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Related Party Transactions

12 Months Ended

Dec. 31, 2023

Related Party Transactions

Related Party Transactions

Note 20: Related Party Transactions

The Company has entered into transactions with certain directors, executive officers, and their affiliates or associates (related parties). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features.

Legal Services

The Company retained a law firm of which a Board member of Merchants Bank is a partner. Services rendered are primarily related to documentation of current loan originations, and loan collections from Merchants Bank’s borrowers. Fees paid to the law firm, both directly and indirectly, totaled $9.4 million, $9.4 million, and $6.6 million for the years ended December 31, 2023, 2022 and 2021 respectively.

Speaking Engagements

The Company made payments to a Board member of Merchants Bank during 2023 for speaking engagements at corporate events. Fees paid to the Board member totaled $30,000 for the year ended December 31, 2023.

Corporate Travel

The Company made payments to a company that is owned by a Board member and executive of Merchants Bank. Payments were made for charter flights taken during 2023 as part of corporate travel expenses. Payments made to the company totaled $62,000 for the year ended December 31, 2023.

Investments

Investments in a Senior Housing and Healthcare Entity

The Company holds a 30% ownership in an LLC that provides funding to the senior housing and healthcare sectors that is accounted for using the equity method of accounting. Transactions with this entity are included in the chart below.

Investments in Low-Income Housing Tax Credit Syndications

In 2020 the Company launched a low-income housing tax credit syndication business through one of its subsidiaries and serves as a general partner, limited partner, or managing member. This business is generally funded through capital investments from external investors and in some cases by Merchants Bank, in the form of limited partnership or managing member interests, and bridge loans. Merchants Bank also serves as a warehouse to fund certain low-income housing tax credit projects until they are sold into the syndicated funds. Due to the short time between purchase and sale, no gains or losses were recognized on the sales during 2023, 2022 or 2021. Transactions with these entities are included in the chart below.

Investments in Debt Financing Entities

The Company has invested in single-family, multi-family, and healthcare debt financing entities (debt funds) through its subsidiaries. This business is funded through capital investments from external investors and by the Company, in the form of limited partnership interests. During 2020, one of the debt funds was wholly owned by the Company. During 2021, this debt fund was deconsolidated see Note 1: Nature of Operations and Summary of Significant Accounting Policies. The Company also serves as a warehouse to acquire certain loans until they are sold into the debt funds. Transactions with these entities are included in the chart below.

The table below provides a summary of the transactions with related entities for which the Company holds an ownership investment. Additional information regarding these investments is provided in Note 12: Variable Interest Entities.

​	​	​	​	​	​	​	​	​	​
​		Year Ended December 31,
​	​	2023			2022			2021
​	​	(In thousands)
Investments in Senior Housing and Healthcare Entity	​	​	​	​	​	​	​	​	​
Origination fees received from borrowers referred by the LLC	​	$	12,669	​	$	24,830	​	$	17,848
Fees paid to LLC for loans referred and originated	​	​	(9,866)	​	​	(17,145)	​	​	(14,512)
Servicing income received for loans referred by the LLC	​	​	561	​	​	417	​	​	69
Servicing income participation paid to LLC	​	​	(281)	​	​	(209)	​	​	(34)
Income from investment in LLC	​	​	1,612	​	​	4,129	​	​	1,369
Distributions received from LLC	​	​	993	​	​	3,795	​	​	405
Interest income paid to LLC for loans originated and referred by the LLC	​	​	(3,587)	​	​	(6,725)	​	​	(4,522)
​	​	​	​	​	​	​	​	​	​
Investments in LIHTC Syndications	​	​	​	​	​	​	​	​	​
Interest income, financing (1) and other fees received from syndicated funds	​	$	16,592	​	$	11,012	​	$	8,030
Loans outstanding, net of participations sold, to syndicated funds	​	​	127,449	​	​	49,004	​	​	18,586
​	​	​	​	​	​	​	​	​	​
Investments in Debt Financing Entities	​	​	​	​	​	​	​	​	​
Income from investments, servicing, interest income, and management of debt funds	​	$	29,992	​	$	4,642	​	$	1,139
Distributions received from debt funds	​	​	890	​	​	512	​	​	—
Loans outstanding, net of participations sold, to debt funds	​	​	108,055	​	​	35,732	​	​	20,700
Loans sold to debt funds	​	​	102,336	​	​	884,247	​	​	273,914
Gains (losses) recognized on loans sold to debt funds	​	​	(263)	​	​	—	​	​	—
Carrying value, at year-end, of held-to-maturity securities purchased from debt funds	​	​	472,539	​	​	248,366	​	​	—

​

(1) Financing fees, net of costs to originate, are deferred and recognized in income over the life of the loan.

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The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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