Merchants Bancorp (MBIN) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01Decreased residential and multi-family mortgage origination, volume and pricing decisions of competitors, and changes in interest rates, may adversely affect our profitability
2. 02Our mortgage banking profitability could significantly decline if we are not able to originate and resell a high volume of mortgage loans46% rewritten
3. 03If we violate HUD requirements, our multi-family FHA origination and servicing business could be adversely affected
4. 04Real estate construction loans are based upon estimates of costs and values associated with the complete project. These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects
5. 05We face strong competition from financial services companies and other companies that offer banking, mortgage, leasing, and providers of multi-family agency financing and servicing, which could harm our business37% rewritten
6. 06If the federal government shuts down or otherwise fails to fully fund the federal budget, or makes material changes to the federal government’s budget or staffing, our multi-family FHA origination business could be adversely affected
7. 07Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our business and the value of our stock
8. 08A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects27% rewritten
9. 09If we do not effectively manage our credit risk, we may experience increased levels of delinquencies, nonperforming loans and charge-offs, which could require increases in our provision for credit losses
10. 10Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future
11. 11Our ACL-Loans may prove to be insufficient to absorb potential losses in our loan portfolio
12. 12The small to midsized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition
13. 13We depend on the accuracy and completeness of information provided by customers and counterparties
14. 14If the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it could require charges to earnings
15. 15Changes in accounting standards could materially impact our financial statements
16. 16We are required to comply with the SEC's rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting
17. 17The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate
18. 18Downgrades to the credit rating of the U.S. government or of its securities or any of its agencies by one or more of the credit ratings agencies could have a material adverse effect on general economic conditions, as well as our business
19. 19Downgrades to the credit rating of the Company or its subsidiaries by one or more of the credit rating agencies could have a material adverse effect on the cost of or our ability to raise additional capital for future growth

Operational Risks

1. 20Our risk management framework may not be effective in mitigating risks and/or losses to us
2. 21We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects
3. 22Our management depends on the use of data and modeling in decision-making, and faulty data or modeling approaches could negatively impact decision-making or possibly subject us to regulatory scrutiny in the future
4. 23System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities
5. 24Adoption of AI may present significant challenges relating to compliance risk, credit risk, reputation risk, and operational risk
6. 25Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations
7. 26We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology
8. 27We are subject to certain operational risks, including customer or employee fraud and data processing system failures and errors
9. 28We may not be able to overcome the integration and other risks associated with acquisitions, which could have an adverse effect on our ability to implement our business strategy
10. 29Certain of our directors and executive officers and their immediate families beneficially own approximately 57% of our outstanding shares of common stock which allows them the ability to substantially influence the outcome of matters requiring shareholder approval
11. 30Our operations could be adversely affected by extraordinary events beyond our controlNew

Market, Interest Rate, and Liquidity Risks

1. 31Fluctuations in interest rates may reduce net interest income and otherwise negatively impact our financial condition and results of operations
2. 32Negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses
3. 33Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations
4. 34or limitation on our subsidiaries abilities to pay us dividends could have a material adverse effect on our liquidity and in particular, affect our ability to repay our borrowingsNew
5. 35If we breach any of the representations or warranties we make to a purchaser of our mortgage loans, we may be liable to the purchaser for certain costs and damages
6. 36We may be adversely affected by the soundness of other financial institutions

Legal, Regulatory, and Compliance Risks

1. 37Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations
2. 38Compliance with the Dodd-Frank Act and its implementing regulations has and will continue to result in additional operating and compliance costs that could have a material adverse effect on our business, financial condition, results of operations and growth prospects
3. 39We are subject to heightened regulatory requirements because we exceed $10 billion in assets54% rewritten
4. 40We are subject to stringent capital requirements and failure to meet such requirements could limit our activities55% rewritten
5. 41Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition, and results of operations
6. 42The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted
7. 43We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions
8. 44We are subject to a complex set of laws relating to our processing and safeguarding of personal informationNew
9. 45We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations
10. 46The Federal Reserve may require us to commit capital resources to support Merchants Bank