8-K
Merchants Bancorp (MBIN)
United
States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest eventreported): October 28, 2024
Merchants Bancorp
(Exact Name of Registrant as Specifiedin its Charter)
| Indiana | 001-38258 | 20-5747400 |
|---|---|---|
| (State or Other Jurisdiction<br><br> <br>of Incorporation) | (Commission<br><br> <br>File Number) | (IRS Employer<br><br> <br>Identification No.) |
410 Monon BoulevardCarmel, Indiana 46032
(Address of Principal Executive Offices) (Zip Code)
(317) 569-7420
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title<br> of each class | Trading<br> <br><br> Symbol(s) | Name<br> of each exchange on which registered |
|---|---|---|
| Common Stock, without par value | MBIN | NASDAQ |
| Depositary Shares, each representing a 1/40th interest in a share of Series B Preferred Stock, without par value | MBINO | NASDAQ |
| Depositary<br> Shares, each representing a 1/40th interest in a share of Series C Preferred Stock, without par value | MBINN | NASDAQ |
| Depositary<br> Shares, each representing a 1/40th interest in a share of Series D Preferred Stock, without par value | MBINM | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | ¨ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Results of Operations and Financial Condition.
On October 28, 2024, Merchants Bancorp issued a press release reporting its financial results for the third quarter of 2024. The press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated October 28, 2024 issued by Merchants Bancorp. |
| 104 | Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document. |
SIGNATURE
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 hereunto duly authorized.
| MERCHANTS BANCORP | ||
|---|---|---|
| Date: October 28, 2024 | By: | /s/ Sean Sievers |
| Name: Sean Sievers | ||
| Title: Chief Financial Officer |
Exhibit 99.1
PRESS RELEASE
Merchants BancorpReports Third Quarter 2024 Results
For Release October 28, 2024
| · | Third<br> quarter 2024 net income of $61.3 million, decreased 25% compared to third quarter of 2023<br> and decreased 20% compared to the second quarter 2024, reflecting unfavorable fair market<br> value adjustments to derivatives and servicing rights, and an increase in specific reserves<br> on loans as part of the allowance for credit losses. |
|---|---|
| · | Third<br> quarter 2024 diluted earnings per common share of $1.17 decreased 30% compared to the third<br> quarter of 2023 and decreased 21% compared to the second quarter of 2024. |
| --- | --- |
| · | Unfavorable<br> fair market value adjustments to interest rate floor derivatives on loans and servicing rights<br> of $7.7 million and $6.7 million, respectively, negatively impacted results during the third<br> quarter of 2024 by approximately $0.24 per diluted common share. |
| --- | --- |
| · | Total<br> assets of $18.7 billion surpassed any level previously reported by the Company, increasing<br> 2% compared to June 30, 2024, and increasing 10% compared to December 31, 2023. |
| --- | --- |
| · | Tangible<br> book value per common share reached a record-high of $32.38 and increased 25% compared to<br> $25.82 in the third quarter of 2023 and increased 4% compared to $31.27 in the second quarter<br> of 2024. |
| --- | --- |
| · | As<br> of September 30, 2024, the Company had $5.1 billion in unused borrowing capacity with<br> the Federal Home Loan Bank and the Federal Reserve Discount window, representing 27% of total<br> assets. |
| --- | --- |
| · | The<br> Company’s most liquid assets are in unrestricted cash, short-term investments, including<br> interest-earning demand deposits, mortgage loans in process of securitization, loans held<br> for sale, and warehouse repurchase agreements included in loans receivable. Taken together,<br> with unused borrowing capacity, these totaled $11.1 billion, or 59%, of the $18.7 billion<br> in total assets as of September 30, 2024. |
| --- | --- |
| · | Loans<br> receivable of $10.3 billion, net of allowance for credit losses on loans, decreased $671.3<br> million, or 6%, compared to June 30, 2024, and increased $134.1 million, or 1%, compared<br> to December 31, 2023. |
| --- | --- |
| · | In<br> September 2024 the Company sold $629 million of healthcare bridge loans into a private<br> securitization via a real estate mortgage investment conduit (REMIC). As part of the transaction,<br> the Company purchased a $535 million senior investment security that is classified as held<br> to maturity and carries an 80% lower capital requirement than bridge loans. |
| --- | --- |
CARMEL, Indiana – (PR Newswire) - Merchants Bancorp (the “Company” or “Merchants”) (Nasdaq: MBIN), parent company of Merchants Bank, today reported third quarter 2024 net income of $61.3 million, or diluted earnings per common share of $1.17. This compared to $81.5 million, or diluted earnings per common share of $1.68 in the third quarter of 2023, and compared to $76.4 million, or diluted earnings per common share of $1.49 in the second quarter of 2024.
“Despite a few isolated credit issues and unfavorable fair market value adjustments related to derivatives and servicing rights, our quarterly results underscore the robust, underlying strength of our core businesses. We surpassed several previous records, reaching $18.7 billion in assets and increasing our tangible book value to $32.38, a 25% rise from the prior year. The declining interest rate environment also positions us well to capitalize on promising growth opportunities across various aspects of our operations,” said Michael F. Petrie, Chairman and CEO of Merchants.
Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, “We remain at the forefront of effective capital management, successfully executing another credit risk transfer transaction this quarter through the securitization of $629 million in healthcare loans. This strategy not only protects us from potential credit losses, but also enables us to efficiently deploy capital for our future growth initiatives.”
Net income of $61.3 million for the third quarter 2024 decreased by $20.2 million, or 25%, compared to the third quarter of 2023, primarily driven by:
| · | a<br> $15.4 million, or 13%, increase in net interest income, |
|---|---|
| · | a<br> $6.0 million, or 56%, increase in gain on sale of loans, |
| --- | --- |
| · | a<br> $5.0 million, or 20%, decrease in provision for income taxes, |
| --- | --- |
| · | an<br> $18.9 million, or 109%, decrease in loan servicing fees, primarily due to negative fair market<br> value adjustments to servicing rights, |
| --- | --- |
| · | an<br> $18.4 million, or 43%, increase in noninterest expense, primarily driven by salaries and<br> employee benefits that reflected higher commissions on higher production volume, increases<br> in deposit insurance expenses, and ongoing premium expense associated with the credit default<br> swap, |
| --- | --- |
| · | a<br> $5.6 million decrease in other income, reflecting negative fair market value adjustments<br> to derivatives, and |
| --- | --- |
| · | a<br> $2.9 million, or 72%, increase in the provision for credit losses primarily related to increased<br> specific reserves. |
| --- | --- |
Page | 2
Net income of $61.3 million for the third quarter 2024 decreased by $15.1 million, or 20%, compared to the second quarter of 2024, primarily driven by:
| · | a<br> $5.6 million, or 50%, increase in gain on sale of loans, |
|---|---|
| · | a<br> $4.7 million, or 4%, increase in net interest income, |
| --- | --- |
| · | a<br> $3.1 million, or 31%, decrease in the provision for credit losses, |
| --- | --- |
| · | a<br> $2.7 million, or 12%, decrease in provision for income taxes, |
| --- | --- |
| · | a<br> $12.3 million, or 114%, decrease in loan servicing fees, primarily due to negative fair market<br> value adjustments to servicing rights, |
| --- | --- |
| · | a<br> $10.9 million, or 22%, increase in noninterest expense, primarily driven by salaries and<br> employee benefits that reflected higher commissions on higher production volume and increases<br> in deposit insurance expenses, and |
| --- | --- |
| · | a<br> $6.5 million decrease in other income, reflecting negative fair market value adjustments<br> to derivatives. |
| --- | --- |
Total Assets
Total assets of $18.7 billion at September 30, 2024 increased $440.6 million, or 2%, compared to June 30, 2024, and increased $1.7 billion, or 10%, compared to December 31, 2023. The increase compared to December 31, 2023 was primarily due to growth in loans held for sale and in the warehouse, and multi-family loan portfolios. There was also an increase in securities held to maturity compared to December 31, 2023, primarily due to the purchase of a security representing healthcare loans sold into a securitization in the third quarter of 2024 that was offset by a decline in loans in the healthcare portfolio that were sold into the securitization.
Return on average assets was 1.34% for the third quarter of 2024 compared to 2.03% for the third quarter of 2023 and 1.72% for the second quarter of 2024.
Asset Quality
The allowance for credit losses on loans of $84.5 million, as of September 30, 2024, increased $3.5 million, or 4%, compared to June 30, 2024, and increased $12.8 million, or 18%, compared to December 31, 2023. The increase compared to June 30, 2024 was primarily due to an $8.0 million increase in specific reserves, primarily related to two customers, that was partially offset by lower loan balances due to the securitization of healthcare loans, which reduced the allowance by approximately $4.4 million.
Page | 3
The $84.5 million allowance for credit losses on loans as of September 30, 2024, compared to the net charge-offs of $6.7 million over the last twelve months ended September 30, 2024, could absorb 13 years of losses if recent loss levels continued into the future.
The Company recorded charge-offs for three customers, primarily in the multi-family loan portfolio, for $2.1 million, and recorded $7,000 of recoveries during the third quarter 2024. This compares to $21,000 in charge-offs and $31,000 in recoveries during the third quarter of 2023 and to $3.5 million in charge-offs and $15,000 of recoveries in the second quarter of 2024.
As of September 30, 2024, non-performing loans were $210.9 million, or 2.04% of gross loans receivable, compared to $143.5 million, or 1.30%, as of June 30, 2024, and $82.0 million, or 0.80%, as of December 31, 2023. The increase in non-performing loans compared to both periods was primarily driven by multi-family and healthcare customers with delinquent payments on variable rate loans that have required higher payments largely due to elevated interest rates. The increase was also attributable to the financial deterioration of a few sponsors. Credit quality is expected to improve with recent reductions in interest rates. After six months of consecutive loan performance, the loans are placed back on accrual status.
All substandard loans as of September 30, 2024 have been evaluated for impairment and these loans have specific reserves of $19.2 million, including $8.0 million added during the third quarter of 2024. Although there has been an increase in adversely classified loans, asset values remain strong overall and loans are well-collateralized.
In addition to elevated reserves for credit losses on loans, the Company has been making additional efforts to minimize its credit risk through loan sale and securitization activities since 2019. In April 2023 and March 2024, the Company strategically entered into credit protection arrangements through a credit linked note and credit default swap, respectively, for $1.7 billion in loans to reduce our risk of losses with incremental coverage of approximately 14% on those covered loans. The balance of loans in those covered portfolios as of September 30, 2024 was $1.3 billion.
Securities Available for Sale
Total securities available for sale of $953.1 million as of September 30, 2024 decreased $64.0 million, or 6%, compared to June 30, 2024, and decreased $160.6 million, or 14%, compared to December 31, 2023. The decreases were primarily due to maturities, sales, and repayments, as well as fair value adjustments that were partially offset by purchases. As of September 30, 2024, Accumulated Other Comprehensive Income (“AOCI”) of $0.1 million, related to securities available for sale, increased $0.6 million, or 119%, compared to June 30, 2024, and increased $2.6 million, or 104%, compared to December 31, 2023.
Page | 4
Securities Held to Maturity
Total securities held to maturity of $1.8 billion as of September 30, 2024 increased $463.9 million, or 36%, compared to June 30, 2024, and increased $550.8 million, or 46%, compared to December 31, 2023. The increases were primarily due to purchases of senior investment securities backed by residential and healthcare loans purchased as part of credit risk transfer securitization transactions originated by the Company.
Total Deposits
Total deposits of $12.9 billion at September 30, 2024 decreased $2.0 billion, or 14%, compared to June 30, 2024, and decreased $1.2 billion, or 8%, compared to December 31, 2023. The change compared to both periods was driven by decreases in certificates of deposit accounts. The changes reflected decreases in brokered deposits that were partially offset by growth in core deposits.
Core deposits of $10.1 billion at September 30, 2024 increased $1.3 billion, or 15%, from June 30, 2024 and increased $2.0 billion, or 25%, from December 31, 2023. Core deposits represented 78% of total deposits at September 30, 2024, 59% of total deposits at June 30, 2024, and 58% of total deposits at December 31, 2023.
Total brokered deposits of $2.8 billion at September 30, 2024 decreased $3.3 billion, or 54%, from June 30, 2024 and decreased $3.2 billion, or 53%, from December 31, 2023. As of September 30, 2024, brokered certificates of deposit had a weighted average remaining duration of 56 days.
Liquidity
Cash balances of $601.9 million as of September 30, 2024 increased by $61.0 million compared to June 30, 2024 and increased by $17.5 million compared to December 31, 2023. The Company continues to have significant borrowing capacity, with unused lines of credit totaling $5.1 billion as of September 30, 2024 compared to $7.0 billion at June 30, 2024 and $6.0 billion at December 31, 2023. Furthermore, its $3.2 billion line of credit with the Federal Reserve Bank of Chicago alone could fund 120% of its uninsured deposits, which represented approximately 20% of total deposits as of September 30, 2024.
This liquidity enhances the ability to effectively manage interest expense and asset levels in the future. Additionally, the Company’s business model is designed to continuously sell or securitize a significant portion of its loans, which provides flexibility in managing its liquidity.
Page | 5
Comparisonof Operating Results for the Three Months Ended
September 30,2024 and 2023
NetInterest Income of $132.8 million increased $15.4 million, or 13%, compared to $117.4 million, primarily reflecting an increase in average balances on loans and loans held for sale, which were partially offset by higher average balances on borrowings.
| · | Net<br> interest margin of 2.99% remained unchanged. The margin was negatively impacted by 6 basis<br> points in the third quarter of 2024 from the net reversal of $2.9 million in accrued interest<br> income associated with the movement of loans into nonaccrual status. |
|---|---|
| · | Interest<br> rate spread of 2.43% decreased 1 basis point compared to 2.44%. |
| --- | --- |
InterestIncome of $338.9 million increased $42.3 million, or 14%, primarily reflecting an increase in average balances of loans and loans held for sale, as well as increased average yields and balances on securities available for sale.
| · | Average<br> balances of $14.6 billion for loans and loans held for sale increased 9% compared to $13.4<br> billion. |
|---|---|
| · | Average<br> yields on securities available for sale of 5.84% increased 210 basis points compared to 3.74%. |
| --- | --- |
| · | Average<br> balances of $1.0 billion for securities available for sale increased $354.6 million, or 54%,<br> compared to $656.6 million. |
| --- | --- |
InterestExpense of $206.1 million increased $26.9 million, or 15%, compared to $179.2 million. The increase reflected higher average balances on borrowings and interest-bearing checking accounts, partially offset by lower average rates on borrowings and lower average balances on certificates of deposit.
| · | Average<br> balances of $2.5 billion for borrowings increased $1.8 billion, or 254%, compared to $711.9<br> million. |
|---|---|
| · | Average<br> balances of $5.3 billion for interest-bearing checking increased 9% compared to $4.9 billion. |
| --- | --- |
| · | Average<br> interest rates of 6.39% for borrowings decreased 271 basis points compared to 9.10%. |
| --- | --- |
| · | Average<br> interest rates of 5.47% for certificates of deposit increased 13 basis points compared to<br> 5.34%. |
| --- | --- |
NoninterestIncome of $16.7 million decreased $19.3 million, or 54%, compared to $36.1 million, primarily due to a $18.9 million, or 109%, decrease in net loan servicing fees and a $5.6 million, or 152%, decrease in other income, partially offset by a $6.0 million, or 56%, increase in gain on sale of loans.
Page | 6
| · | Loan<br> servicing fees included a $6.7 million negative fair market value adjustment to servicing<br> rights, with a $1.6 million negative adjustment in the Banking segment and a $5.1 million<br> negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $11.6<br> million positive fair market value adjustment to servicing rights in the prior period with<br> a $1.2 million positive adjustment in the Banking segment and a $10.4 million positive adjustment<br> in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases<br> in rising interest rate environments and declines in falling interest rate environments due<br> to expected prepayments and earning rates on escrow deposits. |
|---|---|
| · | Other<br> income included a $7.7 million negative fair market value adjustment to derivatives that<br> didn’t occur in the prior comparative period. |
| --- | --- |
| · | Gain<br> on sale of loans increased $6.0 million, reflecting higher volume in the multi-family loan<br> portfolio. |
| --- | --- |
NoninterestExpense of $61.3 million increased $18.4 million, or 43%, compared to $42.9 million, primarily due to increases in salaries and employee benefits that reflected higher commissions on higher production volume, as well as a $5.4 million, or 152%, increase in deposit insurance expenses. The higher noninterest expense also reflected a $3.4 million increase in other expenses primarily associated with ongoing premium expense for the credit default swap that was executed in March 2024.
| · | The<br> efficiency ratio of 41.00% increased 1,303 basis points compared to 27.97%. |
|---|
Comparisonof Operating Results for the Three Months Ended
September 30,2024 and June 30, 2024
NetInterest Income of $132.8 million increased $4.7 million, or 4%, compared to $128.1 million, primarily due to higher average balances on borrowings at lower average interest rates that were partially offset by lower average balances on certificates of deposit at higher average interest rates. Higher average balances on loans and loans held for sale also contributed to the higher net interest income.
| · | Net<br> interest margin of 2.99% remain unchanged. The margin was negatively impacted by 6 basis<br> points in the third quarter of 2024 from the net reversal of $2.9 million in accrued interest<br> income associated with the movement of loans into nonaccrual status. This compared to 6 basis<br> points, or $2.5 million in accrued interest income in the second quarter of 2024. |
|---|---|
| · | Interest<br> rate spread of 2.43% decreased 2 basis points compared to 2.45%. |
| --- | --- |
Page | 7
InterestIncome of $338.9 million increased $10.7 million, or 3%, reflecting an increase in average balances on loans and loans held for sale and securities held to maturity, as well as increased average yields in interest earning deposits and other interest or dividends.
| · | Average<br> balances of $14.6 billion for loans and loans held for sale increased 2% compared to $14.3<br> billion. |
|---|---|
| · | Average<br> balances of $1.3 billion for securities held to maturity increased 11% compared to $1.2 billion. |
| --- | --- |
| · | Average<br> yields on interest earning deposits and other interest or dividends of 6.30% increased 59<br> basis points compared to 5.71%. |
| --- | --- |
InterestExpense of $206.1 million increased 3% compared to $200.2 million. The increase was primarily driven by higher average balances on borrowings at lower average rates, as well as higher average balances of interest-bearing checking accounts. These were partially offset by lower average balances on certificates of deposits.
| · | Average<br> balances of $2.5 billion for borrowings increased $1.5 billion, or 144%, compared to $1.0<br> billion. |
|---|---|
| · | Average<br> interest rates of 6.39% for borrowings decreased 161 basis points compared to 8.00%. |
| --- | --- |
| · | Average<br> balances of $5.3 billion for interest-bearing checking accounts increased $363.8 million,<br> or 7%, compared to $4.9 billion. |
| --- | --- |
| · | Average<br> balances of $5.0 billion for certificate of deposit accounts decreased $1.5 billion, or 23%,<br> compared to $6.5 billion. |
| --- | --- |
NoninterestIncome of $16.7 million decreased 47%, compared $31.4 million, primarily due to a $12.3 million, or 114%, decrease in net loan servicing fees, a $6.5 million, or 142%, decrease in other income that was partially offset by an increase of $5.6 million in gain on sale of loans.
| · | Loan<br> servicing fees included a $6.7 million negative fair market value adjustment to servicing<br> rights, with a $1.6 million negative adjustment in the Banking segment and a $5.1 million<br> negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $5.1<br> million positive fair market value adjustment to servicing rights in the prior period, with<br> a $0.6 million positive adjustment in the Banking segment and a $4.5 million positive adjustment<br> in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases<br> in rising interest rate environments and declines in falling interest rate environments due<br> to expected prepayments and earning rates on escrow deposits. |
|---|
Page | 8
| · | Other<br> income included a $7.7 million negative fair market value adjustment to derivatives compared<br> to a $0.2 million positive fair market value adjustment to derivatives in the second quarter<br> of 2024. |
|---|---|
| · | Gain<br> on sale of loans increased $5.6 million reflecting higher volume in the multi-family loan<br> portfolio. |
| --- | --- |
NoninterestExpense of $61.3 million increased $10.9 million, or 22%, compared to $50.4 million, primarily driven by a $6.8 million, or 24%, increase in salaries and employee benefits reflecting higher commissions on higher production volume, and a $3.4 million increase in deposit insurance expenses.
| · | The<br> efficiency ratio of 41.00% increased 941 basis points compared to 31.59%. |
|---|
About Merchants Bancorp
Ranked as a top performing U.S. public bank by S&P Global Market Intelligence, Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple segments, including Multi-family Mortgage Banking that primarily offers multi-family housing and healthcare facility financing and servicing (through this segment it also serves as a syndicator of low-income housing tax credit and debt funds); Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers retail and correspondent residential mortgage banking, agricultural lending, and traditional community banking. Merchants Bancorp, with $18.7 billion in assets and $12.9 billion in deposits as of September 30, 2024, conducts its business primarily through its direct and indirect subsidiaries, Merchants Bank of Indiana, Merchants Capital Corp., Merchants Capital Investments, LLC, Merchants Capital Servicing, LLC, Merchants Asset Management, LLC, and Merchants Mortgage, a division of Merchants Bank of Indiana. For more information and financial data, please visit Merchants’ Investor Relations page at investors.merchantsbancorp.com.
Forward-Looking Statements
This press release contains forward-looking statements which reflect management’s current views with respect to, among other things, future events and financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, management cautions that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated in these forward-looking statements, including the impacts of factors identified in "Risk Factors" or "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
MEDIA CONTACT: REBECCA MARSH
Merchants Bancorp
Phone: (317) 805-4356
Email: rmarsh@bankmerchants.com
INVESTOR CONTACT: SEAN SIEVERS
Merchants Bancorp
Phone: (317) 663-5197
Email: ssievers@bankmerchants.com
Page | 9
ConsolidatedBalance Sheets
(Unaudited)
(In thousands, except share data)
| June 30, | March 31, | December 31, | September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2024 | 2023 | 2023 | ||||||||||
| Assets | |||||||||||||
| Cash<br> and due from banks | 12,214 | $ | 10,242 | $ | 17,924 | $ | 15,592 | $ | 10,633 | ||||
| Interest-earning<br> demand accounts | 589,692 | 530,640 | 490,831 | 568,830 | 396,605 | ||||||||
| Cash<br> and cash equivalents | 601,906 | 540,882 | 508,755 | 584,422 | 407,238 | ||||||||
| Securities<br> purchased under agreements to resell | 3,279 | 3,304 | 3,329 | 3,349 | 3,385 | ||||||||
| Mortgage<br> loans in process of securitization | 430,966 | 209,244 | 142,629 | 110,599 | 476,047 | ||||||||
| Securities<br> available for sale (682,975, 682,774, 700,640 and 722,497 utilizing fair value option at September 30, 2024, June 30,<br> 2024, March 31, 2024 and December 31, 2023) | 953,063 | 1,017,019 | 1,061,288 | 1,113,687 | 624,586 | ||||||||
| Securities<br> held to maturity (1,756,203, 1,291,960, 1,176,178, 1,203,535 and 1,010,745 at fair value, respectively) | 1,755,047 | 1,291,110 | 1,175,167 | 1,204,217 | 1,012,801 | ||||||||
| Federal<br> Home Loan Bank (FHLB) stock and other equity securities | 184,050 | 67,499 | 64,215 | 48,578 | 48,219 | ||||||||
| Loans<br> held for sale (includes 91,084, 102,873, 84,513, 86,663 and 90,875 at fair value, respectively) | 3,808,234 | 3,483,076 | 3,503,131 | 3,144,756 | 3,477,036 | ||||||||
| Loans<br> receivable, net of allowance for credit losses on loans of 84,549, 81,028, 75,712, 71,752 and 66,864, respectively | 10,261,890 | 10,933,189 | 10,690,513 | 10,127,801 | 9,910,681 | ||||||||
| Premises<br> and equipment, net | 53,161 | 46,833 | 42,450 | 42,342 | 36,730 | ||||||||
| Servicing<br> rights | 177,327 | 178,776 | 172,200 | 158,457 | 162,141 | ||||||||
| Interest<br> receivable | 86,612 | 90,360 | 90,303 | 91,346 | 78,401 | ||||||||
| Goodwill | 8,014 | 8,014 | 8,014 | 15,845 | 15,845 | ||||||||
| Other<br> assets and receivables | 329,427 | 343,116 | 360,582 | 307,117 | 242,126 | ||||||||
| Total<br> assets | 18,652,976 | $ | 18,212,422 | $ | 17,822,576 | $ | 16,952,516 | $ | 16,495,236 | ||||
| Liabilities<br> and Shareholders' Equity | |||||||||||||
| Liabilities | |||||||||||||
| Deposits | |||||||||||||
| Noninterest-bearing | 311,386 | $ | 383,260 | $ | 319,872 | $ | 520,070 | $ | 287,846 | ||||
| Interest-bearing | 12,580,501 | 14,533,807 | 13,655,789 | 13,541,390 | 12,719,492 | ||||||||
| Total<br> deposits | 12,891,887 | 14,917,067 | 13,975,661 | 14,061,460 | 13,007,338 | ||||||||
| Borrowings | 3,568,721 | 1,159,206 | 1,835,985 | 964,127 | 1,654,075 | ||||||||
| Deferred<br> and current tax liabilities, net | 19,530 | 25,098 | 43,935 | 19,923 | 18,006 | ||||||||
| Other<br> liabilities | 233,731 | 222,904 | 190,527 | 205,922 | 183,102 | ||||||||
| Total<br> liabilities | 16,713,869 | 16,324,275 | 16,046,108 | 15,251,432 | 14,862,521 | ||||||||
| Commitments<br> and Contingencies | |||||||||||||
| Shareholders'<br> Equity | |||||||||||||
| Common<br> stock, without par value | |||||||||||||
| Authorized<br> - 75,000,000 shares | |||||||||||||
| Issued<br> and outstanding - 45,764,023 shares, 45,757,567 shares, 43,354,718 shares, 43,242,928 shares and 43,240,212 shares | 239,448 | 238,492 | 139,950 | 140,365 | 139,609 | ||||||||
| Preferred<br> stock, without par value - 5,000,000 total shares authorized | |||||||||||||
| 7% Series A Preferred stock - 25 per share liquidation preference | |||||||||||||
| Authorized - no shares at September 30, 2024 or June 30, 2024 and 3,500,000 shares at March 31, 2024 and all prior periods presented | |||||||||||||
| Issued<br> and outstanding - no shares at September 30, 2024 or June 30, 2024 and 2,081,800 shares at March 31, 2024 and all<br> prior periods presented | — | — | 50,221 | 50,221 | 50,221 | ||||||||
| 6%<br> Series B Preferred stock - 1,000 per share liquidation preference | |||||||||||||
| Authorized<br> - 125,000 shares | |||||||||||||
| Issued<br> and outstanding - 125,000 shares (equivalent to 5,000,000 depositary shares) | 120,844 | 120,844 | 120,844 | 120,844 | 120,844 | ||||||||
| 6%<br> Series C Preferred stock - 1,000 per share liquidation preference | |||||||||||||
| Authorized<br> - 200,000 shares | |||||||||||||
| Issued<br> and outstanding - 196,181 shares (equivalent to 7,847,233 depositary shares) | 191,084 | 191,084 | 191,084 | 191,084 | 191,084 | ||||||||
| 8.25%<br> Series D Preferred stock - 1,000 per share liquidation preference | |||||||||||||
| Authorized<br> - 300,000 shares | |||||||||||||
| Issued<br> and outstanding - 142,500 shares (equivalent to 5,700,000 depositary shares) | 137,459 | 137,459 | 137,459 | 137,459 | 137,459 | ||||||||
| Retained<br> earnings | 1,250,176 | 1,200,778 | 1,138,083 | 1,063,599 | 998,252 | ||||||||
| Accumulated<br> other comprehensive income (loss) | 96 | (510 | ) | (1,173 | ) | (2,488 | ) | (4,754 | ) | ||||
| Total<br> shareholders' equity | 1,939,107 | 1,888,147 | 1,776,468 | 1,701,084 | 1,632,715 | ||||||||
| Total<br> liabilities and shareholders' equity | 18,652,976 | $ | 18,212,422 | $ | 17,822,576 | $ | 16,952,516 | $ | 16,495,236 |
All values are in US Dollars.
Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
| Three Months Ended | Change | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | 3Q24 | 3Q24 | |||||||||||
| 2024 | 2024 | 2023 | vs. 2Q24 | vs. 3Q23 | |||||||||||
| Interest Income | |||||||||||||||
| Loans | $ | 290,259 | $ | 284,421 | $ | 266,561 | 2 | % | 9 | % | |||||
| Mortgage loans in process of securitization | 4,062 | 3,044 | 2,583 | 33 | % | 57 | % | ||||||||
| Investment securities: | |||||||||||||||
| Available for sale | 14,855 | 14,784 | 6,182 | — | 140 | % | |||||||||
| Held to maturity | 22,081 | 19,799 | 17,427 | 12 | % | 27 | % | ||||||||
| FHLB stock and other equity securities (dividends) | 3,128 | 1,277 | 572 | 145 | % | 447 | % | ||||||||
| Other | 4,543 | 4,948 | 3,351 | -8 | % | 36 | % | ||||||||
| Total interest income | 338,928 | 328,273 | 296,676 | 3 | % | 14 | % | ||||||||
| Interest Expense | |||||||||||||||
| Deposits | 165,675 | 179,651 | 162,906 | -8 | % | 2 | % | ||||||||
| Borrowed funds | 40,432 | 20,503 | 16,334 | 97 | % | 148 | % | ||||||||
| Total interest expense | 206,107 | 200,154 | 179,240 | 3 | % | 15 | % | ||||||||
| Net Interest Income | 132,821 | 128,119 | 117,436 | 4 | % | 13 | % | ||||||||
| Provision for credit losses | 6,898 | 9,965 | 4,014 | -31 | % | 72 | % | ||||||||
| Net Interest Income After Provision for Credit Losses | 125,923 | 118,154 | 113,422 | 7 | % | 11 | % | ||||||||
| Noninterest Income | |||||||||||||||
| Gain on sale of loans | 16,731 | 11,168 | 10,758 | 50 | % | 56 | % | ||||||||
| Loan servicing fees, net | (1,509 | ) | 10,827 | 17,384 | -114 | % | -109 | % | |||||||
| Mortgage warehouse fees | 1,620 | 1,524 | 1,858 | 6 | % | -13 | % | ||||||||
| Syndication and asset management fees | 1,834 | 3,233 | 2,368 | -43 | % | -23 | % | ||||||||
| Other income | (1,934 | ) | 4,599 | 3,700 | -142 | % | -152 | % | |||||||
| Total noninterest income | 16,742 | 31,351 | 36,068 | -47 | % | -54 | % | ||||||||
| Noninterest Expense | |||||||||||||||
| Salaries and employee benefits | 35,218 | 28,373 | 27,052 | 24 | % | 30 | % | ||||||||
| Loan expense | 1,114 | 993 | 1,038 | 12 | % | 7 | % | ||||||||
| Occupancy and equipment | 2,231 | 2,239 | 2,196 | — | 2 | % | |||||||||
| Professional fees | 3,439 | 3,556 | 2,555 | -3 | % | 35 | % | ||||||||
| Deposit insurance expense | 8,981 | 5,579 | 3,568 | 61 | % | 152 | % | ||||||||
| Technology expense | 2,068 | 1,859 | 1,609 | 11 | % | 29 | % | ||||||||
| Other expense | 8,267 | 7,781 | 4,912 | 6 | % | 68 | % | ||||||||
| Total noninterest expense | 61,318 | 50,380 | 42,930 | 22 | % | 43 | % | ||||||||
| Income Before Income Taxes | 81,347 | 99,125 | 106,560 | -18 | % | -24 | % | ||||||||
| Provision for income taxes | 20,074 | 22,732 | 25,056 | -12 | % | -20 | % | ||||||||
| Net Income | $ | 61,273 | $ | 76,393 | $ | 81,504 | -20 | % | -25 | % | |||||
| Dividends on preferred stock | (7,757 | ) | (7,757 | ) | (8,668 | ) | — | -11 | % | ||||||
| Impact of preferred stock redemption | — | (1,823 | ) | — | 100 | % | — | ||||||||
| Net Income Available to Common Shareholders | $ | 53,516 | $ | 66,813 | $ | 72,836 | -20 | % | -27 | % | |||||
| Basic Earnings Per Share | $ | 1.17 | $ | 1.50 | $ | 1.68 | -22 | % | -30 | % | |||||
| Diluted Earnings Per Share | $ | 1.17 | $ | 1.49 | $ | 1.68 | -21 | % | -30 | % | |||||
| Weighted-Average Shares Outstanding | |||||||||||||||
| Basic | 45,759,667 | 44,569,345 | 43,238,724 | ||||||||||||
| Diluted | 45,910,052 | 44,698,324 | 43,351,208 |
Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
| Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | ||||||||
| 2024 | 2023 | Change | |||||||
| Interest Income | |||||||||
| Loans | $ | 846,678 | $ | 684,743 | 24 | % | |||
| Mortgage loans in process of securitization | 8,826 | 7,358 | 20 | % | |||||
| Investment securities: | |||||||||
| Available for sale | 44,027 | 14,012 | 214 | % | |||||
| Held to maturity | 62,402 | 50,492 | 24 | % | |||||
| FHLB stock and other equity securities (dividends) | 5,249 | 1,470 | 257 | % | |||||
| Other | 14,192 | 7,964 | 78 | % | |||||
| Total interest income | 981,374 | 766,039 | 28 | % | |||||
| Interest Expense | |||||||||
| Deposits | 516,348 | 405,149 | 27 | % | |||||
| Borrowed funds | 77,030 | 37,144 | 107 | % | |||||
| Total interest expense | 593,378 | 442,293 | 34 | % | |||||
| Net Interest Income | 387,996 | 323,746 | 20 | % | |||||
| Provision for credit losses | 21,589 | 33,484 | -36 | % | |||||
| Net Interest Income After Provision for Credit Losses | 366,407 | 290,262 | 26 | % | |||||
| Noninterest Income | |||||||||
| Gain on sale of loans | 37,255 | 28,841 | 29 | % | |||||
| Loan servicing fees, net | 28,720 | 28,360 | 1 | % | |||||
| Mortgage warehouse fees | 4,126 | 5,751 | -28 | % | |||||
| Loss on sale of investments available for sale ^(1)^ | (108 | ) | — | -100 | % | ||||
| Syndication and asset management fees | 10,370 | 7,476 | 39 | % | |||||
| Other income | 8,604 | 9,786 | -12 | % | |||||
| Total noninterest income | 88,967 | 80,214 | 11 | % | |||||
| Noninterest Expense | |||||||||
| Salaries and employee benefits | 93,187 | 74,922 | 24 | % | |||||
| Loan expense | 3,063 | 2,749 | 11 | % | |||||
| Occupancy and equipment | 6,707 | 6,884 | -3 | % | |||||
| Professional fees | 11,094 | 8,547 | 30 | % | |||||
| Deposit insurance expense | 19,685 | 9,552 | 106 | % | |||||
| Technology expense | 5,781 | 4,757 | 22 | % | |||||
| Other expense | 21,093 | 14,611 | 44 | % | |||||
| Total noninterest expense | 160,610 | 122,022 | 32 | % | |||||
| Income Before Income Taxes | 294,764 | 248,454 | 19 | % | |||||
| Provision for income taxes ^(2)^ | 70,044 | 46,693 | 50 | % | |||||
| Net Income | $ | 224,720 | $ | 201,761 | 11 | % | |||
| Dividends on preferred stock | (24,181 | ) | (26,003 | ) | -7 | % | |||
| Impact of preferred stock redemption | (1,823 | ) | — | -100 | % | ||||
| Net Income Available to Common Shareholders | $ | 198,716 | $ | 175,758 | 13 | % | |||
| Basic Earnings Per Share | $ | 4.46 | $ | 4.07 | 10 | % | |||
| Diluted Earnings Per Share | $ | 4.45 | $ | 4.06 | 10 | % | |||
| Weighted-Average Shares Outstanding | |||||||||
| Basic | 44,549,432 | 43,218,125 | |||||||
| Diluted | 44,696,107 | 43,317,343 |
^(1)^ Includes $(108) and $0 respectively, related to accumulated other comprehensive earnings reclassifications.
^(2)^ Includes $26 and $0 respectively, related to income tax benefit for reclassification items.
Key Operating Results
(Unaudited)
($ in thousands, except share data)
| Three Months Ended | Change | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | 3Q24 | 3Q24 | ||||||||||
| 2024 | 2024 | 2023 | vs. 2Q24 | vs. 3Q23 | ||||||||||
| Noninterest expense | $ | 61,318 | $ | 50,380 | $ | 42,930 | 22 | % | 43 | % | ||||
| Net interest income (before provision for credit losses) | 132,821 | 128,119 | 117,436 | 4 | % | 13 | % | |||||||
| Noninterest income | 16,742 | 31,351 | 36,068 | -47 | % | -54 | % | |||||||
| Total income | $ | 149,563 | $ | 159,470 | $ | 153,504 | -6 | % | -3 | % | ||||
| Efficiency ratio | 41.00 | % | 31.59 | % | 27.97 | % | 941 | bps | 1,303 | bps | ||||
| Average assets | $ | 18,311,393 | $ | 17,814,191 | $ | 16,031,015 | 3 | % | 14 | % | ||||
| Net income | 61,273 | 76,393 | 81,504 | -20 | % | -25 | % | |||||||
| Return on average assets before annualizing | 0.33 | % | 0.43 | % | 0.51 | % | ||||||||
| Annualization factor | 4.00 | 4.00 | 4.00 | |||||||||||
| Return on average assets | 1.34 | % | 1.72 | % | 2.03 | % | (38 | )bps | (69 | )bps | ||||
| Return on average tangible common shareholders' equity ^(1)^ | 14.43 | % | 19.55 | % | 26.69 | % | (512 | )bps | (1,226 | )bps | ||||
| Tangible book value per common share ^(1)^ | $ | 32.38 | $ | 31.27 | $ | 25.82 | 4 | % | 25 | % | ||||
| Tangible common shareholders' equity/tangible assets ^(1)^ | 7.95 | % | 7.86 | % | 6.78 | % | 9 | bps | 117 | bps | ||||
| Consolidated ratios | ||||||||||||||
| Total capital/risk-weighted assets^(2)^ | 12.4 | % | 12.0 | % | 11.5 | % | ||||||||
| Tier I capital/risk-weighted assets^(2)^ | 11.7 | % | 11.4 | % | 10.9 | % | ||||||||
| Common Equity Tier I capital/risk-weighted assets^(2)^ | 9.0 | % | 8.7 | % | 7.6 | % | ||||||||
| Tier I capital/average assets^(2)^ | 10.5 | % | 10.6 | % | 10.1 | % |
^(1)^ Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:
^(2)^ As defined by regulatory agencies; September 30, 2024 shown as estimates and prior periods shown as reported.
Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations and cash flows computed in accordance with GAAP; however, they do have a number of limitations. As such, the reader should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. A reconciliation of GAAP to non-GAAP financial measures is below. Net Income Available to Common Shareholders excludes preferred stock. Tangible common shareholders' equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total equity. Tangible Assets is calculated by excluding the balance of goodwill and intangible assets. Tangible book value per share is calculated by dividing tangible common shareholders' equity by the number of shares outstanding.
| Three Months Ended | Change | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | 3Q24 | 3Q24 | ||||||||||
| 2024 | 2024 | 2023 | vs. 2Q24 | vs. 3Q23 | ||||||||||
| Net income | $ | 61,273 | $ | 76,393 | $ | 81,504 | -20 | % | -25 | % | ||||
| Less: preferred stock dividends | (7,757 | ) | (7,757 | ) | (8,668 | ) | — | -11 | % | |||||
| Less: preferred stock redemption | - | (1,823 | ) | - | -100 | % | — | |||||||
| Net income available to common shareholders | $ | 53,516 | $ | 66,813 | $ | 72,836 | -20 | % | -27 | % | ||||
| Average shareholders' equity | $ | 1,941,026 | $ | 1,824,730 | $ | 1,607,779 | 6 | % | 21 | % | ||||
| Less: average goodwill & intangibles | (8,092 | ) | (8,140 | ) | (16,742 | ) | -1 | % | -52 | % | ||||
| Less: average preferred stock | (449,387 | ) | (449,387 | ) | (499,608 | ) | — | -10 | % | |||||
| Average tangible common shareholders' equity | $ | 1,483,547 | $ | 1,367,203 | $ | 1,091,429 | 9 | % | 36 | % | ||||
| Annualization factor | 4.00 | 4.00 | 4.00 | |||||||||||
| Return on average tangible common shareholders' equity | 14.43 | % | 19.55 | % | 26.69 | % | (512 | )bps | (1,226 | )bps | ||||
| Total equity | $ | 1,939,107 | $ | 1,888,147 | $ | 1,632,715 | 3 | % | 19 | % | ||||
| Less: goodwill and intangibles | (8,079 | ) | (8,108 | ) | (16,676 | ) | — | -52 | % | |||||
| Less: preferred stock | (449,387 | ) | (449,387 | ) | (499,608 | ) | — | -10 | % | |||||
| Tangible common shareholders' equity | $ | 1,481,641 | $ | 1,430,652 | $ | 1,116,431 | 4 | % | 33 | % | ||||
| Assets | $ | 18,652,976 | $ | 18,212,422 | $ | 16,495,236 | 2 | % | 13 | % | ||||
| Less: goodwill and intangibles | (8,079 | ) | (8,108 | ) | (16,676 | ) | — | -52 | % | |||||
| Tangible assets | $ | 18,644,897 | $ | 18,204,314 | $ | 16,478,560 | 2 | % | 13 | % | ||||
| Ending common shares | 45,764,023 | 45,757,567 | 43,240,212 | |||||||||||
| Tangible book value per common share | $ | 32.38 | $ | 31.27 | $ | 25.82 | 4 | % | 25 | % | ||||
| Tangible common shareholders' equity/tangible assets | 7.95 | % | 7.86 | % | 6.78 | % | 9 | bps | 117 | bps |
Key Operating Results
(Unaudited)
($ in thousands, except share data)
| Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | ||||||||
| 2024 | 2023 | Change | |||||||
| Noninterest expense | $ | 160,610 | $ | 122,022 | 32 | % | |||
| Net interest income (before provision for credit losses) | 387,996 | 323,746 | 20 | % | |||||
| Noninterest income | 88,967 | 80,214 | 11 | % | |||||
| Total income | $ | 476,963 | $ | 403,960 | 18 | % | |||
| Efficiency ratio | 33.67 | % | 30.21 | % | 346 | bps | |||
| Average assets | $ | 17,642,004 | $ | 14,541,523 | 21 | % | |||
| Net income | 224,720 | 201,761 | 11 | % | |||||
| Return on average assets before annualizing | 1.27 | % | 1.39 | % | |||||
| Annualization factor | 1.33 | 1.33 | |||||||
| Return on average assets | 1.69 | % | 1.85 | % | (16 | )bps | |||
| Return on average tangible common shareholders' equity ^(1)^ | 19.39 | % | 22.61 | % | (322 | )bps | |||
| Tangible book value per common share ^(1)^ | $ | 32.38 | $ | 25.82 | 25 | % | |||
| Tangible common shareholders' equity/tangible assets ^(1)^ | 7.95 | % | 6.78 | % | 117 | bps |
^(1)^ Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:
Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations and cash flows computed in accordance with GAAP; however, they do have a number of limitations. As such, the reader should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. A reconciliation of GAAP to non-GAAP financial measures is below. Net Income Available to Common Shareholders excludes preferred stock. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total assets. Tangible Assets is calculated by excluding the balance of goodwill and intangible assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding.
| Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | ||||||||
| 2024 | 2023 | Change | |||||||
| Net income | $ | 224,720 | $ | 201,761 | 11 | % | |||
| Less: preferred stock dividends | (24,181 | ) | (26,003 | ) | -7 | % | |||
| Less: preferred stock redemption | (1,823 | ) | - | -100 | % | ||||
| Net income available to common shareholders | $ | 198,716 | $ | 175,758 | 13 | % | |||
| Average shareholders' equity | $ | 1,838,182 | $ | 1,550,196 | 19 | % | |||
| Less: average goodwill & intangibles | (8,906 | ) | (16,859 | ) | -47 | % | |||
| Less: average preferred stock | (466,066 | ) | (499,608 | ) | -7 | % | |||
| Average tangible common shareholders' equity | $ | 1,363,210 | $ | 1,033,729 | 32 | % | |||
| Annualization factor | 1.33 | 1.33 | |||||||
| Return on average tangible common shareholders' equity | 19.39 | % | 22.61 | % | (322 | )bps | |||
| Total equity | $ | 1,939,107 | $ | 1,632,715 | 19 | % | |||
| Less: goodwill and intangibles | (8,079 | ) | (16,676 | ) | -52 | % | |||
| Less: preferred stock | (449,387 | ) | (499,608 | ) | -10 | % | |||
| Tangible common shareholders' equity | $ | 1,481,641 | $ | 1,116,431 | 33 | % | |||
| Assets | $ | 18,652,976 | $ | 16,495,236 | 13 | % | |||
| Less: goodwill and intangibles | (8,079 | ) | (16,676 | ) | -52 | % | |||
| Tangible assets | $ | 18,644,897 | $ | 16,478,560 | 13 | % | |||
| Ending common shares | 45,764,023 | 43,240,212 | |||||||
| Tangible book value per common share | $ | 32.38 | $ | 25.82 | 25 | % | |||
| Tangible common shareholders' equity/tangible assets | 7.95 | % | 6.78 | % | 117 | bps |
Merchants Bancorp
Average Balance Analysis
($ in thousands)
(Unaudited)
| Three Months<br> Ended | Three Months<br> Ended | Three Months<br> Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br> 2024 | June 30,<br> 2024 | September 30,<br> 2023 | ||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||
| Assets: | ||||||||||||||||||||||||
| Interest-earning deposits, and<br> other interest or dividends | $ | 484,712 | $ | 7,671 | 6.30 | % | $ | 438,445 | $ | 6,225 | 5.71 | % | $ | 259,630 | $ | 3,923 | 5.99 | % | ||||||
| Securities available for sale | 1,011,146 | 14,855 | 5.84 | % | 1,039,388 | 14,784 | 5.72 | % | 656,561 | 6,182 | 3.74 | % | ||||||||||||
| Securities held to maturity | 1,288,466 | 22,081 | 6.82 | % | 1,160,170 | 19,799 | 6.86 | % | 1,040,070 | 17,427 | 6.65 | % | ||||||||||||
| Mortgage loans in process of<br> securitization | 308,362 | 4,062 | 5.24 | % | 234,706 | 3,044 | 5.22 | % | 208,767 | 2,583 | 4.91 | % | ||||||||||||
| Loans and<br> loans held for sale | 14,603,750 | 290,259 | 7.91 | % | 14,347,165 | 284,421 | 7.97 | % | 13,399,854 | 266,561 | 7.89 | % | ||||||||||||
| Total interest-earning<br> assets | 17,696,436 | 338,928 | 7.62 | % | 17,219,874 | 328,273 | 7.67 | % | 15,564,882 | 296,676 | 7.56 | % | ||||||||||||
| Allowance for credit losses on<br> loans | (81,178 | ) | (76,456 | ) | (63,449 | ) | ||||||||||||||||||
| Noninterest-earning<br> assets | 696,135 | 670,773 | 529,582 | |||||||||||||||||||||
| Total<br> assets | $ | 18,311,393 | $ | 17,814,191 | $ | 16,031,015 | ||||||||||||||||||
| Liabilities & Shareholders'<br> Equity: | ||||||||||||||||||||||||
| Interest-bearing checking | $ | 5,297,908 | 62,603 | 4.70 | % | $ | 4,935,123 | 58,128 | 4.74 | % | $ | 4,882,727 | 58,642 | 4.76 | % | |||||||||
| Savings deposits | 145,305 | 17 | 0.05 | % | 145,262 | 19 | 0.05 | % | 241,861 | 340 | 0.56 | % | ||||||||||||
| Money market | 2,816,906 | 33,858 | 4.78 | % | 2,788,335 | 33,207 | 4.79 | % | 2,798,325 | 33,235 | 4.71 | % | ||||||||||||
| Certificates of deposit | 5,032,159 | 69,197 | 5.47 | % | 6,535,651 | 88,297 | 5.43 | % | 5,255,573 | 70,689 | 5.34 | % | ||||||||||||
| Total interest-bearing<br> deposits | 13,292,278 | 165,675 | 4.96 | % | 14,404,371 | 179,651 | 5.02 | % | 13,178,486 | 162,906 | 4.90 | % | ||||||||||||
| Borrowings | 2,518,405 | 40,432 | 6.39 | % | 1,031,180 | 20,503 | 8.00 | % | 711,948 | 16,334 | 9.10 | % | ||||||||||||
| Total interest-bearing<br> liabilities | 15,810,683 | 206,107 | 5.19 | % | 15,435,551 | 200,154 | 5.22 | % | 13,890,434 | 179,240 | 5.12 | % | ||||||||||||
| Noninterest-bearing deposits | 327,930 | 331,246 | 333,155 | |||||||||||||||||||||
| Noninterest-bearing liabilities | 231,754 | 222,664 | 199,647 | |||||||||||||||||||||
| Total liabilities | 16,370,367 | 15,989,461 | 14,423,236 | |||||||||||||||||||||
| Shareholders'<br> equity | 1,941,026 | 1,824,730 | 1,607,779 | |||||||||||||||||||||
| Total<br> liabilities and shareholders' equity | $ | 18,311,393 | $ | 17,814,191 | $ | 16,031,015 | ||||||||||||||||||
| Net<br> interest income | $ | 132,821 | $ | 128,119 | $ | 117,436 | ||||||||||||||||||
| Net<br> interest spread | 2.43 | % | 2.45 | % | 2.44 | % | ||||||||||||||||||
| Net<br> interest-earning assets | $ | 1,885,753 | $ | 1,784,323 | $ | 1,674,448 | ||||||||||||||||||
| Net<br> interest margin | 2.99 | % | 2.99 | % | 2.99 | % | ||||||||||||||||||
| Average<br> interest-earning assets to average interest-bearing liabilities | 111.93 | % | 111.56 | % | 112.05 | % |
Supplemental Results
(Unaudited)
($ in thousands)
| Net Income | Net Income | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| 2024 | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Segment | |||||||||||||||
| Multi-family Mortgage Banking | $ | 8,068 | $ | 9,037 | $ | 14,685 | $ | 33,714 | $ | 27,893 | |||||
| Mortgage Warehousing | 15,940 | 22,270 | 19,926 | 58,400 | 47,163 | ||||||||||
| Banking | 44,983 | 52,378 | 52,445 | 153,786 | 144,402 | ||||||||||
| Other | (7,718 | ) | (7,292 | ) | (5,552 | ) | (21,180 | ) | (17,697 | ) | |||||
| Total | $ | 61,273 | $ | 76,393 | $ | 81,504 | $ | 224,720 | $ | 201,761 | |||||
| Total Assets | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, 2024 | June 30, 2024 | December 31, 2023 | |||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||
| Segment | |||||||||||||||
| Multi-family Mortgage Banking | $ | 453,281 | 2 | % | $ | 428,299 | 2 | % | $ | 411,097 | 2 | % | |||
| Mortgage Warehousing | 5,842,489 | 31 | % | 5,626,055 | 31 | % | 4,522,175 | 27 | % | ||||||
| Banking | 12,035,581 | 65 | % | 11,885,484 | 65 | % | 11,760,943 | 69 | % | ||||||
| Other | 321,625 | 2 | % | 272,584 | 2 | % | 258,301 | 2 | % | ||||||
| Total | $ | 18,652,976 | 100 | % | $ | 18,212,422 | 100 | % | $ | 16,952,516 | 100 | % | |||
| Gain on Sale of Loans | Gain on Sale of Loans | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| 2024 | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Loan Type | |||||||||||||||
| Multi-family | $ | 15,302 | $ | 9,083 | $ | 8,616 | $ | 32,808 | $ | 23,897 | |||||
| Single-family | 690 | 524 | 951 | 1,494 | 1,430 | ||||||||||
| Small Business Association (SBA) | 739 | 1,561 | 1,191 | 2,953 | 3,514 | ||||||||||
| Total | $ | 16,731 | $ | 11,168 | $ | 10,758 | $ | 37,255 | $ | 28,841 |
Supplemental Results
(Unaudited)
($ in thousands)
| Loans Receivable and Loans Held for Sale | ||||||
|---|---|---|---|---|---|---|
| September 30, | June 30, | December 31, | ||||
| 2024 | 2024 | 2023 | ||||
| Mortgage warehouse repurchase agreements | $ | 1,213,429 | $ | 1,369,965 | $ | 752,468 |
| Residential real estate ^(1)^ | 1,317,234 | 1,345,656 | 1,324,305 | |||
| Multi-family financing | 4,456,129 | 4,160,420 | 4,006,160 | |||
| Healthcare financing | 1,733,674 | 2,495,910 | 2,356,689 | |||
| Commercial and commercial real estate ^(2)(3)^ | 1,548,689 | 1,566,809 | 1,643,081 | |||
| Agricultural production and real estate | 71,391 | 70,244 | 103,150 | |||
| Consumer and margin loans | 5,893 | 5,213 | 13,700 | |||
| 10,346,439 | 11,014,217 | 10,199,553 | ||||
| Less: Allowance for credit losses on loans | 84,549 | 81,028 | 71,752 | |||
| Loans receivable | $ | 10,261,890 | $ | 10,933,189 | $ | 10,127,801 |
| Loans held for sale | 3,808,234 | 3,483,076 | 3,144,756 | |||
| Total loans, net of allowance | $ | 14,070,124 | $ | 14,416,265 | $ | 13,272,557 |
^(1)^ Includes $1.2 billion, $1.2 billion and $1.2 billion of All-In-One © first-lien home equity lines of credit as of September 30, 2024, June 30, 2024 and December 31, 2023, respectively.
^(2)^^^ Includes $0.9 billion, $1.0 billion and $1.1 billion of revolving lines of credit collateralized primarily by mortgage servicing rights as of September 30, 2024, June 30, 2024 and December 31, 2023, respectively.
^(3)^^^ Includes only $19.3 million, $6.8 million and $8.4 million of non-owner occupied commerical real estate as of September 30, 2024, June 30, 2024 and December 31, 2023, respectively.
| Loan Credit Risk Profile | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2024 | June 30, 2024 | December 31, 2023 | |||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||
| Pass | $ | 9,707,205 | 93.8 | % | $ | 10,523,378 | 95.6 | % | $ | 9,879,659 | 96.9 | % | |||
| Special mention | 351,407 | 3.4 | % | 244,000 | 2.2 | % | 191,267 | 1.9 | % | ||||||
| Substandard | 287,827 | 2.8 | % | 246,839 | 2.2 | % | 128,577 | 1.2 | % | ||||||
| Doubtful | — | — | — | — | 50 | — | |||||||||
| Loans receivable | $ | 10,346,439 | 100.0 | % | $ | 11,014,217 | 100.0 | % | $ | 10,199,553 | 100.0 | % | |||
| Charge-offs (year-to-date) | $ | 6,437 | $ | 4,377 | $ | 9,791 | |||||||||
| Recoveries (year-to-date) | $ | 23 | $ | 16 | $ | 41 | |||||||||
| Nonperforming Loans | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| September 30, | June 30, | December 31, | |||||||||||||
| 2024 | 2024 | 2023 | |||||||||||||
| Nonaccrual loans | $ | 210,811 | $ | 143,319 | $ | 73,847 | |||||||||
| 90 days past due and still accruing | 91 | 133 | 8,168 | ||||||||||||
| Total nonperforming loans | $ | 210,902 | $ | 143,452 | $ | 82,015 | |||||||||
| Other real estate owned | $ | 896 | — | — | |||||||||||
| Total nonperforming assets | $ | 211,798 | $ | 143,452 | $ | 82,015 | |||||||||
| Nonperforming loans to total loans | 2.04 | % | 1.30 | % | 0.80 | % | |||||||||
| Nonperforming assets to total assets | 1.14 | % | 0.79 | % | 0.48 | % |