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, 2020
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 Boulevard
Carmel**,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 of each class | Trading <br><br>Symbol(s) | Name 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 |
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, 2020, Merchants Bancorp issued a press release reporting its financial results for the third quarter of 2020. 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, 2020 issued by Merchants Bancorp |
| 104 | Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101). |
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, 2020 | By: | /s/ John F. Macke |
| Name: John F. Macke | ||
| Title: Chief Financial Officer |
Exhibit 99.1
PRESS RELEASE
MerchantsBancorp Reports Third Quarter 2020 Results
For Release October 28, 2020
| · | Net income<br> of $55.0 million increased $34.7 million, or 171%, compared to the third quarter of 2019<br> and increased $13.8 million, or 34%, compared to the second quarter of 2020 |
|---|---|
| · | Net income<br> per common share of $1.79 increased 198%, compared to the third quarter of 2019, and<br> increased 37%, compared to the second quarter of 2020 |
| --- | --- |
| · | Total assets<br> of $9.5 billion increased $3.2 billion, or 50%, compared to December 31, 2019, and increased<br> $91.1 million, or 1%, compared to June 30, 2020, driven by strong loan growth |
| --- | --- |
| · | Total loans<br> receivable and loans held for sale, increased $3.1 billion, or 60%, compared to December<br> 31, 2019, and increased $169.0 million, or 2%, compared to June 30, 2020 |
| --- | --- |
| · | Credit quality<br> remained exceptionally high, with only 11 loans remaining in payment deferral arrangements<br> due to COVID-19, having unpaid balances of $1.6 million that represented less than 0.02%<br> of total loans and loans held for sale |
| --- | --- |
| · | Return on average<br> assets was 2.34% in the third quarter of 2020, compared to 1.35% in the third quarter<br> of 2019, and 1.89% in the second quarter of 2020 |
| --- | --- |
CARMEL, Indiana – (PR Newswire) - Merchants Bancorp (the “Company” or “Merchants”) (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported third quarter 2020 net income of $55.0 million, or $1.79 per common share. This compared to $20.3 million, or $0.60 per common share, in the third quarter of 2019, and $41.2 million, or $1.31 per common share, in the second quarter of 2020.
The $34.7 million, or 171%, increase in net income for the third quarter 2020, compared to the third quarter of 2019 was driven by a $32.7 million, or 100%, increase in net interest income that reflected significant growth in mortgage warehouse loans, and a 255% increase in gain on sale of loans, primarily from higher growth in both single-family and multi-family mortgages.
The $13.8 million, or 34%, increase in net income for the third quarter 2020, compared to the second quarter of 2020 was primarily driven by a $14.1 million, or 27%, increase in net interest income that also reflected significant growth in mortgage warehouse loans and a 39 basis point increase in the net interest margin.
“Against a backdrop of economic uncertainty and lower interest rates, Merchants has delivered another record-setting level of net income during the third quarter. Our commitment to conservative credit underwriting, effective cost management, and our entrepreneurial approach to serving customers has contributed to earnings per share growth of 198% and asset growth of 50% compared to the prior year’s quarter. By also managing our capital well, we delivered a return on average assets of 2.34%, a return on average tangible shareholders’ equity of 41.0%, a tangible book value of $18.30 per share, and an efficiency ratio of 25.4%,” said Michael F. Petrie, Chairman and CEO of Merchants.
Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, “The safety of our employees and customers remains our first priority. I am proud of our team and our ability to execute in a challenging environment.”
Total Assets
Total assets of $9.5 billion at September 30, 2020 increased $3.2 billion, or 50%, compared to December 31, 2019, and increased $91.1 million, or 1%, compared to June 30, 2020.
The 50% increase compared to December 31, 2019 was primarily due to growth in loans held for sale and loans receivable, which increased a combined total of $3.1 billion, or 60%. The increase reflected the significant loan growth generated from mortgage warehouse business, primarily resulting from lower interest rates that increased the origination volume and refinancing in the single-family mortgage market, as well as higher loan volume generated in multi-family business.
Return on average assets was 2.34% for the third quarter of 2020 compared to 1.35% for the third quarter of 2019 and 1.89% for the second quarter of 2020.
Asset Quality
The allowance for loan losses of $23.4 million at September 30, 2020 increased $7.6 million compared to December 31, 2019 and increased $2.9 million compared to June 30, 2020. The increases were primarily based on growth in the loan portfolio, but also reflected uncertainties surrounding the COVID-19 pandemic. Approximately 85% of the $7.6 million increase compared to December 31, 2019, was related primarily to loan growth, while additional provision associated with the COVID-19 pandemic represented approximately $628,000, or 8%, of the increase. Because it is still too early to know the full extent of potential future losses associated with the impact of COVID-19, the Company continues to monitor the situation and may need to adjust future expectations as developments occur throughout the remainder of 2020.
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Merchants believes it has minimal direct exposure to consumer, commercial and other small businesses that may be negatively impacted by COVID-19 but continues to assist customers facing financial setbacks. As of September 30, 2020, the Company had only 11 loans remaining in payment deferral arrangements, with unpaid balances of $1.6 million that represented less than 0.02% of total loans and loans held for sale. This compared favorably to the unpaid balances of $80.6 million at June 30, 2020.
Non-performing loans were $7.9 million, or 0.16% of loans receivable at September 30, 2020, compared to $4.7 million, or 0.15% of loans receivable at December 31, 2019, and compared to $6.7 million, or 0.16% of loans receivable at June, 2020. The increase in non-performing loans compared to December 31, 2019 was primarily related to one collateralized agricultural loan that is delinquent greater than 90 days late, with repayment still anticipated.
Total Deposits
Total deposits of $7.1 billion at September 30, 2020 increased $1.6 billion, or 29%, compared to December 31, 2019, and increased $176.0 million, or 3%, compared to June 30, 2020. The increases compared to both periods were primarily due to growth in traditional and brokered demand accounts, while the Company significantly reduced its balances of brokered certificates of deposits.
Total brokered deposits of $1.7 billion at September 30, 2020 decreased $429.1 million from December 31, 2019 and decreased $627.0 million from June 30, 2020. Brokered deposits represented 24% of total deposits at September 30, 2020 compared to 39% of total deposits at December 31, 2019 and 34% of total deposits at June 30, 2020.
Liquidity
The Company increased its available borrowing capacity, with unused lines of credit at $2.5 billion at September 30, 2020, compared to $1.9 billion at June 30, 2020. This liquidity enhances the ability to effectively manage interest expense and assets levels in the future. The Company also began utilizing the Federal Reserve’s discount window during the second quarter of 2020 and the Paycheck Protection Program Liquidity Facility (“PPPLF”) during the third quarter of 2020, which has contributed to lower interest expenses and increased borrowing capacity.
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Net Interest Income
Net interest income of $65.3 million in the third quarter of 2020 increased $32.7 million, or 100%, compared to the third quarter of 2019 and increased $14.1 million, or 27%, compared to the second quarter of 2020.
The 100% increase in net interest income compared to the third quarter of 2019 reflected significantly higher loan growth and a higher net interest margin. The interest rate spread of 2.74% for the third quarter of 2020 increased 76 basis points compared to 1.98% in the third quarter of 2019. The net interest margin of 2.81% for the third quarter of 2020 increased 59 basis points compared to 2.22% for the third quarter of 2019. The increase in net interest margin compared to the third quarter of 2019 reflected lower funding costs that outpaced the lower interest rates on loans.
The 27% increase in net interest income compared to the second quarter of 2020 reflected an interest rate spread of 2.74% that increased 43 basis points compared to 2.31% in the second quarter of 2020. The net interest margin of 2.81% for the third quarter of 2020 also increased 39 basis points compared to 2.42% for the second quarter of 2020. The increase in net interest margin compared to the second quarter of 2020 reflected lower funding costs that outpaced the lower interest rates on loans.
Interest Income
Interest income of $76.3 million in the third quarter of 2020 increased $16.5 million, or 28%, compared to the third quarter of 2019 and increased $8.1 million, or 12%, compared to the second quarter of 2020.
The 28% increase in interest income compared to the third quarter of 2019 was primarily due to significant loan growth that was partially offset by lower rates. The higher interest income reflected a $3.2 billion, or 68%, increase in the average balance of loans, including loans held for sale, which reached $7.9 billion for the third quarter of 2020. The average yield on loans and loans held for sale of 3.61% for the third quarter of 2020 decreased 83 basis points compared to 4.44% for the third quarter of 2019. The decline in average yields reflected higher loan volume and lower overall interest rates in the third quarter of 2020.
The 12% increase in interest income compared to the second quarter of 2020 reflected a $987.4 million, or 14%, increase in the average balance of loans, including loans held for sale, which reached $7.9 billion for the third quarter of 2020. The average yield on loans and loans held for sale of 3.61% for the third quarter of 2020 also decreased 10 basis points compared to 3.71% for the second quarter of 2020.
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Interest Expense
Total interest expense of $10.9 million for the third quarter of 2020 decreased $16.2 million, or 60%, compared to the third quarter of 2019 and decreased $6.0 million, or 36%, compared to the second quarter of 2020. Interest expense on deposits of $9.1 million for the third quarter of 2020 decreased $16.9 million, or 65%, compared to the third quarter of 2019 and decreased $6.3 million, or 41%, compared to the second quarter of 2020.
The 65% decrease in interest expense on deposits compared to the third quarter of 2019 was primarily due to custodial interest-bearing checking accounts that are tied to short-term LIBOR rates, which declined significantly. Also contributing significantly to the decline were lower rates on brokered certificates of deposits. The average balance of interest-bearing deposits of $7.2 billion for the third quarter of 2020 increased $2.1 billion, or 42%, compared to the third quarter of 2019. The average cost of interest-bearing deposits was 0.50% for the third quarter of 2020, which was a 152 basis point decrease compared to 2.02% for the third quarter of 2019.
The 41% decrease in interest expense on deposits compared to the second quarter of 2020 was also primarily due to custodial interest-bearing checking accounts that are tied to short-term LIBOR rates, which declined significantly. The average cost of interest-bearing deposits was 0.50% for the third quarter of 2020, which was a 38 basis point decrease compared to 0.88% in the second quarter of 2020. The average balance of interest-bearing deposits of $7.2 billion for the third quarter of 2020 also increased $241.5 million, or 3%, compared to the second quarter of 2020.
Noninterest Income
Noninterest income of $38.7 million for the third quarter of 2020 increased $27.8 million, or 256%, compared to the third quarter of 2019 and increased $12.5 million, or 48%, compared to the second quarter of 2020.
The 256% increase in noninterest income compared to the third quarter of 2019 was primarily due to a $21.2 million, or 255%, increase in gain on sale of loans and a $4.1 million increase in mortgage warehouse fees. Noninterest income for the second quarter of 2020 included a $971,000 negative fair market value adjustment to mortgage servicing rights, which compared to a $1.5 million negative fair market value adjustment for the third quarter of 2019.
The 48% increase in noninterest income compared to the second quarter of 2020 was primarily due to a $12.4 million, or 73%, increase in gain on sale of loans, that were partially offset by a $2.2 million decrease in loan servicing fees. Included in loan servicing fees for the second quarter of 2020 was a $971,000 negative fair market value adjustment to mortgage servicing rights, which compared to a $500,000 negative fair market value adjustment for the second quarter of 2020.
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At September 30, 2020, the mortgage servicing rights asset was valued at $75.8 million, an increase of 2% compared to December 31, 2019 and an increase of 5% compared to September 30, 2019. The value of mortgage servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments.
Noninterest Expense
Noninterest expense of $26.4 million for the third quarter of 2020 increased $10.9 million, or 70%, compared to the third quarter of 2019 and increased $6.1 million, or 30%, compared to the second quarter of 2020.
The 70% increase in noninterest expense compared to the third quarter of 2019 was due primarily to a $7.4 million, or 81%, increase in salaries and employee benefits to support business growth and a $1.7 million, or 136%, increase in loan expenses. The efficiency ratio of 25.4% for the third quarter of 2020 compared to 35.7% for the third quarter of 2019.
The 30% increase in noninterest expense compared to the second quarter of 2020 was primarily due to a $4.7 million, or 40%, increase in salaries and employee benefits to support business growth and a $905,000, or 44%, increase in loan expenses. The efficiency ratio of 25.4% for the third quarter of 2020 compared to 26.2% for the second quarter of 2020.
Segments
For the third quarter of 2020, net income for Mortgage Warehousingincreased 209% compared to the third quarter of 2019, and increased 22% compared to the second quarter of 2020, reflecting significant growth in net interest income from higher loan volume.
For the third quarter of 2020, net income for Multi-familyMortgage Banking increased 115% compared with the third quarter of 2019, and increased 61% compared to the second quarter of 2020, primarily due to higher gain on sale of loans for both periods that was partially offset by higher salaries and benefit expenses to support growth.
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For the third quarter of 2020, net income for Banking increased 129% compared to the third quarter of 2019, and increased 48% compared to the second quarter of 2020, reflecting higher net interest income and gain on sale of loans in the single-family mortgage business for both periods.
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 $9.5 billion in assets and $7.1 billion in deposits as of September 30, 2020, 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.
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.
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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 thousands, except share data)
| June 30, | March 31, | December 31, | September 30, | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2019 | ||||||
| Assets | |||||||||
| Cash and due from banks | 9,276 | $ | 13,830 | $ | 8,168 | $ | 13,909 | $ | 15,614 |
| Interest-earning demand accounts | 419,926 | 389,357 | 559,914 | 492,800 | 349,362 | ||||
| Cash and cash equivalents | 429,202 | 403,187 | 568,082 | 506,709 | 364,976 | ||||
| Securities purchased under agreements to resell | 6,616 | 6,651 | 6,685 | 6,723 | 6,760 | ||||
| Mortgage loans in process of securitization | 374,721 | 518,788 | 465,157 | 269,891 | 227,914 | ||||
| Available for sale securities | 278,861 | 259,656 | 339,053 | 290,243 | 308,673 | ||||
| Federal Home Loan Bank (FHLB) stock | 70,656 | 53,224 | 46,156 | 20,369 | 18,808 | ||||
| Loans held for sale (includes 41,418, 42,000, 18,938, 19,592 and 23,357, respectively, at fair value) | 3,319,619 | 3,877,769 | 2,796,008 | 2,093,789 | 2,498,538 | ||||
| Loans receivable, net of allowance for loan losses of 23,436, 20,497, 18,883, 15,842 and 13,705, respectively | 4,857,554 | 4,133,315 | 3,501,770 | 3,012,468 | 2,742,088 | ||||
| Premises and equipment, net | 29,261 | 29,362 | 29,415 | 29,274 | 29,211 | ||||
| Mortgage servicing rights | 75,772 | 72,889 | 69,978 | 74,387 | 71,989 | ||||
| Interest receivable | 19,130 | 18,574 | 18,139 | 18,359 | 18,780 | ||||
| Goodwill | 15,845 | 15,845 | 15,845 | 15,845 | 15,574 | ||||
| Intangible assets, net | 2,657 | 3,038 | 3,419 | 3,799 | 4,182 | ||||
| Other assets and receivables | 50,581 | 47,102 | 48,691 | 30,072 | 29,693 | ||||
| Total assets | 9,530,475 | $ | 9,439,400 | $ | 7,908,398 | $ | 6,371,928 | $ | 6,337,186 |
| Liabilities and Shareholders' Equity Liabilities | |||||||||
| Deposits | |||||||||
| Noninterest-bearing | 666,081 | $ | 601,265 | $ | 327,805 | $ | 272,037 | $ | 198,843 |
| Interest-bearing | 6,418,566 | 6,307,363 | 6,394,900 | 5,206,038 | 5,300,806 | ||||
| Total deposits | 7,084,647 | 6,908,628 | 6,722,705 | 5,478,075 | 5,499,649 | ||||
| Borrowings | 1,618,201 | 1,761,113 | 444,567 | 181,439 | 159,673 | ||||
| Other liabilities | 70,492 | 61,461 | 68,157 | 58,686 | 48,425 | ||||
| Total liabilities | 8,773,340 | 8,731,202 | 7,235,429 | 5,718,200 | 5,707,747 | ||||
| Commitments and Contingencies | |||||||||
| Shareholders' Equity | |||||||||
| Common stock, without par value | |||||||||
| Authorized - 50,000,000 shares | |||||||||
| Issued and outstanding - 28,745,614 shares, 28,745,614 shares, 28,742,484 shares, 28,706,438 shares, and 28,706,438 shares, respectively | 136,103 | 135,949 | 135,746 | 135,640 | 135,507 | ||||
| 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 - 41,625 shares | 41,581 | 41,581 | 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, 2,081,800 shares, 2,081,800 shares, 2,081,800 shares, and 2,081,800 shares, respectively | 50,221 | 50,221 | 50,221 | 50,221 | 50,245 | ||||
| 6% Series B Preferred stock - 1,000 per share liquidation preference | |||||||||
| Authorized - 125,000 shares | |||||||||
| Issued and outstanding - 125,000 shares, 125,000 shares, 125,000 shares, 125,000 shares and 125,000 shares (all equivalent to 5,000,000 depositary shares) | 120,844 | 120,844 | 120,844 | 120,844 | 120,863 | ||||
| Retained earnings | 407,979 | 358,895 | 323,651 | 304,984 | 280,551 | ||||
| Accumulated other comprehensive income | 407 | 708 | 926 | 458 | 692 | ||||
| Total shareholders' equity | 757,135 | 708,198 | 672,969 | 653,728 | 629,439 | ||||
| Total liabilities and shareholders' equity | 9,530,475 | $ | 9,439,400 | $ | 7,908,398 | $ | 6,371,928 | $ | 6,337,186 |
All values are in US Dollars.
Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| Interest Income | |||||||||||||||
| Loans | $ | 71,857 | $ | 63,979 | $ | 52,779 | $ | 189,400 | $ | 129,599 | |||||
| Mortgage loans in process of securitization | 3,250 | 2,534 | 1,422 | 8,580 | 4,434 | ||||||||||
| Investment securities: | |||||||||||||||
| Available for sale - taxable | 431 | 972 | 1,604 | 2,725 | 4,632 | ||||||||||
| Available for sale - tax exempt | 37 | 38 | 68 | 112 | 217 | ||||||||||
| Federal Home Loan Bank stock | 531 | 447 | 262 | 1,217 | 742 | ||||||||||
| Other | 152 | 234 | 3,626 | 2,845 | 8,572 | ||||||||||
| Total interest income | 76,258 | 68,204 | 59,761 | 204,879 | 148,196 | ||||||||||
| Interest Expense | |||||||||||||||
| Deposits | 9,104 | 15,398 | 26,039 | 45,132 | 59,610 | ||||||||||
| Borrowed funds | 1,832 | 1,572 | 1,098 | 4,838 | 3,909 | ||||||||||
| Total interest expense | 10,936 | 16,970 | 27,137 | 49,970 | 63,519 | ||||||||||
| Net Interest Income | 65,322 | 51,234 | 32,624 | 154,909 | 84,677 | ||||||||||
| Provision for loan losses | 2,981 | 1,745 | 1,193 | 7,724 | 1,947 | ||||||||||
| Net Interest Income After Provision for Loan Losses | 62,341 | 49,489 | 31,431 | 147,185 | 82,730 | ||||||||||
| Noninterest Income | |||||||||||||||
| Gain on sale of loans | 29,498 | 17,084 | 8,312 | 67,748 | 20,059 | ||||||||||
| Loan servicing fees, net | (643 | ) | 1,597 | (1,410 | ) | (4,870 | ) | (3,318 | ) | ||||||
| Mortgage warehouse fees | 6,833 | 5,475 | 2,699 | 15,054 | 4,590 | ||||||||||
| Gains on sale of investments available for sale ^(1)^ | 441 | — | — | 441 | 124 | ||||||||||
| Other income | 2,528 | 2,032 | 1,251 | 6,374 | 2,931 | ||||||||||
| Total noninterest income | 38,657 | 26,188 | 10,852 | 84,747 | 24,386 | ||||||||||
| Noninterest Expense | |||||||||||||||
| Salaries and employee benefits | 16,567 | 11,828 | 9,139 | 42,635 | 27,671 | ||||||||||
| Loan expenses | 2,944 | 2,039 | 1,248 | 6,147 | 3,527 | ||||||||||
| Occupancy and equipment | 1,420 | 1,383 | 994 | 4,295 | 2,816 | ||||||||||
| Professional fees | 712 | 726 | 508 | 2,007 | 1,500 | ||||||||||
| Deposit insurance expense | 1,404 | 1,851 | 859 | 5,041 | 1,354 | ||||||||||
| Technology expense | 903 | 716 | 674 | 2,229 | 1,775 | ||||||||||
| Other expense | 2,434 | 1,739 | 2,100 | 6,605 | 5,834 | ||||||||||
| Total noninterest expense | 26,384 | 20,282 | 15,522 | 68,959 | 44,477 | ||||||||||
| Income Before Income Taxes | 74,614 | 55,395 | 26,761 | 162,973 | 62,639 | ||||||||||
| Provision for income taxes ^(2)^ | 19,612 | 14,233 | 6,502 | 42,226 | 15,371 | ||||||||||
| Net Income | $ | 55,002 | $ | 41,162 | $ | 20,259 | $ | 120,747 | $ | 47,268 | |||||
| Dividends on preferred stock | (3,618 | ) | (3,619 | ) | (3,022 | ) | (10,855 | ) | (5,598 | ) | |||||
| Net Income Allocated to Common Shareholders | 51,384 | 37,543 | 17,237 | 109,892 | 41,670 | ||||||||||
| Basic Earnings Per Share | $ | 1.79 | $ | 1.31 | $ | 0.60 | $ | 3.82 | $ | 1.45 | |||||
| Diluted Earnings Per Share | $ | 1.79 | $ | 1.31 | $ | 0.60 | $ | 3.82 | $ | 1.45 | |||||
| Weighted-Average Shares Outstanding | |||||||||||||||
| Basic | 28,745,614 | 28,743,894 | 28,706,438 | 28,741,395 | 28,704,682 | ||||||||||
| Diluted | 28,778,462 | 28,762,349 | 28,744,953 | 28,766,756 | 28,742,911 |
^(1)^ Includes $441, $0, $0, $441, and $124, respectively, related to accumulated other comprehensive earnings reclassifications.
^(2)^ Includes $(97), $0, $0, $(97), and $(31), respectively, related to income tax (expense)/benefit for reclassification items.
Key Operating Results
(Unaudited)
($ in thousands, except share data)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| Noninterest expense | $ | 26,384 | $ | 20,282 | $ | 15,522 | $ | 68,959 | $ | 44,477 | |||||
| Net interest income (before provision for losses) | 65,322 | 51,234 | 32,624 | 154,909 | 84,677 | ||||||||||
| Noninterest income | 38,657 | 26,188 | 10,852 | 84,747 | 24,386 | ||||||||||
| Total income | $ | 103,979 | $ | 77,422 | $ | 43,476 | $ | 239,656 | $ | 109,063 | |||||
| Efficiency ratio | 25.37 | % | 26.20 | % | 35.70 | % | 28.77 | % | 40.78 | % | |||||
| Average assets | $ | 9,409,450 | $ | 8,689,212 | $ | 6,009,840 | $ | 8,238,641 | $ | 4,798,110 | |||||
| Net income | $ | 55,002 | $ | 41,162 | $ | 20,259 | $ | 120,747 | $ | 47,268 | |||||
| Return on average assets before annualizing | 0.58 | % | 0.47 | % | 0.34 | % | 1.47 | % | 0.99 | % | |||||
| Annualization factor | 4.00 | 4.00 | 4.00 | 1.33 | 1.33 | ||||||||||
| Return on average assets | 2.34 | % | 1.89 | % | 1.35 | % | 1.95 | % | 1.31 | % | |||||
| Return on average tangible common shareholders' equity (1) | 41.01 | % | 32.62 | % | 18.17 | % | 31.34 | % | 14.75 | % | |||||
| Tangible book value per common share (1) | $ | 18.30 | $ | 16.58 | $ | 13.83 | $ | 18.30 | $ | 13.83 | |||||
| Tangible common shareholders' equity/tangible assets (1) | 5.53 | % | 5.06 | % | 6.28 | % | 5.53 | % | 6.28 | % |
(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, | |||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| Net income | $ | 55,002 | $ | 41,162 | $ | 20,259 | $ | 120,747 | $ | 47,268 | |||||
| Less: preferred stock dividends | (3,618 | ) | (3,619 | ) | (3,022 | ) | (10,855 | ) | (5,598 | ) | |||||
| Net income available to common shareholders | $ | 51,384 | $ | 37,543 | $ | 17,237 | $ | 109,892 | $ | 41,670 | |||||
| Average shareholders' equity | $ | 732,533 | $ | 692,132 | $ | 567,732 | $ | 698,071 | $ | 498,091 | |||||
| Less: average goodwill & intangibles | (18,707 | ) | (19,083 | ) | (20,005 | ) | (19,089 | ) | (20,458 | ) | |||||
| Less: average preferred stock | (212,646 | ) | (212,646 | ) | (168,266 | ) | (212,646 | ) | (101,979 | ) | |||||
| Tangible common shareholders' equity | $ | 501,180 | $ | 460,403 | $ | 379,461 | $ | 466,336 | $ | 375,654 | |||||
| Annualization factor | 4.00 | 4.00 | 4.00 | 1.33 | 1.33 | ||||||||||
| Return on average tangible common shareholders' equity | 41.01 | % | 32.62 | % | 18.17 | % | 31.34 | % | 14.75 | % | |||||
| Total equity | $ | 757,135 | $ | 708,198 | $ | 629,439 | $ | 757,135 | $ | 629,439 | |||||
| Less: goodwill and intangibles | (18,502 | ) | (18,883 | ) | (19,756 | ) | (18,502 | ) | (19,756 | ) | |||||
| Less: preferred stock | (212,646 | ) | (212,646 | ) | (212,689 | ) | (212,646 | ) | (212,689 | ) | |||||
| Tangible common shareholders' equity | $ | 525,987 | $ | 476,669 | $ | 396,994 | $ | 525,987 | $ | 396,994 | |||||
| Assets | $ | 9,530,475 | $ | 9,439,400 | $ | 6,337,186 | $ | 9,530,475 | $ | 6,337,186 | |||||
| Less: goodwill and intangibles | (18,502 | ) | (18,883 | ) | (19,756 | ) | (18,502 | ) | (19,756 | ) | |||||
| Tangible assets | $ | 9,511,973 | $ | 9,420,517 | $ | 6,317,430 | $ | 9,511,973 | $ | 6,317,430 | |||||
| Ending common shares | 28,745,614 | 28,745,614 | 28,706,438 | 28,745,614 | 28,706,438 | ||||||||||
| Tangible book value per common share | $ | 18.30 | $ | 16.58 | $ | 13.83 | $ | 18.30 | $ | 13.83 | |||||
| Tangible common shareholders' equity/tangible assets | 5.53 | % | 5.06 | % | 6.28 | % | 5.53 | % | 6.28 | % |
Merchants Bancorp
Average Balance Analysis
($ in thousands)
(Unaudited)
| **** | Three Months Ended | **** | Three Months Ended | **** | Three Months Ended | **** | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | September 30, 2020 | **** | June 30, 2020 | **** | September 30, 2019 | **** | ||||||||||||||||||
| **** | Average | **** | **** | Yield/ | **** | Average | **** | **** | Yield/ | **** | Average | **** | **** | Yield/ | **** | |||||||||
| **** | Balance | **** | Interest | Rate | **** | Balance | **** | Interest | Rate | **** | Balance | **** | Interest | Rate | **** | |||||||||
| Assets: | ||||||||||||||||||||||||
| Interest-bearing deposits, and other | $ | 587,804 | $ | 683 | 0.46 | % | $ | 971,350 | $ | 681 | 0.28 | % | $ | 670,399 | $ | 3,888 | 2.30 | % | ||||||
| Securities available for sale - taxable | 269,896 | 431 | 0.64 | % | 276,928 | 972 | 1.41 | % | 278,314 | 1,604 | 2.29 | % | ||||||||||||
| Securities available for sale - tax exempt | 5,145 | 37 | 2.86 | % | 5,294 | 38 | 2.89 | % | 9,032 | 68 | 2.99 | % | ||||||||||||
| Mortgage loans in process of securitization | 449,336 | 3,250 | 2.88 | % | 328,089 | 2,534 | 3.11 | % | 162,915 | 1,422 | 3.46 | % | ||||||||||||
| Loans and loans held for sale | 7,923,726 | 71,857 | 3.61 | % | 6,936,368 | 63,979 | 3.71 | % | 4,718,771 | 52,779 | 4.44 | % | ||||||||||||
| Total interest-earning<br> assets | 9,235,907 | 76,258 | 3.28 | % | 8,518,029 | 68,204 | 3.22 | % | 5,839,431 | 59,761 | 4.06 | % | ||||||||||||
| Allowance for loan losses | (21,585 | ) | (19,474 | ) | (12,990 | ) | ||||||||||||||||||
| Noninterest-earning assets | 195,128 | 190,657 | 183,399 | |||||||||||||||||||||
| Total assets | $ | 9,409,450 | $ | 8,689,212 | $ | 6,009,840 | ||||||||||||||||||
| Liabilities & Shareholders'<br> Equity: | ||||||||||||||||||||||||
| Interest-bearing checking | 3,890,865 | 1,368 | 0.14 | % | 2,656,105 | 2,327 | 0.35 | % | 1,951,613 | 9,253 | 1.88 | % | ||||||||||||
| Savings deposits | 180,931 | 34 | 0.07 | % | 176,546 | 27 | 0.06 | % | 152,509 | 85 | 0.22 | % | ||||||||||||
| Money market | 1,578,956 | 3,861 | 0.97 | % | 1,402,562 | 3,966 | 1.14 | % | 977,228 | 4,698 | 1.91 | % | ||||||||||||
| Certificates of deposit | 1,589,852 | 3,841 | 0.96 | % | 2,763,853 | 9,078 | 1.32 | % | 2,032,619 | 12,003 | 2.34 | % | ||||||||||||
| Total interest-bearing<br> deposits | 7,240,604 | 9,104 | 0.50 | % | 6,999,066 | 15,398 | 0.88 | % | 5,113,969 | 26,039 | 2.02 | % | ||||||||||||
| Borrowings | 800,021 | 1,832 | 0.91 | % | 518,207 | 1,572 | 1.22 | % | 59,585 | 1,098 | 7.31 | % | ||||||||||||
| Total interest-bearing<br> liabilities | 8,040,625 | 10,936 | 0.54 | % | 7,517,273 | 16,970 | 0.91 | % | 5,173,554 | 27,137 | 2.08 | % | ||||||||||||
| Noninterest-bearing deposits | 579,145 | 372,195 | 198,832 | |||||||||||||||||||||
| Noninterest-bearing liabilities | 57,147 | 107,612 | 69,722 | |||||||||||||||||||||
| Total liabilities | 8,676,917 | 7,997,080 | 5,442,108 | |||||||||||||||||||||
| Shareholders'<br> equity | 732,533 | 692,132 | 567,732 | |||||||||||||||||||||
| Total liabilities and shareholders'<br> equity | $ | 9,409,450 | $ | 8,689,212 | $ | 6,009,840 | ||||||||||||||||||
| Net interest<br> income | $ | 65,322 | $ | 51,234 | $ | 32,624 | ||||||||||||||||||
| Net interest<br> spread | 2.74 | % | 2.31 | % | 1.98 | % | ||||||||||||||||||
| Net interest-earning<br> assets | $ | 1,195,282 | $ | 1,000,756 | $ | 665,877 | ||||||||||||||||||
| Net interest<br> margin | 2.81 | % | 2.42 | % | 2.22 | % | ||||||||||||||||||
| Average<br> interest-earning assets to average interest-bearing liabilities | 114.87 | % | 113.31 | % | 112.87 | % |
Supplemental Results
(Unaudited)
($ in thousands)
| Net Income | Net Income | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| Segment | |||||||||||||||
| Multi-family Mortgage Banking | $ | 5,891 | $ | 3,651 | $ | 2,741 | $ | 14,941 | $ | 4,546 | |||||
| Mortgage Warehousing | 33,793 | 27,712 | 10,924 | 73,942 | 21,076 | ||||||||||
| Banking | 17,486 | 11,812 | 7,649 | 37,248 | 24,826 | ||||||||||
| Other | (2,168 | ) | (2,013 | ) | (1,055 | ) | (5,384 | ) | (3,180 | ) | |||||
| Total | $ | 55,002 | $ | 41,162 | $ | 20,259 | $ | 120,747 | $ | 47,268 | |||||
| Total Assets | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||||||
| September 30, | June 30, | December 31, | |||||||||||||
| 2020 | 2020 | 2019 | |||||||||||||
| Segment | |||||||||||||||
| Multi-family Mortgage Banking | $ | 194,624 | $ | 182,072 | $ | 188,866 | |||||||||
| Mortgage Warehousing | 5,179,664 | 5,575,169 | 3,124,684 | ||||||||||||
| Banking | 4,111,984 | 3,639,638 | 3,018,568 | ||||||||||||
| Other | 44,203 | 42,521 | 39,810 | ||||||||||||
| Total | $ | 9,530,475 | $ | 9,439,400 | $ | 6,371,928 | |||||||||
| Gain on Sale of Loans | Gain on Sale of Loans | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| Loan Type | |||||||||||||||
| Multi-family | $ | 14,872 | $ | 6,839 | $ | 7,582 | $ | 40,563 | $ | 18,714 | |||||
| Single-family | 14,093 | 10,059 | 724 | 26,225 | 1,280 | ||||||||||
| Small Business Association (SBA) | 533 | 186 | 6 | 960 | 65 | ||||||||||
| Total | $ | 29,498 | $ | 17,084 | $ | 8,312 | $ | 67,748 | $ | 20,059 | |||||
| Loans Receivable and Loans Held for Investment | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||||||
| September 30, | June 30, | December 31, | |||||||||||||
| 2020 | 2020 | 2019 | |||||||||||||
| Mortgage warehouse lines of credit | $ | 1,647,521 | $ | 1,287,246 | $ | 765,151 | |||||||||
| Residential real estate | 572,527 | 471,807 | 413,835 | ||||||||||||
| Multi-family and healthcare financing | 2,125,516 | 1,848,811 | 1,347,125 | ||||||||||||
| Commercial and commercial real estate | 419,812 | 432,222 | 398,601 | ||||||||||||
| Agricultural production and real estate | 101,636 | 99,035 | 85,210 | ||||||||||||
| Consumer and margin loans | 13,978 | 14,691 | 18,388 | ||||||||||||
| 4,880,990 | 4,153,812 | 3,028,310 | |||||||||||||
| Less: Allowance for loan losses | 23,436 | 20,497 | 15,842 | ||||||||||||
| Loans receivable | $ | 4,857,554 | $ | 4,133,315 | $ | 3,012,468 | |||||||||
| Loans held for sale | 3,319,619 | 3,877,769 | 2,093,789 | ||||||||||||
| Total loans, net of allowance | $ | 8,177,173 | $ | 8,011,084 | $ | 5,106,257 |