Merchants Bancorp
For the period ended Jun 30, 2025. Filed Aug 11, 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.
Jun 30, 2025 · Filed Aug 11, 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 2025-03-31; filed 2025-05-09.
0001558370-25-007170
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-11.
0001558370-25-011041
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 153 previous paragraphs and 204 current paragraphs.
49 unchanged; 74 reworded; 66 added; 24 removed; 6 previous and 15 current paragraphs rearranged.
Tables are not compared: 36 previous and 42 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 (66)
Current report
Regulatory Developments Regarding the Bancorp and Bank
Current report
Memorandum of Understanding. On June 30, 2025, the Bank entered into a confidential MOU with the FDIC and DFI. While the contents of the MOU are confidential under DFI and FDIC regulations, certain provisions, with the authorization of the DFI and FDIC, are summarized below. The MOU is an informal administrative agreement among the Bank, FDIC, and DFI pursuant to which the Bank has agreed to take various actions and enhance specific areas of the Bank’s operations. In particular, the Bank has agreed to maintain certain capital thresholds, manage asset concentrations, and implement certain plans regarding the Bank’s operations and strategy to mitigate risk of certain assets, which it has already implemented. As of the date of this report, and as of each of the periods ending March 31, 2025 and December 31, 2024, the Bank’s capital exceeded the levels agreed to in the MOU and the Bank was within the asset concentration limits agreed to in the MOU. The MOU will remain in effect until modified or terminated by the FDIC and DFI.
Current report
Management does not expect the actions called for by these regulatory actions to have a material adverse impact on the Company’s financial performance or the Bank’s ongoing day-to-day operations, although they may have the effect of limiting or delaying the Company’s or the Bank’s ability or plans to expand.
Current report
Total Assets. Total assets of $19.1 billion at June 30, 2025 increased $335.5 million, or 2%, 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. Total loan balances grew by 2% even after two loan sales during the three months ended June 30, 2025 totaling over $685.4 million related to securitizations.
Current report
ACL-Loans. The ACL-Loans of $91.8 million at June 30, 2025 increased $7.4 million, or 9%, compared to $84.4 million at December 31,2024. The increase compared to December 31, 2024 was driven by $64.0 million increase in provision expense that was partially offset by $56.6 million in charge-offs, primarily related to the multi-family portfolio. The increases in provision expenses and charge-offs were primarily associated with estimated 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 subordinated loans that the Company no longer offers to borrowers. These 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.
Current report
Deposits. Deposits of $12.7 billion at June 30, 2025 increased $766.9 million, or 6%, compared to $11.9 billion at December 31, 2024. The increase was primarily due to an increase of $2.1 billion in demand deposits and $260.7 million in savings deposits, partially offset by a decrease of $1.6 billion in certificates of deposit. As of June 30, 2025, approximately 83% of the total deposits reprice within three months.
Current report
Other Liabilities. Other Liabilities of$231.0 million at June 30, 2025 were essentially unchanged compared to December 31, 2024.
Current report
The allowance for credit losses on loans of $91.8 million, as of June 30, 2025, increased by $7.4 million, or 9%, compared to December 31, 2024. The $7.4 million increase compared to December 31, 2024 was driven by $64.0 million increase in provision expense that was partially offset by $56.6 million in loan charge-offs. The increases in provision expenses and charge-offs compared to the period was primarily associated with estimated 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 subordinated loans that the Company no longer offers to borrowers. These 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.
Current report
For the six months ended June 30, 2025, there were $56.6 million of charge-offs and $28,000 of recoveries, compared to $4.4 million of charge-offs and $16,000 of recoveries for the six months ended June 30, 2024.
Current report
During the three months ended June 30, 2025, after months of seeking legal remedies, the Company obtained additional access and information, such as through court appointed receivers, to assess the collateral supporting its challenged loans. The evaluation of this information contributed to an increase in loans classified as substandard, bringing the total to $417.7 million compared to $317.3 million as of December 31, 2024.
Current report
Loans receivable classified as Special Mention totaled $171.5 million at June 30, 2025, compared to $380.0 million at December 31, 2024 and $244.0 million at June 30, 2024. These declines reinforce the view that the frequency of migration to criticized status has subsided.
Current report
As of June 30, 2025, all substandard loans have been evaluated for credit losses and these loans have specific reserves of $30.8 million, of which $9.9 million was added during the three months ended June 30, 2025, net of charge-offs. The Company believes that its loan portfolio remains well collateralized.
Current report
General. Net income of $38.0 million for the three months ended June 30, 2025 decreased by $38.4 million, or 50%, compared to the three months ended June 30, 2024, reflecting a $43.1 million, or 432%, increase in provision for credit losses. The increase in provision for credit losses was primarily associated with estimated declines on multi-family property values, after receiving new appraisals, and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud. The decrease in net income also reflected a $27.0 million, or 54%, increase in noninterest expense that was partially offset by a $19.1 million, or 61%, increase in noninterest income, and an $11.9 million, or 52%, decrease in provision for income tax. Of the $38.4 million decrease in net income, $691,000, or $0.01 per diluted common share, was attributable to changes in valuation adjustments. Noninterest income included positive fair market value adjustments of $258,000 to servicing rights and $4.3 million to derivatives, which compared to positive fair market value adjustments of $5.1 million to servicing rights and $215,000 to derivatives, in the three months ended June 30,2024.
Current report
Interest Income. Interest income of $304.4 million for the three months ended June 30, 2025 decreased $23.9 million, or 7%, compared with $328.3 million for the three months ended June 30,2024. This decrease primarily reflected lower average yields on higher average balances on loans and loans held for sale.
Current report
Interest income of $12.1 million on securities available for sale for the three months ended June 30, 2025, decreased $2.7 million, or 18%, compared to $14.8 million for the three months ended June 30, 2024. The average balance of $955.2 million decreased $84.2 million, or 8%, compared to $1.0 billion for the three months ended
Current report
June 30, 2024. The average yield decreased 64 basis points, to 5.08% for the three months ended June 30, 2025, compared to 5.72% for the three months ended June 30, 2024.
Current report
Interest Expense. Total interest expense of $175.7 million for the three months ended June 30, 2025, decreased $24.5 million, or 12%, compared to $200.2 million for the three months ended June 30,2024. The decrease reflected lower average balances at lower average rates on certificates of deposit that were partially offset by higher average balances at lower average rates on borrowings.
Current report
Interest expense of $35.4 million on certificates of deposit for the three months ended June 30, 2025, decreased $52.9 million, or 60%, compared to $88.3 million for the three months ended June 30, 2024. The decrease reflected lower average balances at lower rates. The average balance of $3.1 billion for the three months ended June 30, 2025, decreased $3.4 billion or 53%, compared to $6.5 billion for the three months ended June 30, 2024. The average interest rate decreased 84 basis points to 4.59% for the three months ended June 30, 2025, compared to 5.43% for three months ended June 30, 2024.
Current report
Interest expense of $60.8 million on interest-bearing checking accounts for the three months ended June 30, 2025, increased $2.7 million, or 5%, compared to $58.1 million for the three months ended June 30, 2024. The increase reflected higher average balances at lower rates. The average balance of $6.2 billion for the three months ended June 30, 2025, increased $1.2 billion, or 25%, compared to the three months ended June 30, 2024. The average interest rate decreased 78 basis points to 3.96% for the three months ended June 30, 2025, compared to 4.74% for three months ended June 30, 2024.
Current report
Interest expense of $44.3 million on borrowings for the three months ended June 30, 2025, increased $23.8 million, or 116%, compared to $20.5 million for the three months ended June 30, 2024. The increase was primarily due to higher average balances at lower rates of FHLB borrowings. There was a $2.4 billion, or 235%, increase in overall average borrowings to $3.5 billion at June 30, 2025, compared to $1.0 billion for the three months ended June 30, 2024. The average interest rate decreased 285 basis points to 5.15% for the three months ended June 30, 2025, compared to 8.00% for the three months ended June 30, 2024.
Current report
Noninterest Income.
Current report
Noninterest income of $50.5 million for the three months ended June 30, 2025 increased $19.1 million, or 61%, compared to $31.4 million for the three months ended June 30, 2024. The increase was primarily due to a $12.2 million, or 109%, increase in gain on sale of loans, a $6.5 million, or 200%, increase in syndication and asset management fees, and a $4.7 million, or 101%, increase in other income, partially offset by a $4.7 million, or 43%, decrease in loan servicing fees.
Current report
Loan servicing fees included a $0.3 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2025, compared to a $5.1 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2024.
Current report
Noninterest Expense.
Current report
General. Net income of $96.2 million for the six months ended June 30, 2025 decreased $67.2 million, or 41%, compared to the six months ended June 30, 2024. The decrease was primarily due to a $46.1 million increase in the provision for credit losses, a $39.7 million increase in noninterest expense, and a $4.3 million decrease in net interest income, partially offset by a $20.9 million decrease in the provision for income taxes and a $1.9 million increase in noninterest income.
Current report
Net Interest Income. Net interest income of $250.9 million for the six months ended June 30, 2025 decreased $4.3 million, or 2%, compared to $255.2 million for the six months ended June 30, 2024. The decrease reflected lower interest income and higher interest expense on borrowings that was partially offset by lower interest expense on deposits.
Current report
The interest rate spread of 2.36% for the six months ended June 30, 2025, decreased 16 basis points compared to 2.52% for the six months ended June 30, 2024. Our net interest margin decreased 21 basis points, to 2.86% for the six months ended June 30, 2025 from 3.07% for the six months ended June 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 $622.7 million, or 18%, and warehouse repurchase agreements grew by $473.8 million, or 35%, while other higher-margin loans receivable balances contracted by a net of $964.1 million.
Current report
Interest income of $494.9 million on loans and loans held for sale for the six months ended June 30, 2025, decreased $61.5 million , or 11%, compared to $556.4 million for the six months ended June 30, 2024. The average loan balance during the six months ended June 30, 2025 increased $370.6 million, or 3%, to $14.3 billion compared to $13.9 billion for the six months ended June 30, 2024, and the average yield on loans decreased 106 basis points, to 6.98% for the six months ended June 30, 2025, compared to 8.04% for the six months ended June 30, 2024.
Current report
Interest income of $24.5 million on securities available for sale for the six months ended June 30, 2025, decreased $4.7 million, or 16%, compared to $29.2 million for the six months ended June 30, 2024. The average balance of securities available for sale decreased $104.1 million, or 10%, to $1.0 billion compared to $1.1 billion for the six
Current report
months ended June 30, 2025, and the average yield decreased 37 basis points, to 5.15% for the for the six months ended June 30, 2025, compared to 5.52% for the six months ended June 30, 2024.
Current report
Interest income of $47.5 million on securities held to maturity for the six months ended June 30, 2025, increased $7.2 million, or 18%, compared to $40.3 million for the six months ended June 30, 2024. The average balance of securities held to maturity for the six months ended June 30, 2025 increased $429.3 million, or 36%, to $1.6 billion compared to $1.2 billion for the six months ended June 30, 2024. The average yield on securities held to maturity decreased 92 basis points, to 5.96%, for the six months ended June 30, 2025, reflecting lower variable rates, compared to 6.88% for the six months ended June 30, 2024.
Current report
Interest income of $15.7 million on interest-bearing deposits, and other for the six months ended June 30, 2025, increased $3.9 million, or 33%, compared to $11.8 million for the six months ended June 30, 2024. The average balance of interest-earning deposits and other increased $133.0 million, or 34%, to $525.3 million for the six months ended June 30, 2025, from $392.3 million for the six months ended June 30, 2024, and the average yield decreased 2 basis points, to 6.01%, for the six months ended June 30, 2025, compared to 6.03% for the six months ended June 30, 2024.
Current report
Interest Expense. Total interest expense of $340.7 million for the six months ended June 30, 2025 decreased $46.6 million, or 12%, compared to $387.3 million for the six months ended June 30, 2024. The lower interest expense reflects a shift towards borrowings that has become a more cost-effective option than utilizing brokered certificates of deposit, in addition to growth in lower-cost, interest-bearing checking accounts.
Current report
Interest expense on deposits of $255.3 million for the six months ended June 30, 2025 decreased $95.4 million, or 27%, compared to $350.7 million for the six months ended June 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 accounts.
Current report
Interest expense of $74.2 million on certificates of deposit for the six months ended June 30, 2025, decreased $90.6 million, or 55%, compared to $164.8 million for the six months ended June 30, 2024. The average balance of certificate of deposit accounts was $3.2 billion for the six months ended June 30, 2025, a decrease of $2.9 billion, compared to $6.1 billion for the six months ended June 30, 2024. The average rate on certificate of deposit accounts was 4.63% for the six months ended June 30, 2025, which was a 79 basis point decrease compared to 5.42% for the six months ended June 30, 2024.
Current report
Interest expense of $111.5 million on interest-bearing checking accounts for the six months ended June 30, 2025, decreased $7.4 million, or 6%, compared to the six months ended June 30, 2024. The average balance of interest-bearing checking accounts of $5.6 billion for the six months ended June 30, 2025 increased $641.7 million, or 13%, compared to $5.0 billion for the six months ended June 30, 2024. The average rate on interest-bearing checking accounts was 3.98% for the six months ended June 30,2025, which was an 80 basis point decrease compared to 4.78% for the six months ended June 30, 2024.
Current report
Interest expense of $69.6 million on money market accounts for the six months ended June 30, 2025, increased $2.8 million, or 4%, compared to the six months ended June 30, 2024. The average balance of money market accounts of $3.4 billion for the six months ended June 30, 2025 increased $573.7 million compared to $2.8 billion for the six months ended June 30, 2024. The average rate on money market accounts was 4.16% for the six months ended June 30, 2025, which was a 64 basis point decrease compared to 4.80% for the six months ended June 30, 2024.
Current report
Interest expense of $85.4 million on borrowings for the six months ended June 30, 2025, increased $48.8 million, or 133%, compared to $36.6 million for the six months ended June 30, 2024. The increase was primarily due to a $2.4 billion, or 277%, increase in average balances, partially offset by a decrease of 319 basis points in the average rate of borrowings, to 5.23% compared to 8.42% for the six months ended June 30, 2024.
Current report
Provision for Credit Losses. We recorded a provision for credit losses of $60.8 million for the six months ended June 30, 2025, an increase of $46.1 million, or 314%, compared to $14.7 million for the six months ended June 30,2024. The increases in provision expenses and charge-offs compared to both periods were primarily associated with estimated 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 subordinated 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.
Current report
The $60.8 million provision for credit losses consisted of $64.0 million for the ACL-Loans, net of a release of $2.8 million for the ACL-OBCE’s and $0.4 million for the release of reserves on the ACL-Guarantees, related to a loan securitization.
Showing the first 40 of 66 passages. Open the source sections for the rest.
Removed paragraphs (24)
Previous report
Total Assets. Total assets of $18.8 billion at March 31, 2025 remained essentially unchanged from December 31, 2024.
Previous 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.
Previous report
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 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.
Previous 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.
Previous 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.
Previous report
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 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.
Previous report
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 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.
Previous 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.
Previous 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
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
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 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
Noninterest income included a $1.2 million negative fair market value adjustment to servicing rights for the three months ended March 31, 2025, compared to a $0.8 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2024.
Previous report
FMBI was subject to these measures prior to the sale of its branches and the merger of its remaining charter into Merchants Bank in January 2024. As of December 31, 2023, FMBI met all capital adequacy requirements (as set forth in the table above). The FDIC categorized FMBI as well capitalized at that time and there are no conditions or events since that notification that management believes would have changed that category.
Reworded paragraphs (74)
Previous 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.
Current wording
Management’s discussion and analysis of the financial condition at June 30, 2025 and results of operations for the three and six months ended June 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.
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, 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 provide higher than industry shareholder return.
Previous 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.
Current wording
As of June 30, 2025, we had approximately $19.1 billion in total assets, $12.7 billion in deposits and $2.2 billion in total shareholders’ equity. Total assets as of June 30, 2025 included $10.4 billion of loans receivable, net of ACL-Loans, and $4.1 billion of loans held for sale. There were also $1.5 billion in securities classified as held to maturity. We had $936.3 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 $647.2 million of cash and cash equivalents, other assets of $495.3 million, which primarily related to low-income housing tax credits, and $402.4 million of mortgage loans in process of securitization that represent pre-sold multi-family rental real estate loan originations in primarily Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities pending settlements that typically occur within 30 days. Servicing rights at June 30, 2025 were $193.0 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 $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.
Current wording
Cash and Cash Equivalents. Cash and cash equivalents of $647.2 million at June 30, 2025 increased $170.6 million, or 36%, compared to $476.6 million at December 31, 2024. Included in cash equivalents was $43.8 million in restricted cash associated with senior credit linked notes described inNote 1: Basis of Presentation in this Form 10-Q andNote 1: Basis of Presentation andNote 10: Borrowingsand 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 $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.
Current wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $402.4 million at June 30, 2025 decreased $25.8 million, or 6%, 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, 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 $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.
Current wording
Securities Available for Sale. Securities available for sale of $936.3 million at June 30, 2025 decreased $43.7 million, or 4%, compared to December 31, 2024. The decrease in securities available for sale was primarily due to
Previous 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.
Current wording
Included in securities available for sale were $603.0 million and $635.9 million of investments at June 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.
Previous wording
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 wording
As of June 30, 2025, AOCL of $0.2 million, related to securities available for sale, increased $0.1 million, or 86%, compared to accumulated losses of $0.1 million at December 31, 2024. The $0.2 million of AOCL as of June 30, 2025 represented less than 1% of total equity and 1% of 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 $1.6 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.
Current wording
Securities Held to Maturity. Securities held to maturity of $1.5 billion at June 30, 2025 decreased $116.5 million, or 7%, compared to $1.7 billion at December 31, 2024. The decrease was due to repayments and amortization during the period.
Previous 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.
Current wording
Loans Held for Sale. Loans held for sale of $4.1 billion at June 30, 2025 increased $334.3 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.
Previous 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:
Current wording
Loans Receivable, Net. Loans receivable, net of ACL-Loans, of $10.4 billion at June 30, 2025, increased $78.1 million, or 1%, compared to December 31,2024. The increase in net loans was comprised primarily of:
Previous wording
As of March 31, 2025, approximately 95% of total loans reprice within three months, which reduces the risk of market rate fluctuations.
Current wording
As of June 30, 2025, approximately 95% of total loans reprice within three months, which reduces the risk of market rate increases.
Previous wording
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 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.
Previous 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.
Current wording
Servicing Rights. Servicing rights of $193.0 million at June 30, 2025 increased $3.1 million, or 2%, compared to $189.9 million at December 31, 2024. During the six months ended June 30, 2025, originated and purchased servicing of $8.7 million was partially offset by paydowns of $5.1 million and a negative fair market value adjustment of $0.5 million. The $0.5 million negative fair market value adjustment reflected a positive fair market value adjustment of $1.2 million for multi-family mortgages and a negative fair market value adjustment of $1.7 million for single-family mortgages and SBA loans during the six months ended June 30, 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 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.
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 six months ended June 30, 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 is also influenced by earnings rates on escrow deposits.
Previous wording
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 wording
Other Assets and Receivables. Other assets and receivables of $495.3 million at June 30, 2025 decreased $76.0 million, or 13%, 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.
Previous 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.
Current wording
Core deposits increased by $2.0 billion, or 22%, to $11.4 billion at June 30, 2025 compared to $9.4 billion at December 31, 2024. Core deposits represented 90% of total deposits at June 30, 2025 compared to 79% of total deposits at December 31, 2024.
Previous 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.
Current wording
We have decreased our use of brokered deposits by 50%, to $1.3 billion at June 30, 2025 compared to $2.5 billion at December 31, 2024. Brokered deposits represented 10% of total deposits at June 30, 2025 compared to 21% of total deposits at December 31, 2024. As of June 30, 2025, brokered certificates of deposit had a weighted average remaining duration of 48 days.
Previous 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.
Current wording
Compared to December 31, 2024, interest-bearing deposits increased $690.3 million, or 6%, to $12.4 billion at June 30, 2025, and noninterest-bearing deposits increased $76.5 million, or 32%, to $315.5 million at June 30, 2025.
Previous 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.
Current wording
Uninsured deposits totaled approximately $3.1 billion as of June 30, 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 $1.4 billion and $1.6 billion as of June 30, 2025 and December 31, 2024, respectively.
Previous 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.
Current wording
Borrowings. Borrowings of $4.0 billion at June 30, 2025 decreased $376.6 million, or 9%, compared to $4.4 billion at December 31, 2024. The decrease was primarily due to a reduction of $491.4 million in FHLB advances, partially offset by an increase of $125.0 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 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.
Current wording
The Company continues to have significant borrowing capacity based on available collateral. As of June 30, 2025, unused lines of credit totaled $5.0 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 June 30, 2025.
Previous 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.
Current wording
Total Shareholders’ Equity. Total shareholders’ equity of $2.2 billion at June 30, 2025, decreased $58.7 million, or 3%, 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 $29.7 million during the period, which were partially offset by net income of $96.2 million. SeeNote 14: Preferred Stockfor 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 continually strive to strengthen our various levels of credit and risk management.
Current 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.
Previous 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.
Current wording
During the three months ended June 30, 2025 there were $46.1 million of charge-offs and no recoveries, compared to $3.5 million of charge-offs and $15,000 recoveries for the three months ended June 30, 2024.
Previous 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.
Current wording
Total loans receivable greater than 30 days past due were $279.0 million at June 30, 2025, $292.3 million at December 31, 2024, and $234.8 million at June 30,2024.
Previous 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-
Current wording
Total nonperforming loans (nonaccrual and greater than 90 days past due but still accruing) were $251.5 million, or 2.39%, of total loans receivable at June 30, 2025, compared to $279.7 million, or 2.68%, of total loans at December 31, 2024 and $143.5 million, or 1.30%, at June 30,2024. After six months of consecutive loan performance, the loans are placed back on accrual status.
Previous 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.
Current wording
As a percentage of nonperforming loans, the ACL-Loans was 37% at June 30, 2025 compared to 30% at December 31, 2024 and 56% at June 30, 2024. The changes compared to both periods were primarily due to a decrease in nonperforming loans and an increase in ACL-Loans.
Previous wording
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 wording
The Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019. In March 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. The Company also upsized an existing credit default swap in June 2025 by $800.0 million. These credit protection arrangements totaled $3.7 billion in loans to reduce risk of losses, with incremental coverage ranging from 13-14% 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 June 30, 2025, the balance of loans subject to credit protection arrangements was $2.8 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
Previous wording
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 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 June 30, 2025, respectively.
Previous wording
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 wording
Net Interest Income. Net interest income of $128.7 million for the three months ended June 30, 2025 increased $0.6 million, compared with $128.1 million for the three months ended June 30, 2024. The increase reflected lower interest expense on deposits that was partially offset by lower interest income and higher interest expense on borrowings.
Previous wording
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 wording
The interest rate spread of 2.33% for the three months ended June 30, 2025 decreased 12 basis points compared to 2.45% for the three months ended June 30, 2024. Our net interest margin decreased 16 basis points, to 2.83% for the three months ended June 30, 2025 compared to 2.99% for the three months ended June 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 $622.7 million, or 18%, and warehouse repurchase agreements grew by $473.8 million, or 35%, while other higher-margin loans receivable balances contracted by a net of $964.1 million.
Previous wording
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 wording
Interest income of $255.6 million on loans and loans held for sale for the three months ended June 30, 2025, decreased $28.8 million, or 10%, compared to $284.4 million for the three months ended June 30, 2024. The average loan balance of $14.8 billion for the three months ended June 30, 2025 increased $479.0 million, or 3%, compared to $14.3 billion for the three months ended June 30, 2024. The average yield on loans and loans held for sale decreased 105 basis points, to 6.92% for the three months ended June 30, 2025, compared to 7.97% for the three months ended June 30, 2024.
Previous wording
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 wording
Interest income of $23.2 million on securities held to maturity for the three months ended June 30, 2025, increased $3.4 million, or 17%, compared to $19.8 million for the three months ended June 30, 2024. The average balance of $1.6 billion increased $412.0 million, or 36%, compared to $1.2 billion for the three months ended June 30, 2024. The average yield decreased 95 basis points, to 5.91% for the three months ended June 30, 2025, compared to 6.86% for the three months ended June 30, 2024. The increase in average balances 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.
Previous wording
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 wording
Interest income of $5.3 million on mortgage loans in process of securitization for the three months ended June 30, 2025, increased $2.3 million, or 74%, compared to $3.0 million for the three months ended June 30, 2024. The average balance of $376.9 million increased $142.2 million, or 61%, compared to $234.7 million for the three months ended June 30, 2024. The average yield increased 42 basis points, to 5.64% for the three months ended June 30, 2025, compared to 5.22% for the three months ended June 30, 2024. The increase in average balance was primarily due to a higher origination volume of loans pending settlement for sale on the secondary market.
Previous wording
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 wording
Interest expense on deposits of $131.4 million decreased $48.3 million, or 27%, for the three months ended June 30, 2025, compared to $179.7 million for the three months ended June 30,2024. The decrease primarily reflected lower average balances at lower average rates on certificates of deposit.
Previous 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.
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 4.92% and 7.53%, to an effective rate of 5.15% and 8.00% for the three months ended June 30, 2025 and 2024, respectively.
Previous 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.
Current wording
Provision for Credit Losses. We recorded a provision for credit losses of $53.0 million for the three months ended June 30, 2025, an increase of $43.1 million, or 432%, over the three months ended June 30, 2024.
Previous wording
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 wording
The $53.0 million provision for credit losses consisted of $54.5 million for the ACL-Loans, net of a release of $1.1 million for the ACL-OBCE’s and $0.3 million for the release of reserves on the ACL-Guarantees, related to a loan securitization.
Previous wording
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 wording
The ACL-Loans was $91.8 million, or 0.87% of total loans, at June 30, 2025, compared to $84.4 million, or 0.81% of total loans, at December 31, 2024, and $81.0 million, or 0.74%, at June 30, 2024. The increase compared to December 31, 2024 was driven by a $64.0 million increase in provision expense, primarily related to the multi-family portfolio, which was offset by $56.6 million in charge-offs. The increase compared to June 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 June 30, 2025 and December 31, 2024 and inNote 4: Loans and Allowance for Credit Losses on Loans.
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Current report — wording carried from elsewhere
$391.8 million in calls, maturities, repayments and other adjustments, partially offset by purchases of $348.1 million during the period.
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Comparison of Operating Results for the Six Months Ended June 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.
Current report — wording carried from 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.
Current report — wording carried from 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:
Current report — wording carried from elsewhere
Included in interest expense on borrowings, our warehouse structured financing agreements provide for an additional interest payment for a portion of the earning generated. As a result, the cost of borrowings increased from a base rate of 5.00% and 7.93%, to an effective rate of 5.23% and 8.42% for the six months ended June 30,2025 and 2024, respectively.
Current report — wording carried from elsewhere
The $14.4 million, or 70%, increase in gain on sale of loans resulted from higher volume in the multi-family loan portfolio.
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A summary of the gain on sale of loans for the six months ended June 30, 2025 and 2024 is below:
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Other noninterest income of $12.4 million for the six months ended June 30, 2025 increased $1.9 million, or 18%, compared to $10.5 million for the six months ended June 30, 2024. Other noninterest income included a $2.1 million positive fair value adjustment to the floor derivatives for the six months ended June 30, 2025 compared to a $2.5 million positive fair value adjustment for the six months ended June 30, 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 six months ended June 30, 2025 there was a $1.3 million negative fair value adjustment on the securities that were offset by a $1.3 million positive 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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business. The Banking segment has a well-diversified customer and borrower base and has experienced significant growth over the past three years.
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The volume of loans originated and acquired through our Multi-family business increased by $390.5 million, or 20%, to $2.4 billion, for the six months ended June 30, 2025, compared to $2.0 billion for the six months ended June 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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The volume of loans funded during the six months ended June 30, 2025 amounted to $28.1 billion, an increase of $9.3 billion, or 49%, compared to the six months ended June 30, 2024. This compared to the 16% industry increase in single-family residential loan volumes for the six months ended June 30, 2025 compared to the same period in 2024, according to an estimate of industry volume by the Mortgage Bankers Association.
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that we will have sufficient funds available to meet our current loan origination commitments. Additionally, the Company’s business model is designed to continuously sell a significant portion of its loans, which provides flexibility in managing its liquidity.
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the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption.
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We use two approaches to model interest rate risk: Net Interest Income at Risk (NII at Risk) and Economic Value of Equity (“EVE”). Under NII at Risk, net interest income is modeled utilizing various assumptions for assets,
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Previous report — wording carried 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.
Previous report — wording carried 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.
Previous report — wording carried 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
Previous report — wording carried 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
Previous report — wording carried 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
Previous report — wording carried 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.