Merchants Bancorp Reports Second Quarter of 2026 Results

• Net income of $78.3 million in the second quarter of 2026 increased $40.3 million, or 106%, compared to the second quarter of 2025, and increased $10.6 million, or 16%, compared to the first quarter of 2026.

• Diluted earnings per common share of $1.48 in the second quarter of 2026 increased 147% compared to the second quarter of 2025 and increased 18% compared to the first quarter of 2026.

• Total assets reached $21.2 billion, marking the fifth consecutive quarter of new highs, while increasing 4% compared to March 31, 2026, and increasing 9% compared to December 31, 2025.

• Tangible book value per common share increased to $39.93, its 30th consecutive quarterly high, rising 13% from $35.42 at June 30, 2025, and 4% from $38.55 at March 31, 2026.

• Asset quality improved meaningfully, as criticized loans receivable of $444.7 million decreased $60.8 million, or 12%, from March 31, 2026, and decreased $63.5 million, or 12%, from December 31, 2025. 

• Nonperforming loans of $205.6 million decreased $41.8 million, or 17%, and total delinquent loans of $208.0 million decreased $34.6 million, or 14%, compared to March 31, 2026.

• The provision for credit losses of $9.2 million decreased 83% compared to the second quarter of 2025 and decreased 40% compared to the first quarter of 2026. 

• Capital ratios remained strong, with a total capital ratio of 12.5%, reflecting the Company's continued emphasis on financial strength and balance sheet resilience.

• Liquidity remained strong at $13.0 billion, or 61% of total assets, supported by $5.5 billion of unused borrowing capacity with the Federal Home Loan Bank and Federal Reserve Discount Window and a diversified mix of highly liquid assets, including cash and cash equivalents, short-term investments, mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit.

• Loans receivable, net of allowance for credit losses, totaled $12.3 billion, increasing $862.9 million, or 8%, from March 31, 2026, and increasing $1.3 billion, or 12%, from December 31, 2025.

• Total deposits of $14.3 billion increased $1.3 billion, or 10%, from March 31, 2026, and increased $1.2 billion, or 9%, compared to December 31, 2025. Core deposits of $13.0 billion increased $891.3 million compared to March 31, 2026, and represent 91% of total deposits.

• The Company executed a credit default swap on a $169.9 million pool of multi-family mortgage loans in June 2026, providing credit protection for the loan pool and reducing risk-based capital requirements.

CARMEL, Ind., July 28, 2026 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank, today reported second quarter of 2026 net income of $78.3 million, or diluted earnings per common share of $1.48. This compared to $38.0 million, or diluted earnings per common share of $0.60 in the second quarter of 2025, and compared to $67.7 million, or diluted earnings per common share of $1.25 in the first quarter of 2026.

"Our second quarter results reflected continued strength across our businesses, highlighted by assets reaching a new high of $21.2 billion and tangible book value per share of $39.93, marking our 30th consecutive quarter of record tangible book value. Credit trends also improved during the quarter, with our fifth consecutive quarterly decline in criticized loans, which reached their lowest level since mid-2024, along with decreases in nonperforming loans, delinquencies, charge-offs and provision for credit losses. These results demonstrate the strength of our balance sheet, the benefit of improved credit metrics, and ongoing momentum in our business," said Michael F. Petrie, Chairman and CEO of Merchants.

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "With 10-year Treasury rates remaining elevated, our diversified business model continues to create multiple sources of earnings support in the current rate environment. While the higher rates may pressure near-term gain on sale of loans, loans in our robust pipeline are still expected to convert into permanent loans over time. Meanwhile, higher rates continue to support valuations on our servicing rights and derivatives, providing an offset to pressure on gain on sale revenue. Together with strong liquidity, capital, and improving credit trends, this positions us well to continue generating earnings growth and long-term shareholder value."

Net income for the second quarter of 2026 was $78.3 million, an increase of $40.3 million, or 106%, compared to $38.0 million in the second quarter of 2025. The increase was primarily driven by a $43.8 million, or 83%, decrease in the provision for credit losses, reflecting improved asset quality.

Net income for the second quarter of 2026 was $78.3 million, an increase of $10.6 million, or 16%, from $67.7 million in the first quarter of 2026. The improvement was driven by a $14.0 million, or 12%, increase in net interest income after provision for credit losses.

Total Assets
Total assets of $21.2 billion at June 30, 2026 increased $908.2 million, or 4%, compared to March 31, 2026, and increased $1.8 billion, or 9%, compared to December 31, 2025. The increases for both periods were primarily due to higher balances in the multi-family and warehouse portfolios, as well as revolving lines of credit collateralized by mortgage servicing rights that are included in the commercial and commercial real estate portfolio.

Asset Quality
The allowance for credit losses on loans of $75.8 million, as of June 30, 2026, decreased $1.0 million, or 1%, compared to March 31, 2026, and decreased $7.5 million, or 9%, compared to December 31, 2025. The decreases primarily reflected charge-offs on loans that had specific reserves.

During the second quarter of 2026, the Company recorded charge-offs totaling $16.5 million and had $4.8 million in recoveries. Nearly 95% of the charge-offs in the second quarter of 2026 were associated with two multi-family loan relationships. This compared to $46.1 million in charge-offs and no recoveries during the second quarter of 2025 and $23.0 million in charge-offs and $616,000 in recoveries in the first quarter of 2026.

Overall, criticized loans receivable of $444.7 million declined $60.8 million, or 12%, compared to March 31, 2026, and declined $63.5 million, or 12%, compared to December 31, 2025. These declines are consistent with the Company's expectation that migration to criticized status would stabilize and eventually subside, supported by ongoing portfolio management efforts. As of June 30, 2026, 6% of the criticized loans were covered by credit default swaps.

As of June 30, 2026, all substandard loans have been evaluated for impairment, and these loans have specific reserves of $3.9 million. The Company believes the loan portfolio continues to be well collateralized.

Nonperforming loans decreased $41.8 million, or 17%, compared to March 31, 2026, primarily due to loans being paid in full. As of June 30, 2026, nonperforming loans were $205.6 million, or 1.67% of loans receivable, compared to $247.5 million, or 2.16%, as of March 31, 2026, and $197.8 million, or 1.79%, as of December 31, 2025. 

Total delinquent loans of $208.0 million decreased $34.6 million, or 14%, compared to March 31, 2026. As of June 30, 2026, 10% of the delinquent loans were covered by credit default swaps.

The Company has taken additional steps to reduce credit risk through loan sale and securitization activities since 2019. Since 2023, the Company has executed credit protection arrangements through credit default swaps and a credit-linked note to reduce potential loss exposure, with coverage ranging from 13% to 15% of the unpaid principal balance 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 June 30, 2026, the remaining balance of loans protected by credit default swaps was $2.2 billion.

Total Deposits
Total deposits of $14.3 billion at June 30, 2026, increased $1.3 billion, or 10%, compared to March 31, 2026, and $1.2 billion, or 9%, compared to December 31, 2025. The increase in both periods primarily reflected the growth in core deposits.

Core deposits of $13.0 billion at June 30, 2026, reflected increases of $891.3 million, or 7%, from March 31, 2026, and $1.7 billion, or 15%, from December 31, 2025. Core deposits represented 91% of total deposits at June 30, 2026, 93% of total deposits at March 31, 2026, and 87% of total deposits at December 31, 2025.

Brokered deposits of $1.3 billion at June 30, 2026, increased $411.3 million, or 46%, from March 31, 2026, and decreased $459.5 million, or 26%, from December 31, 2025. As of June 30, 2026, brokered certificates of deposit had a weighted average remaining duration of 51 days.

Liquidity
The Company maintained strong liquidity, supported by substantial borrowing capacity, including unused lines of credit totaling $5.5 billion as of June 30, 2026, compared to $3.9 billion at March 31, 2026, and $5.3 billion at December 31, 2025. 

The Company's most liquid assets include 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 $5.5 billion, these totaled $13.0 billion, or 61%, of its $21.2 billion total assets as of June 30, 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

June 30, 2026 and 2025

Net Interest Income of $136.5 million increased $7.8 million, or 6%, compared to $128.7 million. The increase reflected lower interest expense on certificates of deposit, partially offset by higher interest expense on interest-bearing checking accounts and lower interest income on securities held to maturity.

• Net interest margin of 2.81% decreased two basis points compared to 2.83%. 

• Interest rate spread of 2.43% increased ten basis points compared to 2.33%.

Interest Income of $294.1 million decreased $10.3 million, or 3%, compared to $304.4 million. The decrease was primarily attributable to lower average balances and yields on securities held to maturity, as well as lower average yields on higher average balances on loans and loans held for sale.

• Average balances of $1.4 billion for securities held to maturity decreased $174.1 million, or 11%, compared to $1.6 billion.

• Average yields on securities held to maturity of 5.19% decreased 72 basis points compared to 5.91%.

• Average yields on loans and loans held for sale of 6.26% decreased 66 basis points compared to 6.92%.

• Average balances of $16.2 billion for loans and loans held for sale increased $1.4 billion, or 9%, compared to $14.8 billion.

Interest Expense of $157.5 million decreased 10% compared to $175.7 million. The decrease reflected lower average balances and rates on certificates of deposit, partially offset by higher average balances on interest-bearing checking accounts.

• Average balances of $1.4 billion for certificates of deposit decreased $1.7 billion, or 55%, compared to $3.1 billion.

• Average interest rates of 3.85% for certificates of deposit decreased 74 basis points compared to 4.59%.

• Average balances on interest-bearing checking accounts of $7.9 billion increased $1.7 billion, or 28%, compared to $6.2 billion.

• Average interest rates of 3.43% for interest-bearing checking accounts decreased 53 basis points compared to 3.96%.

Provision for Credit Losses was $9.2 million, a decrease of 83% compared to $53.0 million, reflecting improved asset quality, including lower charge-offs and lower specific reserves.

Noninterest Income of $45.7 million decreased $4.8 million, or 10%, compared to $50.5 million. The decline was primarily due to a decrease of $10.2 million, or 44%, in gain on sale of loans, partially offset by $5.9 million, or 95%, increase in loan servicing fees.

• Loan servicing fees included a $6.0 million positive fair market value adjustment to servicing rights, with a $1.4 million positive adjustment in the Banking segment and a $4.6 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $258,000 positive fair market value adjustment to servicing rights in the prior period with a $487,000 negative adjustment in the Banking segment and a $745,000 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 noninterest income also included a $1.9 million positive fair market value adjustment to floor derivatives, reflected in the Warehouse segment, compared to a $4.3 million positive fair market value adjustment in the prior period.

Noninterest Expense of $73.2 million decreased $4.1 million, or 5%, compared to $77.3 million. The lower expenses were primarily due to a $4.2 million decrease in salaries and employee benefits from lower commissions and bonuses.

Comparison of Operating Results for the Three Months Ended

June 30, 2026 and March 31, 2026

Net Interest Income of $136.5 million increased $7.9 million, or 6%, compared to $128.6 million. The increase reflected higher interest income on loans and loans held for sale, partially offset by higher interest expense on borrowings and deposits.

• Net interest margin of 2.81% decreased 11 basis points compared to 2.92%.

• Interest rate spread of 2.43% decreased seven basis points compared to 2.50%.

The 11 basis point decline in net interest margin was primarily driven by changes in loan mix, as growth was weighted more toward loans held for sale and warehouse lending than the higher-yielding multi-family and healthcare portfolios. While this mix shift lowered the reported margin, the growth remained profitable and contributed to higher net interest income and overall earnings.

Interest Income of $294.1 million increased $23.6 million, or 9%, compared to $270.5 million, primarily reflecting higher average balances at lower average yields on loans and loans held for sale.

• Average balances of $16.2 billion for loans and loans held for sale increased 10% compared to $14.7 billion.

• Average yields on loans and loans held for sale of 6.26% decreased eight basis points compared to 6.34%, primarily reflecting the same loan mix shift discussed above.

Interest Expense of $157.5 million increased 11% compared to $141.9 million. The increase was primarily driven by higher average balances at lower interest rates on borrowings and higher average balances at higher average interest rates on interest-bearing checking accounts.

• Average balances of $4.0 billion on borrowings increased $880.5 million, or 28%, compared to $3.1 billion.

• Average interest rates of 4.06% on borrowings decreased by eight basis points compared to 4.14%.

• Average balances of $7.9 billion for interest-bearing checking accounts increased $692.0 million, or 10%, compared to $7.2 billion.

• Average interest rates on interest-bearing checking accounts of 3.43% increased by a basis point compared to 3.42%.

Provision for Credit Losses was $9.2 million, a decrease of 40% compared to $15.3 million, reflecting improved asset quality, including lower charge-offs and lower specific reserves.

Noninterest Income of $45.7 million decreased 2% compared to $46.6 million. Results reflected a decrease of $3.1 million, or 21%, in loan servicing fees, and a $1.5 million, or 11%, decrease in other noninterest income. Partially offsetting these declines was a $3.8 million, or 122%, increase in syndication and asset management fees.

• Loan servicing fees included a $6.0 million positive fair market value adjustment to servicing rights, with a $1.4 million positive adjustment in the Banking segment and a $4.6 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to an $8.9 million positive fair market value adjustment to servicing rights in the prior period, 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. 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 noninterest income included a $1.9 million positive fair market value adjustment to floor derivatives, reflected in the Warehouse segment, compared to a $2.7 million positive fair market value adjustment to derivatives in the prior period.

Noninterest Expense of $73.2 million decreased $2.4 million, 3%, compared to $75.6 million, primarily due to a $2.5 million decrease in deposit insurance expenses from improved asset quality.

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 $21.2 billion in assets and $14.3 billion in deposits as of June 30, 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," "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.