Merchants Bancorp Reports First Quarter 2026 Results

• First quarter 2026 net income of $67.7 million, increased $9.5 million, or 16%, compared to first quarter of 2025 and was relatively stable compared to the fourth quarter 2025.
• First quarter 2026 diluted earnings per common share of $1.25 increased 34% compared to the first quarter of 2025 and decreased 2% compared to the fourth quarter of 2025.
• Total assets of $20.3 billion reflected the highest level ever reported by the Company, increasing 8% compared to March 31, 2025 and 4% compared to December 31, 2025.
• Tangible book value per common share reached a new record level of $38.55, increasing 10% from $34.90 at March 31, 2025, and 3% from $37.51 at December 31, 2025.
• Asset quality continued to stabilize, as criticized loans receivable of $505.5 million decreased by 31% from March 31, 2025, and 1% from December 31, 2025. 
• Capital ratios have remained elevated, with a total capital ratio of 12.8%, reflecting the Company's continued emphasis on financial strength and balance sheet resilience.
• Liquidity remained strong, with $11.1 billion, or 55% of total assets, comprising of unused borrowing capacity of $3.9 billion through the Federal Home Loan Bank and the Federal Reserve Discount Window, as well as cash and cash equivalents, short‑term investments (including interest‑earning demand deposits), mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit included in loans receivable.
• Loans receivable, net of allowance for credit losses, totaled $11.4 billion, increasing $1.1 billion, or 10%, from March 31, 2025, and $448.5 million, or 4%, from December 31, 2025.
• Total deposits of $13.0 billion increased 4% from March 31, 2025 and remained relatively flat compared to December 31, 2025. Core deposits of $12.1 billion increased $781.4 million, or 7% during the quarter, while brokered deposits declined $870.8 million, or 50%, to $886.5 million. Core deposits now represent 93% of total deposits.
• The Company repurchased 73,164 shares of common stock for $3.0 million, pursuant to its previously authorized share repurchase program.
• During the quarter, the Company's Memorandum of Understanding from mid-2025 with the FDIC and IDFI was terminated, following progress made by management in addressing the MOU provisions.

CARMEL, Ind., April 28, 2026 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (NASDAQ:MBIN), parent company of Merchants Bank, today reported first quarter 2026 net income of $67.7 million, or diluted earnings per common share of $1.25. This compared to $58.2 million, or diluted earnings per common share of $0.93 in the first quarter of 2025, and compared to $67.8 million, or diluted earnings per common share of $1.28 in the fourth quarter of 2025.

"Achieving record‑high assets of $20.3 billion and a record tangible book value of $38.55 per share in the same quarter underscores the strength of our balance sheet and the momentum we are building. Just as important, asset quality continues to stabilize, positioning us exceptionally well as we move forward with confidence," said Michael F. Petrie, Chairman and CEO of Merchants.

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Our results during the quarter reflected the dedication and resilience of our team. Our people remain accountable, collaborative, and disciplined in their work, reinforcing the culture that defines our organization while supporting the continued execution of our strategic plan." 

Net income for the first quarter of 2026 was $67.7 million, representing an increase of $9.5 million, or 16%, compared to the first quarter of 2025.  The improvement was primarily attributable to a $22.9 million, or 97%, increase in noninterest income driven principally by higher positive fair value adjustments to mortgage servicing rights and certain derivatives. Net income also benefited from a $6.5 million, or 5%, increase in net interest income. These increases were partially offset by a $14.0 million, or 23%, increase in noninterest expense and a $7.6 million increase in the provision for credit losses.

Net income of $67.7 million for the first quarter of 2026 remained relatively consistent with the fourth quarter of 2025. Results reflected a $12.5 million, or 45%, decrease in the provision for credit losses and an $8.0 million, or 10%, decrease in noninterest expense, primarily attributable to lower costs associated with credit risk transfer premiums and salaries and employee benefits. These increases to net income were offset by a $9.4 million, or 7%, decrease in net interest income, and a $10.5 million, or 175%, increase in the provision for income taxes, reflecting lower utilization of tax credits compared to the prior quarter. While noninterest income was relatively flat during the quarter, a $12.2 million decrease in gain on sale of loans was nearly offset by the $10.9 million increase in loan servicing fees that reflected higher fair market value adjustments for mortgage servicing rights.

Total Assets

Total assets were $20.3 billion at March 31, 2026, increasing $1.5 billion, or 8%, compared to March 31, 2025, and $872.8 million, or 4%, compared to December 31, 2025. The increases for both periods were primarily due to higher balances in the multi-family and warehouse portfolios, including those held for sale and held for investment. These were partially offset by lower balances in the healthcare loan portfolio.

Asset Quality

The allowance for credit losses on loans of $76.8 million, as of March 31, 2026, decreased by $6.6 million, or 8%, compared to March 31, 2025, and $6.5 million, or 8%, compared to December 31, 2025.  The decreases for both periods were primarily attributable to charge-offs on loans with specific reserves.

During the first quarter of 2026, the Company recorded charge-offs across seven relationships, primarily in the healthcare and multi-family loan portfolios, totaling $23.0 million, and had $616,000 in recoveries. Nearly 75% of the charge-offs in the first quarter of 2026 were associated with two loan relationships.  This compares to $10.5 million in charge-offs and $28,000 in recoveries during the first quarter of 2025 and $38.0 million in charge-offs and $76,000 in recoveries in the fourth quarter of 2025.

The increases to provision for credit losses for the last several quarters were largely associated with declines on certain multi-family property values after receiving new appraisals and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud, as well as loan growth. The increases were also attributable to certain types of subordinated loans that the Company no longer offers to borrowers.  These underperforming loans have been largely identified and evaluated for potential losses that have either been included in the allowance for credit losses on loans as specific reserves or charged off.

Overall, criticized loans receivable of $505.5 million declined by $226.0 million, or 31%, compared to March 31, 2025, and declined by $2.7 million, or 1% compared to December 31, 2025. This decline reinforces the view that the frequency of migration to criticized status would stabilize and eventually subside, driven by favorable market conditions and the Company's efforts with proactive portfolio management. As of March 31, 2026, 6% of the criticized loans were covered by credit default swaps.

As of March 31, 2026, all substandard loans have been evaluated for impairment, and these loans have specific reserves of $11.7 million.  The Company believes that the remaining loan portfolio remains well collateralized. Non-performing loans increased $50.0 million, or 25%, during the quarter, primarily attributable to four relationships in the multi-family portfolio. As of March 31, 2026, non-performing loans were $247.5 million, or 2.16% of loans receivable, compared to $284.6 million, or 2.73%, as of March 31, 2025, and $197.8 million, or 1.79%, as of December 31, 2025. 

Total delinquent loans declined 28%, from $334.7 million as of March 31, 2025, to $242.5 million as of March 31, 2026 and increased 17% from December 31, 2025. As of March 31, 2026, 11% of the delinquent loans were covered by credit default swaps.

The Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019.  Since 2023, the Company has strategically executed credit protection arrangements through credit default swaps and a credit-linked note to reduce risk of losses, with coverage ranging from 13-15% of the unpaid principal balances for each arrangement.  Despite having credit protection on these loans, the Company is required to carry an allowance for credit losses on loans held for investment. As of March 31, 2026, the credit- linked note was repaid in full and the remaining balance of loans protected by credit default swaps was $2.5 billion.

Total Deposits

Total deposits of $13.0 billion at March 31, 2026 increased by $545.6 million, or 4%, compared to March 31, 2025, and remained relatively unchanged compared to December 31, 2025. The increase compared to March 31, 2025 primarily reflects the growth in core deposits.

Core deposits of $12.1 billion at March 31, 2026 reflected increases of $1.4 billion, or 13%, from March 31, 2025 and $781.4 million, or 7%, from December 31, 2025. Core deposits represented 93% of total deposits at March 31, 2026, 86% of total deposits at March 31, 2025, and 87% of total deposits at December 31, 2025.

Brokered deposits of $886.5 million at March 31, 2026 decreased $831.9 million, or 48%, from March 31, 2025 and $870.8 million, or 50%, from December 31, 2025.   As of March 31, 2026, brokered certificates of deposit had a weighted average remaining duration of 88 days.

Liquidity

The Company maintains exceptional liquidity, supported by substantial borrowing capacity, including unused lines of credit totaling $3.9 billion as of March 31, 2026, compared to $4.7 billion at March 31, 2025 and $5.3 billion at December 31, 2025. 

The Company's most liquid assets are in cash and cash equivalents, short-term investments, including interest-earning demand deposits, mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit included in loans receivable. Combined with unused borrowing capacity of $3.9 billion, these totaled $11.1 billion, or 55%, of its $20.3 billion total assets as of March 31, 2026.

This liquidity position provides the Company with flexibility to manage funding costs, interest expense, and asset levels. In addition, the Company's business model is designed to continuously sell or securitize a significant portion of its loans, which provides flexibility in managing its liquidity. 

Comparison of Operating Results for the Three Months Ended

March 31, 2026 and 2025

Net Interest Income of $128.6 million increased $6.5 million, or 5%, reflecting lower interest expense on certificates of deposits and borrowings, partially offset by higher interest expense on interest-bearing checking accounts and lower interest income on loans and loans held for sale.

• Net interest margin of 2.92% increased three basis points compared to 2.89%. 
• Interest rate spread of 2.50% increased 12 basis points compared to 2.38%.

Interest Income of $270.5 million decreased $16.7 million, or 6%, compared to $287.2 million. The decrease was primarily attributable to lower average yields on higher average balances on loans and loans held for sale, as well as lower average yields on lower average balances on securities held to maturity.

• Average yields on loans and loans held for sale of 6.34% decreased 72 basis points compared to 7.06%.
• Average balances of $14.7 billion for loans and loans held for sale increased by $990.1 million, or 7%, compared to $13.8 billion.
• Average yields on securities held to maturity of 5.29% decreased 72 basis points compared to 6.01%.
• Average balances of $1.5 billion for securities held to maturity decreased by $150.5 million, or 9%, compared to $1.6 billion.

Interest Expense of $141.9 million decreased $23.1 million, or 14%, compared to $165.0 million.  The decrease reflected lower average balances at lower average rates on certificates of deposit, and lower average rates on borrowings, which were partially offset by higher average balances at lower average rates on interest-bearing checking accounts.

• Average balances of $1.6 billion for certificates of deposit decreased by $1.8 billion, or 54%, compared to $3.4 billion.
• Average interest rates of 3.92% for certificates of deposit decreased by 75 basis points compared to 4.67%.
• Average interest rates of 4.14% for borrowings decreased by 119 basis points compared to 5.33%.
• Average balances on interest-bearing checking accounts of $7.2 billion increased by $2.1 billion, or 41%, compared to $5.1 billion.
• Average interest rates of 3.42% for interest-bearing checking accounts decreased by 59 basis points compared to 4.01%.

Noninterest Income of $46.6 million increased $22.9 million, or 97%, compared to $23.7 million. The $22.9 million increase reflected an $11.1 million, or 277%, increase in loan servicing fees, a $10.1 million, or 319% increase in other noninterest income, and a $1.9 million, or 16%, increase in gain on sale of loans.    

• Loan servicing fees included an $8.9 million positive fair market value adjustment to servicing rights, with a $1.6 million positive adjustment in the Banking segment and a $7.4 positive adjustment in the Multi-family Mortgage Banking segment.  This is compared to a $754,000 negative fair market value adjustment to servicing rights in the prior period with a $1.2 million negative adjustment in the Banking segment and a $449,000 positive adjustment in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases in rising 10-year interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates that are influenced by projected future interest rates on escrow deposits.
• Other income included a $2.7 million positive fair market value adjustment to floor derivatives, reflected in the Warehouse segment, compared to a $2.3 million negative fair market value adjustment in the prior period.

Noninterest Expense of $75.6 million increased $14.0 million, or 23%, primarily due to a $7.5 million increase in other noninterest expense that included $3.1 million in collateral preservation expenses associated with taxes, insurance, property expenses, and legal fees related to nonperforming assets. The increase also reflects a $2.1 million, or 6%, increase in salaries and employee benefits to support business growth, a $1.9 million increase in credit risk transfer premium expense associated with credit default swaps, as well as $1.2 million, or 16%, increase in deposit insurance expense primarily associated with asset quality.

Comparison of Operating Results for the Three Months Ended

March 31, 2026 and December 31, 2025

Net Interest Income of $128.6 million decreased $9.4 million, or 7%, reflecting lower interest income on loans and loans held for sale, partially offset by lower interest expense on deposits and borrowing.

• Net interest margin of 2.92% increased three basis points compared to 2.89%.
• Interest rate spread of 2.50% increased six basis points compared to 2.44%.

Interest Income of $270.5 million decreased $37.0 million, or 12%, compared to $307.5 million, primarily reflecting lower average yields on lower average balances on loans and loans held for sale.

• Average yields on loans and loans held for sale of 6.34% decreased 32 basis points compared to 6.66%.
• Average balances of $14.7 billion for loans and loans held for sale decreased 4% compared to $15.4 billion.

Interest Expense of $141.9 million decreased $27.5 million, or 16% compared to $169.4 million. The decrease was primarily driven by lower average rates on lower average balances on interest-bearing checking accounts and borrowings.  

• Average interest rates on interest-bearing checking accounts of 3.42% decreased by 31 basis points compared to 3.73%.
• Average balances of $7.2 billion for interest-bearing checking accounts decreased $426.1 million, or 6%, compared to $7.6 billion.
• Average interest rates on borrowings of 4.14% decreased by 74 basis points compared to 4.88%.
• Average balances of $3.1 billion for borrowings decreased $368.5 million, or 11%, compared to $3.5 billion.

Noninterest Income of $46.6 million declined slightly compared to $47.2 million. Results reflected a $12.2 million, or 48%, decrease in gain on sale of loans and a $2.6 million, or 45%, decrease in syndication and asset management fees. This was partially offset by a $10.9 million, or 257%, increase in loan servicing fees and a $3.5 million, or 36%, increase in other income.

• Gain on sale of loans decreased $12.2 million, or 48%, primarily due to higher 10-year interest rates, which delayed borrower decisions to transition to permanent fixed-rate loans. This impact was partially offset by the increase in the fair value adjustments of mortgage servicing rights and floor derivatives as detailed below.
• Loan servicing fees included an $8.9 million positive fair market value adjustment to servicing rights, with a $1.6 million positive adjustment in the Banking segment and a $7.4 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $179,000 negative fair market value adjustment to servicing rights in the prior period, with a $275,000 negative adjustment in the Banking segment and a $96,000 positive adjustment in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases in rising 10-year interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates that are influenced by projected future interest rates on escrow deposits.
• Other income included a $2.7 million positive fair market value adjustment to floor derivatives, reflected in the Warehouse segment, compared to a $4.2 million positive fair market value adjustment to derivatives in the prior period. The prior quarter also reflected an impairment of $4.1 million for an investment in a joint venture that was not repeated in the first quarter 2026.

Noninterest Expense of $75.6 million decreased $8.0 million, or 10%, compared to $83.6 million, primarily due to a $3.8 million, or 9%, decrease in salaries and employee benefits that reflected lower commissions on lower noninterest income, a $2.4 million, or 30%, decrease in credit risk transfer premium expense associated with credit default swaps, and a $1.4 million, or 10%, decrease in other expenses.

About Merchants Bancorp

Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple segments, including Multi-family Mortgage Banking that primarily offers multi-family housing and healthcare facility financing and servicing (through this segment it also serves as a syndicator of low-income housing tax credit and debt funds); Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers retail and correspondent residential mortgage banking, agricultural lending, and traditional community banking.  Merchants Bancorp, with $20.3 billion in assets and $13.0 billion in deposits as of March 31, 2026, conducts its business primarily through its direct and indirect subsidiaries, Merchants Bank of Indiana, Merchants Capital Corp., Merchants Capital Investments, LLC, Merchants Capital Servicing, LLC, Merchants Investment Partners, LLC, and Merchants Mortgage, a division of Merchants Bank of Indiana. For more information and financial data, please visit Merchants' Investor Relations page at investors.merchantsbancorp.com.

Forward-Looking Statements

This press release contains forward-looking statements which reflect management's current views with respect to, among other things, future events and financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, management cautions that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.  A number of important factors could cause actual results to differ materially from those indicated in these forward-looking statements, including the impacts of factors identified in "Risk Factors" or "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.  Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.