Merchants Bancorp
For the period ended Mar 31, 2025. Filed May 9, 2025.
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, 2025 · Filed May 9, 2025
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 2024-09-30; filed 2024-11-08.
0001558370-24-015053
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001558370-25-007170
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 179 previous paragraphs and 153 current paragraphs.
35 unchanged; 64 reworded; 48 added; 73 removed; 7 previous and 6 current paragraphs rearranged.
Tables are not compared: 37 previous and 36 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 (48)
Current report
Total Assets. Total assets of $18.8 billion at March 31, 2025 remained essentially unchanged from December 31, 2024.
Current report
As of March 31, 2025, AOCL of $0.1 million, related to securities available for sale remained essentially unchanged from December 31, 2024. The $0.1 million of AOCL as of March 31, 2025 represented less than 1% of total equity and 1% of total securities available for sale, reflecting our interest rate risk policy of short duration on assets and liabilities.
Current report
The Company is a nationwide lender, especially in our largest portfolios of multi-family and healthcare financing. The tables below provide loans receivable for these two portfolios, including the five highest geographic concentrations.
Current report
ACL-Loans. The ACL-Loans of $83.4 million at March 31, 2025 decreased $973,000, or 1%, compared to $84.4 million at December 31, 2024. The decrease compared to December 31, 2024 was driven by $10.5 million in charge-offs that were partially offset by a $9.5 million increase in provision expense on loans, primarily related to the multi-family portfolio.
Current report
Other Assets and Receivables. Other assets and receivables of $424.3 million at March 31, 2025 decreased by $147.0 million, or 26%, 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 utilized for the January 2, 2025 redemption of Series B Preferred Stock.
Current report
Deposits. Deposits of $12.4 billion at March 31, 2025 increased $486.2 million, or 4%, compared to $11.9 billion at December 31, 2024. The increase was primarily due to a $1.2 billion increase in core demand deposit accounts, partially offset by a decrease of $815.2 million in brokered certificate of deposits.
Current report
Total demand deposits increased by $1.2 billion, total savings deposits by $175.6 million, partially offset by an decrease in total certificates of deposit of $876.3 million. As of March 31, 2025, approximately 80% of the total deposits reprice within three months.
Current report
Other Liabilities. Other liabilities of $193.4 million at March 31, 2025 decreased $37.6 million, or 16%, compared to $231.0 million at December 31,2024. The decrease in other liabilities was primarily in accrued expenses and unfunded commitments for low-income housing credit investments.
Current report
The Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019. In April of 2023, as well as March and December of 2024, the Company strategically executed credit protection arrangements through a credit linked note and credit default swaps, totaling $2.9 billion in loans on the closing date, to reduce risk of losses, with incremental coverage ranging from 13-14% of the unpaid principal balances for each arrangement. These loans have credit protection and also have an allowance for credit losses. As of March 31, 2025, the balance of loans subject to credit protection arrangements was $2.2 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 report
Loans receivable classified as Special Mention totaled $407.9 million at March 31, 2025, compared to $380.0 million at December 31, 2024 and $232.1 million at March 31, 2024. The increase compared to both periods was primarily due to higher interest rates that negatively impact our borrowers’ ability to make higher required payments.
Current report
The percentage of commercial real estate loans as a percentage of total Tier I risk-based capital, including the ACL-Loans, has relatively unchanged from 348% to 353% from December 31, 2024 to March 31, 2025, respectively.
Current report
General. Net income of $58.2 million for the three months ended March 31, 2025 decreased by $28.8 million, or 33%, compared with the three months ended March 31, 2024, reflecting market uncertainty that delayed origination closings and permanent loan conversions in a growing pipeline, which negatively impacted the recognition of gain on sale and net interest margin more than expected. The decrease in net income was primarily driven by a $17.2 million, or 42%, decrease in noninterest income, a $12.8 million, or 26%, increase in noninterest expense, a $4.9 million, or 4%, decrease in net interest income, and a $3.0 million, or 63%, increase in provision for credit losses on loans, which was partially offset by a $9.0 million, or 33%, decrease in provision for income tax. Of the $28.8 million decrease in net income, $19.3 million, or $0.34 per diluted common share, was attributable to changes in valuation adjustments.
Current report
Noninterest income included a $754,000 negative fair market value adjustment to servicing rights and a $2.3 million negative fair market value adjustment to derivatives, which compared to positive fair market value adjustments of $14.0 million to servicing rights and $2.3 million to derivatives for the three months ended March 31, 2024.
Current report
Net Interest Income. Net interest income of $122.2 million for the three months ended March 31, 2025 decreased $4.9 million, or 4%, compared with $127.1 million for the three months ended March 31, 2024. The decrease reflected lower interest income and higher interest expense on borrowings, which were partially offset by lower interest expense for deposits.
Current report
The interest rate spread of 2.38% for the three months ended March 31, 2025 decreased 20 basis points compared to 2.58% for the three months ended March 31, 2024. Our net interest margin decreased 25 basis points, to 2.89%, for the three months ended March 31, 2025 compared to 3.14% for the three months ended March 31, 2024. The margin was negatively impacted by a significant shift in business mix, as lower-margin loans held for sale balances, consisting of primarily warehouse loans, grew by $480.3 million, or 14%, and warehouse repurchase agreements grew by $265.3 million, or 23%, while higher-margin loans receivable balances contracted by $339.1 million, or 3%.
Current report
Interest Income. Interest income of $287.2 million for the three months ended March 31, 2025, decreased $27.0 million, or 9%, compared with $314.2 million for the three months ended March 31, 2024. This decrease reflected lower average yield on loans and loans held for sale, partially offset by a higher average balance on securities held to maturity.
Current report
Interest income of $239.3 million on loans and loans held for sale for the three months ended March 31, 2025, decreased $32.7 million, or 12%, compared to the three months ended March 31, 2024. The average loan balance of $13.8 billion for the three months ended March 31, 2025, increased $256.2 million, or 2%, compared to $13.5 billion for the three months ended March 31, 2024. The average yield on loans decreased 105 basis points to 7.06%, for the three months ended March 31, 2025, compared to 8.11% for the three months ended March 31, 2024.
Current report
Interest income of $12.4 million on securities available for sale for the three months ended March 31, 2025, decreased $2.0 million, or 14%, compared to the three months ended March 31, 2024. The average balance of $961.1 million decreased $124.0 million, or 11%, compared to $1.1 billion for the three months ended March 31, 2024. The average yield decreased 12 basis points to 5.21%, for the three months ended March 31, 2025, compared to 5.33% for the three months ended March 31, 2024. 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 income of $24.4 million on securities held to maturity for the three months ended March 31, 2025, increased $3.8 million, or 19%, compared to the three months ended March 31, 2024. The average balance of $1.6 billion increased $447.1 million, or 37%, compared to $1.2 billion for the three months ended March 31, 2024. The average yield decreased 89 basis points to 6.01% for the three months ended March 31, 2025, compared to 6.90% for the three months ended March 31, 2024. The increase in average balance was primarily due to purchases of senior investment securities backed by residential and healthcare loans retained as part of credit risk transfer securitization transactions originated by the Company.
Current report
Interest income of $3.7 million on mortgage loans in process of securitization for the three months ended March 31, 2025, increased $2.0 million, or 118%, compared to the three months ended March 31, 2024. The average balance of $277.4 million increased $139.5 million, or 101%, compared to $137.9 million for the three months ended March 31, 2024. The average yield increased 45 basis points, to 5.47% for the three months ended March 31, 2025, compared to 5.02% for the for the three months ended March 31, 2024. The increase in average balance was primarily due to a higher origination volume of loans pending settlement for sale on the secondary market.
Current report
Interest Expense. Total interest expense of $165.0 million for the three months ended March 31, 2025, decreased $22.1 million, or 12%, compared with $187.1 million for the three months ended March 31, 2024. The
Current report
decrease reflected a lower average balance at a lower average rate on certificates of deposit that were partially offset by a higher average balance at a lower average rate on borrowings.
Current report
Interest expense on deposits of $123.9 million decreased $47.1 million, or 28%, for the three months ended March 31, 2025, compared to $171.0 million for the three months ended March 31, 2024. The decrease primarily reflected a lower average balance at a lower rate on certificates of deposit and a lower rate on interest-bearing checking accounts.
Current report
Interest expense of $38.8 million on certificate of deposit accountsfor the three months ended March 31, 2025, decreased $37.7 million, or 49%, compared to $76.5 million for the three months ended March 31, 2024. The average balance of $3.4 billion for the three months ended March 31, 2025, decreased $2.3 million, or 41%, compared to the three months ended March 31, 2024. The average interest rate decreased 73 basis points to 4.67% for the three months ended March 31, 2025, compared to 5.40% for the three months ended March 31, 2024.
Current report
Interest expense of $50.6 million on interest-bearing checking accounts for the three months ended March 31, 2025, decreased $10.1 million, or 17%, compared to the three months ended March 31, 2024. The average balance of $5.1 billion for the three months ended March 31, 2025, increased $51.0 million, or 1%, compared to the three months ended March 31, 2024. The average interest rate decreased 80 basis points, to 4.01% for the three months ended March 31, 2025, compared to 4.81% for the three months ended March 31, 2024.
Current report
Interest expense on borrowings of $41.1 million for the three months ended March 31, 2025, increased $25.0 million, or 155%, compared to $16.1 million the three months ended March 31, 2024. The increase was due primarily to a $2.4 billion, or 336%, increase in average borrowings to $3.1 billion at March 31, 2025, compared to $716.9 million for the three months ended March 31, 2024. The average interest rate decreased 370 basis points to 5.33% for the three months ended March 31, 2025, compared to 9.03% for the three months ended March 31, 2024.
Current report
The $7.7 million provision for credit losses consisted of $9.5 million for the ACL-Loans and a negative provision of $1.8 million for the ACL-OBCE’s.
Current report
The ACL-Loans was $83.4 million, or 0.80% of total loans, at March 31, 2025, compared to $84.4 million, or 0.81% of total loans, at December 31, 2024, and $75.7 million, or 0.70%, at March 31, 2024. The $7.7 million increase compared to March 31, 2024 was primarily related to loans in the multi-family portfolio, which were partially offset by charge-offs. The decrease compared to December 31, 2024 was driven by a $9.5 million increase in provision expense, primarily related to the multi-family portfolio, which was offset by $10.5 million in charge-offs. Additional details are provided in the ACL-Loans portion of theComparison of Financial Condition at March 31, 2025 and December 31, 2024 and inNote 4: Loans and Allowance for Credit Losses on Loans.
Current report
Noninterest Income. Noninterest income of $23.7 million for the three months ended March 31, 2025 decreased $17.2 million, or 42%, compared to $40.9 million for the three months ended March 31, 2024. The decrease was primarily due to a $15.4 million, or 79%, decrease in loan servicing fees, a $2.8 million, or 47%, decrease in other income, and a $1.9 million, or 36%, decrease in syndication and asset management fees, which was partially offset by a $2.3 million, or 24%, increase in gain on sale of loans.
Current report
Other noninterest income of $3.2 million for the three months ended March 31, 2025 decreased $2.8 million, or 47%, compared to $5.9 million for the three months ended March 31, 2024. Other noninterest income included a $2.3 million negative adjustment to the fair value of floor derivatives for the three months ended March 31, 2025 compared to a $2.3 million positive fair value adjustment for the three months ended March 31, 2024. The floor derivatives are associated with arrangements whereby there is a guaranteed minimum interest rate the Company will receive on certain assets bearing variable interest rates. The change in value was driven largely by the change in market interest rates during the period. Also included in other noninterest income were changes in fair value on certain securities available for sale that the Company elected to account for under the fair value option, with changes in fair value reflected in earnings. The Company also has put options associated with these securities that provide protection against any change in value. By design, the fair value adjustments of the securities and the put options should be substantially equal and offsetting. For the three months ended March 31, 2025 there was a $6.2 million positive fair value adjustment on the securities that were offset by a $6.2 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.
Current report
Syndication and asset management fees of $3.4 million for the three months ended March 31, 2025, decreased $1.9 million, or 36%, compared to $5.3 million for the three months ended March 31, 2024. The decrease was attributable to less equity raised by our LIHTC syndication platform during the three months ended March 31, 2025 than the prior year.
Current report
The $2.3 million, or 24%, increase in gain on sale of loans resulted from higher volume in the multi-family loan portfolio.
Current report
Noninterest Expense. Noninterest expense of $61.7 million for the three months ended March 31, 2025 increased $12.8 million, or 26%, compared to $48.9 million for the three months ended March 31, 2024. The increase was due primarily to a $6.8 million, or 23%, increase in salaries and employee benefits to support business growth, including $2.5 million associated with the addition of production staff, which is expected to elevate production, gain on sale, and expenses in future quarters as well. Also contributing to the higher expenses, was a $3.9 million increase in credit risk transfer premium expense associated with ongoing credit default swaps that were executed in March and December 2024, as well as a $2.1 million, or 41%, increase in deposit insurance expense, reflecting an increase in underperforming assets, coupled with an increase in total assets.
Current report
Our segment financial information was compiled utilizing the policies described inNote 17: Segment Information, included elsewhere in this report. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes, if any, in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. Transactions between segments consist primarily of borrowed funds and overhead expense sharing. Intersegment interest expense is allocated to the Mortgage Warehousing and Banking segments based on Merchants Bank’s cost of funds. The provision for credit losses is allocated based on information included in our ACL-Loans analysis and specific loan data for each segment.
Current report
Multi-family Mortgage Banking. The Multi-family Mortgage Banking segment reported net income of $3.4 million for the three months ended March 31, 2025, a decrease of $13.2 million, or 79%, compared to net income of $16.6 million for the three months ended March 31, 2024. The decrease in net income was primarily due to a $12.5 million decrease in loan servicing fees, as well as a $5.0 million increase in noninterest expense that included $2.5 million associated with the addition of production staff, which is expected to elevate expenses in future quarters as well.
Current report
Loan servicing fees included positive fair market value adjustment of $0.4 million to servicing rights for the three months ended March 31, 2025, compared to a positive fair market value adjustment of $13.2 million for the three months ended March 31, 2024.
Current report
Mortgage Warehousing. The Mortgage Warehousing segment reported net income of $15.4 million for the three months ended March 31, 2025, a decrease of $4.8 million, or 24%, compared to $20.2 million for the three months ended March 31, 2024. The decrease in net income reflected a $4.1 million decrease in noninterest income.
Current report
Noninterest income included a $2.3 million negative fair market value adjustment to derivatives for the three months ended March 31, 2025, compared to a $2.3 million positive fair market value adjustment to derivatives for the three months ended March 31, 2024.
Current report
The volume of loans funded during the three months ended March 31, 2025 amounted to $11.9 billion, an increase of $3.9 billion, or 49%, compared to the three months ended March 31, 2024. This compared to the 2% industry increase in single-family residential loan volumes for the three months ended March 31, 2025 compared to the same period in 2024, according to an estimate of industry volume by the Mortgage Bankers Association.
Current report
Banking. The Banking segment reported net income of $47.1 million for the three months ended March 31, 2025, a decrease of $9.3 million, or 17%, compared to $56.4 million for the three months ended March 31, 2024. The decrease in net income was primarily due to lower net interest income from a decline in yields and higher interest expense on borrowings.
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Removed paragraphs (73)
Previous report
Total Assets. Total assets of $18.7 billion at September 30, 2024 increased $1.7 billion, or 10%, compared to $17.0 billion at December 31, 2023. The increase was due primarily to growth in loans held for sale and in the warehouse and multi-family loan portfolios. There was also an increase in securities held to maturity compared to December 31, 2023, primarily due to the purchase of a security representing healthcare loans sold into a securitization in the third quarter of 2024 that was offset by a decline in loans in the healthcare portfolio that were sold into the securitization.
Previous report
As of September 30, 2024, Accumulated Other Comprehensive Income (“AOCI”) of $0.1 million, related to securities available for sale, increased $2.6 million, or 104%, compared to accumulated losses of $2.5 million at December 31,2023.
Previous report
Allowance for Credit Losses on Loans. The ACL-Loans of $84.5 million at September 30, 2024 increased $12.8 million, or 18%, compared to December 31, 2023, reflecting an $8.0 million increase in specific reserves, primarily related to two customers, and loan growth in both the warehouse and multi-family loan portfolios. Additional details provided in the ACL-Loans portion of the Comparison of Financial Condition at September 30, 2024 and December 31, 2023 and inNote 4: Loans and Allowance for Credit Losses on Loans.
Previous report
Also influencing the overall level of the ACL-Loans is our differentiated strategy to primarily hold loans with shorter durations while maintaining agency underwriting standards that enable us to sell or refinance the majority of our loans under agency and government programs.
Previous report
Other Assets and Receivables. Other assets and receivables of $329.4 million at September 30, 2024 increased $22.3 million, or 7%, compared to December 31,2023. The increase in other assets and receivables was primarily due to receivables associated with low-income housing tax credit investments.
Previous report
Deposits. Deposits of $12.9 billion at September 30, 2024 decreased $1.2 billion, or 8%, compared to $14.1 billion at December 31, 2023. The decrease was primarily due to a $1.0 billion decrease in certificates of deposit, a $150.2 million decrease in demand deposits and a decrease of $12.5 million in savings deposits. As of September 30,2024, approximately 81% of the total deposits reprice within three months.
Previous report
Loans classified as Special Mention totaled $351.4 million at September 30, 2024, compared to $191.3 million at December 31, 2023. The increase was primarily due to the increase in interest rates for our borrowers and the related levels of net operating income on certain properties in the multi-family and healthcare financing loan portfolios.
Previous report
For the nine months ended September 30, 2024, there were $6.4 million of charge-offs and $23,000 of recoveries, compared to $9.6 million of charge-offs and $40,000 of recoveries for the nine months ended September 30, 2023.
Previous report
In addition to the elevated ACL-loans, the Company has been making efforts to minimize its credit risk through loan sale and securitization activities since 2019. In April 2023 and March 2024, the Company strategically entered into credit protection arrangements through a credit linked note and credit default swap, respectively, for $1.7 billion in loans to reduce our risk of losses with incremental coverage of approximately 14% on those covered loans. The balance of loans in those covered portfolios as of September 30, 2024 was $1.3 billion.
Previous report
General. Net income of $61.3 million for the three months ended September 30, 2024 decreased by $20.2 million, or 25%, compared with $81.5 million for the three months ended September 30,2023. The decrease reflected
Previous report
Net Interest Income. Net interest income of $132.8 million for the three months ended September 30, 2024 increased $15.4 million, or 13%, compared with $117.4 million for the three months ended September 30, 2023. The 13% increase reflected an increase in average balances on loans and loans held for sale, which were partially offset by higher average balances on borrowings. The interest rate spread of 2.43% for the three months ended September 30, 2024 decreased 1 basis points compared to 2.44% for the three months ended September 30,2023.
Previous report
Our net interest margin of 2.99% for the three months ended September 30, 2024 remain unchanged compared to the three months ended September 30,2023. The margin was negatively impacted by approximately 6 basis points in the third quarter of 2024 from the net reversal of $2.9 million in accrued interest income associated with the movement of loans into nonaccrual status.
Previous report
Interest Income. Interest income of $338.9 million for the three months ended September 30, 2024 increased 14%, compared with $296.7 million for the three months ended September 30,2023. This increase primarily reflecting an increase in average balances of loans and loans held for sale, as well as increased average yields and balances on securities available for sale.
Previous report
Interest income of $290.3 million for the three months ended September 30, 2024 for loans and loans held for sale increased $23.7 million, or 9%, compared to $266.6 million for the three months ended September 30, 2023. The average balance of loans, including loans held for sale, during the three months ended September 30, 2024 increased $1.2 billion, or 9%, to $14.6 billion compared to $13.4 billion for the three months ended September 30,2023. The average yield on loans increased 2 basis points, to 7.91% for the three months ended September 30, 2024, compared to 7.89% for the three months ended September 30,2023. The increase in average balances of loans and loans held for sale was primarily due to increases in the loans held for sale, warehouse and multi-family loan portfolios.
Previous report
Interest income of $14.9 million for the three months ended September 30, 2024 on securities available for sale increased $8.7 million, or 140%, compared to $6.2 million for the three months ended September 30, 2023. The average balance of securities available for sale of $1.0 billion increased $354.6 million, or 54%, compared to $656.6 million for the three months ended September 30, 2023. The average yield increased 210 basis points, to 5.84% for the three months ended September 30, 2024, compared to 3.74% for the three months ended September 30, 2023. The increase in average balances of securities available for sale was primarily associated with the acquisition of certain securities from a warehouse customer in December 2023 that provide protective put options and interest rate floor derivatives to prevent losses in value.
Previous report
Interest income of $22.1 million for the three months ended September 30, 2024 for securities held to maturity increased $4.7 million, or 27%, compared to $17.4 million for the three months ended September 30, 2023. The average balance of securities held to maturity, during the three months ended September 30, 2024 increased $248.4 million, or 24%, to $1.3 billion compared to $1.0 billion for the three months ended September 30,2023. The average yield on securities held to maturity increased 17 basis points, to 6.82% for the three months ended September 30, 2024, compared to 6.65% for the three months ended September 30, 2023. The increase in average balance of securities held to maturity was primarily related to securities held to maturity acquired as part of loan securitizations.
Previous report
Interest income of $7.7 million for the three months ended September 30, 2024 on interest-earning deposits, and other interest or dividends increased $3.7 million, or 96%, compared to the three months ended September 30, 2023. The average balance of interest-earning deposits and other of $484.7 million increased $225.1 million, or 87%, compared to $259.6 million for the three months ended September 30, 2023. The average yield increased 31 basis points, to 6.30% for the three months ended September 30, 2024, compared to 5.99% for the three months ended September 30, 2023.
Previous report
Interest Expense. Total interest expense of $206.1 million for the three months ended September 30, 2024 increased $26.9 million, or 15%, compared to $179.2 million for the three months ended September 30, 2023. The increase reflected higher average balances on borrowings and interest-bearing checking accounts, partially offset by lower average rates on borrowings and lower average balances on certificates of deposit. Also included in borrowings, our warehouse structured financing agreements provided for additional interest payments for a portion of earnings generated.
Previous report
Interest expense of $40.4 million for the three months ended September 30, 2024 on borrowings increased $24.1 million, or 148%, compared to $16.3 million for the three months ended September 30, 2023. The increase reflected an increase of $1.8 billion, or 254%, in the average balance of borrowings, to $2.5 billion compared to the three months ended September 30,2023, partially offset by a decrease of 271 basis points in the average rate of borrowings, to 6.39% compared to 9.10% for the three months ended September 30, 2023. The higher level of collateralized borrowing was primarily due to it being a more cost-effective funding option than utilizing brokered deposits.
Previous report
Interest expense on deposits increased $2.8 million, or 2%, to $165.7 million for the three months ended September 30, 2024 compared to $162.9 million for the three months ended September 30, 2023. The increase was primarily due to higher average balances on interest-bearing checking accounts partially offset by lower average balances on certificates of deposit.
Previous report
Interest expense of $62.6 million for the three months ended September 30, 2024 on interest-bearing checking accounts increased $4.0 million, or 7%, compared to $58.6 million for the three months ended September 30, 2023. The average balance of interest-bearing checking accounts of $5.3 billion for the three months ended September 30, 2024 increased $415.2 million, or 9%, compared to $4.9 billion for the three months ended September 30, 2023. The average yield of interest-bearing checking accounts was 4.70% for the three months ended September 30, 2024, which was a 6 basis point decrease compared to 4.76% for three months ended September 30, 2023.
Previous report
Interest expense of $69.2 million for the three months ended September 30, 2024 on certificates of deposit decreased $1.5 million, or 2%, compared to $70.7 million for the three months ended September 30, 2023. The average balance of certificates of deposit of $5.0 billion for the three months ended September 30, 2024 decreased $223.4 million, or 4%, compared to the three months ended September 30, 2023. The average rate on certificates of deposit was 5.47% for the three months ended September 30, 2024, which was a 13 basis point increase compared to 5.34% for three months ended September 30, 2023.
Previous report
The provision for the three months ended September 30, 2024 reflected $8.0 million for specific reserves, primarily related to two customers, and $1.9 million related to charge-offs in excess of reserves, partially offset by a reduction of $3.8 million due to lower loan balances associated with the corresponding healthcare loan securitization.
Previous report
The $6.9 million provision for credit losses consisted of $5.6 million for the ACL-Loans, $2.1 million for the ACL-OBCE’s, net of $0.7 million for the release of non-contingent reserves related to a loan securitization. The ACL-Loans was $84.5 million, or 0.82%, of total loans, at September 30, 2024, compared to $71.8 million, or 0.70%, of total loans, at December 31, 2023, and $66.9 million, or 0.67%, at September 30,2023.
Previous report
Noninterest Income. Noninterest income of $16.7 million for the three months ended September 30, 2024 decreased $19.3 million, or 54%, compared to $36.1 million for the three months ended September 30, 2023. The decrease was primarily due to a $18.9 million, or 109%, decrease in net loan servicing fees and a $5.6 million, or 152%, decrease in other income, partially offset by a $6.0 million, or 56%, increase in gain on sale of loans.
Previous report
Other income included a $7.7 million negative fair market value adjustment to interest rate floor derivatives on loans that didn’t occur in the prior comparative period.
Previous report
Noninterest Expense. Noninterest expense of $61.3 million for the three months ended September 30, 2024 increased $18.4 million, or 43%, compared to $42.9 million for the three months ended September 30, 2023. The increase wasprimarily due to increases in salaries and employee benefits that reflected higher commissions on higher production volume, as well as a $5.4 million, or 152%, increase in deposit insurance expenses. The higher noninterest expense also reflected a $3.4 million increase in other expenses primarily associated with ongoing premium expense for the credit default swap that was executed in March 2024.
Previous report
General. Net income of $224.7 million for the nine months ended September 30, 2024 increased $23.0 million, or 11%, compared to the nine months ended September 30, 2023. The increase was primarily due to a $64.3 million increase in net interest income, an $11.9 million decrease in the provision for credit losses, and an $8.8 million increase in noninterest income, partially offset by a $38.6 million increase in noninterest expense and a $23.4 million increase in the provision for income taxes.
Previous report
Net Interest Income. Net interest income of $388.0 million for the nine months ended September 30, 2024 increased $64.3 million, or 20%, compared to $323.7 million for the nine months ended September 30, 2023. The increase reflected both higher average balances and average yields on loans and loans held for sale, securities available for sale, and securities held to maturity, partially offset by an increase in interest expense from both higher average balances and rates on certificates of deposit accounts, interest-bearing checking, and higher average balances on borrowings. The interest rate spread of 2.48% for the nine months ended September 30, 2024 decreased 4 basis points compared to 2.52% for the nine months ended September 30,2023.
Previous report
Our net interest margin decreased 3 basis points, to 3.04% for the nine months ended September 30, 2024 from 3.07% for the nine months ended September 30,2023. The margin was negatively impacted by approximately 4 basis points from the net reversal of $5.7 million in accrued interest income associated with the movement of loans into nonaccrual status.
Previous report
Interest Income. Interest income of $981.4 million for the nine months ended September 30, 2024 increased $215.3 million, or 28%, compared to the nine months ended September 30,2023. This increase was primarily attributable to an increase in average balances and higher yields of loans and loans held for sale, securities available for sale, securities held to maturity, and interest earning deposits and other interest or dividends.
Previous report
Interest income of $846.7 million for the nine months ended September 30, 2024 on loans and loans held for sale increased $161.9 million, or 24%, compared to the nine months ended September 30, 2023. The average balance of loans, including loans held for sale, during the nine months ended September 30, 2024 increased $2.2 billion, or 18%, to $14.2 billion compared to $12.0 billion for the nine months ended September 30, 2023, and the average yield on loans increased 36 basis points, to 7.99% for the nine months ended September 30, 2024, compared to 7.63% for the nine months ended September 30, 2023.
Previous report
Interest income of $44.0 million for the nine months ended September 30, 2024 on securities available for sale increased $30.0 million, or 214%, compared to the nine months ended September 30, 2023. The average balance of securities available for sale increased $452.6 million, or 76%, to $1.0 billion for the nine months ended September 30, 2024 compared to $592.5 million for the nine months ended September 30, 2023, and the average yield increased 247 basis points, to 5.63% for the nine months ended September 30, 2024, compared to 3.16% for the nine months ended September 30, 2023.
Previous report
Interest income of $62.4 million for the nine months ended September 30, 2024 on securities held to maturity increased $11.9 million, or 24%, compared to $50.5 million for the nine months ended September 30, 2023. The average balance of securities held to maturity, during the nine months ended September 30, 2024 increased $132.9 million, or 12%, to $1.2 billion compared to the nine months ended September 30,2023. The average yield on securities held to maturity increased 62 basis points, to 6.86% for the nine months ended September 30, 2024 ended, compared to 6.24% for the nine months ended September 30, 2023.
Previous report
Interest income of $19.4 million for the nine months ended September 30, 2024 on interest-earning deposits and other interest or dividends increased $10.0 million, or 106%, compared to the nine months ended September 30, 2023. The average balance of interest-earning deposits and other increased $191.8 million, or 83%, to $423.3 million for the nine months ended September 30, 2024, from $231.5 million for the nine months ended September 30, 2023, and the average yield increased 68 basis points, to 6.13% for the nine months ended September 30, 2024, compared to 5.45% for the nine months ended September 30, 2023.
Previous report
Interest Expense. Total interest expense of $593.4 million for the nine months ended September 30, 2024 increased $151.1 million, or 34%, compared to $442.3 million for the nine months ended September 30, 2023. The higher interest expense reflected increases in both deposits and borrowings, with a shift towards higher collateralized borrowings that has become a more cost-effective option that utilizing brokered deposits.
Previous report
Interest expense on deposits increased $111.2 million, or 27%, to $516.3 million for the nine months ended September 30, 2024, compared to $405.1 million for the nine months ended September 30, 2023. The increase was primarily due to higher average balances and higher rates for certificate of deposit accounts and interest-bearing checking accounts, as well as higher rates on money market accounts.
Previous report
Interest expense of $234.0 million for the nine months ended September 30, 2024 for certificates of deposits increased $69.7 million, or 42%, compared to $164.3 million for the nine months ended September 30, 2023. The average balance of certificates of deposit accounts was $5.8 billion for the nine months ended September 30, 2024, an increase of $1.3 billion, or 29%, compared to the nine months ended September 30, 2023. The average rate on certificates of deposit accounts was 5.43% for the nine months ended September 30, 2024, which was a 49 basis point increase compared to 4.94% for the nine months ended September 30, 2023.
Previous report
Interest expense of $181.4 million for the nine months ended September 30, 2024 for interest-bearing checking accounts increased $33.8 million, or 23%, compared to $147.6 million for the nine months ended September 30, 2023. The average balance of interest-bearing checking accounts of $5.1 billion for the nine months ended September 30, 2024 increased $684.6 million, or 15%, compared to $4.4 billion for the nine months ended September 30, 2023. The average rate on interest-bearing checking accounts was 4.75% for the nine months ended September 30, 2024, which was a 28 basis point increase compared to 4.47% for the nine months ended September 30, 2023.
Previous report
Interest expense of $100.7 million for the nine months ended September 30, 2024 for money market accounts increased $8.3 million, or 9%, compared to $92.4 million for the nine months ended September 30, 2023. The average balance of money market accounts of $2.8 billion for the nine months ended September 30, 2024 increased $9.0 million compared to the nine months ended September 30, 2023. The average rate on money market accounts was 4.79% for the nine months ended September 30, 2024, which was a 38 basis point increase compared to 4.41% for the nine months ended September 30, 2023.
Showing the first 40 of 73 passages. Open the source sections for the rest.
Reworded paragraphs (64)
Previous wording
Management’s discussion and analysis of the financial condition at September 30, 2024 and results of operations for the three and nine months ended September 30,2024 and 2023, 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, 2025 and results of operations for the three months ended March 31, 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.
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, Small Business Administration (“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, agricultural lending, SBA lending, and traditional community banking.
Previous wording
Our business consists primarily of funding fixed rate, 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, and 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 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, municipal, retail, commercial, brokered deposits, and 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 higher than industry shareholder return.
Previous wording
The preparation of our 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 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, 2024, we had approximately $18.7 billion in total assets, $12.9 billion in deposits and $1.9 billion in total shareholders’ equity. Total assets as of September 30, 2024 included approximately $10.3 billion of loans receivable, net of allowance for credit losses on loans (“ACL-Loans”) and $3.8 billion of loans held for sale. There were also $1.8 billion in securities classified as held to maturity, most of which were acquired through loan securitizations. Assets also included $953.1 million in securities available for sale, the majority of which were acquired from a warehouse customer through loan securitizations, and others are match funded or required to collateralize our credit-linked notes. Additionally, we had $601.9 million of cash and cash equivalents, $431.0 million of mortgage loans in process of securitization that represent pre-sold multi-family rental real estate loan originations in primarily Government National Mortgage Association (“Ginnie Mae”), Federal National Mortgage Association (“Fannie Mae”), and Federal Home Loan Mortgage Corporation (“Freddie Mac”) mortgage-backed securities pending settlements that typically occur within 30 days. Other assets at September 30, 2024 totaled $329.4 million, which primarily represents low-income
Current wording
As of March 31, 2025, we had approximately $18.8 billion in total assets, $12.4 billion in deposits, and $2.2 billion in total shareholders’ equity. Total assets as of March 31, 2025 included $10.3 billion of loans receivable, net of ACL-Loans and $4.0 billion of loans held for sale. There were also $1.6 billion in securities classified as held to maturity. We had $961.2 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 had $521.3 million of cash and cash equivalents, $389.8 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, and other assets of $424.3 million, which primarily related to low-income housing tax credits. Servicing rights at March 31, 2025 were $189.7 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
Cash and Cash Equivalents. Cash and cash equivalents of $601.9 million at September 30, 2024 increased $17.5 million, or 3%, compared to $584.4 million at December 31, 2023. Included in cash equivalents was $45.7 million in restricted cash associated with the March 2023 issuance of senior credit linked notes described inNote 1: Basis of Presentation and the Company’s 2023 Annual Report on Form 10–K*.*
Current wording
Cash and Cash Equivalents. Cash and cash equivalents of $521.3 million at March 31, 2025 increased $44.7 million, or 9%, compared to $476.6 million at December 31, 2024. Included in cash equivalents was $33.4 million in restricted cash associated with senior credit linked notes described inNote 1: Basis of Presentation andNote 10: Borrowings in the Company’s 2024 Annual Report on Form 10–K.
Previous wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $431.0 million at September 30, 2024 increased $320.4 million, or 290%, compared to $110.6 million at December 31,2023. These represent loans that our banking subsidiary, Merchants Bank, has funded and are held pending settlement, primarily as Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities with a firm investor commitment to purchase the securities. The 290% increase was primarily due to a higher origination volume of loans pending settlement date.
Current wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $389.8 million at March 31, 2025 decreased $38.4 million, or 9%, compared to $428.2 million at December 31, 2024. 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 $953.1 million at September 30, 2024 decreased $160.6 million, or 14%, compared to December 31, 2023. The decrease in securities available for sale was primarily due to $662.2 in calls, maturities, repayments, sales and other adjustments, partially offset by purchases of $501.6 million during the period.
Current wording
Securities Available for Sale. Securities available for sale of $961.2 million at March 31, 2025 decreased $18.9 million, or 2%, compared to $980.1 million at December 31, 2024. The decrease in securities available for sale was primarily due to $181.9 in calls, maturities, repayments, sales and other adjustments, partially offset by purchases of $163.0 million during the period.
Previous wording
Included in securities available for sale were $683.0 million of investments 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 $626.3 million and $635.9 million of investments for which a fair value option was elected at March 31, 2025 and December 31, 2024, 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
Securities Held to Maturity. Securities held to maturity of $1.8 billion at September 30, 2024 increased $550.8 million, or 46%, compared to $1.2 billion at December 31, 2023. The increase was due to purchases of $689.8 million partially offset by remittances of loan payments underlying the securities during the period.
Current wording
Securities Held to Maturity. Securities held to maturity of $1.6 billion at March 31, 2025 decreased $58.4 million, or 4%, compared to $1.7 billion at December 31, 2024. The decrease was due to calls, maturities and repayments of securities totaling $58.5 million during the period.
Previous wording
Loans Held for Sale. Loans held for sale of $3.8 billion at September 30, 2024 increased $663.5 million, or 21%, compared to $3.1 billion at December 31, 2023. 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 pool eligibility. It also includes a growing contribution of multi-family loans that are expected to be sold or securitized within the next year.
Current wording
Loans Held for Sale. Loans held for sale of $4.0 billion at March 31, 2025 increased $211.9 million, or 6%, 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 a growing contribution of multi-family loans that are expected to be sold or securitized within the next year.
Previous wording
Loans Receivable, Net. Loans receivable, net of ACL-Loans, of $10.3 billion at September 30, 2024, which are comprised of loans held for investment, increased $134.1 million, or 1%, compared to $10.1 billion at December 31,2023. The increase in net loans was comprised primarily of:
Current wording
Loans Receivable, Net. Loans receivable, net of ACL-Loans, of $10.3 billion at March 31, 2025, decreased $10.3 million compared to December 31, 2024. The decrease in net loans was comprised primarily of:
Previous wording
As of September 30, 2024, approximately 94% of the total net loans reprice within three months, which reduces the risk of market rate increases.
Current wording
As of March 31, 2025, approximately 95% of total loans reprice within three months, which reduces the risk of market rate fluctuations.
Previous wording
The $84.5 million allowance for credit losses on loans as of September 30, 2024, compared to the net charge-offs of $6.7 million over the last twelve months ended September 30, 2024, could absorb 13 years of losses if recent loss levels continued into the future.
Current wording
The $83.4 million allowance for credit losses on loans as of March 31, 2025, compared to the net charge offs of $20.2 million over the last twelve months ended March 31, 2025, could absorb four years of losses, assuming the same loss levels as the last twelve months.
Previous wording
Goodwill. Goodwill of $8.0 million at September 30, 2024 decreased $7.8 million, or 49%, compared to $15.8 million at December 31,2023. The goodwill associated with FMBI was eliminated upon the sale of their branches to unaffiliated third parties on January 26, 2024.
Current wording
Goodwill. Goodwill of $8.0 million at March 31, 2025 was unchanged compared to December 31, 2024.
Previous wording
Servicing Rights. Servicing rights of $177.3 million at September 30, 2024 increased $18.9 million, or 12%, compared to December 31, 2023. During the nine months ended September 30, 2024, originated servicing of $13.3 million and a positive fair market value adjustment of $12.3 million were partially offset by paydowns of $6.7 million. The $12.3 million positive fair market value adjustment reflected a positive fair market value adjustment of $12.6 million for multi-family mortgages and a negative fair market value adjustment of $0.3 million for single-family mortgages and SBA loans during the nine months ended September 30, 2024.
Current wording
Servicing Rights. Servicing rights of $189.7 million at March 31,2025 decreased compared to $189.9 million at December 31, 2024. During the three months ended March 31, 2025, paydowns of $2.8 million and a negative fair market value adjustment of $0.8 million were partially offset by originated or purchased servicing of $3.3 million. The $0.8 million negative fair market value adjustment reflected a positive adjustment of $0.4 million for multi-family and healthcare mortgages and a negative adjustment of $1.2 million for single-family mortgages and SBA loans during the three months ended March 31, 2025.
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. The fair value increase recorded during the nine months ended September 30, 2024 was driven by higher interest rates that impacted fair market value adjustments. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments and earnings rates on escrow deposits.
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. The fair value decrease recorded during the three months ended March 31, 2025 was driven by lower interest rates that impacted fair market value adjustments. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments and earnings rates on escrow deposits.
Previous wording
Core deposits increased by $2 billion, or 25%, to $10.1 billion at September 30, 2024 compared to December 31, 2023. Core deposits represented 78% of total deposits at September 30, 2024 compared to 58% of total deposits at December 31, 2023.
Current wording
Core deposits, which are comprised of non-brokered deposits. increased by $1.3 billion, or 14%, to $10.7 billion at March 31, 2025 compared to $9.4 billion at December 31, 2024. Core deposits represented 86% of total deposits at March 31, 2025 compared to 79% of total deposits at December 31, 2024.
Previous wording
We have decreased our use of brokered deposits by $3.2 million, or 53%, to $2.8 billion at September 30, 2024 compared to $6.0 billion at December 31, 2023. Brokered deposits represented 22% of total deposits at September 30, 2024 compared to 42% of total deposits at December 31, 2023. The shift away from brokered deposits was primarily due to more cost-effective funding options that utilized our collateralized borrowing capacity. As of September 30, 2024, brokered certificates of deposit had a weighted average remaining duration of 56 days.
Current wording
We have decreased our use of total brokered deposits by $815.7 million, or 32%, to $1.7 billion at March 31, 2025 compared to $2.5 billion at December 31, 2024. Brokered deposits represented 14% of total deposits at March 31, 2025, compared to 21% of total deposits at December 31, 2024. As of March 31, 2025, brokered certificates of deposit had a weighted average remaining duration of 67 days.
Previous wording
Compared to December 31, 2023, interest-bearing deposits decreased $960.9 million, or 7%, to $12.6 billion at September 30, 2024, and noninterest-bearing deposits decreased $208.7 million, or 40%, to $311.4 million at September 30, 2024.
Current wording
Interest-bearing deposits at March 31, 2025 increased $411.9 million, or 4%, to $12.1 billion compared to December 31, 2024, and noninterest-bearing deposits increased $74.3 million, or 31%, to $313.3 million at March 31, 2025 compared to December 31, 2024.
Previous wording
Uninsured deposits represented approximately 20% 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 as of September 30, 2024 compared to $1.6 billion as of December 30, 2023 and $1.8 billion as of September 30, 2023. The Company’s line of credit with the Federal Reserve Bank of Chicago could fund 120% of uninsured deposits.
Current wording
Uninsured deposits totaled approximately $3.0 billion as of March 31, 2025, representing 24% of total Bank 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 $1.6 billion as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
Borrowings. Borrowings increased $2.6 billion, or 270%, to $3.6 billion at September 30, 2024, compared to $964.1 million at December 31, 2023. The increase was primarily due to $2.6 billion in additional FHLB advances. The higher level of collateralized borrowing was primarily due to it being a more cost effective funding option than utilizing brokered deposits. The Company primarily utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, and AFX. SeeNote 12: Borrowings for further information.
Current wording
Borrowings. Borrowings of $4.0 billion at March 31, 2025 decreased $384.4 million, or 9%, compared to $4.4 billion at December 31, 2024. The decrease was primarily due to an decrease of $324.0 million in FHLB advances and a decrease of $50.0 million in the usage of the Federal Reserve’s discount window. 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.
Previous wording
The Company continues to have significant borrowing capacity based on available collateral. As of September 30, 2024, unused lines of credit totaled $5.1 billion, compared to $6.0 billion at December 31, 2023.
Current wording
The Company continues to have significant borrowing capacity based on available collateral. As of March 31, 2025, unused lines of credit totaled $4.7 billion, compared to $4.3 billion at December 31, 2024. The Company’s ratio of total collateralized borrowing capacity to total assets remained at 46% from December 31, 2024 compared to March 31, 2025.
Previous wording
Total Shareholders’ Equity. Total shareholders’ equity of $1.9 billion at September 30, 2024, increased $238.0 million, or 14%, compared to $1.7 billion as of December 31,2023. The $238.0 million increase resulted primarily from net income of $224.7 million and net proceeds of $97.7 million from a common stock offering, which was partially offset by redemption of 7% Series A Preferred Stock for $52.0 million and dividends paid on common and preferred shares of $36.3 million during the period.* *
Current wording
Total Shareholders’ Equity. Total shareholders’ equity was $2.2 billion as of March 31, 2025. The $82.6 million decrease compared to December 31, 2024 resulted primarily from theredemption of 6% Series B Preferred Stock for $125.0 million anddividends paid on common and preferred shares of $14.9 million during the period, which were partially offset by net income of $58.2 million. SeeNote 14: Preferred Stock for more details on the Series B redemption.
Previous wording
Although there has been an increase in adversely classified loans, asset values remain strong overall and loans are well-collateralized. Loans are underwritten to strict agency guidelines. We have continued to strengthen our various levels of credit and risk management.
Current wording
Although there has been an increase in adversely classified loans, asset values remain strong overall and loans are well-collateralized. Loans are underwritten to strict agency guidelines. We continually strive to strengthen our various levels of credit and risk management.
Previous wording
Total nonperforming loans (nonaccrual and greater than 90 days late but still accruing) were $210.9 million, or 2.04%, of total loans at September 30, 2024, compared to $82.0 million, or 0.80%, of total loans at December 31, 2023 and $60.2 million, or 0.60%, at September 30, 2023. The increase in non-performing loans compared to both periods was driven by multi-family and healthcare customers with delinquent payments on variable rate loans that have required higher payments largely due to elevated interest rates. The increase was also attributable to the financial deterioration of
Current wording
Total nonperforming loans (nonaccrual and greater than 90 days past due but still accruing) were $284.6 million, or 2.73% of total loans receivable, at March 31, 2025, compared to $279.7 million, or 2.68%, of total loans at December 31, 2024 and $131.8 million, or 1.22%, at March 31, 2024. The increase in non-performing loans compared to March 31, 2024 was primarily driven by multi-family and healthcare customers with delinquent payments on variable-
Previous wording
a few sponsors. Credit quality is expected to improve with the recent reduction in interest rates. After six months of consecutive loan performance, the loans are placed back on accrual status.
Current wording
rate loans that have required higher payments, as well as the financial deterioration of a few sponsors. The higher payments are associated with the floating nature of the loan terms, which resulted in elevated interest rates relative to when the loans were originated. The increase compared to December 31, 2024 was primarily due to one multi-family customer. Delinquency levels on total loans as of March 31, 2025 have modestly increased by $10.1 million, to $334.7 million, compared to December 31, 2024. After six months of consecutive loan performance, the loans can be placed back on accrual status.
Previous wording
As a percentage of nonperforming loans, the ACL-Loans was 40% at September 30, 2024 compared to 87% at December 31, 2023 and 111% at September 30, 2023. The decrease in percentage compared to both periods was due to an increase in nonperforming loans, all of which have been individually evaluated for impairment.
Current wording
As a percentage of nonperforming loans, the ACL-Loans was 29% at March 31, 2025 compared to 30% at December 31, 2024 and 57% at March 31, 2024. The changes compared to both periods were primarily due to an increase in nonperforming loans, substantially all of which have been individually evaluated for impairment.
Previous wording
Total loans greater than 30 days past due were $257.5 million at September 30, 2024, $183.5 million at December 31, 2023, and $125.4 million at September 30,2023. The increase in non-performing loans compared to both periods was primarily driven by multi-family customers with delinquent payments on variable rate loans that have required higher payments due to interest rates remaining at elevated levels.
Current wording
Total loans receivable greater than 30 days past due were $304.6 million at March 31, 2025, $292.3 million at December 31, 2024, and $188.7 million at March 31, 2024. The increase in delinquent loans compared to both periods was primarily driven by multi-family customers with delinquent payments on variable-rate loans that have required higher payments due to interest rates remaining at elevated levels.
Previous wording
Loans classified as Substandard totaled $287.8 million at September 30, 2024, compared to $128.6 million at December 31, 2023. The increase was primarily due to the increase in interest rates for our borrowers and the related levels of net operating income on certain properties in the multi-family financing loan portfolio. All substandard loans as of September 30, 2024 have been evaluated for impairment and these loans have specific reserves of $19.2 million.
Current wording
Loans receivable classified as Substandard totaled $323.6 million at March 31, 2025, compared to $317.3 million at December 31, 2024 and $123.1 million at March 31, 2024. The increase compared to both periods was primarily due to higher interest rates that negatively impact our borrowers’ ability to make higher required payments. All substandard loans as of March 31, 2025 have been evaluated for impairment and these loans have specific reserves of $20.9 million.
Previous wording
During the three months ended September 30, 2024 there were $2.1 million of charge-offs and $7,000 of recoveries, compared to $21,000 of charge-offs and $31,000 recoveries for the three months ended September 30, 2023.
Current wording
During the three months ended March 31, 2025, there were $10.5 million of charge offs primarily related to five customers in the multi-family portfolio, and $28,000 of recoveries, compared to $925,000 of charge-offs related to one customer and $1,000 of recoveries for the three months ended March 31, 2024.
Previous wording
Interest expense of $77.0 million for the nine months ended September 30, 2024 for borrowings increased $39.9 million, or 107%, compared to $37.1 million for the nine months ended September 30, 2023. The increase was primarily due to a $830.0 million, or 139%, increase in average balances, partially offset by a decrease of 112 basis points in the average rate of borrowings, to 7.21% compared to 8.33% for the nine months ended September 30, 2023. Also included in borrowings, is our warehouse structured financing agreements that provide for additional interest payments for a portion of the earnings generated. As a result, the cost of borrowings increased from a base rate of 6.89% and 8.12%, to an effective rate of 7.21% and 8.33% for the nine months ended September 30,2024 and 2023, respectively.
Current wording
Included in interest expense on borrowings, our warehouse structured financing agreements provide for an additional interest payment for a portion of the earnings generated. As a result, the cost of borrowings increased from a base rate of 5.08% and 8.50%, to an effective rate of 5.33% and 9.03% for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Provision for Credit Losses. We recorded a total provision for credit losses of $6.9 million for the three months ended September 30, 2024, an increase of $2.9 million, or 72%, compared to the three months ended September 30, 2023. The 72% increase reflected higher specific reserves on a relatively small number of borrowers.
Current wording
Provision for Credit Losses. We recorded a provision for credit losses of $7.7 million for the three months ended March 31, 2025, an increase of $3.0 million, or 63%, over the three months ended March 31, 2024.
Previous wording
Loan servicing fees included a $6.7 million negative fair market value adjustment to servicing rights for the three months ended September 30, 2024, compared to a $11.6 million positive adjustment to fair value of servicing rights for the three months ended September 30, 2023. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates on escrow deposits.
Current wording
Loan servicing fees included a $0.8 million negative fair market value adjustment to servicing rights for the three months ended March 31, 2025, compared to a $14.0 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2024.
Previous wording
The efficiency ratio was at 41.00% for the three months ended September 30, 2024, compared with 27.97% for the three months ended September 30, 2023.
Current wording
The efficiency ratio was at 42.27% in the three months ended March 31, 2025, compared with 29.13% in the three months ended March 31, 2024. The $3.9 million in premium expense associated with credit default swaps executed in March and December 2024 had a negative 265 basis point impact on the efficiency ratio in the current quarter. SeeNon-GAAP Financial Measures section at the end of Item 2.
Previous wording
Income Taxes. Income tax expense of $20.1 million for the three months ended September 30, 2024 decreased $5.0 million, or 20%, compared to the three months ended September 30, 2023. The decrease was primarily due to a 24% decrease in pretax income period to period. The effective tax rate was 24.7% for the three months ended September 30, 2024 and 23.5% for the three months ended September 30, 2023.
Current wording
Income Taxes. Income tax expense decreased $9.0 million, or 33%, to $18.3 million for the three months ended March 31, 2025 from the three months ended March 31, 2024. The decrease was due primarily to a 33% decrease in
Previous wording
We operate in three primary segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The reportable segments are consistent with the internal reporting and evaluation of the principal lines of business of the Company. The Multi-family Mortgage Banking segment originates and services government sponsored mortgages for multi-family and healthcare facilities through Merchants Capital. Merchants Capital is also a fully integrated syndicator of low-income housing tax credit and debt funds. As one of the top ranked agency affordable lenders in the nation, our licenses with Fannie Mae, Freddie Mac, and FHA, coupled with our bank financing products, provide sponsors with custom beginning-to-end financing solutions that adapt to an ever-changing market. We are also one of the largest Ginnie Mae servicers in the country based on aggregate loan principal value. As of September 30, 2024 the Company’s total servicing portfolio had an unpaid principal balance of $28.2 billion, primarily managed in the Multi-Family Mortgage Banking segment. Included in this amount was an unpaid principal balance of loans serviced for others of $17.0 billion, an unpaid principal balance of loans sub-serviced for others of $2.6 billion, and other servicing balances of $0.8 billion at September 30, 2024. These loans are not included in the accompanying balance sheets. The Company also manages $7.8 billion of loans for customers that have loans on the balance sheet at September 30, 2024. The servicing portfolio primarily consists of Ginnie Mae, Fannie Mae, and Freddie Mac loans and is a significant source of our noninterest income and deposits.
Current wording
The Multi-family Mortgage Banking segment originates and services government sponsored mortgages for multi-family and healthcare facilities through Merchants Capital. Merchants Capital is also a fully integrated syndicator of low-income housing tax credit and debt funds. As one of the top ranked agency affordable lenders in the nation, our licenses with Fannie Mae, Freddie Mac, and FHA, coupled with our bank financing products, provide sponsors with custom beginning-to-end financing solutions that adapt to an ever-changing market. We are also one of the largest Ginnie Mae servicers in the country based on aggregate loan principal value. As of March 31, 2025 the Company’s total servicing portfolio had an unpaid principal balance of $30.0 billion, primarily managed in the Multi-Family Mortgage Banking segment. Included in this amount was an unpaid principal balance of loans serviced for others of $17.9 billion, an unpaid principal balance of loans sub-serviced for others of $3.6 billion, and other servicing balances of $0.8 billion at March 31, 2025. These loans are not included in the accompanying balance sheets. The Company also manages $7.7 billion of loans for customers that have loans on the balance sheet at March 31, 2025. The servicing portfolio primarily consists of Ginnie Mae, Fannie Mae, and Freddie Mac loans and is a significant source of our noninterest income and deposits.
Previous wording
Our Mortgage Warehousing segment funds agency eligible loans for non-depository financial institutions from the date of origination or purchase until the date of sale to an investor, which typically takes less than 30 days and is a significant source of our net interest income, loans, and deposits. Mortgage Warehousing has grown to fund over $33.2 billion in 2022, $33.0 billion in 2023, and $32.0 billion for the nine months ended September 30,2024. Mortgage Warehousing also provides commercial loans and collects deposits related to the mortgage escrow accounts of its customers.
Current wording
Our Mortgage Warehousing segment funds agency eligible loans for non-depository financial institutions from the date of origination or purchase until the date of sale to an investor, which typically takes less than 30 days and is a significant source of our net interest income, loans, and deposits. Mortgage Warehousing has grown to fund over $33.0 billion in 2023, $45.6 billion in 2024, and $11.9 billion for the three months ended March 31, 2025. Mortgage Warehousing also provides commercial loans and collects deposits related to the mortgage escrow accounts of its customers.
Previous wording
Our segments diversify the net income of Merchants Bank and provide synergies across the segments. Strategic opportunities come from MCC and MCS, where loans are funded by the Banking segment and the Banking segment provides Ginnie Mae custodial services to MCC and MCS. 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 Residential 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.
Current wording
Our segments diversify the net income of Merchants Bank and provide synergies across the segments. Strategic opportunities come from MCC and MCS, where loans are funded by the Banking segment and the Banking segment provides Ginnie Mae custodial services to MCC and MCS. 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 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
Previous wording
The Other segment presented below, inNote 17: Segment Information, and elsewhere in this report includes general and administrative expenses for provision of services to all segments, internal funds transfer pricing offsets resulting from allocations to or from the other segments, certain elimination entries, and investments in low-income housing tax credit limited partnerships or Limited Liability Companies.
Current wording
The Other segment presented below, inNote 17: Segment Information, and elsewhere in this report includes general and administrative expenses for provision of services to all segments, internal funds transfer pricing offsets resulting from allocations to or from the other segments, certain elimination entries, and investments in low-income housing tax credit limited partnerships or LLC.
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Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
pretax income period to period. The effective tax rate was 23.9% and 23.8% for the three months ended March 31, 2025 and March 31, 2024, respectively.
Current report — wording carried from elsewhere
We operate in three primary segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The reportable segments are consistent with the internal reporting and evaluation of the principal lines of business of the Company.
Current report — wording carried from elsewhere
customers provide cross selling opportunities within the Banking segment. Merchants Mortgage is a risk mitigant to Mortgage Warehousing because it provides us with a ready platform to sell the underlying collateral to secure repayment. These and other synergies form a part of our strategic plan.
Current report — wording carried from elsewhere
Certificates of deposit that are scheduled to mature in less than one year from March 31, 2025 totaled $3.0 billion, or 98% of total certificates of deposit. Management expects that a substantial portion of the maturing certificates
Current report — wording carried from elsewhere
interest-bearing liabilities (reprice risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to
Current report — wording carried from elsewhere
redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries or SOFR.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
housing tax credits. Servicing rights at September 30, 2024 totaled $177.3 million based on the fair value of the loan servicing, which are primarily Ginnie Mae multi-family servicing rights with 10-year call protection.
Previous report — wording carried elsewhere
Comparison of Operating Results for the Nine Months Ended September 30, 2024 and 2023
Previous report — wording carried elsewhere
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:
Previous report — wording carried elsewhere
A summary of the gain on sale of loans for the nine months ended September 30, 2024 and 2023 is below:
Previous report — wording carried elsewhere
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 our option, on any dividend payment date on or after October 1, 2027, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption. If the Series D Preferred Stock remains outstanding on October 1, 2027, its dividend rate would reset to the 5-year Treasury rate, plus 4.34% and would remain at that level for an additional 5 years.