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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12

Merchants Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

- --------------------------------------------------------------------------------

4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------

5) Total fee paid:

- --------------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

- --------------------------------------------------------------------------------

2) Form, Schedule or Registration Statement No.:

- --------------------------------------------------------------------------------

3) Filing Party:

- --------------------------------------------------------------------------------

4) Date Filed:

- --------------------------------------------------------------------------------
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.

SEC 1913 (02-02)

MERCHANTS BANCORP, INC.

HILLSBORO, OH 45133

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

APRIL 26, 2005

The annual meeting of shareholders of Merchants Bancorp, Inc. (the
"Company") will be held at Ponderosa Steak House, 545 South High Street,
Hillsboro, Ohio 45133, on Tuesday, April 26, 2005 at 10:00 a.m., for the purpose
of considering and acting upon the following:

1. To elect members of Class II of the Board of Directors as recommended by
the Board of Directors and designated in the attached Proxy Statement;

2. To transact such other business as may properly come before the meeting or
any adjournment thereof.

The Board of Directors has fixed March 10, 2005 as the record date for the
determination of shareholders entitled to notice of and to vote at the annual
meeting. As of the record date there were 2,666,650 shares of the Company's no
par value common stock outstanding. The stock transfer books of the Company will
not be closed prior to the meeting.

A copy of the Company's Annual Report, which includes the Company's
audited Balance Sheets as of December 31, 2004 and 2003, the related audited
Statements of Income, Statements of Changes in Shareholders' Equity, and
Statements of Cash Flows for each of the three years ended December 31, 2004, is
enclosed.

By order of the Board of Directors,

James D. Evans
Secretary

YOUR VOTE IS IMPORTANT, EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
REVOKE YOUR EXECUTED PROXY AT ANY TIME BEFORE IT IS EXERCISED BY NOTIFYING THE
SECRETARY OF THE COMPANY OF YOUR INTENTION AT OR PRIOR TO THE MEETING. IF YOUR
STOCK IS HELD IN MORE THAN ONE (1) NAME, ALL PARTIES MUST SIGN THE PROXY FORM.

Merchants Bancorp, Inc.

PROXY STATEMENT

This Proxy Statement is furnished to the shareholders of Merchants
Bancorp, Inc. (the "Company") in connection with the solicitation of proxies to
be used in voting at the annual meeting of shareholders of the Company to be
held on April 26, 2005 at Ponderosa Steak House, 545 South High Street,
Hillsboro, Ohio 45133, commencing at 10:00 a.m. The enclosed proxy is solicited
by the Board of Directors and Officers (hereinafter sometimes referred to as
"Management") of the Company. Merchants Bancorp, Inc. is the sole shareholder of
Merchants National Bank, Hillsboro, Ohio (the "Bank"). As a holder of Company
common stock, you have the right to attend the annual meeting of shareholders
and vote your shares as you wish. This Proxy Statement and the enclosed form of
proxy is first sent or delivered to the Company's shareholders on or about March
21, 2005, and the Company is bearing all costs in connection with this
solicitation.

ELECTION OF DIRECTORS AND VOTING PROCEDURES

Shareholders of record on March 10, 2005 are entitled to vote on the
election of the Class II Directors. The shares represented by the accompanying
proxy will be voted as directed if the proxy is properly signed and received by
the Company prior to the annual meeting. Any proxy not designating a vote for,
against or an abstention from any particular proposal will be voted for the
proposal in accordance with Management's recommendations. All shareholders
choosing to give Management their proxies should send their completed proxy form
to the Company in the stamped, self-addressed envelope that is enclosed with
this Proxy Statement. Shareholders have the power to revoke their proxy at any
time prior to the vote by (a) attending the meeting or any adjournment thereof
and advising the Secretary of the Board of Directors of the Company (the
"Secretary") of your intent to vote the shares; (b) by delivering notice in
writing to the Secretary of the revocation of your proxy; or (c) by executing
and delivering a subsequently executed proxy. Unless you revoke your proxy in
one of the manners described above, the proxy holders have the authority to vote
the shares for which the proxy is given at the meeting as scheduled and at any
adjournment thereof.

The Company's Articles of Incorporation currently authorize 4,500,000
Common Shares, all of which are without par value. As of March 10, 2005,
2,666,650 of these Common Shares were issued and outstanding. Each Share of
Common Stock of the Company entitles the holder thereof to one (1) vote on all
matters, except with respect to the election of directors, and a majority of the
votes cast at a meeting of the shareholders will decide every question or matter
submitted to the shareholders, unless as otherwise expressly required by Ohio
law or by the Company's Articles of Incorporation. With respect to the election
of directors, shareholders are entitled to vote their shares cumulatively,
provided that notice of this intention is given by any shareholder of the
Company to the President, the Secretary or any Vice President of the Company not
less than 48 hours before the time fixed for holding a meeting of the
shareholders for the purpose of electing directors. In the event that a
complying notice is provided to the Company, the Secretary shall announce the
availability of cumulative voting upon the convening of the meeting of the
shareholders. If cumulative voting is permitted, each shareholder voting
cumulatively may cast the number of shares he owns times the number of Directors
to be elected in favor of one nominee or allocate such votes among all of the
nominees as he or she determines. The discretionary authority to vote any and
all shares cumulatively on behalf of shareholders submitting proxies in
connection with the Annual Meeting is provided under the Form of Proxy attached
hereto.

In accordance with the Company's Code of Regulations, the Board of
Directors, which currently consists of nine (9) membership positions, is
staggered into three separate classes, designated as Class I, Class II and Class
III. Each class consists of approximately one-third of the total number of
directors as fixed from time-to-time by the Directors or the shareholders.
Directors serve staggered three-year terms, so that directors of one class are
elected at each annual meeting of shareholders. Consequently, the term of office
of one class expires each year. Shareholders will elect the Class II Directors
at the forthcoming Annual Meeting, whose term will expire in the year 2008. The
nominees for election to Class II are Messrs. Charles Davis, William Butler and
Jack Walker. Proxies in the form solicited hereby which are returned to the
Company will be voted in favor of the three (3) nominees specified above unless
otherwise instructed by the shareholder, and such proxies cannot be voted for a
greater number of persons than the number of nominees named herein. Abstentions
and shares not voted by brokers and other entities holding shares on behalf of
beneficial owners will not be counted and will have no effect on the outcome of
the election. The nominees receiving the three (3) highest totals of votes cast
in the election will be elected as Directors.

The following tables set forth information with respect to each Class II
Director, each of whom is a nominee for re-election at the forthcoming Annual
Meeting, and with respect to incumbent Directors in Classes I and III of the
Board of Directors who are not nominees for re-election at the Annual Meeting.

NAME AND AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- -------------------- -------------------------------------- --------------
CLASS II DIRECTORS (TERM EXPIRES 2008)
- ----------------------------------------------------------------------------

William Butler, 68 President, Union Stock Yards 1983
Charles A. Davis, 69 Retired - Charles Davis Motor Sales 1983
Jack Walker, 76 Retired - Insurance Consultant 1974

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
EACH OF THE NOMINEES TO CLASS II OF THE BOARD OF DIRECTORS

CLASS III DIRECTORS (TERM EXPIRES 2006)
- ---------------------------------------------------------------------------------

Donald Fender, Jr., 66 Realtor 1972

Richard S. Carr, 58 Farmer and President of Seven Star Entertainment, a
company which owns and operates movie theaters. 2002

CLASS I DIRECTORS (TERM EXPIRES 2007)
- ---------------------------------------------------------------------------------

Paul W. Pence, Jr., 53 President and CEO of the Company and the Bank 1981

James R. Vanzant, 57 Highland County Health Commissioner 1992
Veterinarian (part-time practice)

Robert Hammond, 61 Attorney, Sole Practitioner 1994

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Company's sole business activity is the operation of its subsidiary
banking operation, Merchants National Bank, sometimes hereinafter referred to
individually as the "Bank" or collectively with the Company as the "Company."
The Boards of Directors of the Bank and the Company are comprised of the same
persons at the present time. The Board of Directors of the Company conducts its
business through regular and special meetings. During the fiscal year ended
December 31, 2004, the Board of Directors of the Company held a total of 24
regular meetings. Each director of the Company attended at least 75 percent of
the total meetings of the Board and committees on which such Board member served
during this period. Neither the Board nor any committee thereof has implemented
a formal policy regarding director attendance at the Annual Meeting, although
such attendance is expected. Typically, the Board holds its annual organization
meeting directly following the Annual Meeting, which results in most directors
being able to the attend the Annual Meeting. In 2004, all Directors attended the
Annual Meeting.

The Board of Directors of the Company operates through standing Nominating
and Governance, Audit and Compensation Committees. The Nominating and Governance
Committee was organized by the Board during the fourth quarter of 2003 and met 2
times in 2004. This Committee considers and proposes director nominees to the
full Board of Directors for election at the Annual Meeting; selects candidates
to fill Board vacancies as they may occur; makes recommendations to the Board
regarding Board committee memberships; and performs any other functions or
duties deemed appropriate. The Nominating and Governance Committee is chaired by
Mr. Hammond and otherwise includes Messrs. Fender and Carr. The Committee
operates under a written charter, a copy of which was provided to shareholders
as an appendix to the proxy materials delivered in connection with our 2004
annual meeting. This charter is not available for on-line viewing on any website
of the Company or otherwise. Each member of the Committee is independent in
accordance with Rule 4200(A)(15) of the National Association of Securities
Dealers listing standards. While the Nominating and Governance Committee will
consider nominating persons recommended by shareholders, it has not actively
solicited recommendations from the Company's shareholders for nominees nor
established any procedures for this purpose. The Committee has determined that
based upon the Company's size and the accessibility of the directors and
executive management to the shareholders, no such policy or procedures are
presently required. However, shareholders may also nominate persons for election
to the Board of Directors by following the procedures contained in the Company's
Code of Regulations. These procedures are discussed more thoroughly in this
proxy statement under the section captioned "Shareholder Proposals for Next
Year's Annual Meeting of Shareholders." The identification and evaluation of all
candidates for nominee to the Board of Director are undertaken on an ad hoc
basis within the context of the Corporation's strategic initiatives at the time
a vacancy occurs on the Board. In evaluating candidates, the Committee considers
a variety of factors, including the candidate's integrity, independence,
qualifications, skills, experience (including experiences in finance and
banking), familiarity with accounting rules and practices, and compatibility
with existing members of the Board. Other than the foregoing, there are no
stated minimum criteria for nominees, although the Committee may consider such
other factors as it may deem at the time to be in the best interest of the
Company and its shareholders, which factors may change from time to time.

The Audit Committee has been established by and amongst the Board of
Directors for the purpose of overseeing the accounting and financial reporting
process of the issuer and audits of the financial statements of the issuer. This
Committee, which met 15 times during 2004, is comprised of the following seven
(7) directors: Donald Fender, Jr.; Richard S. Carr; James R. Vanzant; Robert
Hammond; William Butler; Charles A. Davis; and Jack Walker, each of whom is
independent in accordance with Rule 4200(A)(15) of the National Association of
Securities Dealers listing standards. This Committee also operates under a
written charter, a copy of which was provided to shareholders as an appendix to
the

proxy materials delivered in connection with our 2004 annual meeting. Pursuant
to its charter, the Committee is vested with the exclusive authority to approve
and retain the independent auditor with respect to all audit and permissible
non-audit services provided thereby. In fulfilling its oversight duties, this
Committee reviews with the auditors the plan and scope of the audit and audit
fees; reviews the guidelines established for the dissemination of financial
information; meets periodically with the independent and internal auditors, the
Board and management to monitor the adequacy of reporting, internal controls and
compliance with Company policies; reviews consolidated financial statements; and
performs any other functions or duties deemed appropriate by the Board.

The Compensation Committee, which met 2 times during 2004, is comprised of
the following four (4) nonemployee, independent directors: Donald Fender, Jr.;
James R. Vanzant; William Butler; and Charles A. Davis. An overview of the
functions performed by the Compensation Committee is provided below as part of
the Report of the Compensation Committee.

AUDIT COMMITTEE REPORT

Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Committee's responsibility is to monitor and oversee the
processes.

In this context, the Committee has met and held discussions with
management and the independent accountants. Management represented to the
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the consolidated financial statements with management and
the independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by SAS 61 (communication with Audit
Committees).

The Committee has also received the written disclosures and the letter
from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with the independent accountants that firm's independence.
The Committee has considered whether the provision of non-audit services by the
independent accountants to the Company and its subsidiaries is compatible with
maintaining the independence of the independent accountants.

Based upon the Committee's discussion with management and the independent
accountants and the Committee's review of the representations of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004 filed with the Securities and Exchange Commission.

THIS REPORT IS SUBMITTED BY THE AUDIT COMMITTEE MEMBERS:

DONALD FENDER, JR.; RICHARD S. CARR; JAMES R. VANZANT; ROBERT HAMMOND; WILLIAM
BUTLER; CHARLES A. DAVIS; AND JACK WALKER

INDEPENDENT PUBLIC ACCOUNTANT

The Board of Directors has selected the firm of Deloitte & Touche LLP to
continue to serve as its independent public accountant for the current fiscal
year. Representatives of Deloitte & Touche LLP do not currently intend to be
present in person at the annual meeting of shareholders, but may otherwise be
available by telephone, if necessary. If present, however, they will have the
opportunity to make a statement if they desire to do so and will also be
available to respond to any appropriate questions. Deloitte & Touche LLP billed
the aggregate fees shown below for audit, audit related, tax, and all other
services rendered to the Company and its subsidiary for each of the last two
fiscal years. Audit fees for both years include fees billed in connection with
the audit of the Company's annual financial statements, as well as fees billed
for the review of the unaudited financial statements contained in the Company's
periodic reports on Form 10-Q filed with the Securities and Exchange Commission.
Fees listed under "Audit-Related Fees" relate primarily to assurances provided
to the Company in connection with each of the audits. "All Other Fees" in 2004
represent audit work relating to Sarbanes Oxley compliance work. "All Other
Fees" for 2003 relate to the internal auditing "Co-Source" arrangement, pursuant
to which Deloitte & Touche LLP coordinated and oversaw certain internal auditing
functions performed by personnel of the Company. Deloitte & Touche LLP stopped
providing the Company with these internal auditing services effective with the
beginning of the 2004 fiscal year. Tax fees for 2003 and 2004 include fees
billed in connection with general tax preparation assistance.

2004 2003
-------- -------

AUDIT FEES $120,580 $98,000
AUDIT-RELATED FEES $ 6,100 $ 5,700
TAX FEES $ 15,800 $14,500
ALL OTHER FEES $ 10,150 $45,294

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SHAREHOLDERS

To the Company's knowledge, except as noted below, no person or entity
owns beneficially, directly or indirectly, 5 percent or more of the Company's
common stock as of March 21, 2005.

Amount and Nature of % of
Name and Address of Beneficial Owner Beneficial Ownership Class
- ------------------------------------ -------------------- -----

Paul W. Pence, Jr. 148,695 Shares(1) 5.58%
100 North High Street
Hillsboro, Ohio 45133

Donald E. Fender, Jr. 407,000 Shares(2) 15.26%
221 North High Street
Hillsboro, Ohio 45133-1179

- -------------------------------
(1) Includes 20,190 shares held in the estate of Margaret D. Pence, deceased,
92,497 shares held by the Paul W. Pence Credit Shelter Trust and 28,354
shares held by Paul W. Pence Marital Trust, for which Mr. Pence serves as
trustee and 7,655 shares held by Paul W. Pence, Jr.

(2) Includes 377,000 shares held by the Donald E. Fender, Jr. Revocable Trust,
for which Mr. Fender serves as trustee, and 30,000 shares held jointly by
Mr. Fender with his spouse.

MANAGEMENT

The following table sets forth, as of March 21, 2005, information as to
the beneficial ownership of the Company's Common Stock by each Director and
Named Executive Officer and All Directors and Executive Officers as a group.

SHARES OF COMPANY COMMON STOCK OWNED PERCENTAGE OF BENEFICIAL
NAME BENEFICIALLY OWNERSHIP
- ------------------------------- ------------------------------------ ------------------------

William Butler(1) 41,230 1.55%
Charles A. Davis 1,500 0.06%
Jack Walker(2) 22,000 0.83%
Paul W. Pence, Jr.(7) 148,695 5.58%
James R. Vanzant 1,500 0.06%
Robert Hammond(3) 2,500 0.09%
Donald Fender, Jr.(4) 407,000 15.26%
James D. Evans(5) 12,304 0.46%
Richard S. Carr(6) 8,400 0.32%

ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (9 PERSONS) 645,129 24.21%

- ---------------------------
(1) Includes 30 shares held jointly by Mr. Butler with his spouse, 20,600
shares held by the William R. Butler Revocable Trust, for which Mr. Butler
serves as trustee, and 20,600 shares held by the Janet Sue Butler
Revocable Trust, for which Mr. Butler's spouse serves as trustee.

(2) Includes 11,000 shares held by the Jack E. Walker Trust, for which Mr.
Walker serves as trustee, and 11,000 shares held by the Patricia C. Walker
Trust, for which Mr. Walker's spouse serves as trustee.

(3) Includes 1,500 shares held individually by Mr. Hammond and 1,000 shares
held jointly by Mr. Hammond with his spouse (4) Includes 377,000 shares
held by the Donald E. Fender, Jr. Revocable Trust, for which Mr. Fender
serves as trustee, and 30,000 shares held jointly by Mr. Fender with his
spouse.

(5) Includes 12,100 shares held jointly by Mr. Evans with his spouse, and 204
shares held jointly by Mr. Evans with other members of his immediate
family.

(6) Includes 2,700 shares held individually by Mr. Carr, 2,700 shares held
individually by Mr. Carr's spouse, and 3,000 shares held jointly by Mr.
Carr with his spouse.

(7) Includes 20,190 shares held in the estate of Margaret D. Pence, deceased,
92,497 shares held by the Paul W. Pence Credit Shelter Trust and 28,354
shares held by Paul W. Pence Marital Trust, for which Mr. Pence serves as
trustee and 7,655 shares held by Paul W. Pence, Jr.

EXECUTIVE COMPENSATION AND RELATED ITEMS

The following tables set forth information with respect to the Executive
Officers of the Company.

POSITIONS HELD WITH THE COMPANY RESENT
NAME AND AGE AND BANK POSITION HELD SINCE
- ------------------ ------------------------------------- -------------------

Paul W. Pence, Jr. President and Chief Executive Officer 1981
53
James D. Evans Executive Vice President 1987
55

Each individual has held the position noted during the past five years.
The term of each executive officer is subject to annual renewal by resolution of
the Board of Directors of the Company. The following remuneration table sets
forth all direct remuneration paid by the Bank during the last three fiscal
years to the Company's President and Chief Executive Officer and Executive Vice
President. No other officers' total compensation exceeded $100,000 during the
last three years.

SUMMARY COMPENSATION TABLE(3)

ANNUAL COMPENSATION
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- -------- ------- ------------

Paul W. Pence, Jr. 2004 $158,897 $92,160 $ 11,803(1)
President and Chief 2003 $151,330 $ 9,594 $ 12,314
Executive Officer 2002 $146,896 $93,212 $ 2,696

James D. Evans 2004 $131,458 $60,996 $ 3,763(2)
Executive V.P. 2003 $125,198 $ 7,938 $ 3,756
2002 $122,446 $61,693 $ 2,309

- ----------------
(1) This amount includes premiums for term-life insurance in the amount of
$294, health insurance premiums for Mr. Pence and his immediate family in
the amount of $10,652, and long-term disability insurance premiums in the
amount of $857.

(2) This amount includes premiums for term-life insurance in the amount of
$295, long-term disability insurance premiums in the amount of $1,243, and
Company contributions to its 401(k) plan on behalf of Mr. Evans in the
amount of $2,225.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

There are no employment or change in control contracts between the Company
and any of its named executive officers.

DEFINED BENEFIT PLAN DISCLOSURE

The Company has a defined benefit plan available for participation by all
employees of the Company. Each employee of the Bank who is at least 21 years of
age and has completed one year of "eligibility service" is entitled to
participate in the Plan, and all contributions become fully vested following
five years of service. Pursuant to the Plan, the Bank contributes to a separate
trust account on behalf of employees of the Bank an amount determined by an
independent actuary necessary to provide the benefits set forth in the Plan.
Benefits from the Plan become available to the employee upon retirement, or in
the event of death or disability. If employment is terminated prior to normal
retirement, the employee receives all "vested" contributions based upon an
established vesting schedule.

YEARS OF CREDITED SERVICE
-------------------------------------------------------------
AVERAGE ANNUAL SALARY 10 15 20 25 30 35
- --------------------- ------ ------ ------ ------ ------ ------

$10,000 900 1,350 1,800 2,250 2,700 3,150
$25,000 2,250 3,375 4,500 5,625 6,750 7,875
$50,000 5,186 7,779 10,372 12,965 15,558 18,151
$75,000 9,061 13,592 18,122 22,653 27,183 31,714
$100,000 12,936 19,404 25,872 32,340 38,808 45,276
$125,000 16,811 25,217 33,622 42,028 50,433 58,839
$150,000 20,686 31,029 41,372 51,715 62,058 72,401
$175,000 24,561 36,842 49,122 61,403 73,683 85,964
$200,000 28,436 42,654 56,872 71,090 85,308 99,526
$250,000 28,436 42,654 56,872 71,090 85,308 99,526

Compensation covered under the Plan includes the average of the taxable
wage bases in effect under Section 230 of the Social Security Act for each year
in the 35-year period ending with the year in which the Plan member attains his
social security retirement age. In determining a Plan member's covered
compensation for any Plan year, the taxable wage base for the current Plan year
and any subsequent Plan year shall be assumed to be the same as the taxable wage
base in effect as of the beginning of the Plan year for which the determination
is made.

Benefits for unmarried individuals are calculated on a straight-annuity
amount, and benefits for married individuals are in the form of a qualified
joint and survivor annuity of equivalent actuarial value to the pension
otherwise payable, providing for a reduced pension payable to the plan member
during his life, and after his death providing that one-half of that reduced
pension will continue to be paid during the life of, and to, the spouse to whom
he was married. Optional structures for benefit calculations are available to
Plan members pursuant to the Plan, subject to certain restrictions. Benefits are
not subject to reduction for social security or other offset amounts.

Credited service under the plan for Paul W. Pence, Jr. at the end of 2004
was 24 years, and credited service under the plan for James D. Evans at the end
of 2004 was 18 years.

COMPENSATION OF DIRECTORS

Directors are paid an annual retainer of $9,000, $350 per Regular Meeting
of the Board of Directors (held twice per month), $300 for each Special Meeting
of the Board of Directors, if any, and $300 for each Committee Meeting attended.

Directors of the Company are permitted, at their election, to defer some
or all of their retainer and meeting fee compensation pursuant to the Merchants
National Bank Directors' Deferred Compensation Plan. This plan provides an
avenue for members of the Board of Directors to accumulate additional retirement
income by making elective contributions into an unfunded, nonqualified deferred
compensation plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

During the last fiscal year, the following individuals served as members
of the Compensation Committee: Donald Fender, Jr., Charles A. Davis, William
Butler and James R. Vanzant. Some of the Directors who served on the
Compensation Committee, and the companies with which they are associated, were
customers of and have had banking transactions with the Bank in the ordinary
course of the Bank's business in the past and up to the present time. All loans
and commitments for loans included in such transactions were made on
substantially the same terms including interest rates and collateral as were
prevailing at the time for comparable transactions with other persons. In the
opinion of the Board of Directors of the Bank, these loans and commitments for
loans do not involve more than a normal risk of collectibility or present other
unfavorable features. Additionally, other directors, officers and principal
shareholders of the Company and/or the Bank and the companies with which they
are associated were customers of and have had similar banking transactions with
the Bank in the ordinary course of the Bank's business. All such loans and
commitments for loans included in such transactions were made on substantially
the same terms, including interest rates and collateral, as were prevailing at
the time for comparable transactions with other persons. In the opinion of the
Board of Directors of the Bank, these loans and commitments for loans do not
involve more than a normal risk of collectibility or present other unfavorable
features. The Company and the Bank expect to engage in similar banking
transactions with directors, officers and principal shareholders in the future,
as well.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Company, with respect to all employees,
has the responsibility of implementing the compensation policies and practices
as established by the Board of Directors. At the direction of the Board of
Directors, the Compensation Committee has prepared the following report
regarding executive compensation.

Compensation Philosophy - The employee compensation program of the Company
has been designed to:

- Support a policy that rewards all employees for positive corporate
performance;

- Motivate all employees to advance the strategic business goals of
the Company; and

- Provide competitive compensation opportunities that allow the
Company to compete for and retain talented employees who are
critical to the Company's long-term success.

The Compensation Committee annually evaluates the performance and
considers compensation adjustments for all employees. The President and
Executive Vice President present recommended hourly and salaried employees
compensation adjustments to the committee.

The executive officers review with the committee the performance for the
prior year of key officers of the company. At this time, individual improvement
and development needs and job targets for the coming year for the key officers
are discussed with the committee.

A critical function of the Compensation Committee is to conduct reviews,
assemble compensation survey data and make a recommendation to the full Board of
Directors regarding executive compensation. The Compensation Committee then
presents to the Board of Directors a report on recommended adjustments in the
level of compensation and benefits for executive officers and for all employees.
Final disposition of these recommendations of the committee rests solely with
the

Company's Board of Directors. The primary compensation for the named executive
officers is comprised of three principal components: (1) salary; (2)
distributions pursuant to the Company's Profit Sharing Bonus Plan; and (3)
compensation deferrals under the Company's Executive Investment Plan.

Salary. It is the Compensation Committee's policy that a competitive
base salary is essential in order to retain quality executive personnel. The
salary for each named executive officer is determined annually based upon the
Committee's consideration of two primary factors: competitive compensation
levels; and individual performance. As a method for determining competitive
salary levels, the Committee reviews various reports of peer data and
compensation surveys sponsored by trade and consulting groups within the
financial services industry. The reports and surveys utilized by the Committee
generally break down overall compensation data into subcategories based upon the
relative asset size of the various respondent institutions. The Committee
primarily utilizes the compensation data within its respective asset category.
For purposes of salary determinations made for the previous year, the reports
and surveys included the following: the 2003 Compensation & Benefits Survey
compiled by the Ohio Bankers League, the Illinois Bankers Association and the
Michigan Bankers Association; the Crowe, Chizek and Company LLP 2003 Financial
Institution Compensation Survey; and the Delves Group BAI 2003 Key Executive
Total Compensation Survey (East-North Central Region data). Based upon an
analysis of the report data, the Committee determines an appropriate competitive
salary range for each named executive officer. The exact placement of each named
executive officer within the pre-established range is determined by a final
subjective evaluation by the Committee of the performance of the executive
during the prior year. Following this review and determination process, the
Committee submits its salary recommendations to the full Board of Directors,
which retains authority to review and approve all compensation recommendations
made by the Committee.

Profit Sharing Bonus Plan. It is the Compensation Committee's policy
that a significant portion of employee compensation should be payable annually
in the form of a bonus based principally upon the overall financial performance
of the Company.

The Company adopted its Profit Sharing Bonus Plan in May, 1988. This
plan is based on a formula using the company's return on equity to establish a
"bonus pool" which is distributed among all eligible full and part time
employees. To be eligible to participate, an employee must be employed on
December 31st of the plan year. To determine a participant's bonus payment under
the plan, each participant receives one "share" for every $100 of his or her
gross earnings for the calendar year. At the end of the year, the number of
shares accumulated by each employee are added together to compute the total
number of shares participating in the plan for that calendar year. The bonus
pool is then distributed to participants on a per share basis.

As a general matter, resolutions adopted by the full Board of Directors
effectively allow the named executive officers to participate in the Profit
Sharing Bonus Plan at higher levels than provided for general participants.
Additional compensation provided to the named executive officers pursuant to
these resolutions comes from outside of the general bonus pool, and these
functional modifications in no way affect amounts received by general
participants under the plan. Pursuant to these resolutions, Paul W. Pence, Jr.
effectively participates in the Plan at 2.5 times the amount calculated for him
under the general formula of the Plan. Under the same resolutions, James D.
Evans effectively participates at 2.0 times the amount otherwise calculated for
allotment to him under the Plan's general formula.

Executive Investment Plan. Effective January 1, 1997, the Company
implemented an Executive Investment Plan (the "EIP"). The EIP is structured as a
nonqualified deferred compensation plan, pursuant to which executive officers
and other key employees who occupy senior managerial and professional positions
with the Company are periodically granted options to purchase certain investment
securities purchased and held by the Company. As a condition to the grant of an
option, a participant may

be required to enter into a covenant not to compete with the Company or into an
agreement to remain in the employ of the Company for at least six months.

This plan is structured to defer recognition of taxable income by the
employee until the option is exercised. Pursuant to the EIP, options can be
exercised during a period ranging from six months after the date of grant, to,
in some cases, five years after the optionee's termination of employment.
However, individual grants made pursuant to the EIP may provide that the options
vest in periodic increments. Investment securities initially available for
purchase pursuant to the options consist of publicly traded mutual funds of
varying investment risk. However, once a specific grant becomes 60% vested,
participants are then permitted to redirect the investment from the
pre-established mutual funds into individual equity securities of their
choosing. Options granted under the EIP provide for an initial exercise price of
25% of the fair market value of the investment securities on the date of grant
and are periodically adjusted to maintain the exercise price at 25% of the
current fair market value. The fair market value of options vested during a
particular year over the periodically recalculated exercise price equals the
value of the compensation deferred for that year. No acquisitions of fund shares
subject to option under the EIP were approved for purchase during 2004.

Discussion of CEO Compensation - The Compensation Committee recommended, and the
Board approved, an increase of 5% in base compensation for the Company's Chief
Executive Officer for 2004, which resulted in a base salary for Mr. Pence of
$158,897. This increase reflected consideration of competitive data reported in
the compensation surveys discussed above and the Committee's subjective
assessment of the CEO and recognition of the Company's performance during 2003.
With respect to competitive compensation data reviewed by the Committee, it was
determined that the CEO's total cash compensation for 2004 would likely fall
just above the median level of total cash compensation reported by respondent
institutions within the relevant peer groups. This determination factored in
anticipated payments under the Company's Profit Sharing Bonus Plan assuming the
Company's return in 2004 to historic levels of profitability. All compensation
granted to the CEO pursuant to the Company's Profit Sharing Bonus Plan for
fiscal year 2004, in the amount of $92,160, was calculated in accordance with
the formula provided under the plan and the relevant resolutions of the
Company's Board of Directors.

THIS REPORT ON COMPENSATION IS SUBMITTED BY THE COMPENSATION COMMITTEE MEMBERS:
DONALD FENDER, JR., CHAIRMAN, CHARLES A. DAVIS, WILLIAM BUTLER AND JAMES R.
VANZANT

PERFORMANCE GRAPH - FIVE-YEAR SHAREHOLDER RETURN COMPARISON

The following graph provides a comparative presentation of the Company's
cumulative five-year shareholder returns on an indexed basis with the NASDAQ
Bank Index and the Russell 2000. Specifically, the graph compares the value of
$100 invested at the close of business on December 31, 1999, in the Company's
stock, the NASDAQ Bank Index and the Russell 2000.

[PERFORMANCE LINE GRAPH]

ASSUMES $100 INVESTED ON JANUARY 1, 2000 (BASED ON 12/31/99 CLOSING PRICE)
IN MERCHANTS BANCORP, INC. COMMON STOCK,
THE NASDAQ BANK INDEX & THE RUSSELL 2000

*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS

12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
-------- -------- -------- -------- -------- --------

MERCHANTS BANCORP, INC. $ 100.00 $ 90.4 $ 91.6 $ 81.6 $ 76.7 $ 75.6
NASDAQ BANK INDEX $ 100.00 $ 114.2 $ 123.7 $ 126.6 $ 162.9 $ 186.4
RUSSELL 2000 $ 100.00 $ 97.0 $ 99.4 $ 79.0 $ 116.4 $ 137.7

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership of Company stock, and certain changes in ownership, with the
Securities and Exchange Commission. Officers, directors and greater than ten
percent shareholders are required by regulation of the SEC to furnish the
Company with copies of all Section 16(a) forms they file.

Based solely on review of the copies of such forms furnished to the
Company or written representations that no Form 5s, (Annual Statement of
Beneficial Ownership of Securities) were required, the Company believes that
during 2004 all Section 16(a) filing requirements applicable to its officers,
Directors and ten percent beneficial owners were satisfied.

SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING OF SHAREHOLDERS

If any shareholder of the Company wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the Annual Meeting to
be held in 2006, the proposal must be received by James Evans, Secretary of the
Board of Directors, at the principal executive offices of Merchants Bancorp,
Inc., 100 North High Street, Hillsboro, Ohio 45133, prior to the close of
business on November 20, 2005. Proposals from shareholders for next year's
annual meeting received by the Company after February 4, 2006 will be considered
untimely. With respect to such proposals, the Company will vote all shares for
which it has received proxies in the interest of the Company as determined in
the sole discretion of its Board of Directors. The Company also retains its
authority to discretionarily vote proxies with respect to shareholder proposals
received by the Company after November 20, 2005 but prior to February 4, 2006,
unless the proposing shareholder takes the necessary steps outlined in Rule
14a-4(c)(2) under the Securities Exchange Act of 1934 to ensure the proper
delivery of proxy materials related to the proposal.

The Company's Code of Regulations establishes advance notice procedures
which must be followed by persons (other than the board of directors) who wish
to nominate a candidate for election to the board of directors. In order to
nominate a director for election at a meeting of the shareholders, it is
necessary that you notify the Company in writing not fewer than 14, nor more
than 50, days prior to the meeting unless the Company provides shareholders less
than 21 days notice of the meeting. In such instances, notice of the nominations
must be delivered or mailed to the Company not later than the seventh day after
the notice of the meeting was mailed, or public disclosure of such meeting was
provided. In addition, the notice must meet all other requirements contained in
our Code of Regulations. Any shareholder who wishes to take such action should
obtain a copy of the Code of Regulations and may do so by written request
addressed to the Secretary of the Board of Directors at the principal executive
offices of the Company provided above.

The Board of Directors has not yet established a formal process for
shareholders to send communications to the Board. The Board of Directors has
determined that, in light of the general accessibility of the directors in the
community, no formal shareholder communication process is required at this time.
Nonetheless, shareholders are encouraged to send written communications
regarding the operation or governance of the Company to the attention of Paul W.
Pence, Jr., President, Chief Executive Officer and Board member, at the main
office of the Company.

OTHER MATTERS

The Board of Directors of the Company is not aware of any other matters
that may come before the meeting. However, the enclosed Proxy will confer
discretionary authority with respect to matters which are not known to the Board
of Directors at the time of printing hereof and which may properly come before
the meeting. A copy of the Company's 2004 report filed with the Securities and
Exchange Commission, on Form 10-K, is available without charge to shareholders.
Address all requests, in writing, for this document to Mr. Paul W. Pence,
President, Merchants Bancorp, Inc., 100 North High Street, Hillsboro, Ohio
45133.

By Order of the Board of Directors of
Merchants Bancorp, Inc.

James D. Evans, Secretary

PROXY FOR ANNUAL MEETING OF
MERCHANTS BANCORP, INC.
HILLSBORO, OHIO

KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder of
Merchants Bancorp, Inc., Hillsboro, Ohio, do hereby nominate, constitute, and
appoint Patrick Hays, Joseph P. West, Jr., or Bing Williamson, or any one of
them (with full power of substitution for me and in my name, place and stead) to
vote, including the right to vote cumulatively, all the common stock of said
Company, standing in my name on its books on March 10, 2005, at the Annual
Meeting of its shareholders to be held at Ponderosa Steak House, 545 South High
Street, Hillsboro, Ohio 45133, on April 26, 2005 at 10:00 a.m. (local time), or
any adjournments thereof with all the powers the undersigned would possess if
personally present as follows:

1. To elect three (3) members of Class II (term to expire 2008) to the Board
of Directors.

Nominees:
Charles A. Davis
William Butler
Jack Walker

Withhold Authority to Vote For an
For All Nominees Withhold Authority to Vote For all Nominees Individual Nominee
- ---------------------------------- ------------------------------------------- -----------------------------------

(Except as marked to the contrary) TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, CHECK THE
[ ] [ ] "FOR ALL NOMINEES" BOX AND STRIKE
A LINE THROUGH THE NAME(S) OF THE
NOMINEE(S) FOR WHOM AUTHORITY IS
BEING WITHHELD.

2. To transact such other business as may properly come before the meeting or
any adjournment thereof.

THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" THE ABOVE NOMINEES UNLESS OTHERWISE
MARKED. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT. ALL SHARES
REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED.

The Board of Directors recommends a vote "FOR" the the directors nominated by
the Board of Directors. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS and may be revoked prior to its exercise by either written notice or
personally at the meeting or by a subsequently dated proxy.

____________________________________________________

_______________________________ ________________________________
(STOCKHOLDER SIGNATURE) (DATE)

Please Print Name(s)________________________________

Please Print Number of Shares_______________________

(WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, PLEASE
GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. ALL JOINT OWNERS
MUST SIGN.)

PLEASE SIGN AND RETURN IMMEDIATELY IN THE ENCLOSED POSTPAID ENVELOPE WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.