<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended March 31, 2003
                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from ___________ to __________

                         COMMISSION FILE NUMBER: 0-49771

                             MERCHANTS BANCORP, INC.
             (Exact name of registrant as specified in its charter)

         Ohio                                         31-1467303
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)

   100 North High Street, Hillsboro, Ohio               45133
(Address of principal executive offices)              (Zip Code)

                                 (937) 393-1993
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

         Common stock -- 3,000,000 shares outstanding at March 31, 2003
<PAGE>
                         PART I -- FINANCIAL INFORMATION

ITEM 1.  CONDENSED FINANCIAL STATEMENTS

The accompanying information has not been audited by independent public
accountants; however, in the opinion of management such information reflects all
adjustments necessary for a fair presentation of the results for the interim
period. All such adjustments are of a normal and recurring nature.

The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the disclosures
normally required by accounting principles generally accepted in the United
States of America or those made in the Registrant's 10-K. Accordingly, the
reader of the Form 10-Q should refer to the Registrant's 10-K for the year ended
December 31, 2002 for further information in this regard.




                                       2
<PAGE>
MERCHANTS BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002 (IN THOUSANDS EXCEPT SHARE DATA)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                              MARCH 31,     DECEMBER 31,
                                                                2003           2002
ASSETS                                                      (unaudited)
<S>                                                           <C>            <C>

CASH AND CASH EQUIVALENTS:
  Cash and due from banks                                     $  13,867      $  13,852
  Federal funds sold                                             17,750          8,350
                                                              ---------      ---------
      Total cash and cash equivalents                            31,617         22,202
                                                              ---------      ---------

SECURITIES AVAILABLE FOR SALE
  (amortized cost of $35,593 and $38,596, respectively)          36,921         40,012
                                                              ---------      ---------

LOANS                                                           257,925        248,270
Less allowance for loan losses                                   (2,315)        (2,106)
                                                              ---------      ---------
      Net loans                                                 255,610        246,164
                                                              ---------      ---------

OTHER ASSETS:
  Bank premises and equipment, net                                4,321          4,349
  Accrued interest receivable                                     3,069          3,088
  Deferred income taxes                                             142            111
  Other                                                           3,251          2,873
                                                              ---------      ---------
      Total other assets                                         10,783         10,421
                                                              ---------      ---------

TOTAL                                                         $ 334,931      $ 318,799
                                                              =========      =========

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
  Deposits:
   Noninterest bearing                                        $  29,936      $  30,195
   Interest bearing                                             240,276        232,521
                                                              ---------      ---------
      Total deposits                                            270,212        262,716
                                                              ---------      ---------

 Repurchase agreements                                            3,633          3,365
 FHLB borrowings                                                 24,705         17,470
 Other liabilities                                                1,926          1,740
                                                              ---------      ---------
      Total liabilities                                         300,476        285,291
                                                              ---------      ---------

SHAREHOLDERS' EQUITY:
 Common stock - no par value; 4,500,000 shares authorized
  and 3,000,000 shares issued and outstanding                     2,000          2,000
 Additional paid-in capital                                       2,000          2,000
 Retained earnings                                               29,687         28,682
 Accumulated other comprehensive income                             768            826
                                                              ---------      ---------
      Total shareholders' equity                                 34,455         33,508
                                                              ---------      ---------

TOTAL                                                         $ 334,931      $ 318,799
                                                              =========      =========

</TABLE>



See notes to condensed consolidated financial statements.


                                       3
<PAGE>
MERCHANTS BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (IN THOUSANDS EXCEPT PER
SHARE DATA)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                    2003         2002
                                                                      (unaudited)
<S>                                                               <C>          <C>
INTEREST INCOME:
 Interest and fees on loans                                       $ 4,609      $ 4,530
 Interest and dividends on securities:
  Taxable                                                             213          388
  Exempt from income taxes                                            250          181
Interest on federal funds sold                                         46           68
                                                                  -------      -------
      Total interest income                                         5,118        5,167
                                                                  -------      -------

INTEREST EXPENSE:
 Interest on deposits                                               1,392        2,003
 Interest on repurchase agreements and federal funds purchased         31           17
 Interest on FHLB borrowings                                          236          221
                                                                  -------      -------
      Total interest expense                                        1,659        2,241
                                                                  -------      -------

NET INTEREST INCOME                                                 3,459        2,926

PROVISION FOR LOAN LOSSES                                            (404)         (84)
                                                                  -------      -------

NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                                    3,055        2,842
                                                                  -------      -------

NONINTEREST INCOME - Service charges and fees                         371          352
                                                                  -------      -------

NONINTEREST EXPENSE:
 Salaries and employee benefits                                     1,016          893
 Occupancy                                                            306          274
 Legal and professional services                                      115           93
 Franchise tax                                                         84           84
 Data processing                                                       82           64
 Advertising                                                           41           48
 Other                                                                320          279
                                                                  -------      -------
      Total noninterest expense                                     1,964        1,735
                                                                  -------      -------

INCOME BEFORE INCOME TAXES                                          1,462        1,459

INCOME TAXES                                                         (457)        (464)
                                                                  -------      -------

NET INCOME                                                        $ 1,005      $   995
                                                                  =======      =======

BASIC AND DILUTED EARNINGS PER SHARE                              $  0.34      $  0.33
                                                                  =======      =======
</TABLE>



See notes to condensed consolidated financial statements.




                                       4
<PAGE>
MERCHANTS BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                            2003        2002
                                                                               (unaudited)
<S>                                                                      <C>           <C>
OPERATING ACTIVITIES:
 Net income                                                              $  1,005      $    995
 Adjustments to reconcile net income to net cash provided by
  operating activities:
   Depreciation and amortization                                              227           228
   Provision for loan losses                                                  404            84
   Gain on sale of mortgage loans                                             (78)          (53)
   Proceeds from sale of mortgage loans                                     5,809         3,911
   Mortgage loans originated for sale                                      (5,731)       (3,858)
   Deferred federal income taxes                                                -             4
   Changes in assets and liabilities:
    Accrued interest receivable                                                19            32
    Other assets                                                             (430)         (255)
    Accrued interest, taxes and other liabilities                             238           (72)
                                                                         --------      --------
     Net cash provided by operating activities                              1,463         1,016
                                                                         --------      --------

INVESTING ACTIVITIES:
 Proceeds from sales and maturities of securities available for sale        2,959         3,613
 Purchases of securities available for sale                                     -       (12,419)
 Net increase in loans                                                     (9,850)       (4,584)
 Capital expenditures                                                        (156)         (100)
                                                                         --------      --------
     Net cash used in investing activities                                 (7,047)      (13,490)
                                                                         --------      --------

FINANCING ACTIVITIES:
 Net increase (decrease) in deposits                                        7,496       (14,610)
 Net increase in repurchase agreements                                        268           482
 FHLB borrowings                                                            7,250         9,994
 FHLB payments                                                                (15)            -
                                                                         --------      --------
     Net cash provided by (used in) financing activities                   14,999        (4,134)
                                                                         --------      --------

NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                                                9,415       (16,608)

CASH AND CASH EQUIVALENTS:
 Beginning of year                                                         22,202        34,788
                                                                         --------      --------

 End of year                                                             $ 31,617      $ 18,180
                                                                         ========      ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 Cash paid for federal income taxes                                             -      $    134
                                                                         ========      ========
 Cash paid for interest                                                  $  1,638      $  2,300
                                                                         ========      ========

</TABLE>



                                       5
<PAGE>

MERCHANTS BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
--------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

         The unaudited condensed consolidated financial statements include the
         accounts of Merchants Bancorp, Inc. (the "Company") and its
         wholly-owned subsidiary, Merchants National Bank. All significant
         intercompany balances and transactions have been eliminated in
         consolidation.

         In the opinion of management, these condensed consolidated financial
         statements include all adjustments (which consist of normal recurring
         accruals) necessary to present the condensed consolidated financial
         position as of March 31, 2003 and the results of operations and cash
         flows for the three months ended March 31, 2003 and 2002. These
         condensed consolidated financial statements have been prepared in
         accordance with instructions to Form 10-Q, and therefore do not include
         all information and footnote disclosures necessary for a fair
         presentation of financial position, results of operations and cash
         flows in conformity with accounting principles generally accepted in
         the United States of America. Financial information as of December 31,
         2002 has been derived from the audited Consolidated Financial
         Statements of Merchants Bancorp, Inc. and subsidiary. The results of
         operations and cash flows for the three months ended March 31, 2003 and
         2002 are not necessarily indicative of the results to be expected for
         the full year. For further information, refer to the Consolidated
         Financial Statements and footnotes thereto for the year ended December
         31, 2002, included in the Company's 10-K.

         EARNINGS PER SHARE -- Basic earnings per share is computed using the
         weighted average number of shares of common stock outstanding during
         the period. For the three months ended March 31, 2003 and 2002, the
         Company had three million shares outstanding. There were no common
         stock equivalents outstanding during the respective periods.

2.    LOANS

         Major classifications of loans are summarized as follows
         (in thousands):



<TABLE>
<CAPTION>
                                             MARCH 31,      DECEMBER 31,
                                               2003            2002

<S>                                         <C>            <C>
         Commercial real estate             $  54,765      $  53,104
         Commercial and industrial             27,140         25,779
         Agricultural                          41,763         41,106
         Residential real estate              105,004         99,610
         Installment                           27,695         27,178
         Other                                  1,558          1,493
                                            ---------      ---------
                  Total                       257,925        248,270
         Less allowance for loan losses        (2,315)        (2,106)
                                            ---------      ---------
                                            $ 255,610      $ 246,164
                                            =========      =========
</TABLE>




                                       6
<PAGE>
3.    FHLB BORROWINGS

         All stock in the Federal Home Loan Bank ("FHLB") and qualifying first
         mortgage residential loans are pledged as collateral on FHLB
         borrowings. Maturities and interest rates at March 31, 2003 are as
         follows (dollars in thousands):



<TABLE>
<CAPTION>
                                        INTEREST
          MATURITY                        RATE             AMOUNT
          <S>                          <C>               <C>
          April 10, 2008                    5.39%         $ 1,000
          September 25, 2008                4.78%           3,000
          March 15, 2010                    6.26%           3,000
          September 1, 2011                 5.23%             464
          January 3, 2012                   4.60%          10,000
          March 1, 2013                     3.13%             496
          April 1, 2013                     2.85%           1,250
          March 1, 2018                     3.56%             747
          April 1, 2018                     3.26%           1,250
          March 1, 2023                     3.77%             748
          April 1, 2023                 3.47%-3.74%         2,750
                                                          -------

          Total                                           $24,705
                                                          =======
</TABLE>



         The maximum amount available to the Company under FHLB borrowings was
         approximately $60.9 million and $57.8 million as of March 31, 2003 and
         December 31, 2002, respectively.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

Merchants Bancorp, Inc. (the "Company") is a bank holding company and sole
shareholder of Merchants National Bank (the "Bank"), headquartered in Hillsboro,
Ohio. At March 31, 2003, the Company had total assets of approximately $335
million and total shareholders' equity of approximately $34.5 million.

The Company, through its banking affiliate, offers a broad range of banking
services to the commercial, industrial and consumer market segments which it
serves. The primary business of the Bank consists of accepting deposits through
various consumer and commercial deposit products, and using such deposits to
fund various loan products. The Bank's primary loan products are as follows: (1)
loans secured by residential real estate, including loans for the purchase of
one to four family residences which are secured by 1st and 2nd mortgages and
home equity loans; (2) consumer loans, including new and used automobile loans,
loans for the purchase of mobile homes and debt consolidation loans; (3)
agricultural loans, including loans for the purchase of real estate used in
connection with agricultural purposes, operating loans and loans for the
purchase of equipment; and (4) commercial loans, including loans for the
purchase of real estate used in connection with office or retail activities,
loans for the purchase of equipment and loans for the purchase of inventory.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the appropriate
application of certain accounting policies, many of which require us to make
estimates and assumptions about future events and their impact on amounts


                                       7
<PAGE>
reported in our financial statements and related notes. Since future events and
their impact cannot be determined with certainty, the actual results will
inevitably differ from our estimates. Such differences could be material to the
financial statements.

The Company believes the application of accounting policies and the estimates
required therein are reasonable. These accounting policies and estimates are
constantly reevaluated, and adjustments are made when facts and circumstances
dictate a change. Historically, the Company has found its application of
accounting policies to be appropriate, and actual results have not differed
materially from those determined using necessary estimates.

The Company's accounting policies are more fully described in Note 1 to the
condensed consolidated financial statements.

Management believes that the determination of the allowance for loan losses
represents a critical accounting policy. The Company maintains an allowance for
loan losses to absorb probable loan losses inherent in the portfolio. The
allowance for loan losses is maintained at a level management considers to be
adequate to absorb probable loan losses inherent in the portfolio, based on
evaluations of the collectibility and historical loss experience of loans.
Credit losses are charged and recoveries are credited to the allowance.
Provisions for loan losses are based on management's review of the historical
loan loss experience and such factors which, in management's judgment, deserve
consideration under existing economic conditions in estimating probable credit
losses. The allowance is based on ongoing assessments of the probable estimated
losses inherent in the loan portfolio. The Company's methodology for assessing
the appropriate allowance level consists of several key elements, as described
below.

Larger commercial loans that exhibit probable or observed credit weaknesses are
subject to individual review. Where appropriate, reserves are allocated to
individual loans based on management's estimate of the borrower's ability to
repay the loan given the availability of collateral, other sources of cash flow
and available legal options. Included in the review of individual loans are
those that are impaired as provided in Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended. Any specific reserves for impaired loans are measured based on the fair
value of the underlying collateral. The Company evaluates the collectibility of
both principal and interest when assessing the need for a specific reserve.
Historical loss rates are applied to other commercial loans not subject to
specific reserve allocations.

Homogenous loans, such as consumer installment and residential mortgage loans,
are not individually reviewed by management. Reserves are established for each
pool of loans based on the expected net charge-offs. Loss rates are based on the
average five-year net charge-off history by loan category.

Historical loss rates for commercial and consumer loans may be adjusted for
significant factors that, in management's judgment, reflect the impact of any
current conditions on loss recognition. Factors which management considers in
the analysis include the effects of the local economy, trends in the nature and
volume of loans (delinquencies, charge-offs, nonaccrual and problem loans),
changes in the internal lending policies and credit standards, collection
practices, and examination results from bank regulatory agencies and the
Company's internal credit review function.

An unallocated reserve is maintained to recognize the imprecision in estimating
and measuring loss when evaluating reserves for individual loans or pools of
loans.

Specific reserves on individual loans and historical loss rates are reviewed
throughout the year and adjusted as necessary based on changing borrower and/or
collateral conditions and actual collection and charge-off experience.

                                       8
<PAGE>
The Company has not substantively changed any aspect of its overall approach in
the determination of the allowance for loan losses since January 1, 2003. There
have been no material changes in assumptions or estimation techniques as
compared to prior years that impacted the determination of the current year
allowance.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND
2002

The Company reported net income of $1,005,000 and $995,000 for the three months
ended March 31, 2003 and 2002, respectively. During the same periods, basic and
diluted earnings per share were $.34 and $.33, respectively. On an annualized
basis, return on average assets was 1.24% and return on average equity was
12.01% for the three months ended March 31, 2003, compared to 1.30% and 12.88%,
respectively, for the comparable period in 2002.

Net interest income for the three months ended March 31, 2003, was $3,459,000,
an increase of $533,000, or 18.22%, compared to net interest income of
$2,926,000 for the comparable period in 2002. Net interest margin was 4.53% for
the three months ended March 31, 2003, compared to 4.09% for the comparable
period in 2002. The average annualized yield on earning assets decreased to
6.71% for the three months ended March 31, 2003, from 7.22% for the comparable
period in 2002. The average cost of interest-bearing funds was 2.55% for the
three months ended March 31, 2003, a decrease from 3.66% for the comparable
period in 2002. Management attributes the improved net interest margin to the
relatively short maturity of its certificates of deposit, which have repriced
downward relatively quickly in the current interest rate environment, as well as
the contractual repricing within the mortgage loan portfolio. While many of the
Company's mortgage loan customers have refinanced to a lower interest rate,
other customers have not, but are expected to when their lending terms mature.

The provision for loan losses was $404,000 and $84,000 for the three months
ended March 31, 2003 and 2002, respectively, representing an increase of 381%.
Net charge-offs for the three-months ended March 31, 2003 were $195,000 compared
to $58,000 experienced during the three month ended March 31, 2002. Management
increased the provision for loan losses during the first three months of 2003 to
reflect the increased estimate of probable loan losses in 2003, primarily
related to three borrowers within the agricultural portfolio, which have been
identified by management. Drought conditions, reduced government program
payments, and average to below-average grain prices have affected the repayment
opportunities for these three borrowers. Management has reviewed the borrowings
to these three customers and provided specific reserves totaling $300,000 during
the first quarter of 2003. Management has conducted a review of its agricultural
lending approval process and made modifications where necessary to strengthen
its underwriting of agricultural operating loans. Management believes its review
process has adequately identified probable loans within its portfolio on a
timely basis.

Total noninterest income was $371,000 for the three months ended March 31, 2003,
an increase of $19,000, or 5.4%, from $352,000 for the comparable period in
2002. The increase is due to increased volumes of transactions, resulting in
higher service charges on customers' deposit account transactions.

Total noninterest expense was $1,964,000 for the three months ended March 31,
2003, an increase of $229,000, or 13.2%, from $1,735,000 for the comparable
period in 2002. The increase is primarily due to higher occupancy costs from the
additional branch added in 2002, as well as higher professional fees incurred
for legal and accounting services related to the Company's regulatory filings.
Salaries and benefits expense comprises the largest component of noninterest
expense, with totals of $1,016,000 and $893,000 for the three months ended March
31, 2003 and 2002, respectively. The increase in salaries and benefits expense
is primarily attributable to the additional employees at the new branch and the
hiring of a mortgage loan officer.




                                       9
<PAGE>
FINANCIAL CONDITION

The Company's total assets increased to $335 million as of March 31, 2003 from
$318.8 million as of December 31, 2002, an increase of 5.1%. An increase of $9.6
million in loans was partially offset by a decrease of $3.1 million in
securities. The increase of $7.2 million in FHLB borrowings funded the increase
in loans, which was driven by increases in the residential mortgage portfolio
due to the continued historically low interest rates.

LOANS AND ALLOWANCE FOR LOAN LOSSES

The Company reported total loans of $257.9 million as of March 31, 2003 and
$248.3 million as of December 31, 2002, an increase of $9.6 million, or 3.9%.
The portfolio composition has remained relatively consistent during the period,
with a slight increase in residential mortgage loans.

Federal regulations and generally accepted accounting principles require that
the Company establish prudent allowances for loan losses. The Company maintains
an allowance for loan losses to absorb probable loan losses inherent in the
portfolio, based on evaluations of the collectibility and historical loss
experience of loans. Loan losses are charged and recoveries are credited to the
allowance. Provisions for loan losses are based on management's review of the
historical loan loss experience and such factors which, in management's
judgment, deserve consideration under existing economic conditions in estimating
probable loan losses. The allowance is based on ongoing assessments of the
probable estimated losses inherent in the loan portfolio. The Company has not
substantively changed any aspect of its overall approach in the determination of
the allowance for loan losses during 2003. There have been no material changes
in assumptions or estimation techniques as compared to prior years that impacted
the determination of the current year allowance.

The allowance for loan losses was 0.90% of total loans as of March 31, 2003 and
0.85% as of December 31, 2002.

The amount of nonaccrual loans decreased to $307,000 as of March 31, 2003 from
$476,000 at December 31, 2002. As a percentage of total loans, nonaccrual loans
represented .12% as of March 31, 2003 and 0.19% as of December 31, 2002.

The category of accruing loans which are past due 90 days or more increased to
$2,223,000 as of March 31, 2003 from $1,133,000 as of December 31, 2002. As a
percentage of total loans, loans past due 90 days and still accruing interest
represented .86% as of March 31, 2003 and 0.46% as of December 31, 2002. The
increase of $1.1 million is primarily attributable to borrowings from two
commercial customers. One customer is an FMSA Guaranteed agricultural operating
borrower who experienced an operating loss in 2002. Management is attempting to
restructure this credit, as well as to secure a 90% FMSA Guarantee for 2003 by
the second quarter. The second commercial customer owns a business that has
ceased operations. Management believes that liquidation of the underlying
collateral will be sufficient to mitigate any significant loss on the loan.

As a percentage of the allowance for loan losses, total nonaccrual loans and
loans past due 90 days or more were 109.2% as of March 31, 2003 and 76.4% as of
December 31, 2002.





                                       10
<PAGE>
DEPOSITS

Deposits totaled $270.2 million as of March 31, 2003, an increase of $7.5
million, or 2.9%, from $262.7 million as of December 31, 2002. The increase is
primarily due to the deposits of public deposits from a local municipality.

FHLB BORROWINGS

Federal Home Loan Bank borrowings increased $7.2 million to $24.7 million as of
March 31, 2003 from $17.5 million as of December 31, 2002. The additional
borrowings were primarily used to fund 1-4 family fixed rate loans made and held
by the Bank for additional future loan fundings.

LIQUIDITY AND CAPITAL RESOURCES

The declaration and payment of dividends by the Company are subject to the
discretion of the Board of Directors and to the earnings and financial condition
of the Company and applicable laws and regulations. The Company did not pay any
dividends during the three months ended March 31, 2003 and 2002.

At March 31, 2003, consolidated Tier 1 risk based capital was 13.79%, and total
risk-based capital was 14.74%. The minimum Tier 1 and total risk-based capital
ratios required by the Board of Governors of the Federal Reserve are 4% and 8%,
respectively.

Effective liquidity management ensures that the cash flow requirements of
depositors and borrowers, as well as company cash needs, are met. The Company
manages liquidity on both the asset and liability sides of the balance sheet.
Community bank liquidity management currently involves the challenge of
attracting deposits while maintaining positive loan growth at a reasonable
interest rate spread. The loan to deposit ratio at March 31, 2003 was 95.5%
compared to 94.5% as of December 31, 2002. Loans to total assets were 77% at
March 31, 2003 compared to 77.9% at the end of 2002. The securities portfolio is
available for sale and consists of securities that are readily marketable.
Approximately 45% of the available for sale portfolio is pledged to secure
public deposits, short-term and long-term borrowings and for other purposes as
required by law. The balance of the available for sale securities could be sold
if necessary for liquidity purposes. Also, a stable deposit base, consisting of
88% core deposits, makes the Company less susceptible to large fluctuations in
funding needs. The Company also has both short- and long-term borrowings
capacity available through FHLB with unused available credit of approximately
$16.2 million as of March 31, 2003. The Company has the ability to obtain
deposits in the brokered certificate of deposit market to help provide liquidity
to fund loan growth, if necessary. Generally, the Company uses short-term
borrowings to fund overnight and short-term funding needs in the Company's
balance sheet. Longer-term borrowings have been primarily used to fund
mortgage-loan originations. This has occurred when FHLB longer-term rates are a
more economical source of funding than traditional deposit gathering activities.
Additionally, the Company occasionally uses FHLB borrowings to fund larger
commercial loans.

As of March 31, 2003, management is not aware of any current recommendations by
banking regulatory authorities which, if they were to be implemented, would
have, or would be reasonably likely to have, a material adverse impact on the
Company's liquidity, capital resources, or operations.



                                       11
<PAGE>
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value
of financial instruments due to variations in interest rates, exchange rates,
equity price risk and commodity prices. The Company does not maintain a trading
account for any class of financial instrument, and is not currently subject to
currency exchange rate risk, equity price risk or commodity price risk. The
Company's market risk is composed primarily of interest rate risk.

The major source of the Company's interest rate risk is the difference in the
maturity and repricing characteristics between the Company's core banking assets
and liabilities -- loans and deposits. This difference, or mismatch, poses a
risk to net interest income. Most significantly, the Company's core banking
assets and liabilities are mismatched with respect to repricing frequency,
maturity and/or index. Most of the Company's commercial loans, for example,
reprice rapidly in response to changes in short-term interest. In contrast, many
of the Company's consumer deposits reprice slowly, if at all, in response to
changes in market interest rates.

The Company's Senior Management is responsible for reviewing the interest rate
sensitivity position of the Company and establishing policies to monitor and
limit exposure to interest rate risk. The guidelines established by senior
management are approved by the Company's Board of Directors. The primary goal of
the asset/liability management function is to maximize net interest income
within the interest rate risk limits set by approved guidelines. Techniques used
include both interest rate gap management and simulation modeling that measures
the effect of rate changes on net interest income and market value of equity
under different rate scenarios.


In the Company's simulation models, each asset and liability balance is
projected over a time horizon. Net interest income is then projected based on
expected cash flows and projected interest rates under a stable rate scenario
and analyzed. The results of this analysis are factored into decisions made
concerning pricing strategies for loan and deposits, balance sheet mix,
securities portfolio strategies, liquidity and capital adequacy.

Simulation models are also performed under an instantaneous parallel 200 basis
point increase or decrease in interest rates. The model includes assumptions as
to repricing and expected prepayments, anticipated calls, and expected decay
rates of transaction accounts under the different rate scenarios. The results of
these simulations include changes in both net interest income and market value
of equity.

The Company's rate shock simulation models provide results in extreme interest
rate environments and results are used accordingly. Reacting to changes in
economic conditions, interest rates and market forces, the Company has been able
to alter the mix of short and long-term loans and investments, and increase or
decrease the emphasis on fixed and variable rate products in response to
changing market conditions. By managing the interest rate sensitivity of its
asset composition in this manner, the Company has been able to maintain a fairly
stable flow of net interest income.

Complicating management's efforts to control non-trading exposure to interest
rate risk is the fundamental uncertainty of the maturity, repricing, and/or
runoff characteristics of some of the Company's core banking assets and
liabilities. This uncertainty often reflects options embedded in these financial
instruments. The most important embedded options are contained in consumer
deposits and loans.




                                       12
<PAGE>
For example, many of the Company's interest bearing retail deposit products
(e.g., interest checking, savings and money market deposits) have no contractual
maturity. Customers have the right to withdraw funds from these deposit accounts
freely. Deposit balances may therefore run off unexpectedly due to changes in
competitive or market conditions. To forestall such runoff, rates on interest
bearing deposits may have to be increased more (or reduced less) than expected.
Such repricing may not be highly correlated with the repricing of prime
rate-based or U.S. Treasury-based loans. Finally, balances that leave the
banking franchise may have to be replaced with other more expensive retail or
wholesale deposits. Given the uncertainties surrounding deposit runoff and
repricing, the interest rate sensitivity of core bank liabilities cannot be
determined precisely.

Management believes as of March 31, 2003, there have been no material changes in
the Company's interest rate sensitive instruments which would cause a material
change in the market risk exposures which affect the quantitative and
qualitative risk disclosures as presented in the Company's 10-K filed for the
period ended December 31, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, the Corporation
performed an evaluation, under the supervision and with the participation of the
Company"s management, including the Company's Principal Executive Officer and
Principal Financial Officer, of the effectiveness and the design and operation
of the Company's disclosure controls and procedures pursuant to Rule 13a-14 of
the Securities Exchange Act of 1934. Based upon that evaluation, the Principal
Executive Officer and the Principal Financial Officer concluded that the
Corporation's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company required to be
included in the Company's periodic SEC filings. Since the date of the Company's
most recent evaluation, there were no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.


FORWARD-LOOKING STATEMENTS

Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Economic circumstances, the Company's operation and the
Company's actual results could differ significantly from those discussed in the
forward-looking statements. Forward-looking statements are typically identified
by words or phrases such as "believe," "expect," "anticipate," "intend,"
"estimate," "may increase," "may fluctuate," and similar expressions or future
or conditional verbs such as "will," "should," "would" and "could." These
forward-looking statements involve risks and uncertainties including, but not
limited to, economic conditions, portfolio growth, the credit performance of the
portfolios, including bankruptcies, and seasonal factors; changes in general
economic conditions including the performance of financial markets, the prices
of crops, prevailing inflation and interest rates, and losses on lending
activities; results of various investment activities; the effects of
competitors' pricing policies, of changes in laws and regulations on competition
and of demographic changes on target market populations' savings and financial
planning needs; industry changes in information technology systems on which we
are dependent; and the resolution of legal proceedings and related matters. In
addition, the policies and regulations of the various regulatory authorities
could affect the Company's results. These statements are representative only on
the date hereof, and the Company undertakes no obligation to update any
forward-looking statements made.




                                       13
<PAGE>
                          PART II -- OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

    (a) All applicable exhibits required by Item 601 of Regulation S-K are
        furnished with this report.

    (b) There were no reports on Form 8-K filed during the quarter for which
        this report is filed.





                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                           MERCHANTS BANCORP, INC.

Date:    May 14, 2003                      By:  /s/ Paul W. Pence, Jr.
                                                Paul W. Pence, Jr., President
                                                and Principal Financial Officer


















                                       14
<PAGE>
           CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

         I, Paul W. Pence, Jr., certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Merchants
         Bancorp, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       I am responsible for establishing and maintaining disclosure controls
         and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
         the registrant and I have:

         a)     designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to me by others within
                those entities, particularly during the period in which this
                quarterly report is being prepared;

         b)     evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of this quarterly report (the "Evaluation Date");
                and

         c)     presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

5.       I have disclosed, based on my most recent evaluation, to the
         registrant's auditors and the audit committee of registrant's board of
         directors (or persons performing the equivalent function):

         a)     all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

         b)     any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

6.       I have indicated in this quarterly report whether or not there were
         significant changes in internal controls or in other factors that could
         significantly affect internal controls subsequent to the date of my
         most recent evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.



Date: May 14, 2003                              /s/ Paul W. Pence, Jr.
     -------------------------------            --------------------------
                                                Paul W. Pence, Jr.
                                                Principal Executive and
                                                Financial Officer





                                       15
<PAGE>
                                  EXHIBIT INDEX



<TABLE>
<CAPTION>
   NUMBER                                    DESCRIPTION                     PAGE NUMBER

<S>           <C>                                                            <C>
    3.1.      Amended and Restated Articles of Incorporation of                  N/A
              Merchants Bancorp, Inc. Previously filed as Exhibit (3)(I)
              to the Merchants Bancorp, Inc. Registration Statement on
              Form 10, which was filed April 30, 2002.
                                                                                 N/A
    3.2.      Code of Regulations of Merchants Bancorp, Inc. Previously
              filed as Exhibit (3)(II) to the Merchants Bancorp, Inc.
              Registration Statement on Form 10, which was filed April
              30, 2002.                                                          N/A

    4         See Exhibit 3.

    99.1      Certification of Principal Executive and Financial Officer
              pursuant to 18 U.S.C. Section 1350.                                17
</TABLE>




                                       16