Merchants Bancorp
For the period ended Mar 31, 2026. Filed May 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 7, 2026
MBIN$51.76-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-07.
0001104659-25-108470
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0001104659-26-057107
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 205 previous paragraphs and 162 current paragraphs.
39 unchanged; 88 reworded; 30 added; 67 removed; 11 previous and 5 current paragraphs rearranged.
Tables are not compared: 39 previous and 44 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
Cash and Cash Equivalents. Cash and cash equivalents of $83.2 million at March 31, 2026 decreased $129.0 million, or 61%, compared to $212.2 million at December 31, 2025. The decrease was primarily attributable to growth in the loan portfolio.
Current report
The tables below provide loans receivable for multi-family and healthcare portfolios, including the five highest geographic concentrations.
Current report
Other Real Estate Owned. Other real estate owned of $60.2 million at March 31, 2026 increased $0.1 million compared to December 31, 2025.
Current report
Other Assets and Receivables. Other assets and receivables of $744.2 million at March 31, 2026 increased by $30.9 million, or 4%, compared to December 31, 2025. The increase was primarily due to a $22.9 million increase in income tax receivable primarily related to tax credits purchased during the period.
Current report
Other Liabilities. Other liabilities of $219.8 million at March 31, 2026 decreased $30.7 million, or 12%, compared to $250.5 million at December 31, 2025. The decrease in other liabilities was primarily in accrued expenses and unfunded commitments for low-income housing credit investments.
Current report
Loans receivable classified as Special Mention totaled $234.3 million at March 31, 2026, compared to $204.9 million at December 31, 2025 and $407.9 million at March 31, 2025. Loans receivable classified as Substandard totaled $271.2 million at March 31, 2026, compared to $303.3 million at December 31, 2025 and $323.6 million at March 31, 2025.
Current report
General. Net income of $67.7 million for the three months ended March 31, 2026 increased by $9.5 million, or 16%, compared with the three months ended March 31, 2025. The improvement was primarily attributable to a $22.9 million, or 97%, increase in noninterest income driven principally by higher positive fair value adjustments to mortgage servicing rights and certain derivatives. Net income also benefited from a $6.5 million, or 5%, increase in net interest income. These increases were partially offset by a $14.0 million, or 23%, increase in noninterest expense and a $7.6 million increase in the provision for credit losses.
Current report
The interest rate spread of 2.50% for the three months ended March 31, 2026 increased 12 basis points compared to 2.38% for the three months ended March 31, 2025. Our net interest margin increased three basis points, to 2.92%, for the three months ended March 31, 2026 compared to 2.89% for the three months ended March 31, 2025. The increase in net interest margin was primarily attributable to the repayment of credit-linked notes in December 2025.
Current report
Interest income of $230.3 million on loans and loans held for sale for the three months ended March 31, 2026, decreased $9.0 million, or 4%, compared to $239.3 million for the three months ended March 31, 2025. The average yield on loans decreased 72 basis points to 6.34%, for the three months ended March 31, 2026, compared to 7.06% for the three months ended March 31, 2025. The average balance of loans and loans held for sale of $14.7 billion for the three months ended March 31, 2026 increased $990.1 million, or 7%, compared to the three months ended March 31, 2025.
Current report
ended March 31, 2026 decreased $150.5 million, or 9%, compared to $1.6 billion for the three months ended March 31, 2025. The decrease in average balance was primarily due to repayments.
Current report
Interest income of $9.9 million on securities available for sale for the three months ended March 31, 2026, decreased $2.4 million, or 20%, compared to the three months ended March 31, 2025. The average balance of securities available for sale of $856.8 million for the three months ended March 31, 2026 decreased $104.2 million, or 11%, compared to the three months ended March 31, 2025. The average yield decreased 50 basis points to 4.71%, for the three months ended March 31, 2026, compared to 5.21% for the three months ended March 31, 2025. The decrease in average balance of securities available for sale was primarily due to maturities and repayments, as well as fair value adjustments, that were partially offset by purchases.
Current report
Interest Expense. Total interest expense of $141.9 million for three months ended March 31, 2026, decreased $23.1 million, or 14%, compared with $165.0 million for the three months ended March 31, 2025.
Current report
Interest expense of $15.1 million on certificate of deposit accountsfor the three months ended March 31, 2026, decreased $23.7 million, or 61%, compared to $38.8 million for the three months ended March 31, 2025. The average balance of $1.6 billion for the three months ended March 31, 2026, decreased $1.8 billion, or 54%, compared to $3.4 billion the three months ended March 31, 2025. The average rate on certificates of deposit was 3.92% for the three months ended March 31, 2026, which was a 75 basis points decrease compared to 4.67% for the three months ended March 31, 2025. The decrease in certificates of deposit is primarily due to the decrease in use of brokered deposits.
Current report
Interest expense of $60.8 million on interest-bearing checking accounts for the three months ended March 31, 2026, increased $10.2 million, or 20%, compared to $50.6 million the three months ended March 31, 2025. The average balance of $7.2 billion for the three months ended March 31, 2026, increased $2.1 billion, or 41%, compared to $5.1 billion the three months ended March 31, 2025. The average rate on interest-bearing checking accounts was 3.42% for the three months ended March 31, 2026, which was a 59 basis points decrease compared to 4.01% for the three months ended March 31, 2025.
Current report
Interest expense of $34.0 million for money market/savings accounts decreased $0.5 million, or 2%, for the three months ended March 31, 2026, compared to $34.5 million for the three months ended March 31, 2025. The average balance of money market/savings accounts of $3.9 billion for the three months ended March 31, 2026 increased $380.5 million, or 11%, compared to $3.5 billion for the three months ended March 31, 2025. The average rate on
Current report
money market/savings accounts was 3.51% for the three months ended March 31, 2026, which was a 44 basis point decrease compared to 3.95% for the three months ended March 31, 2025.
Current report
Interest expense on borrowings of $32.0 million for the three months ended March 31, 2026, decreased $9.1 million, or 22%, compared to $41.1 million the three months ended March 31, 2025. The decrease was due primarily to a 119 basis points reduction in average interest rates, to 4.14%, for the three months ended March 31, 2026, compared to 5.33% for the three months ended March 31, 2025. This was partially offset by an $11.4 million increase in average borrowings, to $3.1 billion, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.
Current report
Noninterest income of $46.6 million for the three months ended March 31, 2026 increased $22.9 million, or 97%, compared to $23.7 million for the three months ended March 31, 2025. Results reflected a $11.1 million, or 277%, increase in loan servicing fees, $10.1 million, or 319%, increase in other income, and a $1.9 million, or 16%, increase in gain on sale of loans.
Current report
Loan servicing fees of $15.1 million for the three months ended March 31, 2026 increased $11.1 million, or 277%, compared to $4.0 million for the three months ended March 31, 2025. Loan servicing fees included an $8.9 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2026, compared to a $0.8 million negative fair market value adjustment to servicing rights for the three months ended March 31, 2025.
Current report
Gain on sale of loans of $13.5 million for the three months ended March 31, 2026 increased $1.9 million, or 16%, compared to $11.6 million for the three months ended March 31, 2025. The increase in gain on sale of loans resulted primarily from higher volume in the multi-family loan portfolio.
Current report
Multi-family Mortgage Banking. The Multi-family Mortgage Banking segment reported net income of $11.0 million for the three months ended March 31, 2026, an increase of $7.6 million, or 223%, compared to net income of $3.4 million for the three months ended March 31, 2025. The rise in net income was primarily due to increases of $7.6 million in loan servicing fees and $2.1 million in gain on sale of loans, which was partially offset by an increase in income tax expense of $1.4 million.
Current report
Loan servicing fees included $7.4 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2026, compared to a $0.4 million positive fair market value adjustment for the three months ended March 31, 2025.
Current report
Mortgage Warehousing. The Mortgage Warehousing segment reported net income of $28.6 million for the three months ended March 31, 2026, an increase of $13.3 million, or 86%, compared to the three months ended March 31, 2025. The rise in net income reflected increases of $10.1 million in net interest income and $5.0 million in other noninterest income, which was partially offset by an increase in income tax expense of $2.3 million.
Current report
Banking. The Banking segment reported net income of $38.0 million for the three months ended March 31, 2026, a decrease of $9.1 million, or 19%, compared to $47.1 million for the three months ended March 31, 2025. The decrease in net income was primarily due to lower net interest income after provision for credit losses.
Current report
The following table and summary provide cash flow information for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Current report
On January 28, 2026, the Company announced a stock repurchase program, up to $100,000,000 of common stock, expiring December 31, 2027. On February 26, 2026, the Company entered into a Rule 10b5-1 plan (the “10b5-1
Current report
Plan”) with a broker for the repurchase of shares of its common stock commencing on March 3, 2026. The details of this repurchase plan were provided in a press release issued by the Company on January 28, 2026.
Current report
The following table summarizes our share repurchase authorization and repurchase activity of our common stock during the three months ended March 31, 2026.
Current report
The timing and actual number of additional shares repurchased will depend on a variety of factors, including cash requirements to meet the operating needs of the business, legal requirements, as well as the share price and economic and market conditions.
Current report
During the three months ended March 31, 2026, the Company’s MOU from mid-2025 with the FDIC and DFI was terminated, following progress made by management in addressing the MOU provisions. As a result, the Company is no longer subject to any dividend or capital restrictions beyond those applicable to institutions that are considered well-capitalized under applicable regulatory guidelines.
Removed paragraphs (67)
Previous report
Cash and Cash Equivalents. Cash and cash equivalents of $598.0 million at September 30, 2025 increased $121.4 million, or 25%, compared to $476.6 million at December 31, 2024. Included in cash equivalents was $83.8 million in restricted cash associated with senior credit linked notes described inNote 1: Basis of Presentation in this Form 10-Q andNote 10: Borrowingsand the Company’s 2024 Annual Report on Form 10–K*.*
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Other Assets and Receivables. Other assets and receivables of $543.5 million at September 30, 2025 decreased $27.8 million, or 5%, compared to $571.3 million at December 31, 2024. The decrease was primarily due to a $125.0 million prepaid asset at December 31, 2024 that was released for the January 2, 2025 redemption of Series B Preferred Stock, partially offset by the increase in low income housing tax credits.
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Core deposits increased by $3.4 billion, or 36%, to $12.8 billion at September 30, 2025 compared to $9.4 billion at December 31, 2024. Core deposits represented 92% of total deposits at September 30, 2025 compared to 79% of total deposits at December 31, 2024. The increases were attributable primarily to growth in custodial deposits from warehouse customers as well as strategic initiatives focused on delivering innovative liquidity solutions in expanded markets.
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Other Liabilities. Other Liabilities of$262.9 million increased $31.9 million, or 14%, compared to $231.0 million at December 31, 2024 largely due to increased funding commitments for equity investments and joint ventures.
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The allowance for credit losses on loans of $93.3 million, as of September 30, 2025, increased by $8.9 million, or 11%, compared to $84.4 million as of December 31, 2024. The $8.9 million increase compared to December 31,2024 driven by $95.0 million in provision expense that was partially offset by $86.1 million in charge-offs, primarily related to the multi-family portfolio. These changes were primarily associated with declines on multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. Additionally, the increases were attributable to certain types of subordinated loans that the Company no longer offers to borrowers. These underperforming loans have been largely identified and evaluated for potential losses that have either been included in the provision for credit losses as specific reserves or charged off.
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For the nine months ended September 30, 2025, there were $86.1 million of charge-offs and $51,000 of recoveries, compared to $6.4 million of charge-offs and $23,000 of recoveries for the nine months ended September 30, 2024.
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Loans receivable classified as Substandard totaled $426.5 million at September 30, 2025, compared to $317.3 million as of December 31,2024 and $287.8 million at September 30, 2024.
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The increase in non-performing loans was primarily attributable to one multi-family relationship that was partially offset by charge-offs. This relationship drove the increase in total delinquent loans.
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General. Net income of $54.7 million for the three months ended September 30, 2025 decreased by $6.6 million, or 11%, compared to the three months ended September 30,2024, reflecting a $27.1 million, or 22%, decrease in net interest income after provision for credit losses, reflecting higher provision expenses. This decline was nearly offset by a $26.3 million, or 157%, increase in noninterest income, driven by growth in gains on loan sales and loan servicing fees. Results also reflected a $15.9 million, or 26%, increase in noninterest expense, largely attributable to higher salaries and employee benefits, and a $10.2 million, or 51%, decrease in the provision for income taxes, which reflect benefits from the utilization of tax credits and lower pre-tax income. Noninterest income included a positive fair market value adjustment of $2.1 million to servicing rights and a negative fair market value adjustment of $770,000 to derivatives, which compared to negative fair market value adjustments of $6.7 million to servicing rights and $7.7 million to derivatives, in the three months ended September 30, 2024.
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Net Interest Income. Net interest income of $128.1 million for the three months ended September 30, 2025 decreased $4.8 million, compared with the three months ended September 30, 2024. The decrease reflected lower interest income partially offset by lower interest expense on deposits and borrowings.
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The interest rate spread of 2.33% for the three months ended September 30, 2025 decreased 10 basis points compared to 2.43% for the three months ended September 30, 2024. Our net interest margin decreased 17 basis points, to 2.82% for the three months ended September 30, 2025 compared to 2.99% for the three months ended September 30,2024. The margin was negatively impacted by a significant shift in business mix, as highly profitable but lower-margin loans held for sale balances, consisting of primarily warehouse loans, grew by $321.1 million, or 8%, and warehouse repurchase agreements grew by $432.5 million, or 36%, while other higher-margin loans receivable balances, such as the healthcare financing portfolio, contracted by a net of $170.3 million.
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Interest Income. Interest income of $301.8 million for the three months ended September 30, 2025 decreased $37.1 million, or 11%, compared with $338.9 million for the three months ended September 30,2024. The decrease primarily reflected lower average yields on loans and loans held for sale, primarily in the warehouse portfolio.
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Interest income of $254.1 million on loans and loans held for sale for the three months ended September 30, 2025, decreased $36.2 million, or 12%, compared to $290.3 million for the three months ended September 30, 2024. The average loan balance of $14.7 billion for the three months ended September 30, 2025 increased $50.8 million compared to $14.6 billion for the three months ended September 30, 2024. The average yield on loans and loans held for sale decreased 103 basis points, to 6.88% for the three months ended September 30, 2025, compared to 7.91% for the three months ended September 30, 2024.
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Interest income of $11.9 million on securities available for sale for the three months ended September 30, 2025, decreased $3.0 million, or 20%, compared to $14.9 million for the three months ended September 30, 2024. The average balance of $923.6 million decreased $87.5 million, or 9%, compared to $1.0 billion for the three months ended
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September 30, 2024. The average yield decreased 74 basis points, to 5.10% for the three months ended September 30, 2025, compared to 5.84% for the three months ended September 30, 2024.
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Interest expense on deposits of $139.7 million decreased $25.9 million, or 16%, for the three months ended September 30, 2025, compared to the three months ended September 30,2024.
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Interest expense of $25.8 million on certificates of deposit for the three months ended September 30, 2025, decreased $43.4 million, or 63%, compared to $69.2 million for the three months ended September 30, 2024. The decrease reflected lower average balances at lower rates. The average balance of $2.2 billion for the three months ended September 30, 2025, decreased $2.8 billion or 56%, compared to $5.0 billion for the three months ended September 30, 2024. The average interest rate decreased 90 basis points, to 4.57%, for the three months ended September 30, 2025, compared to 5.47% for three months ended September 30, 2024.
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Interest expense of $75.4 million on interest-bearing checking accounts for the three months ended September 30, 2025, increased $12.8 million, or 20%, compared to $62.6 million for the three months ended September 30, 2024. The increase reflected higher average balances at lower rates. The average balance of $7.5 billion for the three months ended September 30, 2025, increased $2.2 billion, or 41%, compared to $5.3 billion for the three months ended September 30, 2024. The average interest rate decreased 68 basis points to 4.02% for the three months ended September 30, 2025, compared to 4.70% for three months ended September 30, 2024.
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Interest expense of $34.0 million on borrowings for the three months ended September 30, 2025, decreased $6.5 million, or 16%, compared to the three months ended September 30, 2024. The decrease was primarily due to lower average rates on lower average FHLB borrowings. The average interest rate decreased 95 basis points to 5.44% for the three months ended September 30, 2025, compared to 6.39% for the three months ended September 30, 2024.
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after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. The increases were also attributable to certain types of subordinated loans that the Company no longer offers to borrowers. The underperforming loans have been largely identified and evaluated for potential losses that have either been included in the provision for credit losses as specific reserves or charged off.
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Noninterest income of $43.0 million for the three months ended September 30, 2025 increased $26.3 million, or 157%, compared to $16.7 million for the three months ended September 30, 2024. The increase was primarily due to a $9.5 million, or 629%, increase in loan servicing fees, a $7.9 million, or 47%, increase in gain on sale of loans, a $5.7 million, or 294%, increase in other income, and a $3.0 million, or 165%, increase in syndication and asset management fees.
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Loan servicing fees included a $2.1 million positive fair market value adjustment to servicing rights for the three months ended September 30, 2025, compared to a $6.7 million negative fair market value adjustment to servicing rights for the three months ended September 30, 2024.
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The $7.9 million, or 47%, increase in gain on sale of loans resulted from higher volume in the multi-family loan portfolio, including a securitization through a Freddie Mac sponsored Q-Series transaction.
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General. Net income of $150.9 million for the nine months ended September 30, 2025 decreased $73.8 million, or 33%, compared to the nine months ended September 30, 2024. The decrease was primarily due to a $68.4 million increase in the provision for credit losses, a $55.6 million increase in noninterest expense, and a $9.0 million decrease in net interest income, partially offset by a $31.0 million decrease in the provision for income taxes and a $28.2 million increase in noninterest income.
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The interest rate spread of 2.34% for the nine months ended September 30, 2025, decreased 14 basis points compared to 2.48% for the nine months ended September 30, 2024. Our net interest margin decreased 20 basis points, to 2.84% for the nine months ended September 30, 2025 from 3.04% for the nine months ended September 30, 2024. The margin was negatively impacted by a significant shift in business mix, as highly profitable but lower-margin loans held for sale balances, consisting of primarily warehouse loans, grew by $357.8 million, or 9%, and warehouse repurchase agreements grew by $199.8 million, or 14%, while other higher-margin loans receivable balances, such as the healthcare financing portfolio, contracted by a net of $29.7 million.
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Interest income of $749.0 million on loans and loans held for sale for the nine months ended September 30, 2025, decreased $97.7 million, or 12%, compared to $846.7 million for the nine months ended September 30, 2024. The average loan balance during the nine months ended September 30, 2025 increased $263.6 million, or 2%, to $14.4 billion compared to $14.2 billion for the nine months ended September 30, 2024, and the average yield on loans decreased 104 basis points, to 6.95% for the nine months ended September 30, 2025, compared to 7.99% for the nine months ended September 30, 2024.
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Interest income of $36.3 million on securities available for sale for the nine months ended September 30, 2025, decreased $7.7 million, or 17%, compared to $44.0 million for the nine months ended September 30, 2024. The average balance of securities available for sale decreased $98.6 million, or 9%, to $946.5 million compared to $1.0 billion for the nine months ended September 30, 2024, and the average yield decreased 50 basis points, to 5.13% for the for the nine months ended September 30, 2025, compared to 5.63% for the nine months ended September 30, 2024.
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Interest income of $14.4 million on mortgage loans in process of securitization for the nine months ended September 30, 2025, increased $5.5 million, or 63%, compared to $8.8 million for the nine months ended September 30, 2024. The average balance of $350.3 million increased $123.1 million, or 54%, compared to the nine months ended September 30, 2024. The average yield increased 29 basis points, to 5.48% for the nine months ended September 30, 2025, compared to 5.19% for the nine months ended September 30, 2024. The increase in average balance was primarily due to higher origination volume of loans pending settlement for sale on the secondary market.
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Interest income of $23.7 million on interest-earning deposits, and other interest or dividends for the nine months ended September 30, 2025, increased $4.3 million, or 22%, compared to $19.4 million for the nine months ended September 30, 2024. The average balance of interest-earning deposits and other increased $112.6 million, or 27%, to $535.9 million for the nine months ended September 30, 2025, from $423.3 million for the nine months ended September 30, 2024, and the average yield decreased 21 basis points, to 5.92%, for the nine months ended September 30, 2025, compared to 6.13% for the nine months ended September 30, 2024.
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Interest Expense. Total interest expense of $514.4 million for the nine months ended September 30, 2025 decreased $79.0 million, or 13%, compared to $593.4 million for the nine months ended September 30, 2024. The lower interest expense reflects a shift towards borrowings that have become a more cost-effective option than utilizing brokered certificates of deposit, in addition to growth in lower-cost, interest-bearing checking accounts.
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Interest expense on deposits of $395.1 million for the nine months ended September 30, 2025 decreased $121.3 million, or 23%, compared to the nine months ended September 30, 2024. The decrease was primarily due to lower average balances and lower average rates for certificate of deposit accounts and higher average balances at lower average rates on interest-bearing checking and money market accounts.
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Interest expense of $100.0 million on certificates of deposit for the nine months ended September 30, 2025, decreased $134.0 million, or 57%, compared to $234.0 million for the nine months ended September 30, 2024. The average balance of certificate of deposit accounts was $2.9 billion for the nine months ended September 30, 2025, a decrease of $2.9 billion, or 50%, compared to $5.8 billion for the nine months ended September 30, 2024. The average rate on certificate of deposit accounts was 4.62% for the nine months ended September 30, 2025, which was a 81 basis point decrease compared to 5.43% for the nine months ended September 30, 2024.
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Interest expense of $108.2 million on money market accounts for the nine months ended September 30, 2025, increased $7.5 million, or 7%, compared to $100.7 million for the nine months ended September 30, 2024. The average balance of money market accounts of $3.5 billion for the nine months ended September 30, 2025 increased $665.0 million, or 24%, compared to $2.8 billion for the nine months ended September 30, 2024. The average rate on money market accounts was 4.17% for the nine months ended September 30, 2025, which was a 62 basis point decrease compared to 4.79% for the nine months ended September 30, 2024.
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Interest expense of $186.9 million on interest-bearing checking accounts for the nine months ended September 30, 2025, increased $5.5 million, or 3%, compared to $181.4 million for the nine months ended September 30, 2024. The average balance of interest-bearing checking accounts of $6.3 billion for the nine months ended September 30, 2025 increased $1.2 billion, or 23%, compared to $5.1 billion for the nine months ended September 30, 2024. The average rate on interest-bearing checking accounts was 4.00% for the nine months ended September 30, 2025, which was an 75 basis point decrease compared to 4.75% for the nine months ended September 30, 2024.
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Interest expense of $119.3 million on borrowings for the nine months ended September 30, 2025, increased $42.3 million, or 55%, compared to $77.0 million for the nine months ended September 30, 2024. The increase was primarily due to a $1.6 billion, or 112%, increase in average balances, partially offset by a decrease of 192 basis points in the average rate of borrowings, to 5.29% compared to 7.21% for the nine months ended September 30, 2024.
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Provision for Credit Losses. We recorded a provision for credit losses of $90.0 million for the nine months ended September 30, 2025, an increase of $68.4 million, or 317%, compared to $21.6 million for the nine months ended September 30,2024. The increases in provision expenses and charge-offs compared to both periods were primarily associated with declines on multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. The increases were also attributable to certain types of underperforming loans that the Company no longer offers to borrowers. The subordinated loans have been largely identified and evaluated for potential losses that have either been included in the provision for credit losses as specific reserves or charged off.
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Noninterest Income.
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Noninterest income of $117.2 million for the nine months ended September 30, 2025 increased $28.2 million, or 32%, compared to the nine months ended September 30, 2024. The increase was primarily due to a $22.4 million, or 60%, increase in gain on sale of loans, a $7.6 million, or 73%, increase in syndication and asset management fees, and a $7.6 million, or 88%, increase in other noninterest income, partially offset by a decrease of $10.6 million, or 37% in loan servicing fees compared to the nine months ended September 30,2024.
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The $22.4 million, or 60%, increase in gain on sale of loans resulted from higher volume in the multi-family loan portfolio.
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Syndication and asset management fees of $18.0 million for the nine months ended September 30, 2025, increased $7.6 million, or 73%, compared to $10.4 million for the nine months ended September 30, 2024. The increase was attributable to an increase in the amount of projects and funds managed in combination with new equity raises by our LIHTC syndication platform during the nine months ended September 30, 2025 than the prior year.
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Reworded paragraphs (88)
Previous wording
Management’s discussion and analysis of the financial condition at September 30, 2025 and results of operations for the three and nine months ended September 30, 2025 and 2024, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto, appearing in Part I, Item 1 of this Form 10-Q.
Current wording
Management’s discussion and analysis of the financial condition at March 31, 2026 and results of operations for the three months ended March 31, 2026 and 2025, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto, appearing in Part I, Item 1 of this Form 10-Q.
Previous wording
We are a diversified bank holding company headquartered in Carmel, Indiana and registered under the Bank Holding Company Act of 1956, as amended. We currently operate in multiple business segments, including Multi-family Mortgage Banking that offers multi-family housing and healthcare facility financing and servicing, as well as syndicated low-income housing tax credit and debt funds; Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers portfolio lending for multi-family and healthcare facility loans, retail and correspondent residential mortgage banking, agricultural lending, SBA lending, and traditional community banking.
Current wording
We are a diversified bank holding company headquartered in Carmel, Indiana and registered under the Bank Holding Company Act of 1956, as amended. We currently operate in multiple business segments, including Multi-family Mortgage Banking that offers multi-family housing and healthcare facility financing and servicing, as well as syndicated low-income housing tax credit and debt funds; Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers portfolio lending for multi-family and healthcare facility loans, retail and correspondent residential mortgage banking, jumbo lending, agricultural lending, SBA lending, and traditional community banking.
Previous wording
Our business consists of funding low risk multi-family, residential, and SBA loans meeting underwriting standards of government programs under an originate to sell model, and retaining adjustable-rate loans as held for investment to reduce interest rate risk. The gain on sale of these loans and servicing fees contribute to noninterest income. The funding source is primarily from mortgage custodial, municipal, retail, commercial and brokered deposits, as well as short-term borrowing. We believe that the combination of net interest income and noninterest income from the sale of low risk profile assets results in lower than industry charge-offs and a lower expense base, which serves to maximize net income and provide higher than industry shareholder return.
Current wording
Our business consists of funding low risk, multi-family, residential, and SBA loans meeting underwriting standards of government programs under an originate to sell model, and retaining adjustable-rate loans as held for investment to reduce interest rate risk. The gain on sale of these loans and servicing fees contribute to noninterest income. The funding source is primarily from mortgage custodial, retail, commercial, brokered deposits, and short-term borrowings. We believe that the combination of net interest income and noninterest income from the sale of low risk profile assets has traditionally resulted in lower than industry charge-offs and a lower expense base, which serves to maximize net income and higher than industry shareholder return.
Previous wording
The preparation of our unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the current circumstances. These estimates form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Current wording
The preparation of our unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the current circumstances. These estimates and assumptions form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Previous wording
As of September 30, 2025, we had approximately $19.4 billion in total assets, $13.9 billion in deposits and $2.2 billion in total shareholders’ equity. Total assets as of September 30, 2025 included $10.5 billion of loans receivable, net of ACL-Loans, and $4.1 billion of loans held for sale. There were also $1.7 billion in securities classified as held to maturity. We had $885.1 million in securities available for sale, the majority of which were acquired from a warehouse customer, and others are match funded with related custodial deposits or required to collateralize our credit linked notes. There are some restrictions on the types of securities we hold, particularly for those that are funded by certain multi-family custodial deposits where we set the cost of deposits based on the yield of the related security. Additionally, we
Current wording
As of March 31, 2026, we had approximately $20.3 billion in total assets, $13.0 billion in deposits, and $2.3 billion in total shareholders’ equity. Total assets as of March 31, 2026 included $11.4 billion of loans receivable, net of
Previous wording
had $598.0 million of cash and cash equivalents, other assets of $543.5 million, which primarily related to low-income housing tax credits, and $414.8 million of mortgage loans in process of securitization that represent pre-sold multi-family rental real estate loan originations in primarily Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities pending settlements that typically occur within 30 days. Servicing rights at September 30, 2025 were $213.2 million based on the fair value of the loan servicing, which primarily includes Ginnie Mae multi-family servicing rights with 10-year call protection.
Current wording
ACL-Loans and $4.7 billion of loans held for sale. Assets also included $1.4 billion in securities held to maturity and $843.9 million in securities available for sale, the majority of which were acquired from a warehouse customer. There are some restrictions on the types of securities we hold, particularly for those that are funded by certain multi-family custodial deposits where we set the cost of deposits based on the yield of the related security. Additionally, we had $437.0 million of mortgage loans in process of securitization that represent pre-sold multi-family rental real estate loan originations in primarily Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities pending settlements that typically occur within 30 days, as well as other assets of $744.2 million, which primarily related to low-income housing tax credits, and $83.2 million of cash and cash equivalents. Servicing rights at March 31, 2026 were $229.6 million based on the fair value of the loan servicing, which primarily includes Ginnie Mae multi-family servicing rights with 10-year call protection.
Previous wording
Total Assets. Total assets of $19.4 billion at September 30, 2025 increased $548.9 million, or 3%, compared to $18.8 billion at December 31, 2024. The increase was due primarily to growth in loans held for sale and in the warehouse and multi-family loan portfolios, which were partially offset by lower balances in the residential loan portfolio. The warehouse portfolio is exclusively made up of loans to residential and multi-family mortgage bankers that are funding agency-eligible mortgages and commercial loans, which represent all of the Company’s loans to non-depository institutions.
Current wording
Total Assets. Total assets of $20.3 billion at March 31, 2026 increased $872.8 million, or 4%, compared to $19.4 billion at December 31, 2025. The increase was due primarily to growth in loans and loans held for sale, specifically in the warehouse and multi-family loan portfolios, which were partially offset by lower balances in the healthcare loan portfolio. Warehouse loans, including loans held for sale and loans receivable, are exclusively made up of loans to residential and multi-family mortgage bankers that are funding agency-eligible mortgages and commercial loans, which represent all of the Company’s loans to non-depository institutions.
Previous wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $414.8 million at September 30, 2025 decreased $13.4 million, or 3%, compared to $428.2 million at December 31, 2024. These represent loans that our banking subsidiary, Merchants Bank, has originated or funded and are held in the loan portfolio pending settlement, primarily into Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities with a firm investor commitment to purchase the securities.
Current wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $437.0 million at March 31, 2026 decreased $183.1 million, or 30%, compared to $620.1 million at December 31, 2025. These represent loans that our banking subsidiary, Merchants Bank, has funded and are held in the loan portfolio pending settlement, as primarily Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities with a firm investor commitment to purchase the securities.
Previous wording
Securities Available for Sale. Securities available for sale of $885.1 million at September 30, 2025 decreased $95.0 million, or 10%, compared to $980.1 million at December 31, 2024. The decrease in securities available for sale was primarily due to $642.8 million in calls, maturities, repayments and other adjustments, partially offset by purchases of $547.9 million during the period.
Current wording
Securities Available for Sale. Securities available for sale of $843.9 million at March 31, 2026 decreased $21.2 million, or 2%, compared to $865.1 million at December 31, 2025. The decrease in securities available for sale was primarily due to $225.5 million in calls, maturities, repayments, sales and other adjustments, partially offset by purchases of $204.3 million during the period.
Previous wording
Included in securities available for sale were $591.4 million and $635.9 million of investments at September 30, 2025 and December 31, 2024, respectively, for which a fair value option was elected. Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the unaudited condensed consolidated balance sheets with changes in the fair value recognized in earnings as they occur.
Current wording
Included in securities available for sale were $550.2 million and $571.3 million of investments for which a fair value option was elected at March 31, 2026 and December 31, 2025, respectively. Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the unaudited condensed consolidated balance sheets with changes in the fair value recognized in earnings as they occur.
Previous wording
As of September 30, 2025, AOCL of $0.2 million, related to securities available for sale, increased $0.1 million, or 59%, compared to accumulated losses of $0.1 million at December 31, 2024. The $0.2 million of AOCL as of September 30, 2025 represented 0.01% of total equity and 0.02% of total securities available for sale, reflecting our interest rate risk policy of maintaining short duration on assets and liabilities.
Current wording
As of March 31, 2026, AOCL of $0.8 million, related to securities available for sale increased $771,000 from December 31, 2025. The $0.8 million of AOCL as of March 31, 2026 represented less than 0.001% of total equity and total securities available for sale, reflecting our interest rate risk policy of maintaining short duration on assets and liabilities.
Previous wording
Securities Held to Maturity. Securities held to maturity of $1.7 billion at September 30, 2025 increased $5.9 million compared to December 31, 2024. The increase was due to purchases net of repayments and amortization during the period.
Current wording
Securities Held to Maturity. Securities held to maturity of $1.4 billion at March 31, 2026 decreased $117.7 million, or 8%, compared to $1.5 billion at December 31, 2025. The decrease was due to repayments and amortization of securities totaling $117.7 million during the period.
Previous wording
Loans Held for Sale. Loans held for sale of $4.1 billion at September 30, 2025 increased $357.8 million, or 9%, compared to $3.8 billion at December 31, 2024. The increase in loans held for sale was due primarily to an increase in warehouse participations, as we experienced higher volume. Loans held for sale are comprised primarily of single-family residential real estate loan participations that meet Fannie Mae, Freddie Mac, or Ginnie Mae eligibility. It also includes some multi-family loans that are expected to be sold or securitized in the future.
Current wording
Loans Held for Sale. Loans held for sale of $4.7 billion at March 31, 2026 increased $836.7 million, or 22%, compared to $3.9 billion at December 31, 2025. The increase in loans held for sale was due primarily to a significant increase in single-family warehouse participations, as we experienced higher volume. Loans held for sale are comprised
Previous wording
Loans Receivable, Net. Loans receivable, net of ACL-Loans, of $10.5 billion at September 30, 2025, increased $161.2 million, or 2%, compared to $10.4 billion at December 31,2024. The increase in net loans was comprised primarily of:
Current wording
Loans Receivable, Net. Loans receivable, net of ACL-Loans, of $11.4 billion at March 31, 2026, increased $448.5 million compared to $11.0 billion at December 31, 2025. The increase in net loans was comprised primarily of:
Previous wording
As of September 30, 2025, approximately 96% of total loans reprice within three months, which reduces the risk of market rate increases.
Current wording
As of March 31, 2026, approximately 97% of total loans reprice within three months, which reduces the risk of market rate fluctuations.
Previous wording
The Company is a nationwide lender, especially in our largest portfolios of multi-family and healthcare financing. The table below provides loan receivable data for these two portfolios, including the five highest geographic concentrations.
Current wording
The Company is a nationwide lender, especially in our largest portfolios of multi-family, mortgage warehouse repurchase agreements, and healthcare financing.
Previous wording
The ACL-Loans was $93.3 million, or 0.88% of total loans, at September 30, 2025, compared to $84.4 million, or 0.81% of total loans, at December 31, 2024, and $84.5 million, or 0.82%, at September 30, 2024. The increase compared to December 31, 2024 was driven by a $95.0 million in provision expense, primarily related to the multi-family portfolio, which was offset by $86.1 million in charge-offs. The increase compared to September 30, 2024 was primarily related an increase in provision expense for loans in the multi-family portfolio, which were partially offset by charge-offs. Additional details are provided in the Asset Quality portion of theComparison of Financial Conditionat September 30, 2025 and December 31, 2024 and inNote 4: Loans and Allowance for Credit Losses on Loans.
Current wording
ACL-Loans. The ACL-Loans of $76.8 million at March 31, 2026 decreased $6.5 million, or 8%, compared to $83.3 million at December 31, 2025. The decrease compared to December 31, 2025 was driven by $23.0 million in charge-offs that were partially offset by a $15.9 million increase in provision expense on loans. The latter was primarily associated with declines on certain multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud, and loan growth. Additionally, the changes were attributable to certain types of subordinated loans that the Company no longer offers to borrowers. Losses on underperforming loans have been largely identified and have either been included in ACL-Loans as specific reserves or charged-off. Additional details are provided in the Asset Quality portion of theComparison of Financial Condition at March 31, 2026 and December 31, 2025 and inNote 4: Loans and Allowance for Credit Losses on Loans.
Previous wording
Servicing Rights. Servicing rights of $213.2 million at September 30, 2025 increased 12%, compared to December 31, 2024. The increase during the nine months ended September 30, 2025, was primarily due to originated and purchased servicing of $29.1 million and a positive fair market value adjustment of $1.6 million partially offset by paydowns of $7.5 million. The $1.6 million positive fair market value adjustment reflected a positive adjustment of $3.7 million for multi-family mortgages and a negative adjustment of $2.1 million for single-family mortgages and SBA loans during the nine months ended September 30, 2025.
Current wording
Servicing Rights. Servicing rights of $229.6 million at March 31,2026 increased $12.3 million compared to $217.3 million at December 31, 2025. During the three months ended March 31, 2026, a positive fair market value adjustment of $8.9 million and originated or purchased servicing of $5.9 million were partially offset by paydowns of $2.5 million. The $8.9 million positive fair market value adjustment reflected a positive adjustment of $7.4 million for multi-family and healthcare mortgages and $1.6 million for single-family mortgages and SBA loans during the three months ended March 31, 2026.
Previous wording
Servicing rights are recognized in connection with salesof loans when we retain servicing of the sold loans. The servicing rights are recorded and carried at fair value based on the expected future cash flows. The fair value increase recorded during the nine months ended September 30, 2025 was driven by higher escrow earnings rates in multi-family servicing, which was partially offset by lower interest rates that impacted single-family servicing. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments.
Current wording
Servicing rights are recognized in connection with salesof loans when we retain servicing of the sold loans. The servicing rights are recorded and carried at fair value based on the expected future cash flows. The fair value increase recorded during the three months ended March 31, 2026 was driven by higher escrow earnings rates in the multi-family and healthcare servicing portfolios, which increased the expected cash flows from servicing activities. Lower prepayment assumptions in the single-family and healthcare portfolios also contributed to the higher servicing values. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments.
Previous wording
Deposits. Deposits of $13.9 billion at September 30, 2025 increased $2.0 billion, or 17%, compared to $11.9 billion at December 31, 2024. The increase was primarily due to an increase of $3.5 billion in demand deposits and $346.4 million in savings deposits, partially offset by a decrease of $1.9 billion in certificates of deposit. As of September 30, 2025, approximately 83% of the total deposits reprice within three months.
Current wording
Deposits. Deposits of $13.0 billion at March 31, 2026 decreased $89.4 million, or 1%, compared to December 31, 2025. As of March 31, 2026, approximately 83% of the total deposits reprice within three months.
Previous wording
A summary of the gain on sale of loans for the nine months ended September 30, 2025 and 2024 is below:
Current wording
A summary of deposits as of March 31, 2026 and December 31, 2025 is below.
Previous wording
September 30, 2025 compared to the same period in 2024, according to an estimate of industry volume by the Mortgage Bankers Association.
Current wording
Core deposits increased by $781.4 million, or 7%, to $12.1 billion at March 31, 2026 compared to $11.3 billion at December 31, 2025. Core deposits represented 93% of total deposits at March 31, 2026 compared to 87% of total deposits at December 31, 2025.
Previous wording
We have decreased our use of brokered deposits by 55%, which totaled $1.1 billion at September 30, 2025 compared to $2.5 billion at December 31, 2024. Brokered deposits represented 8% of total deposits at September 30, 2025 compared to 21% of total deposits at December 31, 2024. As of September 30, 2025, brokered certificates of deposit had a weighted average remaining duration of 49 days.
Current wording
We have decreased our use of total brokered deposits by $870.8 million, or 50%, to $886.5 million at March 31, 2026, compared to $1.8 billion at December 31, 2025. Brokered deposits represented 7% of total deposits at March 31, 2026, compared to 13% of total deposits at December 31, 2025. As of March 31, 2026, brokered certificates of deposit had a weighted average remaining duration of 88 days.
Previous wording
Compared to December 31, 2024, interest-bearing deposits increased $1.9 billion, or 16%, to $13.5 billion at September 30, 2025, and noninterest-bearing deposits increased $160.8 million, or 67%, to $399.8 million at September 30, 2025.
Current wording
Interest-bearing deposits at March 31, 2026 increased $12.8 million, to $12.4 billion compared to December 31, 2025, and noninterest-bearing deposits decreased $102.2 million, or 17%, to $501.9 million at March 31, 2026 compared to December 31, 2025.
Previous wording
$250,000 through our insured cash sweep program that extends FDIC protection up to $100 million. The balance of deposits in this program was $1.4 billion and $1.6 billion as of September 30, 2025 and December 31, 2024, respectively.
Current wording
Uninsured deposits totaled approximately $3.5 billion as of March 31, 2026, representing 27% of total deposits. Since 2018, the Company has offered its customers an opportunity to insure balances in excess of $250,000 through our insured cash sweep program that extends FDIC protection up to $100 million. The balance of deposits in this program was $1.5 billion and $1.4 billion as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
Borrowings. Borrowings of $2.9 billion at September 30, 2025 decreased $1.5 billion, or 34%, compared to $4.4 billion at December 31, 2024. The decrease was primarily due to a reduction of $1.4 billion in FHLB advances in addition to the increase in core deposits available. The Company primarily utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, and AFX, using the most cost-effective options available. SeeNote 10: Borrowings for further information.
Current wording
Borrowings. Borrowings of $4.8 billion at March 31, 2026 increased $930.9 million, or 24%, compared to December 31, 2025. The higher level of collateralized borrowing was primarily due to increased borrowings at FHLB. The Company primarily utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, AFX, and Federal Funds, using the most cost-effective options available. SeeNote 10: Borrowings for further information.
Previous wording
The Company continues to have significant borrowing capacity based on available collateral. As of September 30, 2025, unused lines of credit totaled $5.9 billion, an increase of 37%, compared to $4.3 billion at December 31, 2024. The Company’s ratio of total collateralized borrowing capacity to total assets was 45% at September 30, 2025 compared to 46% at December 31, 2024.
Current wording
The Company continues to have significant borrowing capacity based on available collateral. As of March 31, 2026, unused lines of credit totaled $3.9 billion, compared to $5.3 billion at December 31, 2025. The Company’s ratio of total collateralized borrowing capacity to total assets was 42% at March 31, 2026, compared to 47% as of December 31, 2025.
Previous wording
Total Shareholders’ Equity. Total shareholders’ equity of $2.2 billion at September 30, 2025, decreased $17.9 million, or 1%, compared to December 31, 2024. The decrease resulted primarily from the redemption of 6% Series B Preferred Stock for $125.0 million and dividends paid on common and preferred shares of $44.6 million during the period, which were partially offset by net income of $150.9 million. SeeNote 14: Preferred Stockfor more details on the Series B redemption.* *
Current wording
Total Shareholders’ Equity. Total shareholders’ equity was $2.3 billion as of March 31, 2026. The $49.5 million, or 2%, increase compared to December 31, 2025 resulted from net income of $67.7 million for the three months ended March 31, 2026. The increase was partially offset by dividends paid on common and preferred shares of $15.3 million during the period as well as repurchases of common stock totaling $2.2 million. SeeNote 13: Common Stock for more details on the common stock repurchases.
Previous wording
Loans are underwritten to strict Freddie Mac, Fannie Mae, HUD, or other Agency guidelines. We continually strive to strengthen our various levels of credit and risk management.
Current wording
Loans are generally underwritten to strict Freddie Mac, Fannie Mae, HUD, or other agency guidelines. We continually strive to strengthen our various levels of credit and risk management.
Previous wording
ACL-Loans. The ACL-Loans of $93.3 million at September 30, 2025 increased $8.9 million, or 11%, compared to $84.4 million at December 31, 2024. The increase compared to December 31,2024 was driven by $95.0 million in provision expense that was partially offset by $86.1 million in charge-offs, primarily related to the multi-family portfolio. These changes were primarily associated with declines on multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. Additionally, the increases were attributable to certain types of subordinated loans that the Company no longer offers to borrowers. These underperforming loans have been largely identified and evaluated for potential losses that have either been included in the provision for credit losses as specific reserves or charged off.
Current wording
The ACL-Loans of $76.8 million, as of March 31, 2026, decreased by $6.5 million, or 8%, compared to $83.3 million as of December 31, 2025. The $6.5 million decrease compared to December 31, 2025 was driven by $23.0 million in charge-offs, partially offset by $15.9 million in provision expense. The latter was primarily associated with declines on certain multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. Additionally, the changes were attributable to certain types of subordinated loans that the Company no longer offers to borrowers. These underperforming loans have been largely identified and evaluated for potential losses that have either been included in the ACL-Loans as specific reserves or charged-off.
Previous wording
During the three months ended September 30, 2025 there were $29.5 million of charge-offs for nine relationships, primarily in the multi-family loan portfolio, and $23,000 in recoveries, compared to $2.1 million of charge-offs and $7,000 recoveries for the three months ended September 30, 2024.
Current wording
During the three months ended March 31, 2026, the Company recorded charge-offs across seven relationships, primarily in the healthcare and multi-family loan portfolios totaling $23.0 million and had $616,000 of recoveries compared to $10.5 million of charge-offs and $28,000 of recoveries for the three months ended March 31, 2025. Nearly 75% of the charge-offs for the three months ended March 31, 2026 were related to two relationships.
Previous wording
Loans receivable classified as Special Mention totaled $155.7 million at September 30, 2025, declined $224.3 million, or 59%, compared to $380.0 million at December 31, 2024 and declined by $195.7 million, or 56%, compared to $351.4 million at September 30, 2024. These declines reinforce the view that the frequency of migration to criticized status would subside, driven by favorable market conditions and the Company’s efforts with proactive portfolio management.
Current wording
Overall criticized loans receivable of $505.5 million declined by $2.7 million, or 1%, compared to December 31, 2025 and $226.0 million, or 31%, compared to March 31, 2025. These declines reinforce the view that the frequency of migration to criticized status would stabilize and eventually subside, driven by favorable market conditions and our efforts with proactive portfolio management.
Previous wording
As of September 30, 2025, all Substandard loans have been evaluated for impairment and these loans have specific reserves of $31.1 million, of which $0.3 million was added during the three months ended September 30,2025, net of charge-offs. The Company believes that the remaining loans are well collateralized.
Current wording
As of March 31, 2026, all Substandard loans have been evaluated for impairment, and these loans have specific reserves of $11.7 million. The Company believes that the remaining loans are well collateralized.
Previous wording
Total nonperforming loans (nonaccrual and greater than 90 days past due but still accruing) were $298.3 million, or 2.81%, of total loans receivable at September 30, 2025, compared to $279.7 million, or 2.68%, of total loans at December 31, 2024 and $210.9 million, or 2.04%, at September 30,2024. After six months of consecutive loan performance, the loans are placed back on accrual status.
Current wording
Total nonperforming loans (nonaccrual and greater than 90 days late but still accruing) were $247.5 million, or 2.16% of total loans receivable, at March 31, 2026, compared to $197.8 million, or 1.79%, of total loans receivable at December 31, 2025 and $284.6 million, or 2.73%, at March 31, 2025.
Previous wording
Total loans receivable greater than 30 days past due were $324.6 million at September 30, 2025, $292.3 million at December 31, 2024, and $257.5 million at September 30,2024. Of the $324.6 million in delinquent loans, $45.7 million are partially protected under credit risk transfer transactions.
Current wording
Loans receivable greater than 30 days past due were $242.3 million at March 31, 2026 compared to $206.6 million at December 31, 2025 and $304.6 million at March 31, 2025. As of March 31, 2026, 11% of the delinquent loans were covered by credit default swaps.
Previous wording
As a percentage of nonperforming loans, the ACL-Loans was 31% at September 30, 2025 compared to 30% at December 31, 2024 and 40% at September 30, 2024. The change compared to September 30, 2024, was primarily due to an increase in nonperforming loans.
Current wording
As a percentage of nonperforming loans, the ACL-Loans was 31% at March 31, 2026 compared to 42% at December 31, 2025 and 29% at March 31, 2025. The changes in percentage was primarily due to fluctuations in nonperforming loans.
Previous wording
The Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019. Since 2023, the Company has strategically executed several credit protection arrangements through a credit linked note and credit default swaps. At their inception, these credit protection arrangements addressed $4.2 billion in loans to reduce risk of losses, with coverage ranging from 13-15% of the unpaid principal balances for each arrangement. Despite having credit protection on these loans, the Company also continues to carry an allowance for credit losses on loans held for investment. As of September 30, 2025, the balance of loans subject to credit protection arrangements was $2.4 billion, compared to $2.3 billion as of December 31, 2024. For additional information seeNote 11: Derivative Financial Instrumentsand the Company’s 2024 Annual Report on Form 10–K
Current wording
The Company continues to reduce its credit risk through loan sales and securitization activities. Since 2024, the Company has strategically executed credit protection arrangements through credit default swaps to reduce risk of losses. The coverage ranges from 13-15% of the unpaid principal balances for each arrangement. As of March 31, 2026, the unpaid principal balance of loans protected by credit default swaps was $2.5 billion, compared to $2.8 billion as of December 31, 2025. Despite having credit protection on these loans, the Company is required to carry an allowance for credit losses on loans receivable. For additional information seeNote 11: Derivative Financial Instrumentsand the Company’s 2025 Annual Report on Form 10–K.
Previous wording
The percentage of commercial real estate loans as a percentage of total Tier I risk-based capital, including the ACL-Loans, has declined from 348% to 328% from December 31, 2024 to September 30, 2025, respectively.
Current wording
The percentage of commercial real estate loans as a percentage of total Tier I risk-based capital, including the ACL-Loans, has declined from 324% to 309% from December 31, 2025 to March 31, 2026, respectively.
Previous wording
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in weighted average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Yields have been calculated on a pre-tax basis.
Current wording
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in weighted average interest rates (rate). The following table sets forth the effects of changing volumes and rates on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Yields have been calculated on a pre-tax basis.
Previous wording
The following table summarizes the increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates:
Current wording
The following table summarizes the increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates (rate).
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Current report — wording carried from elsewhere
primarily of single-family residential real estate loan participations that meet Fannie Mae, Freddie Mac, or Ginnie Mae eligibility. Loans held for sale also includes single-family, SBA, and multi-family loans that are expected to be sold or securitized in the future.
Current report — wording carried from elsewhere
We are also one of the largest Ginnie Mae servicers in the country based on aggregate unpaid principal balance. As of March 31, 2026 the Company’s servicing portfolio included unpaid principal balance of loans serviced for others of $21.3 billion, loans sub-serviced for others of $4.1 billion and other servicing balances of $680.8 million. The
Current report — wording carried from elsewhere
servicing portfolio is primarily Ginnie Mae, Fannie Mae, and Freddie Mac loans and is a significant source of our noninterest income and deposits.
Current report — wording carried from elsewhere
Overview. Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and
Current report — wording carried from elsewhere
-100, +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year period.
Rearranged previous paragraphs (11)
Previous report — wording carried elsewhere
Uninsured deposits totaled approximately $3.7 billion as of September 30, 2025, representing 27% of total Bank deposits. Since 2018, the Company has offered its customers an opportunity to insure balances in excess of
Previous report — wording carried elsewhere
The $29.2 million provision for credit losses consisted of $31.0 million for the ACL-Loans, net of a release of $1.8 million for the ACL-OBCE’s.
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Comparison of Operating Results for the Nine Months Ended September 30, 2025 and 2024
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The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Yields have been calculated on a pre-tax basis. Nonaccrual loans are included in loans and loans held for sale.
Previous report — wording carried elsewhere
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in weighted average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Yields have been calculated on a pre-tax basis.
Previous report — wording carried elsewhere
The following table summarizes the increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates:
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Included in interest expense on borrowings, our warehouse structured financing agreements provide for an additional interest payment for a portion of the earnings generated from the interest-earning assets. As a result, the cost of borrowings increased from a base rate of 5.04% and 6.89%, to an effective rate of 5.29% and 7.21% for the nine months ended September 30,2025 and 2024, respectively.
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should be substantially equal and offsetting. For the nine months ended September 30, 2025 there was a $5.3 million positive fair value adjustment on the securities that were offset by a $5.3 million negative fair value adjustment on the put options, hence having no net gain or loss recognized. Also seeNote 2: Investment Securities, Note 11: Derivative Financial Instruments, andNote 12: Disclosures about Fair Value of Assets and Liabilities.
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The volume of loans originated and acquired through our Multi-family business increased by $609.3 million, or 16%, to $4.4 billion, for the nine months ended September 30, 2025, compared to $3.8 billion for the nine months ended September 30, 2024. It includes construction loans coupled with agreements for future permanent loan refinancing, as well as bridge loans housed in our Banking segment, while borrowers await conversion to permanent financing. It also includes loans originated and acquired for sale in the secondary market.
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of total securities available for sale, reflecting our interest rate risk policy of maintaining short duration on assets and liabilities.
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Quantitative measures established by regulation to ensure capital adequacy require the Company and Merchants Bank to maintain minimum amounts and ratios (set forth in the table above). Management believes, as of