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, 2021
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 |
| Series A Preferred Stock, without par value | MBINP | NASDAQ |
| Depositary Shares, each representing a 1/40th interest in a share of Series B Preferred Stock, without par value | MBINO | NASDAQ |
| Depositary Shares, each representing a 1/40th interest in a share of Series C Preferred Stock, without par value | MBINN | 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 | x |
|---|
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, 2021, Merchants Bancorp issued a press release reporting its financial results for the third quarter of 2021. 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, 2021 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, 2021 | By: | /s/ John F. Macke |
| Name: John F. Macke | ||
| Title: Chief Financial Officer |
Exhibit 99.1
PRESS RELEASE
Merchants Bancorp Reports Third Quarter 2021 Results
For Release October 28, 2021
| · | Third quarter 2021 net income of $58.5 million increased 6% compared to the third quarter of 2020 and increased 14% compared to the<br>second quarter of 2021 |
|---|---|
| · | Third quarter 2021 diluted earnings per common share of $1.83 increased 2% compared to the third quarter of 2020 and increased 16%<br>compared to the second quarter of 2021 |
| --- | --- |
| · | Assets reached another record level of $11.0 billion, increasing 11% compared to June 30, 2021, and increasing 14% compared to<br>December 31, 2020. |
| --- | --- |
| · | Return on average assets was 2.29% in the third quarter of 2021 compared to 2.34% in the third quarter of 2020 and 2.14% in the second<br>quarter of 2021 |
| --- | --- |
| · | Tangible book value per common share reached a new record of $25.36 compared to $18.30 in the third quarter of 2020 and $23.59 in<br>the second quarter of 2021 |
| --- | --- |
| · | Credit quality remained strong, as nonperforming loans represented 0.05% of loans receivable compared to 0.05% at June 30, 2021<br>and 0.11% at December 31, 2020 |
| --- | --- |
CARMEL, Indiana – (PR Newswire) - Merchants Bancorp (the “Company” or “Merchants”) (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported third quarter 2021 net income of $58.5 million, or diluted earnings per common share of $1.83. This compared to $55.0 million, or diluted earnings per common share of $1.79 in the third quarter of 2020, and compared to $51.4 million, or diluted earnings per common share of $1.58 in the second quarter of 2021.
“As total assets surpassed the $10 billion mark during the third quarter, Merchants continued to effectively manage its capital by organically growing its product offerings and expanding its customer base to deliver profitable growth, all while minimizing credit and interest rate risk. During the quarter our tangible book value reached $25.36 per common share, return on assets reached 2.29%, and our return on average tangible common equity was 29.8%,” said Michael F. Petrie, Chairman and CEO of Merchants.
Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, “The demand for affordable housing continues to grow and we have never been better positioned to offer both debt and equity products to support our multi-family customers. Our low-income housing tax credit syndication business was launched late last year and has already closed several funds. We also started a new multi-family debt fund during the third quarter. Warehouse and single-family have performed well despite an industry decline, and our SBA platform has shown significant growth and expanded nationally. The breadth, diversity, and risk levels of our product offerings have positioned us well for profitable growth.”
Net income for the third quarter 2021 increased by $3.5 million, or 6%, compared to the third quarter of 2020, driven by a $3.6 million, or 5%, increase in net interest income that reflected a 23% decrease in the cost of deposits and a 1% increase in interest income from higher loan balances. Also contributing to the increase was a $1.6 million, or 4%, increase in noninterest income. Noninterest income for the third quarter of 2021 benefited from a $3.0 million positive fair market value adjustment to servicing rights that compared to $1.0 negative fair market value adjustment in the third quarter of 2020.
Net income for the third quarter 2021 increased by $7.1 million, or 14%, compared to the second quarter of 2021, primarily driven by a $7.4 million, or 23%, increase in noninterest income, as gain on sale of loans increased by 15% and loan servicing fees more than doubled. Loan servicing fees for the third quarter of 2021 benefited from a $3.0 million positive fair market value adjustment compared to $0.7 positive fair market value adjustment in the second quarter of 2021. Net interest income also contributed to the growth in net income, as it grew 7% compared to the second quarter of 2021.
Total Assets
Total assets of $11.0 billion at September 30, 2021 increased $1.1 billion, or 11%, compared to June 30, 2021, and increased $1.3 billion, or 14%, compared to December 31, 2020.
Return on average assets was 2.29% for the third quarter of 2021 compared to 2.34% for the third quarter of 2020 and 2.14% for the second quarter of 2021.
Asset Quality
The allowance for loan losses of $29.1 million at September 30, 2021 increased $0.4 million compared to June 30, 2021 and increased $1.6 million compared to December 31, 2020. The increases compared to December 31, 2020 were primarily based on growth in the multi-family loan portfolio. The portion of the allowance associated with the COVID-19 pandemic has remained relatively steady since September 30, 2020, at approximately $0.7 million. As of September 30, 2021, the Company had only 3 loans remaining in payment deferral arrangements, with unpaid balances of $37.0 million.
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Non-performing loans were $2.9 million, or 0.05%, of loans receivable at September 30, 2021, compared to $3.0 million, or 0.05% of loans receivable at June 30, 2021, and compared to $6.3 million, or 0.11% of loans receivable at December 31, 2020.
Total Deposits
Total deposits of $8.9 billion at September 30, 2021 increased $907.7 million compared to June 30, 2021, and increased $1.5 billion, or 21%, compared to December 31, 2020. The increase compared to December 31, 2020 was primarily due to growth in brokered certificates of deposits.
Total brokered deposits of $1.7 billion at September 30, 2021 increased $813.3 million, or 95%, from June 30, 2021 and increased $492.7 million, or 42%, from December 31, 2020. Brokered deposits represented 19% of total deposits at September 30, 2021 compared to 11% of total deposits at June 30, 2021 and 16% of total deposits at December 31, 2020. The increases reflected a shift from borrowing at the Federal Home Loan Bank of Indianapolis during the third quarter of 2021 after a change in their collateral policy to eliminate certain agency eligible mortgage loan participations.
Liquidity
Cash balances of $802.6 million at September 30, 2021 increased by $400.5 million compared to June 30, 2021 and increased by $622.8 million compared to December 31, 2020. The Company also continues to have significant borrowing capacity, with unused lines of credit at $2.1 billion at September 30, 2021 compared to $3.3 billion at June 30, 2021 and $2.6 billion at December 31, 2020. This liquidity enhances the ability to effectively manage interest expense and asset levels in the future. The decrease in borrowing capacity compared to prior periods reflected the change in collateral policy at the Federal Home Loan Bank of Indianapolis to eliminate certain agency eligible mortgage loan participations.
Net Interest Income
Net interest income of $68.9 million in the third quarter of 2021 increased $3.6 million, or 5%, compared to the third quarter of 2020 and increased $4.5 million, or 7%, compared to the second quarter of 2021.
The 5% increase in net interest income compared to the third quarter of 2020 reflected a 23% decrease in the cost of deposits and a 1% increase in interest income from higher loan balances. The interest rate spread of 2.67% for the third quarter of 2021 decreased 7 basis points compared to 2.74% in the third quarter of 2020. The net interest margin of 2.73% for the third quarter of 2021 decreased 8 basis points compared to 2.81% for the third quarter of 2020. The modest decrease in net interest margin compared to the third quarter of 2020 reflected lower funding costs and higher loan balances that were outpaced by lower interest rates on loans.
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The 7% increase in net interest income compared to the second quarter of 2021 reflected higher loan balances and lower rates on loans. The interest rate spread of 2.67% for the third quarter of 2021 decreased 1 basis point compared to 2.68% in the second quarter of 2021. The net interest margin of 2.73% for the third quarter of 2021 also decreased 2 basis points compared to 2.75% for the second quarter of 2021.
Interest Income
Interest income of $77.3 million in the third quarter of 2021 increased $1.1 million, or 1%, compared to the third quarter of 2020 and increased $4.9 million, or 7%, compared to the second quarter of 2021.
The 1% increase in interest income compared to the third quarter of 2020 was primarily due to significant loan growth that was partially offset by lower rates. The higher interest income reflected a $765.4 million, or 10%, increase in the average balance of loans, including loans held for sale, which reached $8.7 billion for the third quarter of 2021. The average yield on loans and loans held for sale of 3.33% for the third quarter of 2021 decreased 28 basis points compared to 3.61% for the third quarter of 2020.
The 7% increase in interest income compared to the second quarter of 2021 reflected a $783.4 million, or 10%, increase in the average balance of loans, including loans held for sale, which reached $8.7 billion for the third quarter of 2021. The average yield on loans and loans held for sale of 3.33% for the third quarter of 2021 decreased 13 basis points compared to 3.46% for the second quarter of 2021.
Interest Expense
Total interest expense decreased $2.5 million, or 23%, to $8.4 million for the third quarter of 2021 compared to the third quarter of 2020 and increased $0.4 million, or 5%, compared to the second quarter of 2021. Interest expense on deposits of $7.0 million for the third quarter of 2021 decreased $2.1 million, or 23%, compared to the third quarter of 2020 and increased $0.3 million, or 4%, compared to the second quarter of 2021.
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The 23% decrease in interest expense on deposits compared to the third quarter of 2020 was primarily due to significant decreases in average balances and rates of certificates of deposits. The average balance of interest-bearing deposits of $7.8 billion for the third quarter of 2021 increased $576.4 million, or 8%, compared to the third quarter of 2020. The average yield of interest-bearing deposits was 0.35% for the third quarter of 2021, which was a 15 basis point decrease compared to 0.50% for the third quarter of 2020.
The 4% increase in interest expense on deposits compared to the second quarter of 2021 was primarily due to higher balances of money market and certificates of deposit that were partially offset by lower rates on certificates of deposit. The average balance of interest-bearing deposits of $7.8 billion for the third quarter of 2021 increased $427.8 million, or 6%, compared to the second quarter of 2021. The average yield of interest-bearing deposits was 0.35% for the third quarter of 2021, which was a 1 basis point decrease compared to 0.36% in the second quarter of 2021.
Noninterest Income
Noninterest income of $40.3 million for the third quarter of 2021 increased $1.6 million, or 4%, compared to the third quarter of 2020 and increased $7.4 million, or 23%, compared to the second quarter of 2021.
The 4% increase in noninterest income compared to the third quarter of 2020 was primarily due to a $6.0 million increase in loan servicing fees that was partially offset by a $4.1 million decrease in mortgage warehouse fees. Included in loan servicing fees for the third quarter of 2021 was a $3.0 million positive fair market value adjustment to servicing rights, which compared to a $1.0 million negative fair market value adjustment for the third quarter of 2020.
The 23% increase in noninterest income compared to the second quarter of 2021 was primarily due to a $3.9 million increase in gain on sale of loans and a $3.6 million increase in loan servicing fees. Included in loan servicing fees for the third quarter of 2021 was a $3.0 million positive fair market value adjustment to servicing rights, which compared to a $0.7 million positive fair market value adjustment for the second quarter of 2021.
At September 30, 2021, servicing rights were valued at $105.5 million, an increase of 39% compared to September 30, 2020 and an increase of 7% compared to June 30, 2021. These increases were driven by higher loan balances of serviced assets and higher interest rates that impacted fair market value adjustments in the third quarter of 2021. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments.
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Noninterest Expense
Noninterest expense of $29.5 million for the third quarter of 2021 increased $3.1 million, or 12%, compared to the third quarter of 2020 and increased $1.3 million, or 5%, compared to the second quarter of 2021.
The 12% increase in noninterest expense compared to the third quarter of 2020 was due primarily to a $3.6 million, or 22%, increase in salaries and employee benefits, including commissions, to support higher loan production volumes. The efficiency ratio of 27.0% for the third quarter of 2021 compared to 25.4% for the third quarter of 2020.
The 5% increase in noninterest expense compared to the second quarter of 2021 was primarily due to a $1.3 million, or 7%, increase in salaries and employee benefits that reflected higher commissions from higher loan volumes. The efficiency ratio of 27.0% for the third quarter of 2021 compared to 29.0% for the second quarter of 2021.
Segments
Multi-family Mortgage Banking
For the third quarter of 2021, net income of $14.5 million for Multi-family Mortgage Banking increased 145% compared with the third quarter of 2020, primarily due to higher noninterest income from gain on sale of loans. Noninterest income reflected a positive fair market value adjustment of $0.7 million on servicing rights in the third quarter of 2021 compared to a negative fair market value adjustment of $0.7 million in the third quarter of 2020.
Compared to the second quarter of 2021, net income for this segment increased 32%, reflecting higher gain on sale of loans and loan servicing fees. Included in loan servicing fees was a positive fair market value adjustment of $0.7 million on servicing rights in the third quarter of 2021 compared to a positive fair market value adjustment of $0.1 million in the second quarter of 2021.
Banking
For the third quarter of 2021, net income of $23.5 million for Banking increased 34% from to the third quarter of 2020, reflecting higher net interest income that was partially offset by lower gains on sale of loans. Included in noninterest income for the third quarter of 2021 was a $2.3 million positive fair market value adjustment to servicing rights, which compared to a $0.2 million negative fair market value adjustment for the third quarter of 2020.
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Net income for this segment increased 8% from the second quarter of 2021 primarily due to higher net interest income and higher loan servicing fees that were partially offset by an increase in the provision for loan losses. Included in loan servicing fees for the third quarter of 2021 was a $2.3 million positive fair market value adjustment to servicing rights, which compared to a $0.6 million positive fair market value adjustment for the second quarter of 2021.
Mortgage Warehousing
For the third quarter of 2021, net income of $23.2 million for Mortgage Warehousing decreased 31% compared to the third quarter of 2020 and increased 8% compared to the second quarter of 2021. The decreases compared to the prior year period reflected lower net interest income as industry volumes declined.
About Merchants Bancorp
Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple lines of business, including Federal Housing Administration ("FHA") multi-family housing and healthcare facility financing and servicing; mortgage warehouse financing; retail and correspondent residential mortgage banking; agricultural lending; and traditional community banking. Merchants Bancorp, with $11.0 billion in assets and $8.9 billion in deposits as of September 30, 2021, conducts its business primarily through its direct and indirect subsidiaries, Merchants Bank of Indiana, Merchants Capital Corp., Farmers-Merchants Bank of Illinois, Merchants Capital Servicing, 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.
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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, such as the potential impacts of the COVID-19 pandemic. 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 the COVID-19 pandemic, such as the severity, magnitude, duration and businesses’ and governments’ responses thereto, on the Company’s operations and personnel, and on activity and demand across its businesses, and other 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 we do 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@merchantsbankofindiana.com
INVESTOR CONTACT: JOHN MACKE
Merchants Bancorp
Phone: (317) 536-7421
Email: jmacke@merchantsbankofindiana.com
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| Consolidated Balance Sheets | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||||
| (In<br> thousands, except share data) | ||||||||||
| June 30, | March 31, | December 31, | September 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2021 | 2021 | 2020 | 2020 | |||||||
| Assets | ||||||||||
| Cash and due from banks | 14,352 | $ | 13,745 | $ | 12,003 | $ | 10,063 | $ | 9,276 | |
| Interest-earning demand accounts | 788,224 | 388,304 | 257,436 | 169,665 | 419,926 | |||||
| Cash and cash equivalents | 802,576 | 402,049 | 269,439 | 179,728 | 429,202 | |||||
| Securities purchased under agreements to resell | 5,923 | 6,507 | 6,544 | 6,580 | 6,616 | |||||
| Mortgage loans in process of securitization | 634,027 | 461,914 | 432,063 | 338,733 | 374,721 | |||||
| Available for sale securities | 301,119 | 315,260 | 241,691 | 269,802 | 278,861 | |||||
| Federal Home Loan Bank (FHLB) stock | 70,767 | 70,767 | 70,656 | 70,656 | 70,656 | |||||
| Loans held for sale (includes 26,296, 26,623, 57,998, 40,044 and 41,418, respectively, at fair value) | 3,453,279 | 2,955,390 | 2,749,662 | 3,070,154 | 3,319,619 | |||||
| Loans receivable, net of allowance for loan losses of 29,134, 28,696, 29,091, 27,500 and 23,436, respectively | 5,431,227 | 5,444,227 | 5,710,291 | 5,507,926 | 4,857,554 | |||||
| Premises and equipment, net | 31,423 | 31,384 | 31,261 | 29,761 | 29,261 | |||||
| Servicing rights | 105,473 | 98,331 | 96,215 | 82,604 | 75,772 | |||||
| Interest receivable | 21,894 | 22,068 | 22,111 | 21,770 | 19,130 | |||||
| Goodwill | 15,845 | 15,845 | 15,845 | 15,845 | 15,845 | |||||
| Intangible assets, net | 1,843 | 1,990 | 2,136 | 2,283 | 2,657 | |||||
| Other assets and receivables | 76,637 | 55,800 | 57,346 | 49,533 | 50,581 | |||||
| Total assets | 10,952,033 | $ | 9,881,532 | $ | 9,705,260 | $ | 9,645,375 | $ | 9,530,475 | |
| Liabilities and Shareholders' Equity | ||||||||||
| Liabilities | ||||||||||
| Deposits | ||||||||||
| Noninterest-bearing | 824,118 | $ | 814,567 | $ | 818,621 | $ | 853,648 | $ | 666,081 | |
| Interest-bearing | 8,123,201 | 7,225,011 | 7,244,560 | 6,554,418 | 6,418,566 | |||||
| Total deposits | 8,947,319 | 8,039,578 | 8,063,181 | 7,408,066 | 7,084,647 | |||||
| Borrowings | 809,136 | 701,373 | 545,160 | 1,348,256 | 1,618,201 | |||||
| Deferred and current tax liabilities, net | 21,681 | 18,819 | 41,610 | 20,405 | 22,405 | |||||
| Other liabilities | 64,019 | 62,698 | 44,054 | 58,027 | 48,087 | |||||
| Total liabilities | 9,842,155 | 8,822,468 | 8,694,005 | 8,834,754 | 8,773,340 | |||||
| Commitments and Contingencies | ||||||||||
| Shareholders' Equity | ||||||||||
| Common stock, without par value | ||||||||||
| Authorized - 50,000,000 shares | ||||||||||
| Issued and outstanding - 28,785,374 shares, 28,783,599 shares, 28,782,139 shares, 28,747,083 shares and 28,745,614 shares, respectively | 137,200 | 136,836 | 136,474 | 135,857 | 136,103 | |||||
| Preferred stock, without par value - 5,000,000 total shares authorized | ||||||||||
| 8% Preferred stock - 1,000 per share liquidation preference | ||||||||||
| Authorized - 50,000 shares | ||||||||||
| Issued and outstanding - 0 shares, 0 shares, 41,625 shares, 41,625 shares and 41,625 shares. | — | — | 41,581 | 41,581 | 41,581 | |||||
| 7% Series A Preferred stock - 25 per share liquidation preference | ||||||||||
| Authorized - 3,500,000 shares | ||||||||||
| Issued and outstanding - 2,081,800 shares | 50,221 | 50,221 | 50,221 | 50,221 | 50,221 | |||||
| 6% Series B Preferred stock - 1,000 per share liquidation preference | ||||||||||
| Authorized - 125,000 shares | ||||||||||
| Issued and outstanding - 125,000 shares (equivalent to 5,000,000 depositary shares) | 120,844 | 120,844 | 120,844 | 120,844 | 120,844 | |||||
| 6% Series C Preferred stock - 1,000 per share liquidation preference | ||||||||||
| Authorized - 250,000 shares | ||||||||||
| Issued and outstanding - 196,181 shares at Septmeber 30, 2021, 196,181 shares at June 30, 2021 and 150,000 shares at March 31, 2021 (equivalent to 7,847,233 depositary shares at September 30, 2021, 7,847,233 depositary shares at June 30, 2021 and 6,000,000 depositary shares at March 31, 2021) | 191,084 | 191,084 | 144,925 | — | — | |||||
| Retained earnings | 610,267 | 560,083 | 516,961 | 461,744 | 407,979 | |||||
| Accumulated other comprehensive income | 262 | (4 | ) | 249 | 374 | 407 | ||||
| Total shareholders' equity | 1,109,878 | 1,059,064 | 1,011,255 | 810,621 | 757,135 | |||||
| Total liabilities and shareholders' equity | 10,952,033 | $ | 9,881,532 | $ | 9,705,260 | $ | 9,645,375 | $ | 9,530,475 |
All values are in US Dollars.
| Consolidated Statement of Income | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | |||||||||||||||
| (In<br> thousands, except share data) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||
| Interest Income | |||||||||||||||
| Loans | $ | 72,924 | $ | 68,276 | $ | 71,857 | $ | 216,717 | $ | 189,400 | |||||
| Mortgage loans in process of securitization | 2,868 | 2,724 | 3,250 | 8,728 | 8,580 | ||||||||||
| Investment securities: | |||||||||||||||
| Available for sale - taxable | 1,115 | 833 | 431 | 2,302 | 2,725 | ||||||||||
| Available for sale - tax exempt | 12 | 9 | 37 | 32 | 112 | ||||||||||
| Federal Home Loan Bank stock | 190 | 392 | 531 | 966 | 1,217 | ||||||||||
| Other | 205 | 204 | 152 | 556 | 2,845 | ||||||||||
| Total interest income | 77,314 | 72,438 | 76,258 | 229,301 | 204,879 | ||||||||||
| Interest Expense | |||||||||||||||
| Deposits | 6,981 | 6,683 | 9,104 | 19,764 | 45,132 | ||||||||||
| Borrowed funds | 1,452 | 1,348 | 1,832 | 4,286 | 4,838 | ||||||||||
| Total interest expense | 8,433 | 8,031 | 10,936 | 24,050 | 49,970 | ||||||||||
| Net Interest Income | 68,881 | 64,407 | 65,322 | 205,251 | 154,909 | ||||||||||
| Provision (credit) for loan losses | 1,079 | (315 | ) | 2,981 | 2,427 | 7,724 | |||||||||
| Net Interest Income After Provision for Loan Losses | 67,802 | 64,722 | 62,341 | 202,824 | 147,185 | ||||||||||
| Noninterest Income | |||||||||||||||
| Gain on sale of loans | 29,013 | 25,122 | 29,498 | 82,755 | 67,748 | ||||||||||
| Loan servicing fees, net | 5,313 | 1,727 | (643 | ) | 14,991 | (4,870 | ) | ||||||||
| Mortgage warehouse fees | 2,732 | 3,079 | 6,833 | 9,927 | 15,054 | ||||||||||
| Gains<br> on sale of investments available for sale ^(1)^ | — | — | 441 | — | 441 | ||||||||||
| Other income | 3,213 | 2,927 | 2,528 | 9,389 | 6,374 | ||||||||||
| Total noninterest income | 40,271 | 32,855 | 38,657 | 117,062 | 84,747 | ||||||||||
| Noninterest Expense | |||||||||||||||
| Salaries and employee benefits | 20,197 | 18,869 | 16,567 | 60,340 | 42,635 | ||||||||||
| Loan expenses | 1,734 | 1,921 | 2,944 | 6,178 | 6,147 | ||||||||||
| Occupancy and equipment | 1,861 | 1,808 | 1,420 | 5,296 | 4,295 | ||||||||||
| Professional fees | 901 | 779 | 712 | 2,102 | 2,007 | ||||||||||
| Deposit insurance expense | 664 | 651 | 1,404 | 1,986 | 5,041 | ||||||||||
| Technology expense | 1,169 | 971 | 903 | 3,077 | 2,229 | ||||||||||
| Other expense | 2,946 | 3,184 | 2,434 | 8,760 | 6,605 | ||||||||||
| Total noninterest expense | 29,472 | 28,183 | 26,384 | 87,739 | 68,959 | ||||||||||
| Income Before Income Taxes | 78,601 | 69,394 | 74,614 | 232,147 | 162,973 | ||||||||||
| Provision for income taxes ^(2)^ | 20,098 | 17,977 | 19,612 | 60,244 | 42,226 | ||||||||||
| Net Income | $ | 58,503 | $ | 51,417 | $ | 55,002 | $ | 171,903 | $ | 120,747 | |||||
| Dividends on preferred stock | (5,729 | ) | (5,659 | ) | (3,618 | ) | (15,145 | ) | (10,855 | ) | |||||
| Net Income Allocated to Common Shareholders | 52,774 | 45,758 | 51,384 | 156,758 | 109,892 | ||||||||||
| Basic Earnings Per Share | $ | 1.83 | $ | 1.59 | $ | 1.79 | $ | 5.45 | $ | 3.82 | |||||
| Diluted Earnings Per Share | $ | 1.83 | $ | 1.58 | $ | 1.79 | $ | 5.43 | $ | 3.82 | |||||
| Weighted-Average Shares Outstanding | |||||||||||||||
| Basic | 28,784,197 | 28,782,813 | 28,745,614 | 28,779,745 | 28,741,395 | ||||||||||
| Diluted | 28,876,503 | 28,874,325 | 28,778,462 | 28,867,125 | 28,766,756 |
^(1)^ Includes $0, $0, $441, $0, and $441, respectively, related to accumulated other comprehensive earnings reclassifications.
^(2)^Includes $0, $0, $(97), $0 and $(97), respectively, related to income tax (expense)/benefit for reclassification items.
| Key Operating Results | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | |||||||||||||||
| ($<br> in thousands, except share data) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||
| Noninterest expense | $ | 29,472 | $ | 28,183 | $ | 26,384 | $ | 87,739 | $ | 68,959 | |||||
| Net interest income (before provision for losses) | 68,881 | 64,407 | 65,322 | 205,251 | 154,909 | ||||||||||
| Noninterest income | 40,271 | 32,855 | 38,657 | 117,062 | 84,747 | ||||||||||
| Total income | $ | 109,152 | $ | 97,262 | $ | 103,979 | $ | 322,313 | $ | 239,656 | |||||
| Efficiency ratio | 27.00 | % | 28.98 | % | 25.37 | % | 27.22 | % | 28.77 | % | |||||
| Average assets | $ | 10,236,491 | $ | 9,609,957 | $ | 9,409,450 | $ | 9,934,159 | $ | 8,238,641 | |||||
| Net income | $ | 58,503 | $ | 51,417 | $ | 55,002 | $ | 171,903 | $ | 120,747 | |||||
| Return on average assets before annualizing | 0.57 | % | 0.54 | % | 0.58 | % | 1.73 | % | 1.47 | % | |||||
| Annualization factor | 4.00 | 4.00 | 4.00 | 1.33 | 1.33 | ||||||||||
| Return on average assets | 2.29 | % | 2.14 | % | 2.34 | % | 2.30 | % | 1.95 | % | |||||
| Return on average tangible common shareholders' equity (1) | 29.83 | % | 27.61 | % | 41.01 | % | 31.60 | % | 31.34 | % | |||||
| Tangible book value per common share (1) | $ | 25.36 | $ | 23.59 | $ | 18.30 | $ | 25.36 | $ | 18.30 | |||||
| Tangible common shareholders' equity/tangible assets (1) | 6.68 | % | 6.88 | % | 5.53 | % | 6.68 | % | 5.53 | % |
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures"
(1) Reconciliation of Non-GAAP Financial Measures
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.
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||
| Net income | $ | 58,503 | $ | 51,417 | $ | 55,002 | $ | 171,903 | $ | 120,747 | |||||
| Less: preferred stock dividends | (5,729 | ) | (5,659 | ) | (3,618 | ) | (15,145 | ) | (10,855 | ) | |||||
| Net income available to common shareholders | $ | 52,774 | $ | 45,758 | $ | 51,384 | $ | 156,758 | $ | 109,892 | |||||
| Average shareholders' equity | $ | 1,087,675 | $ | 1,031,246 | $ | 732,533 | $ | 991,467 | $ | 698,071 | |||||
| Less: average goodwill & intangibles | (17,770 | ) | (17,916 | ) | (18,707 | ) | (17,913 | ) | (19,089 | ) | |||||
| Less: average preferred stock | (362,149 | ) | (350,320 | ) | (212,646 | ) | (313,689 | ) | (212,646 | ) | |||||
| Tangible common shareholders' equity | $ | 707,756 | $ | 663,010 | $ | 501,180 | $ | 659,865 | $ | 466,336 | |||||
| Annualization factor | 4.00 | 4.00 | 4.00 | 1.33 | 1.33 | ||||||||||
| Return on average tangible common shareholders' equity | 29.83 | % | 27.61 | % | 41.01 | % | 31.60 | % | 31.34 | % | |||||
| Total equity | $ | 1,109,878 | $ | 1,059,064 | $ | 757,135 | $ | 1,109,878 | $ | 757,135 | |||||
| Less: goodwill and intangibles | (17,688 | ) | (17,835 | ) | (18,502 | ) | (17,688 | ) | (18,502 | ) | |||||
| Less: preferred stock | (362,149 | ) | (362,149 | ) | (212,646 | ) | (362,149 | ) | (212,646 | ) | |||||
| Tangible common shareholders' equity | $ | 730,041 | $ | 679,080 | $ | 525,987 | $ | 730,041 | $ | 525,987 | |||||
| Assets | $ | 10,952,033 | $ | 9,881,532 | $ | 9,530,475 | $ | 10,952,033 | $ | 9,530,475 | |||||
| Less: goodwill and intangibles | (17,688 | ) | (17,835 | ) | (18,502 | ) | (17,688 | ) | (18,502 | ) | |||||
| Tangible assets | $ | 10,934,345 | $ | 9,863,697 | $ | 9,511,973 | $ | 10,934,345 | $ | 9,511,973 | |||||
| Ending common shares | 28,785,374 | 28,783,599 | 28,745,614 | 28,785,374 | 28,745,614 | ||||||||||
| Tangible book value per common share | $ | 25.36 | $ | 23.59 | $ | 18.30 | $ | 25.36 | $ | 18.30 | |||||
| Tangible common shareholders' equity/tangible assets | 6.68 | % | 6.88 | % | 5.53 | % | 6.68 | % | 5.53 | % |
| Merchants Bancorp | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance Analysis | ||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three Months<br> Ended | Three Months<br> Ended | Three Months<br> Ended | ||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September<br> 30, 2021 | June<br> 30, 2021 | September<br> 30, 2020 | ||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||
| Assets: | ||||||||||||||||||||||||
| Interest-bearing deposits,<br> and other | $ | 580,397 | $ | 395 | 0.27 | % | $ | 788,002 | $ | 596 | 0.30 | % | $ | 587,804 | $ | 683 | 0.46 | % | ||||||
| Securities available for sale<br> - taxable | 308,476 | 1,115 | 1.43 | % | 285,536 | 833 | 1.17 | % | 269,896 | 431 | 0.64 | % | ||||||||||||
| Securities available for sale<br> - tax exempt | 1,361 | 12 | 3.50 | % | 1,363 | 9 | 2.65 | % | 5,145 | 37 | 2.86 | % | ||||||||||||
| Mortgage loans in process of securitization | 437,601 | 2,868 | 2.60 | % | 416,559 | 2,724 | 2.62 | % | 449,336 | 3,250 | 2.88 | % | ||||||||||||
| Loans and<br> loans held for sale | 8,689,144 | 72,924 | 3.33 | % | 7,905,766 | 68,276 | 3.46 | % | 7,923,726 | 71,857 | 3.61 | % | ||||||||||||
| Total<br> interest-earning assets | 10,016,979 | 77,314 | 3.06 | % | 9,397,226 | 72,438 | 3.09 | % | 9,235,907 | 76,258 | 3.28 | % | ||||||||||||
| Allowance for loan losses | (28,679 | ) | (28,778 | ) | (21,585 | ) | ||||||||||||||||||
| Noninterest-earning<br> assets | 248,191 | 241,509 | 195,128 | |||||||||||||||||||||
| Total assets | $ | 10,236,491 | $ | 9,609,957 | $ | 9,409,450 | ||||||||||||||||||
| Liabilities & Shareholders'<br> Equity: | ||||||||||||||||||||||||
| Interest-bearing checking | 4,754,633 | 1,561 | 0.13 | % | 4,473,251 | 1,362 | 0.12 | % | 3,890,865 | 1,368 | 0.14 | % | ||||||||||||
| Savings deposits | 211,494 | 39 | 0.07 | % | 205,884 | 38 | 0.07 | % | 180,931 | 34 | 0.07 | % | ||||||||||||
| Money market | 2,259,786 | 4,394 | 0.77 | % | 2,197,750 | 4,175 | 0.76 | % | 1,578,956 | 3,861 | 0.97 | % | ||||||||||||
| Certificates of deposit | 591,093 | 987 | 0.66 | % | 512,316 | 1,108 | 0.87 | % | 1,589,852 | 3,841 | 0.96 | % | ||||||||||||
| Total<br> interest-bearing deposits | 7,817,006 | 6,981 | 0.35 | % | 7,389,201 | 6,683 | 0.36 | % | 7,240,604 | 9,104 | 0.50 | % | ||||||||||||
| Borrowings | 677,201 | 1,452 | 0.85 | % | 523,942 | 1,348 | 1.03 | % | 800,021 | 1,832 | 0.91 | % | ||||||||||||
| Total<br> interest-bearing liabilities | 8,494,207 | 8,433 | 0.39 | % | 7,913,143 | 8,031 | 0.41 | % | 8,040,625 | 10,936 | 0.54 | % | ||||||||||||
| Noninterest-bearing deposits | 586,981 | 590,886 | 579,145 | |||||||||||||||||||||
| Noninterest-bearing liabilities | 67,628 | 74,682 | 57,147 | |||||||||||||||||||||
| Total<br> liabilities | 9,148,816 | 8,578,711 | 8,676,917 | |||||||||||||||||||||
| Shareholders'<br> equity | 1,087,675 | 1,031,246 | 732,533 | |||||||||||||||||||||
| Total liabilities<br> and shareholders' equity | $ | 10,236,491 | $ | 9,609,957 | $ | 9,409,450 | ||||||||||||||||||
| Net<br> interest income | $ | 68,881 | $ | 64,407 | $ | 65,322 | ||||||||||||||||||
| Net<br> interest spread | 2.67 | % | 2.68 | % | 2.74 | % | ||||||||||||||||||
| Net<br> interest-earning assets | $ | 1,522,772 | $ | 1,484,083 | $ | 1,195,282 | ||||||||||||||||||
| Net<br> interest margin | 2.73 | % | 2.75 | % | 2.81 | % | ||||||||||||||||||
| Average<br> interest-earning assets to average interest-bearing liabilities | 117.93 | % | 118.75 | % | 114.87 | % |
| Supplemental Results | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | |||||||||||||||
| ($<br> in thousands) | |||||||||||||||
| Net Income | Net Income | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||
| Segment | |||||||||||||||
| Multi-family Mortgage Banking | $ | 14,448 | $ | 10,971 | $ | 5,891 | $ | 37,380 | $ | 14,941 | |||||
| Mortgage Warehousing | 23,217 | 21,448 | 33,793 | 73,848 | 73,942 | ||||||||||
| Banking | 23,463 | 21,741 | 17,486 | 68,229 | 37,248 | ||||||||||
| Other | (2,625 | ) | (2,743 | ) | (2,168 | ) | (7,554 | ) | (5,384 | ) | |||||
| Total | $ | 58,503 | $ | 51,417 | $ | 55,002 | $ | 171,903 | $ | 120,747 |
| Total Assets | ||||||
|---|---|---|---|---|---|---|
| September 30, | June 30, | December 31, | ||||
| 2021 | 2021 | 2020 | ||||
| Segment | ||||||
| Multi-family Mortgage Banking | $ | 280,927 | $ | 238,165 | $ | 210,714 |
| Mortgage Warehousing | 4,685,037 | 4,265,162 | 4,893,513 | |||
| Banking | 5,950,316 | 5,328,684 | 4,498,880 | |||
| Other | 35,753 | 49,521 | 42,268 | |||
| Total | $ | 10,952,033 | $ | 9,881,532 | $ | 9,645,375 |
| Gain on Sale of Loans | Gain on Sale of Loans | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Nine Months Ended | |||||||||
| September 30, | June 30, | September 30, | September 30, | |||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||
| Loan Type | ||||||||||
| Multi-family | $ | 24,309 | $ | 21,408 | $ | 14,872 | $ | 68,553 | $ | 40,563 |
| Single-family | 1,592 | 1,872 | 14,093 | 7,677 | 26,225 | |||||
| Small Business Association (SBA) | 3,112 | 1,842 | 533 | 6,525 | 960 | |||||
| Total | $ | 29,013 | $ | 25,122 | $ | 29,498 | $ | 82,755 | $ | 67,748 |
| Loans Receivable and Loans Held for Sale | ||||||
|---|---|---|---|---|---|---|
| September 30, | June 30, | December 31, | ||||
| 2021 | 2021 | 2020 | ||||
| Mortgage warehouse lines of credit | $ | 891,605 | $ | 1,177,940 | $ | 1,605,745 |
| Residential real estate | 828,950 | 806,325 | 678,848 | |||
| Multi-family and healthcare financing | 3,244,442 | 2,970,770 | 2,749,020 | |||
| Commercial and commercial real estate | 391,562 | 409,710 | 387,294 | |||
| Agricultural production and real estate | 92,113 | 92,786 | 101,268 | |||
| Consumer and margin loans | 11,689 | 15,392 | 13,251 | |||
| 5,460,361 | 5,472,923 | 5,535,426 | ||||
| Less: Allowance for loan losses | 29,134 | 28,696 | 27,500 | |||
| Loans receivable | $ | 5,431,227 | $ | 5,444,227 | $ | 5,507,926 |
| Loans held for sale | 3,453,279 | 2,955,390 | 3,070,154 | |||
| Total loans, net of allowance | $ | 8,884,506 | $ | 8,399,617 | $ | 8,578,080 |