,978
Comprehensive Income	$	37,811	$	77,056	$	96,106	$	165,425

See notes to condensed consolidated financial statements.

7

Merchants Bancorp

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

For the Three and Six Months Ended June 30, 2025 and 2024

(In thousands, except share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2025			2024			2025			2024
	Shares		Amount	Shares		Amount	Shares		Amount	Shares		Amount
Common Stock
Balance beginning of period	45,881,706	$	240,512	43,354,718	$	139,950	45,767,166	$	240,313	43,242,928	$	140,365
Distribution to employee stock ownership plan	-		-	-		-	30,802		1,124	23,414		997
Issuance of common stock, net of $5.5 million in offering expenses	-		-	2,400,000		97,655	-		-	2,400,000		97,655
Shares issued for stock compensation plans, net of taxes withheld to satisfy tax obligations	3,752		940	2,849		887	87,490		15	91,225		(525)
Balance end of period	45,885,458		241,452	45,757,567		238,492	45,885,458		241,452	45,757,567		238,492
7% Series A Preferred Stock
Balance beginning of period	-		-	2,081,800		50,221	-		-	2,081,800		50,221
Redemption of 7% Series A preferred stock	-		-	(2,081,800)		(50,221)	-		-	(2,081,800)		(50,221)
Balance at beginning and end of period	-		-	-		-	-		-	-		-
6% Series B Preferred Stock
Balance beginning of period	-		-	125,000		120,844	125,000		120,844	125,000		120,844
Redemption of 6% Series B preferred stock	-		-	-		-	(125,000)		(120,844)	-		-
Balance at end of period	-		-	125,000		120,844	-		-	125,000		120,844
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	-		-
Retained Earnings
Balance beginning of period			1,369,009			1,138,083			1,330,995			1,063,599
Net income			37,981			76,393			96,220			163,447
Dividends on 7% Series A preferred stock, $1.75 per share, annually			-			-			-			(910)
Dividends on 6% Series B preferred stock, $60.00 per share, annually			-			(1,875)			-			(3,750)
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)			-			(8,767)			-
Dividends on common stock, $0.40 per share, annually in 2025 and $0.36 per share, annually in 2024			(4,588)			(4,118)			(9,177)			(8,021)
Impact of 7% Series A preferred stock redemption			-			(1,823)			-			(1,823)
Impact of 6% Series B preferred stock redemption			-			-			(4,156)			-
Excise tax on preferred stock redemption			-			-			(1,215)			-
Balance end of period			1,392,136			1,200,778			1,392,136			1,200,778
Accumulated Other Comprehensive Loss
Balance beginning of period			(77)			(1,173)			(133)			(2,488)
Other comprehensive (loss) income			(170)			663			(114)			1,978
Balance end of period			(247)			(510)			(247)			(510)
Total shareholders' equity		$	2,184,632		$	1,888,147		$	2,184,632		$	1,888,147

See notes to condensed consolidated financial statements.

8

Merchants Bancorp

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended June 30, 2025 and 2024

(In thousands)

	Six Months Ended
	June 30,
	2025		2024
Operating activities:
Net income	$	96,220	$	163,447
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		1,540		1,471
Provision for credit losses		60,754		14,691
Loss on sale of securities		—		108
Gain on sale of loans		(34,961)		(20,524)
Proceeds from sales of loans		18,150,631		11,889,091
Loans and participations originated and purchased for sale		(18,254,897)		(12,260,927)
Proceeds from sale of low-income housing tax credits		9,777		27,564
Purchases of low-income housing tax credits for sale		(22,987)		(32,106)
Change in servicing rights for paydowns and fair value adjustments		5,550		(14,392)
Net change in:
Mortgage loans in process of securitization		25,779		(98,645)
Other assets and receivables		(14,219)		(8,493)
Other liabilities		(1,865)		5,592
Other		5,564		470
Net cash provided by (used in) operating activities		26,886		(332,653)
Investing activities:
Net change in securities purchased under agreements to resell		20		45
Purchases of securities available for sale		(344,503)		(302,783)
Purchases of securities held to maturity		—		(155,268)
Purchases of mortgage servicing rights		(70)		—
Proceeds from the sale of securities available for sale		—		9,983
Proceeds from calls, maturities and paydowns of securities available for sale		391,790		382,840
Proceeds from calls, maturities and paydowns of securities held to maturity		116,573		68,376
Purchases of loans		(30,408)		(68,468)
Net change in loans receivable		(503,358)		(745,744)
Proceeds from loans held for sale previously classified as loans receivable		386,604		1,600
Purchase of FHLB stock		(46)		(19,316)
Proceeds from sale of FHLB stock		—		395
Purchases of premises and equipment		(11,358)		(7,590)
Purchase of limited partnership interests		(35,210)		(10,488)
Net cash paid on sale of branches		—		(170,594)
Other investing activities		2,737		4,839
Net cash used in investing activities		(27,229)		(1,012,173)
Financing activities:
Net change in deposits		577,652		1,085,442
Proceeds from borrowings		141,830,587		47,606,878
Repayment of borrowings		(142,197,028)		(47,404,262)
Proceeds from notes payable		—		3,592
Proceeds from issuance of common stock		—		97,655
Payment of credit linked notes		(10,605)		(11,529)
Repurchase of preferred stock		—		(52,045)
Dividends		(29,708)		(24,445)
Net cash provided by financing activities		170,898		1,301,286
Net Change in Cash and Cash Equivalents		170,555		(43,540)
Cash and Cash Equivalents, Beginning of Period		476,610		584,422
Cash and Cash Equivalents, End of Period	$	647,165	$	540,882
Supplemental Cash Flows Information:
Interest paid	$	344,939	$	371,467
Income taxes paid, net of refunds		41,093		46,043
Change in payable for limited partnership interest of LLCs		2,752		—
Change in ROU assets due to lease renegotiation		—		(1,063)
Investments received in securitization of loans sold		3,583		—
Liabilities accrued for additions in premises and equipment		2,627		—
Beneficial interests received in exchange for LIHTC's sold		4,227		—
Liabilities accrued for excise tax on preferred stock repurchase		1,215		—
Change in prepaid assets for preferred stock repurchase		125,000		—
Deposits received upon loan origination		189,206		—
Transfer of loans from loans held for sale to loans receivable		18,429		47,850
Transfer of loans from loans receivable to loans held for sale		386,604		1,600

See notes to condensed consolidated financial statements.

9

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, FMBI (whose branches were sold to unaffiliated third parties and its remaining charter collapsed into Merchants Bank on January 26, 2024), and MAM. 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 sheets of the Company as of December 31, 2024, which has been derived from audited consolidated financial statements, and unaudited condensed consolidated financial statements of the Company as of June 30, 2025 and for the three and six months ended June 30, 2025 and 2024, were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the 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 consolidated financial statements and notes thereto of the Company as of and for the year ended December 31, 2024 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.

All adjustments, which are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported, have been included in the accompanying unaudited condensed consolidated financial statements. All interim amounts have not been audited and the results of operations for the three and six months ended June 30, 2025, 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, 2025 and 2024 include results from the Company, and its wholly owned subsidiaries, Merchants Bank, FMBI (until its branches were sold and its bank charter merged into Merchants Bank on January 26, 2024), and MAM. 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 a 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 that could be significant to the entity. 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. Additionally, the Company has certain variable interest investments that it was deemed not to be a primary beneficiary of as of June 30, 2025 and December 31, 2024. These VIEs are not consolidated and the equity method or proportional amortization method of accounting has been applied. The Company will analyze whether the primary beneficiary designation has changed through triggering events on a prospective basis. Changes in facts and circumstances occurring since the previous primary beneficiary determination will be considered as part of this ongoing assessment. See Note 8: Variable Interest Entities (VIEs) for additional information about VIEs.

10

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 assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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 2024 Annual Report on Form 10–K.

Restricted Cash

Included in cash equivalents is an account restricted as collateral for the potential risk of loss on senior credit linked notes issued by the Company in March 2023. The balance of the notes as of June 30, 2025 and December 31, 2024 was $76.9 million and $87.6 million, respectively. As of June 30, 2025 and December 31, 2024, there was $43.8 million and $33.5 million, respectively, in restricted cash held in a separate account included in the total of interest-earning demand accounts on the unaudited condensed consolidated balance sheets. Also see Note 10: Borrowings.

Reclassifications

Certain reclassifications have been made to the 2024 financial statements to conform to the financial statement presentation as of and for the three and six months ended June 30, 2025. These reclassifications had no effect 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.

Recent Accounting Pronouncements

The Company continually monitors for potential accounting standards updates and SEC releases. The following updates and releases have been deemed to have the most applicability to the Company’s financial statements:

FASB ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued an ASU that will require public business entity’s disclosures to include an enhanced tabular tax rate reconciliation. The update will also require all public entities disclose income tax expense and taxes paid broken down by federal, state, and foreign with a disaggregation for jurisdictions that exceed 5% of income for taxes paid.

11

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The updates in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. An entity shall apply the ASU on a prospective basis to financial statements for annual periods beginning after the effective date. The Company does not expect it to have a material impact on the Company’s financial position or results of operations.

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 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.

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, 2025
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Securities available for sale:
Treasury notes	$	70,125	$	4	$	27	$	70,102
Federal Agencies		260,000		9		310		259,699
Mortgage-backed - Government Agency (2) - multi-family		3,580		—		—		3,580
Mortgage-backed - Non-Agency - residential - fair value option (1)		407,539		—		—		407,539
Mortgage-backed - Agency - residential - fair value option (1)		195,423		—		—		195,423
Total securities available for sale	$	936,667	$	13	$	337	$	936,343
Securities held to maturity:
Mortgage-backed - Non-Agency - multi-family	$	550,912	$	—	$	1,479	$	549,433
Mortgage-backed - Non-Agency - residential		491,090		1,692		133		492,649
Mortgage-backed - Non-Agency - healthcare		494,439		3		—		494,442
Mortgage-backed - Agency - multi-family		11,770		—		769		11,001
Total securities held to maturity	$	1,548,211	$	1,695	$	2,381	$	1,547,525
FHLB and other equity securities (3)	$	217,850

(1) 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.

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

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

12

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

	December 31, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Securities available for sale:
Treasury notes	$	89,898	$	108	$	—	$	90,006
Federal Agencies		253,218		—		282		252,936
Mortgage-backed - Government Agency (2) - multi-family		1,162		—		—		1,162
Mortgage-backed - Non-Agency - residential - fair value option (1)		430,779		—		—		430,779
Mortgage-backed - Agency - residential - fair value option (1)		205,167		—		—		205,167
Total securities available for sale	$	980,224	$	108	$	282	$	980,050
Securities held to maturity:
Mortgage-backed - Non-Agency - multi-family	$	592,053	$	—	$	1,162	$	590,891
Mortgage-backed - Non-Agency - residential		526,242		1,871		75		528,038
Mortgage-backed - Non-Agency - healthcare		534,538		374		—		534,912
Mortgage-backed - Agency - multi-family		11,853		—		1,020		10,833
Total securities held to maturity	$	1,664,686	$	2,245	$	2,257	$	1,664,674
FHLB and other equity securities (3)	$	217,804

(1) 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.

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

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

Accrued interest on securities available for sale totaled $5.3 million at June 30, 2025 and $4.9 million at December 31, 2024, and is excluded from the estimate of credit losses.

Accrued interest on securities held to maturity totaled $4.7 million at June 30, 2025 and $5.8 million at December 31, 2024, and is excluded from the estimate of credit losses.

The amortized cost and fair value of securities available for sale at June 30, 2025 and December 31, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may

13

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, 2025				December 31, 2024
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Securities available for sale:
Within one year	$	70,125	$	70,102	$	89,898	$	90,006
After one through five years		260,000		259,699		253,218		252,936
		330,125		329,801		343,116		342,942
Mortgage-backed - Agency - multi-family		3,580		3,580		1,162		1,162
Mortgage-backed - Non-Agency residential - fair value option		407,539		407,539		430,779		430,779
Mortgage-backed - Agency - residential - fair value option		195,423		195,423		205,167		205,167
	$	936,667	$	936,343	$	980,224	$	980,050
Securities held to maturity:
Mortgage-backed - Non-Agency - multi-family	$	550,912	$	549,433	$	592,053	$	590,891
Mortgage-backed - Non-Agency - residential		491,090		492,649		526,242		528,038
Mortgage-backed - Non-Agency - healthcare		494,439		494,442		534,538		534,912
Mortgage-backed - Agency - multi-family		11,770		11,001		11,853		10,833
	$	1,548,211	$	1,547,525	$	1,664,686	$	1,664,674

During the three and six months ended June 30, 2025, no securities available for sale were sold. During the three months ended June 30, 2024, no securities available for sale were sold. During the six months ended June 30, 2024, the Company received proceeds of $10.0 million and recognized a net loss of $108,000 from sales of securities available for sale, which consisted of $10,000 in gains and $118,000 of losses.

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, 2025 and December 31, 2024:

	June 30, 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:
Treasury notes	$	26,900	$	27	$	—	$	—	$	26,900	$	27
Federal Agencies		234,690		310		—		—		234,690		310
	$	261,590	$	337	$	—	$	—	$	261,590	$	337

December 31, 2024

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

$

252,936

$

282

$

—

$

—

$

252,936

$

282

14

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Allowance for Credit Losses

For securities available for sale with an unrealized loss position, the Company evaluates the securities to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. Any expected loss that is not credit-related is recognized in accumulated other comprehensive loss, net of tax. Credit-related expected losses are recognized as an ACL for securities available for sale on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Accrued interest receivable is excluded from the estimate of credit losses. Both the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company expects, or is required, to sell a security available for sale before recovering its amortized cost basis, the entire expected credit loss amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there is no ACL in this situation.

In evaluating securities available for sale in unrealized loss positions for credit losses and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors. 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. There were no credit-related factors underlying unrealized losses on available for sale debt securities at June 30, 2025 and December 31, 2024.

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 the bank has exposure to credit losses.

The Company has a held to maturity mortgage-backed security with an amortized cost value of $550.9 million and fair value of $549.4 million at June 30, 2025, acquired via a mortgage securitization transaction facilitated by the Company, which has experienced delinquencies in some of the underlying loans. The underlying loans in the securitization have an average loan-to-value ratio of 61%. Additionally, the security is a senior tranche that has credit protection from the first 14.4% of losses. The company continues to receive timely interest payments on this security, which is current as of June 30, 2025. The asset 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, 2025. All other securities held to maturity were classified as Pass as of June 30, 2025. All securities held to maturity were classified as Pass as of December 31, 2024. No allowance for credit losses were recorded for this, or any other non-agency security, as of June 30, 2025 and December 31, 2024.

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

15

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

securities and Fannie Mae and Freddie Mac participation certificates, all of which are pending settlement under firm investor commitments to purchase the securities, typically occurring within 30 days. The aggregate positive fair value adjustment recorded in mortgage loans in process of securitization was $3.0 million and $4.1 million as of June 30, 2025 and December 31, 2024, respectively.

Note 4:   Loans and Allowance for Credit Losses on Loans

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 unearned income, charge-offs, the ACL-Loans, any unamortized deferred fees or costs on originated loans, and unamortized premiums or discounts on purchased loans.

For loans at amortized cost, 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 $47.5 million and $51.9 million at June 30, 2025 and December 31, 2024, respectively.

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

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

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

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

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

16

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Loan Portfolio Summary‌

Loans receivable at June 30, 2025 and December 31, 2024 include:

	June 30,		December 31,
	2025		2024
	(In thousands)
Mortgage warehouse repurchase agreements	$	1,843,742	$	1,446,068
Residential real estate(1)		988,783		1,322,853
Multi-family financing		4,833,548		4,624,299
Healthcare financing		1,442,095		1,484,483
Commercial and commercial real estate(2)(3)		1,328,765		1,476,211
Agricultural production and real estate		82,425		77,631
Consumer and margin loans		4,570		6,843
Loans Receivable		10,523,928		10,438,388
Less:
ACL-Loans		91,811		84,386
Loans Receivable, net	$	10,432,117	$	10,354,002

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

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

(3) Includes only $19.8 million and $18.7 million of non-owner occupied commercial real estate as of June 30, 2025 and December 31, 2024, 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. A traditional secured warehouse facility typically carries a base interest rate of the SOFR, or mortgage note rate, and a margin.

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 primarily 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 held for investment, included in this segment are All-in-One^© first-lien HELOC products that integrate a borrower’s mortgage and deposit account into a single facility and have typically carried a base interest rate of One-Year CMT, plus a margin. New originations are tied to 30-day SOFR, plus a margin.

17

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 depends on the 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. 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 government backed or can be sold in the secondary market.

Healthcare Financing (HC FIN): The healthcare financing portfolio includes customized loan products for 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 permanent loans, sales of developed property or an interim loan commitment from the Company until permanent agency-eligible financing is obtained, 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, and a margin. The Company focuses on loan classes that are government backed 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 mortgage servicing rights that are assessed for fair value quarterly at the Company’s request. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. SBA loans are included in this category. An immaterial portion of commercial and commercial real estate loans are typically made up of non-owner occupied commercial real estate loans.

Agricultural Production and Real Estate Loans (AG & AGRE): Agricultural production loans are generally comprised of seasonal operating lines of credit to grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. The Company also offers long-term financing to purchase agricultural real estate. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating-year based on industry-developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary. The Company is approved to sell agricultural loans in the secondary market through Farmer Mac and uses this relationship to manage interest rate risk within the portfolio. Agricultural real estate loans included in this segment are typically structured with a one-year ARM, three-year ARM or five-year ARM indexed to CMT and 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 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.

18

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 modest historical credit loss experience, peer and industry data was 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.

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.

19

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables present, by loan portfolio segment, the activity in the ACL-Loans for the three and six months ended June 30, 2025 and 2024:

	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

	Three Months Ended June 30, 2024
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
ACL-Loans
Balance, beginning of period	$	3,022	$	6,905	$	28,664	$	24,587	$	11,990	$	450	$	94	$	75,712
Provision for credit losses		594		(595)		9,097		(1,065)		702		39		(19)		8,753
Loans charged to the allowance		—		—		(3,349)		—		(103)		—		—		(3,452)
Recoveries of loans previously charged-off		—		13		—		—		2		—		—		15
Balance, end of period	$	3,616	$	6,323	$	34,412	$	23,522	$	12,591	$	489	$	75	$	81,028

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 $1.1 million for the ACL-OBCE’s and $0.4 million for the release of reserves on the ACL-Guarantees, related to a loan securitization.

The Company recorded a total provision for credit losses of $10.0 million for the three months ended June 30, 2024. The $10.0 million total provision for credit losses consisted of $8.8 million for the ACL-Loans as shown above and $1.2 million for the ACL-OBCE’s.

	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

	Six Months Ended June 30, 2024
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
ACL-Loans
Balance, beginning of period	$	2,070	$	7,323	$	26,874	$	22,454	$	12,243	$	619	$	169	$	71,752
FMBI's ACL for loans sold		—		(55)		(186)		(2)		(92)		(246)		(12)		(593)
Provision for credit losses		1,546		(958)		11,073		1,070		1,465		116		(82)		14,230
Loans charged to the allowance		—		—		(3,349)		—		(1,028)		—		—		(4,377)
Recoveries of loans previously charged-off		—		13		—		—		3		—		—		16
Balance, end of period	$	3,616	$	6,323	$	34,412	$	23,522	$	12,591	$	489	$	75	$	81,028

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,

20

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

net of $2.8 million for the ACL-OBCE’s and $0.4 million for the release of reserves on the ACL-Guarantees, related to a loan securitization.

The Company recorded a total provision for credit losses of $14.7 million for the six months ended June 30, 2024. The $14.7 million total provision for credit losses consisted of $14.2 million for the ACL-Loans as shown above, $1.1 million for the ACL-OBCE’s, net of $0.6 million for the release of FMBI’s ACL-Loans for loans sold.

The following table presents, by loan portfolio segment, the activity in the ACL-Loans, for the year-ended December 31, 2024:

	Year Ended December 31, 2024
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
ACL-Loans
Balance, beginning of period	$	2,070	$	7,323	$	26,874	$	22,454	$	12,243	$	619	$	169	$	71,752
FMBI's ACL for loans sold		—		(55)		(186)		(2)		(92)		(246)		(12)		(593)
Provision for credit losses		1,746		(1,340)		33,674		(10,795)		276		166		(49)		23,678
Loans charged to the allowance		—		—		(5,282)		(3,095)		(2,210)		—		—		(10,587)
Recoveries of loans previously charged-off		—		14		46		—		76		—		—		136
Balance, end of period	$	3,816	$	5,942	$	55,126	$	8,562	$	10,293	$	539	$	108	$	84,386

The Company recorded a total provision for credit losses of $24.3 million for the year ended December 31, 2024. The $24.3 million provision for credit losses consisted of $23.7 million for the ACL-Loans as shown above, $2.2 million for the ACL-OBCEs, net of $1.0 million for the release of reserves on ACL-Guarantees, related to a loan securitization and $0.6 million for the release of FMBI’s ACL-Loans for loans sold.

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, 2025 and December 31, 2024:

	June 30, 2025
	Real Estate		Accounts Receivable / Equipment		Other		Total		ACL-Loans Allocation
	(In thousands)
RES RE	$	7,964	$	—	$	—	$	7,964	$	39
MF FIN		294,206		—		693		294,899		30,324
HC FIN		103,288		—		—		103,288		454
CML & CRE		8,813		1,447		1,060		11,320		2,226
AG & AGRE		181		5		—		186		2
Total collateral dependent loans	$	414,452	$	1,452	$	1,753	$	417,657	$	33,045

There were no significant changes to the types of collateral securing the Company’s collateral dependent loans compared to December 31, 2024.

	December 31, 2024
	Real Estate		Accounts Receivable / Equipment		Other		Total		ACL-Loans Allocation
	(In thousands)
RES RE	$	6,153	$	—	$	—	$	6,153	$	31
MF FIN		227,054		—		693		227,747		22,265
HC FIN		73,225		—		—		73,225		2,569
CML & CRE		8,125		1,447		629		10,201		358
AG & AGRE		—		6		—		6		1
Total collateral dependent loans	$	314,557	$	1,453	$	1,322	$	317,332	$	25,224

21

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 contain elevated risk that requires management’s attention.

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 institution’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 institution 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 an officer of 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.

22

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables present the credit risk profile of the Company’s loan portfolio based on internal risk rating category and origination year as of June 30, 2025 and December 31, 2024:

	June 30, 2025
	2025		2024		2023		2022		2021		Prior		Revolving Loans		TOTAL
	(In thousands)
MTG WHRA
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	1,843,742	$	1,843,742
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	1,843,742	$	1,843,742
RES RE
Pass	$	24,996	$	39,767	$	28,692	$	7,458	$	5,152	$	23,199	$	851,555	$	980,819
Substandard		—		—		—		22		—		129		7,813		7,964
Total	$	24,996	$	39,767	$	28,692	$	7,480	$	5,152	$	23,328	$	859,368	$	988,783
MF FIN
Pass	$	726,822	$	774,109	$	320,907	$	222,274	$	41,803	$	11,004	$	2,336,075	$	4,432,994
Special Mention		59,903		17,000		—		23,934		—		235		4,583		105,655
Substandard		13,545		14,601		160,419		78,486		—		—		27,848		294,899
Total	$	800,270	$	805,710	$	481,326	$	324,694	$	41,803	$	11,239	$	2,368,506	$	4,833,548
Charge-offs	$	—	$	—	$	10,135	$	34,917	$	—	$	3,651	$	—	$	48,703
HC FIN
Pass	$	540,046	$	78,920	$	112,643	$	241,655	$	—	$	—	$	306,548	$	1,279,812
Special Mention		17,368		30,237		—		5,450		—		—		5,940		58,995
Substandard		—		42,521		25,600		9,000		20,317		—		5,850		103,288
Total	$	557,414	$	151,678	$	138,243	$	256,105	$	20,317	$	—	$	318,338	$	1,442,095
Charge-offs	$	—	$	—	$	—	$	—	$	5,296	$	2,201	$	—	$	7,497
CML & CRE
Pass	$	38,225	$	52,569	$	46,200	$	103,145	$	36,693	$	29,685	$	1,004,155	$	1,310,672
Special Mention		3,310		—		442		1,616		1,283		47		75		6,773
Substandard		—		447		148		637		8,988		26		1,074		11,320
Total	$	41,535	$	53,016	$	46,790	$	105,398	$	46,964	$	29,758	$	1,005,304	$	1,328,765
Charge-offs	$	—	$	—	$	147	$	110	$	113	$	—	$	—	$	370
AG & AGRE
Pass	$	8,813	$	16,263	$	7,264	$	4,688	$	2,858	$	20,482	$	21,782	$	82,150
Special Mention		89		—		—		—		—		—		—		89
Substandard		—		—		5		181		—		—		—		186
Total	$	8,902	$	16,263	$	7,269	$	4,869	$	2,858	$	20,482	$	21,782	$	82,425
CON & MAR
Pass	$	80	$	250	$	33	$	11	$	3	$	—	$	4,193	$	4,570
Total	$	80	$	250	$	33	$	11	$	3	$	—	$	4,193	$	4,570
Total Pass	$	1,338,982	$	961,878	$	515,739	$	579,231	$	86,509	$	84,370	$	6,368,050	$	9,934,759
Total Special Mention	$	80,670	$	47,237	$	442	$	31,000	$	1,283	$	282	$	10,598	$	171,512
Total Substandard	$	13,545	$	57,569	$	186,172	$	88,326	$	29,305	$	155	$	42,585	$	417,657
Total Loans	$	1,433,197	$	1,066,684	$	702,353	$	698,557	$	117,097	$	84,807	$	6,421,233	$	10,523,928
Total Charge-offs	$	—	$	—	$	10,282	$	35,027	$	5,409	$	5,852	$	—	$	56,570

The table above excludes two multi-family loans, rated as Special Mention, totaling $41.6 million and classified as held for sale at June 30, 2025. The Company did not have any material revolving loans converted to term loans that were not re-underwritten at June 30, 2025.

23

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

	December 31, 2024
	2024		2023		2022		2021		2020		Prior		Revolving Loans		TOTAL
	(In thousands)
MTG WHRA
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	1,446,068	$	1,446,068
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	1,446,068	$	1,446,068
RES RE
Pass	$	40,363	$	30,750	$	8,212	$	6,181	$	18,712	$	6,210	$	1,206,272	$	1,316,700
Substandard		—		—		22		—		—		203		5,928		6,153
Total	$	40,363	$	30,750	$	8,234	$	6,181	$	18,712	$	6,413	$	1,212,200	$	1,322,853
MF FIN
Pass	$	1,028,288	$	518,320	$	419,723	$	66,787	$	5,460	$	10,456	$	2,109,707	$	4,158,741
Special Mention		88,337		77,700		57,679		—		—		238		13,857		237,811
Substandard		18,884		105,553		76,093		2,550		—		—		24,667		227,747
Total	$	1,135,509	$	701,573	$	553,495	$	69,337	$	5,460	$	10,694	$	2,148,231	$	4,624,299
Charge-offs	$	—	$	870	$	4,412	$	—	$	—	$	—	$	—	$	5,282
HC FIN
Pass	$	460,259	$	112,223	$	466,393	$	—	$	—	$	—	$	234,316	$	1,273,191
Special Mention		32,547		—		8,900		—		—		—		96,620		138,067
Substandard		13,961		25,600		—		25,363		—		—		8,301		73,225
Total	$	506,767	$	137,823	$	475,293	$	25,363	$	—	$	—	$	339,237	$	1,484,483
Charge-offs	$	—	$	—	$	—	$	3,095	$	—	$	—	$	—	$	3,095
CML & CRE
Pass	$	52,323	$	45,999	$	107,451	$	48,903	$	16,264	$	18,216	$	1,172,763	$	1,461,919
Special Mention		—		—		2,331		1,633		—		52		75		4,091
Substandard		40		150		110		8,835		—		41		1,025		10,201
Total	$	52,363	$	46,149	$	109,892	$	59,371	$	16,264	$	18,309	$	1,173,863	$	1,476,211
Charge-offs	$	—	$	—	$	253	$	982	$	—	$	975	$	—	$	2,210
AG & AGRE
Pass	$	17,328	$	7,373	$	4,676	$	3,170	$	8,790	$	13,705	$	22,583	$	77,625
Substandard		—		6		—		—		—		—		—		6
Total	$	17,328	$	7,379	$	4,676	$	3,170	$	8,790	$	13,705	$	22,583	$	77,631
CON & MAR
Pass	$	326	$	75	$	18	$	9	$	—	$	4,151	$	2,264	$	6,843
Total	$	326	$	75	$	18	$	9	$	—	$	4,151	$	2,264	$	6,843
Total Pass	$	1,598,887	$	714,740	$	1,006,473	$	125,050	$	49,226	$	52,738	$	6,193,973	$	9,741,087
Total Special Mention	$	120,884	$	77,700	$	68,910	$	1,633	$	—	$	290	$	110,552	$	379,969
Total Substandard	$	32,885	$	131,309	$	76,225	$	36,748	$	—	$	244	$	39,921	$	317,332
Total Loans	$	1,752,656	$	923,749	$	1,151,608	$	163,431	$	49,226	$	53,272	$	6,344,446	$	10,438,388
Total Charge-offs	$	—	$	870	$	4,665	$	4,077	$	—	$	975	$	—	$	10,587

The table above excludes one multi-family loan, rated as Special Mention, totaling $17.4 million and classified as held for sale at December 31, 2024. The Company did not have any material revolving loans converted to term loans that were not re-underwritten at December 31, 2024.

24

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, 2025 and December 31, 2024.

	June 30, 2025
	30-59 Days			60-89 Days			90+ Days			Total						Total
	Past Due			Past Due			Past Due			Past Due			Current			Loans
	(Dollars in thousands)
MTG WHRA	$	—		$	—		$	—		$	—		$	1,843,742		$	1,843,742
RES RE		4,720			90			6,279			11,089			977,694			988,783
MF FIN		11,370			—			174,926			186,296			4,647,252			4,833,548
HC FIN		16,101			—			61,416			77,517			1,364,578			1,442,095
CML & CRE		—			70			4,032			4,102			1,324,663			1,328,765
AG & AGRE		—			—			5			5			82,420			82,425
CON & MAR		—			—			—			—			4,570			4,570
	$	32,191		$	160		$	246,658		$	279,009		$	10,244,919		$	10,523,928
		—	%		—	%		3	%		3	%		97	%		100	%

The Company did not have any loans classified as held for sale that were past due as of June 30, 2025.

	December 31, 2024
	30-59 Days			60-89 Days			90+ Days			Total						Total
	Past Due			Past Due			Past Due			Past Due			Current			Loans
	(Dollars in thousands)
MTG WHRA	$	—		$	—		$	—		$	—		$	1,446,068		$	1,446,068
RES RE		1,294			3,797			2,339			7,430			1,315,423			1,322,853
MF FIN		8,497			11,148			201,508			221,153			4,403,146			4,624,299
HC FIN		—			—			59,264			59,264			1,425,219			1,484,483
CML & CRE		596			688			3,047			4,331			1,471,880			1,476,211
AG & AGRE		73			—			12			85			77,546			77,631
CON & MAR		—			—			—			—			6,843			6,843
	$	10,460		$	15,633		$	266,170		$	292,263		$	10,146,125		$	10,438,388
		—	%		—	%		3	%		3	%		97	%		100	%

The table above excludes one multi-family loan of $30.1 million and two residential real estate loans totaling $2.1 million, 30-59 days past due, and one residential real estate loan of $0.1 million, 90+ days past due, classified as held for sale at December 31, 2024.

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. Interest income of $0 and $0.1 million for the three and six months ended June 30, 2025, respectively, and $0.9 million for both the three and six months ended June 30, 2024, was recognized on nonaccrual financial assets at the time of payoff.

25

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the Company’s nonperforming loans and nonperforming assets at June 30, 2025 and December 31, 2024.

	June 30, 2025				December 31, 2024
			Total Loans >				Total Loans >
			90 Days &				90 Days &
	Nonaccrual		Accruing		Nonaccrual		Accruing
	(In thousands)
RES RE	$	7,835	$	129	$	6,154	$	—
MF FIN		177,530		585		201,508		—
HC FIN		61,416		—		69,001		—
CML & CRE		4,032		—		3,047		—
AG & AGRE		5		—		6		6
CON & MAR		—		—		—		—
	$	250,818	$	714	$	279,716	$	6

The Company did not have any loans classified as held for sale on nonaccrual or past due as of June 30, 2025. The table above excludes one residential real estate loan, classified as held for sale, on nonaccrual at December 31, 2024, totaling $0.1 million.

The Company did not have any nonaccrual loans without an estimated ACL at June 30, 2025 or December 31, 2024.

Modifications to Borrowers Experiencing Financial Difficulty

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

The following tables present the amortized cost basis of loans at June 30, 2025 and June 30, 2024 that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2025 and June 30, 2024, 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, 2025									Six Months Ended June 30, 2025
	Payment Delay		Term Extension		Combination - Term Extension and Payment Delay		Total Class of Financing Receivable		% of Total Class of Financing Receivable				Payment Delay	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	%

26

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

	Three Months Ended June 30, 2024											Six Months Ended June 30, 2024
	Payment Delay		Term Extension		Combination - Term Extension and Payment Delay		Total Class of Financing Receivable		% of Total Class of Financing Receivable				Payment Delay	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	$	35,137	$	42,452	$	—	$	77,589		2	%	$	35,137	$	42,452	$	—	$	77,589		2	%
HC FIN		—		4,240		—		4,240		—	%		—		4,240		—		4,240		—	%
Total	$	35,137	$	46,692	$	—	$	81,829		1	%	$	35,137	$	46,692	$	—	$	81,829		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, 2025, there were no specific reserves recorded on troubled loan modifications disclosed herein. The Company has committed to lend no additional amounts to the borrowers included in the table below.

	Three Months Ended June 30, 2025
	Term Extension	Combination - Term Extension and Forbearance
Loan Type	Financial Effect	Financial Effect
MF FIN	Added a weighted average 7 months.
	Six Months Ended June 30, 2025
	Term Extension	Combination - Term Extension and Forbearance
Loan Type	Financial Effect	Financial Effect
MF FIN	Added a weighted average 7 months.	Term extension and forbearance 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.

	Three Months Ended June 30, 2024
	Term Extension	Payment Delay
Loan Type	Financial Effect	Financial Effect
MF FIN	Added a weighted average 28 months.	Forbearance average of 7 months.
HC FIN	Added a weighted average 12 months.
	Six Months Ended June 30, 2024
	Term Extension	Payment Delay
Loan Type	Financial Effect	Financial Effect
MF FIN	Added a weighted average 28 months.	Forbearance average of 7 months.
HC FIN	Added a weighted average 12 months.

27

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Multi-family loans totaling $9.6 million that had prior forbearance modifications defaulted during the three and six months ended June 30, 2025.

Immaterial Revision of Prior Period Footnote Disclosures Regarding Troubled Loan Modifications

The Company revised amounts reported in the previously issued Form 10-Q for the period end June 30, 2024 related to TLMs in the above notes to the unaudited condensed consolidated financial statements due to incorrectly classifying eight loans totaling $104.6 million as TLMs that did not meet the Company’s definition of a TLM. For comparative purposes, the Company has made a revision to the applicable prior period notes in this section to reflect this correction. The impacts of the misclassification and subsequent revisions are contained entirely within these disclosures and had no impact to the unaudited condensed consolidated financial statements for the period ended June 30, 2024. The effect of this error was evaluated by the Company in accordance with SEC Staff Accounting Bulletins No. 99 and 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures.

Foreclosures

There were $2.6 million in residential loans in the process of foreclosure as of June 30, 2025 and there were $1.9 million in process of foreclosure as of December 31, 2024.

Significant Loan Sales

On June 5, 2025, the Company completed a $373.3 million securitization of 18 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $5.9 million gain on sale was recognized. The Company was retained as the mortgage sub-servicer for Freddie Mac on the entire $373.3 million pool of loans. Beyond sub-servicing the loans, the Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in representation. In connection with this transaction, a mortgage servicing right of $1.6 million was established.

On June 27, 2025, the Company completed a $312.1 million sale of All-in-One^©, first-lien home equity lines of credit through a sale to a related third party. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $2.2 million gain on sale was recognized. The Company was retained as the mortgage sub-servicer on the entire $312.1 million pool of loans. Beyond sub-servicing the loans, the Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in representation. No mortgage servicing right was established in connection with this transaction.

28

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Loans Purchased

The Company purchased $30.4 million and $68.5 million of loans during the six months ended June 30, 2025 and 2024, respectively.

Loan Guarantees

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. 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 terms of these standby letters of credit range from less than one to eight years. These commitments are not recorded in the unaudited condensed consolidated financial statements. The total for these guarantees at June 30, 2025 and December 31, 2024 was $178.1 million and $204.7 million, respectively.

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 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.

		June 30, 2025				December 31, 2024
		(In thousands)
Investment	Accounting Method	Investment		Unfunded Commitments		Investment		Unfunded Commitments
LIHTC	Proportional amortization	$	153,596	$	91,904	$	123,574	$	93,929
LIHTC (1)	Lower of cost or market		45,580		—		56,533		—
LIHTC subtotal		$	199,176	$	91,904	$	180,107	$	93,929
Joint Venture	Consolidated		10,937		—		10,937		—
Total		$	210,113	$	91,904	$	191,044	$	93,929

(1) LIHTC projects held for future syndication.

29

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, 2025 and 2024.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
	(In thousands)				(In thousands)
Amortization expense	$	3,784	$	2,305	$	7,559	$	5,145
Expected tax credits	$	4,095	$	2,391	$	8,369	$	5,418

The Company serves as a general partner for several syndicated low-income housing tax credit funds that are owned by one investor, holding 99.99% of the funds, as a limited partner. The Company, as general partner, provided services during 2024 and prior years, such as formation of the funds and identifying or acquiring tax credit investments, for which it expects to receive fees in the future, up to approximately $19.3 million. The amount of payments to be received as the general partner is contingent upon achieving certain performance obligations, including the stabilization of the properties and delivery of tax credits to the limited partner in the future, which could extend out until 2042. Due to the long-term nature of the agreement, amounts to be received, and the uncertainty of achieving the performance obligation, variable consideration and revenue recognition has been 100% constrained as of June 30, 2025. Revenue recognition will be continuously evaluated as facts and circumstances evolve. The Company has also advanced these LIHTC funds $81.4 million as of June 30, 2025 and $98.8 million as of December 31, 2024 to acquire its LIHTC investment projects, for which it expects repayment over a similar period. These advances have been recorded in other assets on the unaudited condensed consolidated balance sheets.

Note 6: Leases

The Company has operating leases for various locations with terms ranging from one to seven years. Some operating leases include options to extend. The extensions were included in the right-of-use 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, 2025 and December 31, 2024:

		June 30, 2025		December 31, 2024
		(In thousands)
Balance Sheet
Operating lease ROU asset (in other assets)	$	7,429	$	8,332
Operating lease liability (in other liabilities)		8,325		9,303
Weighted average remaining lease term (years)		4.1		4.6
Weighted average discount rate		3.44%		3.43%

30

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The table below presents the components of lease expenses for the three and six months ended June 30, 2025 and 2024. Operating lease expenses are included in occupancy and equipment expense on the unaudited condensed consolidated income statement.

		Three Months Ended			Six Months Ended
		June 30,			June 30,
		2025		2024	2025		2024
		(In thousands)			(In thousands)
Statement of Income
Components of lease expense:
Operating lease cost	$	738	$	765	1,432	$	1,369

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

Maturities of lease liabilities:	June 30, 2025
		(In thousands)
One year or less	$	2,354
Year two		2,273
Year three		1,989
Year four		1,312
Year five		707
Thereafter		299
Total future minimum lease payments		8,934
Less: imputed interest		609
Total	$	8,325

		Six Months Ended
		June 30,
		2025		2024
		(In thousands)
Cash Flow Statement
Supplemental cash flow information:
Operating cash flows for operating leases	$	1,133	$	1,220

Note 7: Other Assets and Receivables

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

Joint Ventures

The Company has investments in various joint ventures totaling $50.9 million and $42.2 million at June 30, 2025 and December 31, 2024, respectively. These investments are primarily made up of investments in debt funds totaling $30.5 million and $31.8 million at June 30, 2025 and December 31, 2024, 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 $10.0 million and $3.8 million reflected in the investment balance and liabilities at June 30, 2025 and December 31, 2024, respectively. See Note 8: Variable Interest Entities (VIEs) for additional information about VIE’s.

31

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Qualified Affordable Housing

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

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 consisted of warehouse participation certificates, classified as loans held for sale, but could include warehouse repurchase agreements, classified as loans receivable. The protected tranche will cover 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. A scope exception within ASC 815 – Derivatives and Hedging 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 for the protected portion of the amounts included in the ACL-loans. The recovery asset and recovery income accounts are adjusted as the ACL-loans is adjusted for changes in loss expectations.

As of June 30, 2025 and December 31, 2024, a CDS recovery asset of $445,000 and $0, respectively, was established based on the repurchase agreements included in loans receivable. The total loan pool balances were $2.0 billion and $1.2 billion as of June 30, 2025 and December 31, 2024, respectively.

Note 8:   Variable Interest Entities

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

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

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

The Company has invested in single-family, multi-family, and healthcare debt financing entities, as well as low-income housing syndicated funds that are deemed to be VIEs. The Company also has deemed 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 has both the power to direct the activities that most significantly impact the entity, and an interest that could be significant to the entity. To determine if an interest could be significant to the entity, both qualitative and quantitative factors regarding the nature, size and form of involvement with the entity are evaluated.

32

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At June 30, 2025 the Company determined it was not the primary beneficiary for most of its VIEs, primarily because the Company did not have control or the obligation to absorb losses or the rights to receive benefits from the VIE that could potentially be significant to the VIE. Evaluation and reassessment 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 assets of the VIEs, as well as the maximum exposure to loss in connection with unconsolidated VIEs and liabilities for binding, unfunded commitments at June 30, 2025 and December 31, 2024. The Company’s maximum exposure to loss associated with its unconsolidated VIEs consists of the capital invested plus any unfunded equity commitments. These investments are recorded in other assets and other liabilities 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.

	Investments		Loans		Securities		Maximum		Liabilities
Assets	in VIEs		to VIEs		for VIEs		Exposure to Loss		for VIEs
	(In thousands)
June 30, 2025
Low-income housing tax credit investments	$	236,005	$	343,398	$	—	$	579,403	$	81,606
Debt funds		30,536		241,367		—		271,903		—
Mortgage-backed securitizations (1)		—		21,924		1,536,441		1,558,365		—
Total Unconsolidated VIEs	$	266,541	$	606,689	$	1,536,441	$	2,409,671	$	81,606
December 31, 2024
Low-income housing tax credit investments	$	225,727	$	282,584	$	—	$	508,311	$	89,956
Debt funds		31,772		109,480		—		141,252		2,752
Mortgage-backed securitizations (1)		—		23,564		1,652,833		1,676,397		—
Total Unconsolidated VIEs	$	257,499	$	415,628	$	1,652,833	$	2,325,960	$	92,708

(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.

33

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 9: Deposits

Deposits were comprised of the following at June 30, 2025 and December 31, 2024:

	June 30, 2025		December 31, 2024
	(In thousands)
Noninterest-bearing deposits
Core demand deposits	$	315,523	$	239,005
Interest-bearing deposits
Demand deposits:
Core demand deposits	$	6,066,933	$	4,319,512
Brokered demand deposits		250,000		—
Total interest-earning demand deposits		6,316,933		4,319,512
Savings deposits:
Core savings deposits		3,703,270		3,442,111
Brokered savings deposits		358		859
Total savings deposits		3,703,628		3,442,970
Certificates of deposit:
Core certificates of deposits		1,346,630		1,385,270
Brokered certificates of deposits		1,004,121		2,533,219
Total certificates of deposits		2,350,751		3,918,489
Total interest-bearing deposits		12,371,312		11,680,971
Total deposits	$	12,686,835	$	11,919,976
Total core deposits	$	11,432,356	$	9,385,898
Total brokered deposits	$	1,254,479	$	2,534,078
Total deposits	$	12,686,835	$	11,919,976

Maturities for certificates of deposit are as follows:

	June 30, 2025
	(In thousands)
Due within one year	$	2,294,984
Due in one year to two years		45,459
Due in two years to three years		10,308
Due in three years to four years		—
Due in four years to five years		—
Due in five years to six years		—
	$	2,350,751

Certificates of deposit of $250,000 or more totaled $671.6 million and $694.8 million at June 30, 2025 and December 31, 2024, respectively.

34

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 10: Borrowings

Borrowings comprised the following at June 30, 2025 and December 31, 2024:

	June 30, 2025		December 31, 2024
	(In thousands)
Federal Reserve discount window borrowings	$	175,000	$	50,000
Subordinated debt		71,800		71,800
FHLB advances		3,680,588		4,172,030
Credit linked notes, net of debt discount		74,152		84,358
Other borrowings		7,934		7,934
Total borrowings	$	4,009,474	$	4,386,122

On May 27, 2025, the Company entered into an interest free, fixed-rate community development advance debt agreement with the FHLB. The balance of the advance was $2.5 million as of June 30, 2025, and the full principal balance matures on May 24, 2030.

On June 24, 2025, 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, 2025, and matures on September 22, 2025. The variable interest rate is based on the Federal Funds effective rate, plus 15 basis points, which was 4.48% on June 30, 2025. The FHLB has a put option to cancel the agreement 60 days after the initial execution date and the Company has a call option to cancel the agreement at any time, with one day’s notice.

On June 30, 2025, 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 $1.7 billion as of June 30, 2025, and matures on September 29, 2025. The variable interest rate is based on the Federal Funds effective rate, plus 15 basis points, which was 4.48% on June 30, 2025. The FHLB has a put option to cancel the agreement 60 days after the initial execution date and the Company has a call option to cancel the agreement at any time, with one day’s notice.

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 income on the unaudited condensed consolidated statements of income.

Interest rate swaps are also used by the Company to reduce the risk that significant increases in interest rates may have on the value of certain fixed-rate loans held for sale and the respective loan payments received from borrowers. All changes in the fair market value of these interest rate swaps and associated loans held for sale have been

35

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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.

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

Credit Risk Management

In March 2024, the Company entered into a contract as the buyer of credit protection through the credit derivative market. A CDS was purchased to manage credit risk associated with specific multi-family mortgage loans. Under the terms of the contract, the Company will be compensated for certain credit-related losses on a pool of multi-family mortgage loans. The protection seller has posted aggregate collateral of $64.8 million related to their obligations under the contract. The collateral is not included on the Company’s unaudited condensed consolidated balance sheets. There was no gain or loss associated with the credit default swap valuation as of June 30, 2025 and June 30, 2024. Any future changes in the fair market value of this instrument will be included in other noninterest expense.

The 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 noninterest 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 on the unaudited condensed consolidated balance sheets 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 derivatives utilized by the Company at June 30, 2025 and December 31, 2024. 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, 2025
Interest rate lock commitments	$	48,949	Other assets/liabilities	$	270	$	8
Forward contracts		51,847	Other assets/liabilities		—		427
Interest rate swaps		49,734	Other assets/liabilities		2,484		—
Put options		648,016	Other assets		45,055		—
Interest rate floors		1,144,335	Other assets		6,118		—
Credit derivatives		64,184	Other assets/liabilities		—		—
				$	53,927	$	435

36

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

		Notional			Fair Value
		Amount	Balance Sheet Location		Asset		Liability
		(In thousands)
December 31, 2024
Interest rate lock commitments	$	24,609	Other assets/liabilities	$	30	$	176
Forward contracts		33,000	Other assets/liabilities		229		1
Interest rate swaps		49,891	Other assets/liabilities		4,199		—
Put options		680,354	Other assets		43,777		—
Interest rate floors		1,228,274	Other assets		4,043		—
Credit derivatives		58,526	Other assets/liabilities		—		—
				$	52,278	$	177

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, 2025 and 2024.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
	(In thousands)					(In thousands)
Derivative (loss) gain included in gain on sale of loans:
Interest rate lock commitments	$	224	$	(109)	$	408	$	(93)
Forward contracts (includes pair-off settlements)		(168)		285		(518)		379
Interest rate swaps		(438)		247		(1,280)		1,622
Net (loss) gain	$	(382)	$	423	$	(1,390)	$	1,908
Derivative gain included in other income:
Put options (1)		7,522		3,467		1,277		11,080
Interest rate floors		4,333		214		2,075		2,548
Net gain	$	11,855	$	3,681	$	3,352	$	13,628

___________________________

(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 risk management 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 offsetting, economic interest rate hedge, but the Company does not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred, typically resulting in no net earnings impact.

37

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The fair values of 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, 2025	$	983,600	Other assets/liabilities	$	10,015	$	10,015
December 31, 2024	$	724,224	Other assets/liabilities	$	309	$	309

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
	(In thousands)					(In thousands)
Gross swap gains	$	5,162	$	5,371	$	9,706	$	2,538
Gross swap losses		5,162		5,371		9,706		2,538
Net swap gains (losses)	$	—	$	—	$	—	$	—

The Company pledged $7.5 million and $263,000 in collateral to secure its obligations under swap contracts at June 30, 2025 and December 31, 2024, 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

38

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, 2025 and December 31, 2024:

	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, 2025
Mortgage loans in process of securitization	$	402,427	$	—	$	402,427	$	—
Securities available for sale:
Treasury notes		70,102		70,102		—		—
Federal Agencies		259,699		—		259,699		—
Mortgage-backed - Agency		3,580		—		3,580		—
Mortgage-backed - Non-Agency residential - fair value option		407,539		—		407,539		—
Mortgage-backed - Agency - fair value option		195,423		—		195,423		—
Loans held for sale		91,930		—		91,930		—
Servicing rights		193,037		—		—		193,037
Derivative assets:
Interest rate lock commitments		270		—		—		270
Interest rate swaps		2,484		—		2,484		—
Interest rate swaps, caps and floors (back-to-back)		10,015		—		10,015		—
Put options		45,055		—		8,845		36,210
Interest rate floors		6,118		—		—		6,118
Derivative liabilities:
Interest rate lock commitments		8		—		—		8
Forward contracts		427		—		427		—
Interest rate swaps, caps and floors (back-to-back)		10,015		—		10,015		—
December 31, 2024
Mortgage loans in process of securitization	$	428,206	$	—	$	428,206	$	—
Securities available for sale:
Treasury notes		90,006		90,006		—		—
Federal Agencies		252,936		—		252,936		—
Mortgage-backed - Agency		1,162		—		1,162		—
Mortgage-backed - Non-Agency residential - fair value option		430,779		—		430,779		—
Mortgage-backed - Agency - fair value option		205,167		—		205,167		—
Loans held for sale		78,170		—		78,170		—
Servicing rights		189,935		—		—		189,935
Derivative assets:
Interest rate lock commitments		30		—		—		30
Forward contracts		229		—		229		—
Interest rate swaps		4,199		—		4,199		—
Interest rate swaps, caps and floors (back-to-back)		309		—		309		—
Put options		43,777		—		12,481		31,296
Interest rate floors		4,043		—		—		4,043
Derivative liabilities:
Interest rate lock commitments		176		—		—		176
Forward contracts		1		—		1		—
Interest rate swaps, caps and floors (back-to-back)		309		—		309		—

39

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, 2025 and the year ended December 31, 2024. 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 Federal Housing Administration 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.

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 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 sales commitments - 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.

40

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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.

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.

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 Swap – The fair value of the CDS is linked to the value of its underlying mortgage loans. The Company estimates the fair value based on estimated discounted cash flows that are derived from inputs, including credit spreads that are not readily observable and, thus, are classified as Level 3 on the hierarchy. These valuations are estimated by a third party.

41

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,
	2025		2024		2025		2024
	(In thousands)				(In thousands)
Servicing rights
Balance, beginning of period	$	189,711	$	172,200	$	189,935	$	158,457
Purchased servicing		70				70		—
Originated servicing		5,244		3,761		8,582		5,927
Paydowns		(2,246)		(2,252)		(5,054)		(4,639)
Changes in fair value		258		5,067		(496)		19,031
Balance, end of period	$	193,037	$	178,776	$	193,037	$	178,776
Securities available for sale - Mortgage-backed - Non-Agency residential - fair value option
Balance, beginning of period	$	—	$	472,192	$	—	$	485,500
Paydowns		—		(7,884)		—		(16,870)
Changes in fair value		—		(1,681)		—		(6,003)
Balance, end of period	$	—	$	462,627	$	—	$	462,627
Derivative assets - put options
Balance, beginning of period	$	28,295	$	22,976	$	31,296	$	18,654
Changes in fair value		7,915		1,681		4,914		6,003
Balance, end of period	$	36,210	$	24,657	$	36,210	$	24,657
Derivative assets - interest rate floors
Balance, beginning of period	$	1,785	$	8,910	$	4,043	$	6,576
Changes in fair value		4,333		214		2,075		2,548
Balance, end of period	$	6,118	$	9,124	$	6,118	$	9,124
Derivative assets - interest rate lock commitments
Balance, beginning of period	$	126	$	174	$	30	$	140
Gain (loss) recognized		144		(4)		240		30
Balance, end of period	$	270	$	170	$	270	$	170
Derivative liabilities - interest rate lock commitments
Balance, beginning of period	$	88	$	22	$	176	$	4
Gain (loss) recognized		(80)		105		(168)		123
Balance, end of period	$	8	$	127	$	8	$	127

42

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, 2025 and December 31, 2024.

	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, 2025
Collateral dependent loans	$	194,337	$	—	$	—	$	194,337
December 31, 2024
Collateral dependent loans	$	59,915	$	—	$	—	$	59,915
Other real estate owned	$	7,313	$	—	$	—	$	7,313

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

Collateral Dependent Loans, Net of ACL-Loans

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

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

Other Real Estate Owned

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

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

43

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
	(In thousands)
At June 30, 2025:
Collateral dependent loans	$	194,337	Market comparable properties	Marketability discount and costs to sell	0% - 100%	14%
Servicing rights - Multi-family	$	152,100	Discounted cash flow	Discount rate	8% - 15%	9%
				Constant prepayment rate	0% - 100%	9%
				Earnings rate on escrows	3%	3%
Servicing rights - Single-family	$	33,595	Discounted cash flow	Discount rate	10% - 11%	10%
				Constant prepayment rate	6% - 15%	7%
Servicing rights - Healthcare	$	3,214	Discounted cash flow	Discount rate	13%	13%
				Constant prepayment rate	2% - 7%	4%
				Earnings rate on escrows	3%	3%
Servicing rights - SBA	$	4,128	Discounted cash flow	Discount rate	16%	16%
				Constant prepayment rate	5% - 21%	14%
Derivative assets:
Interest rate lock commitments	$	270	Discounted cash flow	Loan closing rates	59% - 100%	82%
Put options	$	36,210	Intrinsic value	Market credit spread	4%	4%
Interest rate floors	$	6,118	Discounted cash flow	Discount rate	6% - 7%	7%
Derivative liabilities - interest rate lock commitments	$	8	Discounted cash flow	Loan closing rates	59% - 100%	82%
At December 31, 2024:
Collateral dependent loans	$	59,915	Market comparable properties	Marketability discount and costs to sell	0% - 90%	29%
Other real estate owned	$	7,313	Market comparable properties	Marketability discount and costs to sell	2% - 8%	5%
Servicing rights - Multi-family	$	146,483	Discounted cash flow	Discount rate	8% - 15%	9%
				Constant prepayment rate	0% - 100%	7%
				Earnings rate on escrows	3%	3%
Servicing rights - Single-family	$	34,986	Discounted cash flow	Discount rate	10% - 11%	10%
				Constant prepayment rate	6% - 14%	7%
Servicing rights - Healthcare	$	4,207	Discounted cash flow	Discount rate	13%	13%
				Constant prepayment rate	1% - 2%	1%
				Earnings rate on escrows	3%	3%
Servicing rights - SBA	$	4,259	Discounted cash flow	Discount rate	16%	16%
				Constant prepayment rate	4% - 24%	14%
Derivative assets:
Interest rate lock commitments	$	30	Discounted cash flow	Loan closing rates	71% - 99%	87%
Put options	$	31,296	Intrinsic value	Market credit spread	4%	4%
Interest rate floors	$	4,043	Discounted cash flow	Discount rate	6% - 8%	7%
Derivative liabilities - interest rate lock commitments	$	176	Discounted cash flow	Loan closing rates	71% - 99%	87%

Sensitivity of Significant Unobservable Inputs

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

44

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.

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.

45

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, 2025 and December 31, 2024.

			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, 2025
Financial assets:
Cash and cash equivalents	$	647,165	$	647,165	$	647,165	$	—	$	—
Securities purchased under agreements to resell		1,539		1,539		—		1,539		—
Securities held to maturity		1,548,211		1,547,525		—		503,650		1,043,875
FHLB stock and other equity securities		217,850		217,850		—		187,850		30,000
Loans held for sale		4,013,835		4,013,835		—		4,013,835		—
Loans receivable, net		10,432,117		10,361,673		—		—		10,361,673
Interest receivable		82,391		82,391		—		82,391		—
Financial liabilities:
Deposits		12,686,835		12,689,577		10,336,084		2,353,493		—
Subordinated debt		71,800		71,800		—		71,800		—
FHLB advances		3,680,588		3,680,257		—		3,680,257		—
Other borrowing		182,934		182,934		—		182,934		—
Credit linked notes		74,152		74,151		—		74,151		—
Interest payable		30,225		30,225		—		30,225		—
December 31, 2024
Financial assets:
Cash and cash equivalents	$	476,610	$	476,610	$	476,610	$	—	$	—
Securities purchased under agreements to resell		1,559		1,559		—		1,559		—
Securities held to maturity		1,664,686		1,664,674		—		538,871		1,125,803
FHLB stock and other equity securities		217,804		217,804		—		187,804		30,000
Loans held for sale		3,693,340		3,693,340		—		3,693,340		—
Loans receivable, net		10,354,002		10,297,439		—		—		10,297,439
Interest receivable		83,409		83,409		—		83,409		—
Financial liabilities:
Deposits		11,919,976		11,923,961		8,001,487		3,922,474		—
Subordinated debt		71,800		71,800		—		71,800		—
FHLB advances		4,172,030		4,171,843		—		4,171,843		—
Other borrowing		57,934		57,934		—		57,934		—
Credit linked notes		84,358		84,357		—		84,357		—
Interest payable		34,475		34,475		—		34,475		—

46

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 13:   Common Stock

Public Offerings of Common Stock:

On May 13, 2024, the Company issued 2,400,000 shares of the Company’s common stock, without par value, at a public offering price of $43.00 per share in an underwritten public offering. The aggregate gross offering proceeds for the shares issued by the Company was $103.2 million, and after deducting underwriting discounts, commissions, and offering expenses of $5.5 million paid to third parties, the Company received total net proceeds of $97.7 million.

Note 14:   Preferred Stock

Public Offerings of Preferred Stock:

Series A Preferred Stock – On March 28, 2019, the Company issued 2,000,000 shares of 7.00% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $25 per share. The aggregate gross offering proceeds for the shares issued by the Company was $50.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $1.7 million paid to third parties, the Company received total net proceeds of $48.3 million. On April 12, 2019, the Company issued an additional 81,800 shares of Series A 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 $2.0 million in net proceeds, after deducting $41,000 in underwriting discounts.

The Company redeemed all outstanding shares of the Series A Preferred Stock on April 1, 2024 at a price equal to the liquidation preference of $25 per share, or $52.0 million, using cash on hand.

The $1.8 million 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 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 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. Similarly, the redemption resulted in an excise tax of $1.2 million that will not be payable until 2025 taxes are due in 2026, and any future issuance of shares until one year after the redemption can offset the amount of excise tax that will be paid.

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-to-Floating 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

47

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $150.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $5.1 million paid to third parties, the Company received total net proceeds of $144.9 million.

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

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

Series E Preferred Stock – On November 25, 2024, the Company issued 9,200,000 depositary shares, each representing a 1/40th interest in a share of its 7.625% Fixed Rate Reset 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 Company’s 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.

48

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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, 2025 and 2024. The Company issued 80,875 and 85,212 shares during the six months ended June 30, 2025 and 2024, 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. As of January 1, 2024, 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 3,752 and 2,849 shares, issued to non-executive directors during the three months ended June 30, 2025 and 2024, respectively and there were 6,615 and 6,013 shares, issued to non-executive directors during the six months ended June 30, 2025 and 2024, respectively.

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, 2025 and 2024. Expenses recognized for the contribution to the ESOP totaled $389,000 and $286,000 for the three months ended June 30, 2025 and 2024, respectively and totaled $726,000 and $573,000 for the six months ended June 30, 2025 and 2024, respectively. The Company contributed 30,802 shares and 23,414 shares to the ESOP for the six months ended June 30, 2025 and 2024, respectively.

Note 16:   Earnings Per Share

Earnings per share were computed as follows for the three and six months ended June 30, 2025 and 2024:

	Three Months Ended June 30,
	2025					2024
			Weighted-	Per				Weighted-	Per
	Net		Average	Share		Net		Average	Share
	Income		Shares	Amount		Income		Shares	Amount
	(In thousands, except share data)
Net income	$	37,981				$	76,393
Dividends on preferred stock		(10,266)					(7,757)
Impact of preferred stock redemption		—					(1,823)
Net income allocated to common shareholders	$	27,715				$	66,813
Basic earnings per share			45,883,644	$	0.60			44,569,345	$	1.50
Effect of dilutive securities-restricted stock awards			45,919					128,979
Diluted earnings per share			45,929,563	$	0.60			44,698,324	$	1.49

	Six Months Ended June 30,
	2025					2024
			Weighted-	Per				Weighted-	Per
	Net		Average	Share		Net		Average	Share
	Income		Shares	Amount		Income		Shares	Amount
	(In thousands, except share data)
Net income	$	96,220				$	163,447
Dividends on preferred stock		(20,531)					(16,424)
Impact of preferred stock redemption		(5,371)					(1,823)
Net income allocated to common shareholders	$	70,318				$	145,200
Basic earnings per share			45,853,998	$	1.53			43,937,665	$	3.30
Effect of dilutive securities-restricted stock awards			67,990					144,820
Diluted earnings per share			45,921,988	$	1.53			44,082,485	$	3.29

49

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 lending, 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.

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 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 or refinance the underlying collateral to secure repayment. These and other synergies form a part of our strategic plan.

The reportable business segments are strategic business units that offer distinct, but complimentary, products and services. Due to the specialized nature of each segment and different resource requirements, they are managed separately.

The 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, 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 of Directors, and various management committees, as appropriate.

50

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The tables below present selected business segment financial information for the three and six months ended June 30, 2025 and 2024.

Multi-family
Mortgage	Mortgage
Banking