PROPOSAL 2 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed, and the Board has ratified, BKD, LLP to be the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019, subject to ratification by shareholders.  A representative of BKD, LLP is not expected to be present at the annual meeting to respond to appropriate questions from shareholders or make a statement.

If the ratification of the appointment of the independent registered public accounting firm is not approved by a majority of the votes cast by shareholders at the annual meeting, the Audit Committee of the Board will consider other independent registered public accounting firms.

The Board recommends that shareholders vote “FOR” the ratification of the appointment of BKD, LLP as the Company’s independent registered public accounting firm.

CORPORATE GOVERNANCE

Generally, the Board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the Board does not involve itself in the day-to-day operations of the Company, which are monitored by our Executive Officers and management. Our Directors fulfill their duties and responsibilities by attending regular meetings of the Board, with additional special meetings held from time to time. Our Directors also discuss business and other matters with Messrs. Petrie and Dunlap, and other key executives, as well as our principal external advisers (legal counsel, auditors, and other consultants) at times other than regularly scheduled meetings when appropriate.

Our Board has established standing committees in connection with the discharge of its responsibilities. These committees include the Audit Committee, Compensation Committee, and the Nominating and Corporate Governance Committee. Our Board also may establish such other committees as it deems appropriate, in accordance with applicable laws and regulations and our First Amended and Restated Articles of Incorporation, as amended (“Articles”) and By-Laws.

The Board held five (5) regularly scheduled and special meetings during 2018. In 2019, the Board intends to meet four (4) times, with special meetings held from time to time when necessary, and through committee membership, which is discussed below. During 2018, all Directors attended at least 75 percent of the meetings of the Board and the committees on which they served. Although we do not have a formal policy regarding Director attendance at the annual meeting, we encourage and expect all of our Directors to attend. All of the Directors serving at that time were present at the Company’s 2019 annual meeting of shareholders.

Director Independence

Under the rules of The Nasdaq Stock Market LLC (“Nasdaq”) and the SEC, our Board has affirmatively determined that five (5) of the nine (9) Directors qualify as independent Directors: Ms. Gilroy, Mr. O’Brien, Mr. Perry, Ms. Sellers and Mr. Shane. Additionally, our Board as affirmatively determined that Mr. Juster, if elected, would qualify as an independent director.  Messrs. Petrie, Dunlap, and Evans do not qualify as independent directors because each is an Executive Officer. Mr. Rogers does not qualify as an independent director because he is an employee and was our President and Chief Operating Officer in 2018.

Our Board has a Chairman whose duties are described in our By-Laws, and it performs its oversight role through various committees. The Board may select any of its members as its Chairman and has no formal policy as to whether our Chief Executive Officer will serve as Chairman or whether any other Director, including a non-employee or independent director, may be elected to serve as Chairman. At present, the positions of Chairman and Chief Executive Officer are both held by Mr. Petrie. The Board believes that Mr. Petrie is best situated to serve as

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Chairman because of his familiarity with the Company’s business and because he is the most capable of effectively identifying strategic opportunities and leading the execution of our business strategy.

However, our Board has adopted a written charter to govern in the event the positions of Chairman and Chief Executive Officer are held by the same individual. This “Independent Lead Director Charter” was developed to describe the responsibilities of the Independent Lead Director in the same individual is Chairman and Chief Executive Officer, and the Independent Lead Director will be a member of the Board who satisfies the requirements for independent directors under the Nasdaq rules. The Independent Lead Director is currently John W. Perry. With Mr. Perry’s retirement, at the next meeting of the Board after the Annual Meeting the Board will appoint a new Director to serve as Independent Lead Director.

As described in the charter, the Independent Lead Director has responsibility for, among other things:

·                   consulting with the Chief Executive Officer for Board schedules and agendas, including advising the Chief Executive Officer as to the quality, quantity, and timeliness of the information submitted by Merchants’ management;

·                   organize meetings of the independent Directors as necessary to, in part, ensure they have adequate resources for decision making and to serve as the principal liaison between the independent Directors and the Chief Executive Officer;

·                   conducting exit interviews with all departing senior executives, as appropriate; and

·                   handling other such matters that are specifically delegated to the Independent Lead Director by our Board from time to time.

The independent Directors regularly have the opportunity to meet without the non-independent Directors present. In 2018, the Board did not hold independent sessions of the independent Directors. In 2019, the Board expects to have at least two (2) independent sessions of the independent Directors.

Board’s Role in Risk Management

Risk is inherent in any business, and, as is the case with other management functions, our senior management has primary responsibility for managing the risks we face. However, as a financial institution, our business involves financial risks that do not exist, or that are more extensive than the risks that exist, in some other types of businesses. We are subject to extensive regulation that requires us to assess and manage those risks, and during their periodic examinations our regulators assess our performance in that regard. As a result, the Board is actively involved in overseeing our risk management programs.

While the full Board is charged with ultimate oversight responsibility for risk management, various committees of the Board and members of management also have responsibilities with respect to our risk oversight. In particular, the Audit Committee plays a large role in monitoring and assessing our financial, legal, and organizational risks, and receives regular reports from senior management regarding comprehensive organizational risk as well as particular areas of concern. The Compensation Committee monitors and assesses the various risks associated with compensation policies and oversees incentives that encourage a level of risk-taking consistent with our overall strategy.

Further, our Chairman meets regularly with senior management to discuss strategy and the risks we face.  Senior management attends Board meetings and is available to address any questions or concerns raised by the Board on risk management and any other matters.

Board Committees

Our Board currently has three (3) standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each committee is comprised solely of Directors that meet the definition of “independent director” under the Nasdaq rules, and as to the Audit Committee, also satisfy the requirements of SEC Rule 10A-3. Each of the committees of the Board meets at such times as determined to be necessary.

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Our Board also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our Articles and By-Laws.

Each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee has a written charter which sets forth the committee’s duties and responsibilities and is reviewed by the committee on a regular basis. The current charters of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are available on the investor relations section of our website, http://investors.merchantsbankofindiana.com/.

The following table identifies our standing committees and their members.

Audit Committee

Our Board has affirmatively determined that each member of the Audit Committee also satisfies the additional independence standards under the Nasdaq rules and applicable SEC rules for audit committee service and has the ability to read and understand fundamental financial statements. In addition, our Board has determined that each of John W. Perry, Anne E. Seller, and David N. Shane qualify as an “audit committee financial expert,” as that term is defined under the applicable SEC rules.

As described in its charter, our Audit Committee has responsibility for, among other things:

·                   selecting and reviewing the performance of our independent auditors and approving, in advance, all engagements and fee arrangements;

·                   reviewing earnings releases, financial statements and reports to be filed with the SEC or otherwise;

·                   reviewing and approving transactions for potential conflicts of interest under our Code of Conduct; and

·                   handling other such matters that are specifically delegated to the Audit Committee by our Board from time to time.

Compensation Committee.

As described in its charter, our Compensation Committee has responsibility for, among other things:

·                   overseeing executive compensation and management succession plans, and personnel policies, benefits programs, and incentive compensation as they relate to our Executive Officers, and ensuring the competitiveness thereof;

·                   establishing performance goals and objectives relative to the compensation of our Executive Officers;

·                   determining the annual compensation of our Chief Executive Officer;

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·                   recommending to the Board the compensation of all other Executive Officers, including annual base salary, annual or short-term incentive opportunities, long-term incentive opportunities, employment, severance, and/or change-in-control agreements, and any perquisites or special benefits;

·                   reviewing the talent development and executive succession planning process with our Chief Executive Officer;

·                   preparing the Compensation Committee report that may be required by SEC rules to be included in our future annual reports and proxy statements; and

·                   handling such other matters that are specifically delegated to the Compensation Committee by our Board from time to time.

Nominating and Corporate Governance Committee.

As described in its charter, our Nominating and Corporate Governance Committee has responsibility for, among other things:

·                   recommending persons to be selected by our Board as nominees for election as directors or to fill any vacancies on our Board;

·                   monitoring the functioning of our standing committees and recommending any changes, including the creation or elimination of any committee;

·                   reviewing and assessing the standard for determining director independence consistent with the requirements of applicable laws, regulations, and the Nasdaq rules;

·                   annually assessing the independence of non-executive directors and recommending action to the Board to effect changes in incumbent directors (if deemed appropriate by the Committee);

·                   recommending to the Board on an annual basis an independent director to serve as Chairman or Lead Director, as applicable;

·                   reviewing shareholder proposals properly submitted, including any proposed amendments to our Articles or By-Laws; and

·                   generally advising the Board on corporate governance matters, including reviewing and assessing the Company’s compliance with the requirements of applicable laws, regulations, including state and federal banking laws, and the Sarbanes-Oxley Act, and the Nasdaq rules;

Additionally, as provided for in its charter, our Nominating and Corporate Governance Committee also has the power and authority to conduct certain activities as the Committee deems appropriate, including:

·                   advise and make recommendations to the Board on the appropriate size and composition of the Board; and

·                   make recommendations to the Board with respect to the qualifications and independence of members of the Board, committee member qualifications, and committee structure and operations.

One of our nominees for Director, Andrew A. Juster, is not currently a Director of the Company. Mr. Juster was recommended to the Nominating and Corporate Governance Committee for nomination as a Director by our Chairman and Chief Executive Officer, Mr. Petrie. After Mr. Petrie’s recommendation, the Nominating and Corporation Governance Committee evaluated the experience, qualifications, and potential contributions of Mr. Juster, particularly considering the skills and contributions of Mr. Perry that will be lost upon his retirement, and voted to recommend Mr. Juster as a nominee for Director.

made to shareholders, such written notice, to be timely, shall be delivered or mailed to the Secretary and received at our principal office not later than the close of business on the 10 th  day following the day on which notice of the date of the meeting was mailed to shareholders or such prior public disclosure was made. On February 21, 2019, we filed a Current Report on Form 8-K announcing the date of the Annual Meeting, which means any shareholder nomination for a Director must have been delivered to our Secretary no later than March 3, 2019 for the Annual Meeting. We did not receive any shareholder nominations for Director.

The shareholder’s notice to the Secretary must include: (a) the name and address of record of the nominating shareholder; (b) a representation that the nominating shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the persons specified in the notice; (c) the name, age, business and residence addresses, and principal occupation or employment of each nominee; (d) a description of all arrangements or understandings between the nominating shareholder and each nominee and any other person (naming such person) pursuant to which the nominations are to be made by the nominating shareholder; (e) such other information regarding each nominee proposed by such nominating shareholder as is required to be included in a proxy statement filed pursuant to the proxy rules of the SEC, as in effect; and (f) the consent of each nominee to serve as a Director of the Company if so elected.

Other Shareholder Proposals.  In accordance with our By-Laws, for proposals to be otherwise brought by a shareholder and voted upon at an annual meeting of shareholders, the shareholder must give written notice of the proposal to our Secretary, at the above address, which much be received not less than 90 days nor more than 120 days prior to the annual meeting. However, that if less than 100 days’ notice or prior public disclosure of the date of the annual meeting is given or made to shareholders, such written notice, to be timely, shall be delivered or mailed to the Secretary and received at our principal office not later than the close of business on the 10 th  day following the day on which notice of the date of the meeting was mailed to shareholders or such prior public disclosure was made. On February 21, 2019 we filed a Current Report on Form 8-K announcing the date of the Annual Meeting, which means any shareholder proposal must have been delivered to our Secretary no later than March 3, 2019 for the Annual Meeting. We did not receive any shareholder proposals.

The shareholder’s notice to the Secretary must include: (a) a brief description of the proposal desired to be brought before the meeting and the reasons for conducting such business at the meeting; (b) the name and address of record of the shareholder proposing such business; (c) the number of shares of our common stock beneficially owned by such shareholder on the date of such shareholder’s notice; and (d) any financial or other interest of such shareholder in the proposal.

$10,000 in the aggregate for each Director. Each of Messrs. Petrie, Rogers, Dunlap, and Evans were Executive Directors in 2018 and did not receive additional compensation for their service as a Director.

(1)  Each Director receives a number of shares of the Company’s common stock equal to $10,000, rounded up to the nearest whole share. For 2018, each Director received 366 shares based on the closing price of $27.37 on June 4, 2018, the day immediately preceding the Directors election to the Board.

Directors’ Fees

Prior to June 2018 Non-Executive Directors received $ 3,000 per Board meeting attended and members of the Boards’ committees, as well as the chairpersons thereof received an additional fee of $1,000 and $1,500 per committee meeting attended, respectively.

Beginning June 2018, the compensation paid to Non-Executive Directors was increased as provided immediately below, largely in consideration of the increased responsibilities of the Company’s Directors associated with the Company becoming a reporting company under the Exchange Act.

·                   $1,000, $500, and $500 per Audit, Compensation, and Nominating and Corporate Governance Committee meeting attended, respectively (whether in person or by telephone); and

·                   $7,500, $2,500, and $2,500 to the Chairpersons of the Audit, Compensation, and Nominating and Corporate Governance Committees, respectively.

Each of our Directors also serves as a Director of Merchants Bank. No additional compensation is paid to our Directors for service as a Director of Merchants Bank or any of our subsidiaries.

The following summary compensation table shows all cash and non-cash compensation paid to or received or deferred by our Named Executive Officers for services rendered to us and our subsidiaries in all capacities during the fiscal years ended December 31, 2018 and 2017.

(1)                                  Stock awards are generally made in the first quarter of the following year based on our full year performance. For 2018, restricted stock units were awarded in February 2019 and for 2017, restricted stock units were awarded in February 2018. The amounts set forth in the “Stock Awards” column reflect the aggregate grant date fair value of stock awards for the years ended December 31, 2018 and 2017 in accordance with FASB ASC Topic 718.

(2)                                  “All Other Compensation” for the Named Executive Officers during 2018 and 2017 includes our match under the terms of our 401(k) Plan and for Mr. Petrie includes monthly country club dues and assessments.

(3)                                  Effective January 1, 2018, Mr. Dunlap became President and Chief Operating Officer of the Company, in addition to serving as President and Co-Chief Operating Officer of Merchants Bank.

(4)                                  Effective January 1, 2018, Mr. Dury was promoted from Executive Vice President to President of Merchants Capital Corp.

General

We compensate our Named Executive Officers (other than Mr. Petrie) through a combination of base salary, annual bonuses, equity awards, and other benefits. Our Compensation Committee believes the executive compensation packages that we provide to our executives, including the Named Executive Officers (other than Mr. Petrie), should include both cash and equity compensation that reward performance as measured against established corporate goals. Each element of compensation is designed to achieve a specific purpose and to contribute to a total package that is competitive with similar packages provided by other institutions that compete for the services of individuals like our Named Executive Officers.

Base Salary

The Compensation Committee reviews and recommends to the Board the base salaries of our Named Executive Officers and sets the compensation of our Chief Executive Officer. The Committee relies on market data provided by our internal human resources department and survey data from industry resources. The Compensation Committee also retains independent consultants as it deems appropriate. Salary levels are typically considered annually as part of our performance review process and upon a promotion or other change in job responsibility.

Bonus

Annual bonuses for Mr. Dunlap and Mr. Dury are approved by the Compensation Committee subject to the terms of their respective incentive arrangements.

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Equity Awards

Prior to our adoption of the 2017 Equity Incentive Plan, the equity awards we issued historically consisted of restricted stock awards issued pursuant to the Prior Incentive Plan, which, as described more fully below, allowed the Compensation Committee to establish the terms and conditions of the awards, subject to the Prior Incentive Plan’s terms.

Benefits

401(k) Plan.     The 401(k) Plan is designed to provide retirement benefits to all eligible full-time and part-time employees (including those of our subsidiaries). The 401(k) Plan provides employees with the opportunity to save for retirement on a tax-favored basis. Named Executive Officers, all of whom were eligible during 2018, may elect to participate in the 401(k) Plan on the same basis as all other employees. Employees may defer between 1% and 100% of their compensation to the 401(k) Plan, up to the applicable IRS limit. We currently match, dollar for dollar, the first 3% of an employee’s contribution to the 401(k) Plan. Our match is contributed in the form of cash and is invested according to the employee’s current investment allocation.

Health and Welfare Benefits.     Our Named Executive Officers are eligible to participate in our standard health and welfare benefits program, which offers medical, dental, vision, life, accident, and disability coverage to all of our eligible employees. We do not provide the Named Executive Officers with any health and welfare benefits that are not generally available to our other employees.

Perquisites.     We pay monthly dues and assessments for a country club membership for Mr. Petrie which he uses primarily to entertain current and prospective customers. We do not provide any other perquisites to our Named Executive Officers.

Employment Agreements

Mr. Petrie does not have an employment agreement.

Mr. Dunlap does not have an employment agreement. Mr. Dunlap will also be eligible for an annual cash bonus based on the Company’s achievement of certain financial goals, including the Company’s revenue growth and return on shareholders’ equity, as determined annually by the Company’s Compensation Committee, not to exceed an amount equal to 20% of his base salary.

We entered into an “at will” employment agreement dated December 29, 2010, and has been amended from time to time, with Mr. Dury which currently provides for a base salary of $110,000, and the opportunity to earn commissions on loan fees received by us on loans originated by Mr. Dury. The loan fees on which Mr. Dury earns commissions are determined in our sole discretion and do not include fees paid prior to or after closing, or fees paid by any party other than the borrower.

Under the amended employment agreement, Mr. Dury had the opportunity to earn commissions for 2018 on the basis below:

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Mr. Dury’s employment agreement includes certain restrictive covenants, including a 12-month non-competition period.

Mr. Dunlap and Mr. Dury both are also eligible to receive equity awards under the Company’s long-term incentive plans described below. The Compensation Committee determines the amount of any award each plan participant is eligible to receive and establishes certain targets for the Company’s performance.

Long-Term Incentive Plans

Equity-based incentive awards are currently made though our 2017 Equity Incentive Plan (the “2017 Incentive Plan”). We also maintain the Incentive Plan for Merchants Bank of Indiana Executive Officers (the “Prior Incentive Plan”). As of the effective date of the 2017 Equity Incentive Plan, no further awards shall be granted under the Prior Incentive Plan. However, any previously outstanding incentive award granted under the Prior Incentive Plan remains subject to the terms of such plans until the time it is no longer outstanding.

Merchants Bancorp 2017 Equity Incentive Plan

The 2017 Equity Incentive Plan was adopted by our Board on June 22, 2017 and approved by our shareholders on July 5, 2017. The 2017 Equity Incentive Plan was designed to ensure availability of equity awards that will assist us in attracting, retaining and rewarding key employees, Directors and other service providers. Pursuant to the 2017 Equity Incentive Plan, a committee of the Board (the “Committee,” for which the Compensation Committee has been appointed by the Board to serve in such role) is allowed to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other incentive awards. Up to 1,500,000 shares of common stock are available for issuance under the 2017 Equity Incentive Plan. As of December 31, 2018, there have been no awards under the 2017 Equity Incentive Plan.

Awards vest, become exercisable and contain such other terms and conditions as determined by the Committee and set forth in individual agreements with the participants receiving the awards. Awards to our Chief Executive Officer must have a vesting period of at least three (3) years. The 2017 Equity Incentive Plan enables the Committee to set specific performance criteria, in compliance with the United States Treasury Department’s final “Guidance on Sound Incentive Compensation Policies,” that must be met before an award vests under the 2017 Equity Incentive Plan. In establishing criteria, the Committee must attempt to balance risk and financial results in a manner that does not encourage participants to expose us to unnecessary or excess risks. At least 50% of any award to the Chief Executive Officer must be performance-based. An award agreement with the Chief Executive Officer also must stipulate that the Chief Executive Officer will hold shares of stock received for at least a 12-month period after vesting requirements are satisfied, unless the Chief Executive Officer incurs a termination of service, in which case the holding period ends on the termination date.

The 2017 Equity Incentive Plan allows for acceleration of vesting and exercise privileges of grants if a change in control occurs and a participant incurs a termination of service without cause following the change in control or in the event of a participant’s death or total disability. If a participant’s job is terminated for cause, then all unvested awards expire at the date of termination.

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Outstanding Equity Awards at Fiscal Year End

The following table provides information for each of our Named Executive Officers regarding outstanding unvested stock awards held by the Named Executive Officers as of December 31, 2018.

None of our Named Executive Officers had outstanding stock options as of December 31, 2018.  Market values are presented as of the end of 2018 (based on the closing price of $19.96 on December 31, 2018).

(1)          All shares were awarded under our Prior Incentive Plan and will accelerate and vest in full upon a change in control (as defined in the Prior Incentive Plan).

(2)          All are restricted stock units: 11,366 vest on December 31, 2019, 9,353 vest on December 31, 2020, and 12,703 vest on December 31, 2021.

(3)          All are restricted stock units: 5,429 vest on December 31, 2019, 5,237 vest on December 31, 2020, and 3,913 vest on December 31, 2021.

EXECUTIVE OFFICERS

A description of the background and business experience of our current Executive Officers who are not Directors is provided below. Messrs. Petrie, Dunlap, and Evans,’ each of whom currently serves as a Director, background and business experience is discussed in Election of Directors above.

John F. Macke, 53.     Mr. Macke joined Merchants in July 2017 as the Chief Financial Officer. Prior to joining Merchants, Mr. Macke served as Executive Vice President of Capital Markets at Stonegate Mortgage Corporation where he also served as Chief Financial Officer from April 2013 to May 2014 after joining in January 2012. Mr. Macke also held executive positions with Freedom Mortgage and Irwin Mortgage and has over 25 years of mortgage banking experience. Mr. Macke holds a Bachelor of Science degree in Business Administration from the University of Dayton and an MBA from Indiana University.

Michael R. Dury, 34.     Mr. Dury joined Merchants Capital in July 2007and has served in various capacities, starting as a Real Estate Investment Officer and is currently in the position of President of Merchants Capital. During his employment with Merchants Capital, Mr. Dury has also served as the Assistant Vice President, Vice President, Senior Vice President, Executive Vice President, and Chief Operating Officer. Mr. Dury also previously served as President of The Notre Dame Club of Indiana.

Susan D. Kucer, 64.     Ms. Kucer joined Merchants Bank in February 2016 as the President of the Indianapolis Market. Prior to joining Merchants Bank, Ms. Kucer served as Senior Vice President and the Business Banking Market Manager for PNC Bank from November 1982 through December 2016. At PNC Bank Ms. Kucer led a team of sales and relationship managers to provide deposit, lending, treasury management and merchant services to business customers throughout four Midwest states. Ms. Kucer is currently on the board of Visitors for Butler University’s College of Liberal Arts and Sciences and on the Board of Trustees for Brebeuf Jesuit Preparatory School.

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Jerry F. Koors, 55.     Mr. Koors joined Merchants in October 2013 as the President of Merchants Mortgage, a division of Merchants Bank. Prior to joining Merchants Mortgage, Mr. Koors had served as a Regional Vice President for PNC Mortgage since February 1995. Mr. Koors has spent over 20 years in lending and bank-related management roles, including managing up to 120 loan officers in up to five states in the origination of investment quality loans sold to various agencies.

Richard L. Belser, 68.     Mr. Belser joined Merchants in July 2007 as Senior Vice President and Senior Credit Officer for the Indianapolis market. Following graduation with a finance degree from the Indiana University Kelley School of Business and an MBA degree from Butler University, his banking career spans over 40 years holding executive management positions in Retail, Business, and Corporate Banking. Mr. Belser’s responsibilities include Loan Administration and Chairman of Merchants Bank’s Discount Committee.

Kevin T. Langford, 51.     Mr. Langford joined Merchants and is currently the Senior Vice President and Chief Administrative Officer and his responsibilities include management of human resources, information technology, compliance and marketing. Prior to joining Merchants Bank, Mr. Langford served in various executive and management capacities with First Financial Bank in Cincinnati, Ohio, including President of Community Banking, President of Consumer Banking, CIO, and CAO.

Terry A. Oznick, 35 . Mr. Oznick joined Merchants as Senior Vice President and General Counsel in September 2018. Mr. Oznick has extensive experience representing financial institutions, including advising on mergers and acquisitions, SEC filings and compliance, operational issues, cash management products, and electronic banking. Prior to joining Merchants, Mr. Oznick served as Senior Associate at the law firm of Krieg DeVault LLP, Senior Counsel and Vice President at Citibank, N.A., and Assistant General Counsel and Vice President at JPMorgan Chase Bank, N.A.

*denotes less than 1%

(1)          Does not include awards under the Prior Incentive Plan or the 2017 Equity Incentive Plan that are unvested and the recipient is not entitled to vote or receive dividends.

(2)          Jody J. Petrie is the wife of Michael F. Petrie and is the sole trustee of the following trusts: The Julia L. Petrie Irrevocable GST Trust 2010 (950,000 shares); The Emily J. Petrie Irrevocable GST Trust 2010 (950,000 shares); The Emily J. Petrie Irrevocable Trust — 2010 (2,392,790 shares); and The Julia L. Petrie Irrevocable Trust — 2010 (2,392,790 shares). Mrs. Petrie’s reported beneficial ownership includes 3,302,197 shares held jointly with Mr. Petrie.

(3)          Mary H. Rogers is the wife of Randall D. Rogers and is the sole trustee of the following trusts: The Katherine H. Rogers Irrevocable GST Trust 2011 (582,000 shares); The Carey Rogers Kulongoski Irrevocable GST Trust 2010 (582,000 shares); and The Randall D. Rogers, Jr. Irrevocable GST Trust 2011 (582,000 shares). Mrs. Rogers’ beneficial ownership also includes 546,786 shares held individually by Mr. Rogers as to which Mrs. Rogers may be deemed to have beneficial ownership. Mrs. Rogers disclaims beneficial ownership of shares held individually by Mr. Rogers.

(4)          Katherine H. Rogers, Carey Rogers Kulongoski, and Randall D. Rogers, Jr. are the adult children of Randall D. Rogers.

(5)          Includes 3,302,197 shares held jointly by Mr. Petrie and Jody J. Petrie and 6,685,580 shares held by trusts of which Jody J. Petrie is the sole trustee, as described in footnote (2) above, as to which Mr. Petrie may be deemed to have beneficial ownership. Mr. Petrie disclaims beneficial ownership of all shares that he does not hold individually.

(6)          Includes 546,786 shares held individually by Mr. Rogers and 1,746,000 shares held by trusts of which Mary H. Rogers is the sole trustee, as described in footnote (3) above, as to which Mr. Rogers may be deemed to have beneficial ownership. Mr. Rogers disclaims beneficial ownership of all shares that he does not hold individually.

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We do not currently have any compensation plans under which equity securities are authorized for issuance that have not been approved by security holders.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our Directors and Executive Officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership of, and transactions in, our equity securities with the SEC. Our Directors and Executive Officers are also required to furnish us with copies of all such Section 16(a) reports they file. These reports are available on our website at http://investors.merchantsbankofindiana.com/InsiderFilings

Based on a review of these reports, and on written representations from our reporting persons, we believe that all such Section 16(a) filing requirements applicable to our Directors and Executive Officers were satisfied during 2018.

did not involve more than the normal risk of collectability or present other unfavorable features. All such loans are approved by Merchants Bank’s board of directors in accordance with bank regulatory requirements. Similarly, all certificates of deposit and depository relationships with these persons were made in the ordinary course of business and involved substantially the same terms, including interest rates, as those prevailing at the time for comparable depository relationships with persons not related to us or Merchants Bank.

Policies and Procedures Regarding Related Party Transactions

Transactions by us or Merchants Bank and certain of our other subsidiaries with related parties are subject to certain regulatory requirements and restrictions, including Sections 23A and 23B of the Federal Reserve Act (which govern certain transactions by Merchants Bank with its affiliates) and the Federal Reserve’s Regulation O (which governs certain loans by Merchants Bank to its executive officers, directors and principal shareholders).

Under applicable SEC and Nasdaq rules, related party transactions are transactions in which we are a participant, the amount involved exceeds $120,000 and a related party has or will have a direct or indirect material interest. Our related parties include Directors (including nominees for election as Directors), Executive Officers, 5% shareholders and the immediate family members of these persons or entities affiliated with them. In accordance with our Audit Committee Charter, related party transactions are evaluated in accordance with our Code of Conduct. In determining whether to approve a related party transaction, the Audit Committee will consider, among other factors, the fairness of the proposed transaction, the direct or indirect nature of the related party’s interest in the transaction, the appearance of an improper conflict of interests for any Director or Executive Officer taking into account the size of the transaction and the financial position of the related party, whether the transaction would impair a Non-Executive Director’s independence, the acceptability of the transaction to our regulators and the potential violations of other corporate policies.

their report, express an opinion on the conformity of our financial statements to accounting principles generally accepted in the United States of America. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal control over financial reporting designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions with management and the independent registered public accounting firm do not assure that our financial statements are presented in accordance with accounting principles generally accepted in the United States of America, that the audit of our financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board or that our independent registered public accounting firm is in fact “independent.”

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, the audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC. The Audit Committee has appointed, subject to shareholder ratification, BKD, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.

The Audit Committee of the Board of Directors
of Merchants Bancorp

John W. Perry, Chairperson
Sue Anne Gilroy
Patrick D. O’Brien
Anne E. Sellers
David N. Shane

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Fees

The following table sets forth the aggregate fees billed for audit services rendered by BKD, LLP in connection with its audit of our consolidated financial statements and reports for our fiscal years ended December 31, 2018 and 2017 and for other services rendered during fiscal years ended December 31, 2018 and 2017, as well as all out-of-pocket costs incurred in connection with these services.

(1)                            Includes fees billed for the audit of consolidated financial statements, including review of interim financial information contained in Quarterly Reports on Form 10-Q and other regulatory reports.

(2)                            For 2018, this amount includes fees associated with the audit of our employee benefits plans. For 2017, this amount includes fees associated with our initial public offering and other attestation services.

(3)                            Includes fees billed for tax compliance services, including preparation of federal and state income tax returns, preparation of property tax returns, and tax payment and planning advice.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm.  The Audit Committee is responsible for appointing, setting compensation and overseeing the work of the independent registered public accounting firm.  In accordance with its charter, the Audit Committee approves, in advance, all audit and permissible non-audit services to be performed by the independent registered public accounting firm.

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SHAREHOLDER PROPOSALS FOR THE 2020 ANNUAL MEETING

We anticipate holding our 2020 annual meeting of shareholders on May 14, 2020. Based on the date this proxy statement is being made available to shareholders, proposals submitted by shareholders under Rule 14a-8 of the Exchange Act to be presented at the 2020 annual meeting must be received by the Company at its principal executive office no later than December 6, 2019, to be considered for inclusion in the proxy statement and form of proxy relating to that meeting, and must otherwise comply with the SEC rules and regulations. Any such proposals should be sent to the attention of the Secretary of the Company at 11555 N. Meridian Street, Suite 400, Carmel, Indiana 46032.

All Director nominations and other shareholder proposals must be made in accordance with the requirements contained in the Company’s By-Laws, however, the Company is not required to include such nomination or proposal in its proxy statement. See the description of the nomination procedures beginning on page 11.