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Regulatory Matters

3 Months Ended

Mar. 31, 2024

Note 6: Regulatory Matters

The Company, Merchants Bank and FMBI (prior to the January 26, 2024 sale of its branches and merger of its remaining charter into Merchants Bank) are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by federal and state banking regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Merchants Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Merchants Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Merchants Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, and other factors. Furthermore, the Company’s and Merchants Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Merchants Bank to maintain minimum amounts and ratios (set forth in the table below). Management believes, as of March 31, 2024 and December 31, 2023, that the Company and Merchants Bank met all capital adequacy requirements.

As of March 31, 2024 and December 31, 2023, the most recent notifications from the Board of Governors of the Federal Reserve System (“Federal Reserve”) categorized the Company as well capitalized and most recent notifications from the Federal Deposit Insurance Corporation (“FDIC”) categorized Merchants Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Company’s or Merchants Bank’s category.

FMBI was subject to these same requirements and guidelines 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 below). 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.

The Company’s, Merchants Bank’s, and FMBI’s actual capital amounts and ratios are presented in the following tables.


					Minimum
					Amount to be Well				Minimum Amount
					Capitalized with				To Be Well
	Actual				Basel III Buffer⁽¹⁾				Capitalized⁽¹⁾
	Amount		Ratio		Amount		Ratio		Amount		Ratio

	(Dollars in thousands)
March 31, 2024
Total capital⁽¹⁾ (to risk-weighted assets)
Company	$	1,858,348	11.7	%	$	1,662,302	10.5	%	$	—	N/A	%
Merchants Bank		1,801,020	11.4	%		1,660,561	10.5	%		1,581,487	10.0
Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		1,768,553	11.2	%		1,345,673	8.5	%		—	N/A	%
Merchants Bank		1,711,225	10.8	%		1,344,264	8.5	%		1,265,189	8.0
Common Equity Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		1,268,945	8.0	%		1,108,202	7.0	%		—	N/A	%
Merchants Bank		1,711,225	10.8	%		1,107,041	7.0	%		1,027,966	6.5
Tier I capital⁽¹⁾ (to average assets)
Company		1,768,553	10.5	%		839,199	5.0	%		—	N/A	%
Merchants Bank		1,711,225	10.2	%		837,560	5.0	%		837,560	5.0

(1)

As defined by regulatory agencies.


					Minimum
					Amount to be Well				Minimum Amount
					Capitalized with				To Be Well
	Actual				Basel III Buffer⁽¹⁾				Capitalized⁽¹⁾
	Amount		Ratio		Amount		Ratio		Amount		Ratio

	(Dollars in thousands)
December 31, 2023
Total capital⁽¹⁾ (to risk-weighted assets)
Company	$	1,772,195	11.6	%	$	1,598,260	10.5	%	$	—	N/A	%
Merchants Bank		1,724,505	11.5	%		1,577,434	10.5	%		1,502,318	10.0	%
FMBI		40,613	21.1	%		20,209	10.5	%		19,247	10.0	%
Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		1,686,202	11.1	%		1,293,830	8.5	%		—	N/A	%
Merchants Bank		1,639,171	10.9	%		1,276,970	8.5	%		1,201,854	8.0	%
FMBI		39,953	20.8	%		16,360	8.5	%		15,398	8.0	%
Common Equity Tier I capital⁽¹⁾ (to risk-weighted assets)
Company		1,186,594	7.8	%		1,065,507	7.0	%		—	N/A	%
Merchants Bank		1,639,171	10.9	%		1,051,623	7.0	%		976,507	6.5	%
FMBI		39,953	20.8	%		13,473	7.0	%		12,511	6.5	%
Tier I capital⁽¹⁾ (to average assets)
Company		1,686,202	10.1	%		832,706	5.0	%		—	N/A	%
Merchants Bank		1,639,171	10.1	%		815,191	5.0	%		815,191	5.0	%
FMBI		39,953	11.5	%		17,391	5.0	%		17,391	5.0	%

(1)

As defined by regulatory agencies.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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