Merchants Bancorp Reports Third Quarter 2023 Results

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October 26, 2023 4:05 PM EDT
  • Third quarter 2023 net income of $81.5 million increased 39% compared to third quarter of 2022 and increased 25% compared to the second quarter 2023.
  • Third quarter 2023 diluted earnings per common share of $1.68 increased 38% compared to the third quarter of 2022 and increased 28% compared to the second quarter of 2023.
  • Total assets of $16.5 billion increased 4% compared to June 30, 2023, and increased 31% compared to December 31, 2022.
  • As of September 30, 2023, the Company had $5.4 billion, or 32% of total assets, in unused borrowing capacity with the Federal Home Loan Bank and the Federal Reserve Discount window, based on available collateral.
  • The Company's most liquid assets are in unrestricted cash, short-term investments, including interest-bearing demand deposits, mortgage loans in process of securitization, loans held for sale, and warehouse lines of credit included in loans receivable. Taken together, with unused borrowing capacity, these totaled $10.7 billion, or 65%, of the $16.5 billion in total assets as of September 30, 2023.
  • Uninsured deposits totaled approximately $2 billion as of September 30, 2023, representing less than 20% of total deposits.
  • Loans receivable of $9.9 billion, net of allowance for credit losses on loans, increased $56.7 million, or 1%, compared to June 30, 2023, and increased $2.5 billion, or 33%, compared to December 31, 2022.
  • Efficiency ratio was 28.0% in the third quarter of 2023 compared to 30.5% in the third quarter of 2022 and 32.7% in the second quarter of 2023.
  • Tangible book value per common share of $25.82 increased 24% compared to $20.78 in the third quarter of 2022 and increased 7% compared to $24.14 in the second quarter of 2023.
  • On August 31, 2023, the Company completed a $303.6 million securitization of 11 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction.
  • On September 7, 2023, the Company entered into an agreement with Bank of Pontiac to sell its Farmers-Merchants Bank of Illinois branch locations in Paxton, Melvin, and Piper City, Illinois, and into an agreement with CBI Bank & Trust, to sell its Farmers-Merchants Bank of Illinois branch located in Joy, Illinois.

CARMEL, Ind., Oct. 26, 2023 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported third quarter 2023 net income of $81.5 million, or diluted earnings per common share of $1.68.  This compared to $58.5 million, or diluted earnings per common share of $1.22 in the third quarter of 2022, and compared to $65.3 million, or diluted earnings per common share of $1.31 in the second quarter of 2023.

"We could not be prouder to have achieved the highest earnings and asset levels in company history during the third quarter, along with tangible book value of $25.82 per share that grew 24% over the last year.  Our focus on growing our sales teams in new markets, conservative underwriting, cost controls, and effectively matching our asset and liability duration have positioned us well for sustainable earnings growth for the remainder of 2023 and beyond," said Michael F. Petrie, Chairman and CEO of Merchants. 

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Our team has continued to maximize sources of liquidity and capital efficiencies to ensure that our strong pipeline of loan growth can be effectively executed in various interest rate environments so we can meet the needs of our customers and continue to generate ongoing profitability.  We could not have achieved these record-setting milestones during the third quarter without the hard work and dedication of our entire team."

Net income of $81.5 million for the third quarter 2023 increased by $23.0 million, or 39%, compared to the third quarter of 2022, primarily driven by a $32.1 million, or 38%, increase in net interest income. Results for the third quarter 2023 included a $11.6 million positive fair market value adjustment to servicing rights compared to a $4.6 million positive adjustment in the third quarter of 2022.

Net income of $81.5 million for the third quarter 2023 increased by $16.2 million, or 25%, compared to the second quarter of 2023, primarily driven by an $11.8 million, or 11% increase, in net interest income, an $18.6 million decrease in provision for credit losses related to credit events in the second quarter 2023, and a $6.2 million, or 21% increase in noninterest income. These increases to net income were partially offset by a $21.8 million increase in the provision for income taxes following the $13.0 million tax benefit related to tax refunds and changes to state tax apportionment calculations that were recognized in the second quarter 2023.  Results for the third quarter 2023 included a $11.6 million positive fair market value adjustment to servicing rights compared to a $3.4 million positive adjustment in the second quarter of 2023.

Total Assets
Total assets of $16.5 billion at September 30, 2023 increased $620.4 million, or 4%, compared to June 30, 2023, and increased $3.9 billion, or 31%, compared to December 31, 2022.  The increase compared to December 31, 2022 was primarily due to significant growth in the healthcare, commercial lines of credit on collateralized mortgage servicing rights, multi-family, and warehouse loan portfolios. 

Return on average assets was 2.03% for the third quarter of 2023 compared to 2.05% for the third quarter of 2022 and 1.78% for the second quarter of 2023.

Asset Quality
The allowance for credit losses on loans of $66.9 million, as of September 30, 2023, increased $3.9 million, or 6%, compared to June 30, 2023 and increased $22.9 million, or 52%, compared to December 31, 2022.  The increase compared to June 30, 2023 was primarily in the multi-family, healthcare, and commercial portfolios due to a combination of changes in qualitative loss factors and loan growth.  The increase compared to December 31, 2022 was primarily due to loan growth in the period, as well as credit events and increases in qualitative factors and forecasted loss rates to reflect changes in industry conditions that were recorded during the second quarter 2023.  The Company experienced net recoveries of $10,000 during the third quarter 2023.

Non-performing loans were $60.2 million, or 0.60%, of loans receivable as of September 30, 2023, compared to 0.69% at June 30, 2023, and 0.36% at December 31, 2022.  The increase in non-performing loans compared to December 31, 2022 was primarily due to 3 customers.

Securities Available for Sale
Total securities available for sale of $624.6 million as of September 30, 2023 decreased $23.4 million, or 4%, compared to June 30, 2023, and increased $301.2 million, or 93%, compared to December 31, 2022.

As of September 30, 2023, Accumulated Other Comprehensive Losses ("AOCL") of $4.8 million, related to securities available for sale, decreased $2.3 million, or 32%, compared to June 30, 2023, and decreased $5.8 million, or 55%, compared to December 31, 2022.  The $4.8 million of AOCL as of September 30, 2023 represented less than 1% of total equity and less than 1% of total investment securities.

Total Deposits
Total deposits of $13.0 billion at September 30, 2023 decreased $52.5 million compared to June 30, 2023, and increased $2.9 billion, or 29%, compared to December 31, 2022. The changes for both periods were primarily due to changes in brokered certificates of deposit.

Total brokered deposits of $4.4 billion at September 30, 2023 decreased $350.8 million, or 7%, from June 30, 2023 and increased $1.6 billion, or 59%, from December 31, 2022.   Brokered deposits represented 34% of total deposits at September 30, 2023 compared to 36% of total deposits at June 30, 2023 and 27% of total deposits at December 31, 2022.  As of September 30, 2023, brokered certificates of deposit had a weighted average remaining duration of 49 days.

The Company continues to offer new products, such as adjustable-rate certificates of deposits, to minimize interest rate risks by aligning the rate and short duration characteristics of its deposit and loan portfolios.  As of September 30, 2023, deposit balances in Flex CD products increased by $294.3 million, or 201%, compared to December 31, 2022.  Additionally, the Company has offered an insured cash sweep program since 2018, which extends FDIC protection up to $100 million per depositor. The balance of deposits in this program was $1.8 billion as of September 30, 2023 and has contributed to the Company's low level of uninsured deposits, which were below 20% of total deposits.

Liquidity
Cash balances of $407.2 million as of September 30, 2023 increased by $29.9 million compared to June 30, 2023 and increased by $181.1 million compared to December 31, 2022.  The Company continues to have significant borrowing capacity, with unused lines of credit totaling $5.4 billion as of September 30, 2023 compared to $5.3 billion at June 30, 2023 and $3.1 billion at December 31, 2022. 

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.

Comparison of Operating Results for the Three Months Ended
September 30, 2023 and 2022

Net Interest Income of $117.4 million increased $32.1 million, or 38%, reflecting higher yields and average balances on loans and loans held for sale, and higher balances of securities held to maturity, which were partially offset by higher rates and average balances on deposits, as well as higher rates on borrowings that were primarily related to the credit linked notes issued by the Company during the first quarter of 2023.

  • Interest rate spread of 2.44% decreased 33 basis points compared to 2.77%.
  • Net interest margin of 2.99% decreased 6 basis points compared to 3.05%.

Interest Income of $296.7 million increased $162.6 million, or 121%, compared to $134.1 million, reflecting an increase in both yields and average balances of loans and loans held for sale, as well as higher balances in securities held to maturity. 

  • Average balances of $13.4 billion for loans and loans held for sale increased 31% compared to $10.2 billion.
  • Average yield on loans and loans held for sale of 7.89% increased 289 basis points compared to 5.00%.

Interest Expense of $179.2 million increased $130.5 million, or 268%, compared to $48.7 million.  The increase was primarily due to higher rates on certificates of deposit, interest-bearing checking, and money market accounts, as well higher average balances of certificates of deposit and higher rates on borrowings.

  • Average balances of $13.2 billion for interest-bearing deposits increased 46% compared to $9.0 billion.
  • Average interest rates of 4.90% for interest-bearing deposits increased 292 basis points compared to 1.98%.

Noninterest Income of $36.1 million increased $6.9 million, or 24%, compared to $29.2 million, primarily due to a $9.2 million, or 113%, increase in loan servicing fees that was offset by a $2.6 million, or 19%, decrease in gain on sale of loans.  

  • Loan servicing fees included a $11.6 million positive fair market value adjustment to servicing rights, with a $1.2 million positive adjustment in the Banking segment and a $10.4 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $4.6 million positive fair market value adjustment to mortgage servicing rights in the prior period, of which $0.9 million was in the Banking segment and $3.7 million was in the Multi-family Mortgage Banking segment.
  • The decrease in gain on sale of loans was associated with a business mix shift in multi-family lending, from volumes sold in the secondary market towards those maintained on the balance sheet.

Noninterest Expense of $42.9 million increased $8.0 million, or 23%, primarily due to increases in salaries and employee benefits and deposit insurance expense.

  • The efficiency ratio of 28.0% decreased 253 basis points compared to 30.5%.

Comparison of Operating Results for the Three Months Ended
September 30, 2023 and June 30, 2023

Net Interest Income of $117.4 million increased $11.8 million, or 11%, compared to $105.6 million, reflecting higher average balances and yields on loans and loans held for sale, which were partially offset by higher average balances and rates and on deposits, as well as higher average balances on borrowings.

  • Interest rate spread of 2.44% increased 3 basis points compared to 2.41%.
  • Net interest margin of 2.99% increased 2 basis points compared to 2.97%.

Interest Income of $296.7 million increased $38.6 million, or 15%, compared to $258.1 million, reflecting an increase in average balances and yields on loans and loans held for sale.

  • Average balances of $13.4 billion for loans and loans held for sale increased 12%, compared to $12.0 billion.
  • Average yield on loans and loans held for sale of 7.89% increased 22 basis points compared to 7.67%.

Interest Expense of $179.2 million increased 18% compared to $152.5 million. The increase was primarily due to higher average balances and rates on certificates of deposit and interest-bearing checking accounts, as well as higher average balances on borrowings.  

  • Average balances of $13.2 billion for interest-bearing deposits increased 10% compared to $12.0 billion.
  • Average interest rates of 4.90% for interest-bearing deposits increased 30 basis points compared to 4.60%.

Noninterest Income of $36.1 million increased $6.2 million, or 21%, compared $29.9 million, primarily due to a $8.8 million, or 102%, increase in loan servicing fees.

  • Loan servicing fees included a $11.6 million positive fair market value adjustment to servicing rights, with a $1.2 million positive adjustment in the Banking segment and a $10.4 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $3.4 million positive fair market value adjustment to servicing rights in the prior period, with a $1.3 million positive adjustment in the Banking segment and a $2.1 million positive adjustment in the Multi-family Mortgage Banking segment.

Noninterest Expense of $42.9 million decreased $1.4 million, or 3%, primarily due to a decrease in professional fees and other miscellaneous expenses that were partially offset by higher salaries and employee benefits.

  • The efficiency ratio of 28.0% decreased 474 basis points compared to 32.7%.

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 $16.5 billion in assets and $13.0 billion in deposits as of September 30, 2023, 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, Farmers-Merchants Bank of Illinois, 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.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)














September 30,


June 30,


March 31,


December 31,


September 30,



2023


2023


2023


2022


2022

Assets











Cash and due from banks


$                10,633


$                15,390


$                19,002


$                22,170


$                13,796

Interest-earning demand accounts


396,605


361,920


350,584


203,994


310,165

Cash and cash equivalents


407,238


377,310


369,586


226,164


323,961

Securities purchased under agreements to resell


3,385


3,412


3,438


3,464


3,497

Mortgage loans in process of securitization


476,047


298,907


197,074


154,194


137,448

Securities available for sale


624,586


648,003


679,518


323,337


322,069

Securities held to maturity (includes $1,010,745, $1,058,590,
$1,106,582, $1,118,966 and $1,005,487 at fair value,
respectively)


1,012,801


1,062,017


1,104,835


1,119,078


1,005,487

Federal Home Loan Bank (FHLB) stock


48,219


39,130


39,130


39,130


39,130

Loans held for sale (includes $90,875, $82,931, $85,516, $82,192
and $68,785 at fair value, respectively)


3,477,036


3,058,013


2,855,250


2,910,576


2,844,750

Loans receivable, net of allowance for credit losses on loans of
$66,864, $62,986, $51,838, $44,014 and $38,996, respectively


9,910,681


9,854,018


8,575,210


7,426,858


6,919,128

Premises and equipment, net


36,730


36,947


35,793


35,438


35,492

Servicing rights


162,141


147,288


143,867


146,248


144,984

Interest receivable


78,401


70,509


64,282


56,262


40,170

Goodwill 


15,845


15,845


15,845


15,845


15,845

Intangible assets, net


831


949


1,068


1,186


1,307

Other assets and receivables


241,295


262,524


156,070


157,447


145,454

Total assets


$         16,495,236


$         15,874,872


$         14,240,966


$         12,615,227


$         11,978,722

Liabilities and Shareholders' Equity











  Liabilities











Deposits











Noninterest-bearing


$              287,846


$              349,387


$              313,733


$              326,875


$              315,868

Interest-bearing


12,719,492


12,710,477


11,031,498


9,744,470


10,003,611

Total deposits


13,007,338


13,059,864


11,345,231


10,071,345


10,319,479

Borrowings 


1,654,075


1,016,836


1,233,762


930,392


97,279

Deferred and current tax liabilities, net


18,006


16,084


32,827


19,613


19,124

Other liabilities


183,102


221,788


123,462


134,138


130,250

Total liabilities


14,862,521


14,314,572


12,735,282


11,155,488


10,566,132

Commitments and  Contingencies











Shareholders' Equity











Common stock, without par value











Authorized - 75,000,000 shares











Issued and outstanding  - 43,240,212 shares, 43,237,300 shares,
43,233,618 shares, 43,113,127 shares and 43,109,578 shares


139,609


138,853


138,105


137,781


137,226

Preferred stock, without par value - 5,000,000 total shares
authorized











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 - 200,000 shares











Issued and outstanding - 196,181 shares (equivalent to
7,847,233 depositary shares) 


191,084


191,084


191,084


191,084


191,084

8.25% Series D Preferred stock - $1,000 per share liquidation
preference











Authorized - 300,000 shares











Issued and outstanding - 142,500 shares (equivalent to
5,700,000 depositary shares) 


137,459


137,459


137,459


137,459


137,371

Retained earnings


998,252


928,875


875,700


832,871


787,530

Accumulated other comprehensive loss


(4,754)


(7,036)


(7,729)


(10,521)


(11,686)

Total shareholders' equity


1,632,715


1,560,300


1,505,684


1,459,739


1,412,590

Total liabilities and shareholders' equity


$         16,495,236


$         15,874,872


$         14,240,966


$         12,615,227


$         11,978,722

 

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)

















Three Months Ended


Change



September 30,


June 30,


September 30,


3Q23


3Q23



2023


2023


2022


vs. 2Q23


vs. 3Q22

Interest Income














Loans


$

266,561


$

228,732


$

129,101


17 %


106 %

Mortgage loans in process of securitization



2,583



3,127



2,162


-17 %


19 %

Investment securities:














Available for sale - taxable



6,182



5,564



485


11 %


1175 %

Held to maturity



17,427



17,311



970


1 %


1697 %

Federal Home Loan Bank stock



572



471



379


21 %


51 %

Other



3,351



2,864



1,015


17 %


230 %

Total interest income



296,676



258,069



134,112


15 %


121 %

Interest Expense














Deposits



162,906



137,801



45,002


18 %


262 %

Borrowed funds



16,334



14,651



3,725


11 %


338 %

Total interest expense



179,240



152,452



48,727


18 %


268 %

Net Interest Income



117,436



105,617



85,385


11 %


38 %

Provision for credit losses



4,014



22,603



2,225


-82 %


80 %

Net Interest Income After Provision for Credit Losses



113,422



83,014



83,160


37 %


36 %

Noninterest Income














Gain on sale of loans



10,758



11,350



13,354


-5 %


-19 %

Loan servicing fees, net



17,384



8,616



8,169


102 %


113 %

Mortgage warehouse fees



1,858



2,865



1,105


-35 %


68 %

Syndication and asset management fees



2,368



3,896



3,073


-39 %


-23 %

Other income



3,700



3,155



3,485


17 %


6 %

Total noninterest income



36,068



29,882



29,186


21 %


24 %

Noninterest Expense














Salaries and employee benefits



27,052



25,724



23,027


5 %


17 %

Loan expenses



1,038



907



1,226


14 %


-15 %

Occupancy and equipment



2,196



2,456



1,967


-11 %


12 %

Professional fees



2,555



3,723



2,429


-31 %


5 %

Deposit insurance expense



3,568



3,806



755


-6 %


373 %

Technology expense



1,609



1,571



1,325


2 %


21 %

Other expense



4,912



6,133



4,222


-20 %


16 %

Total noninterest expense



42,930



44,320



34,951


-3 %


23 %

Income Before Income Taxes



106,560



68,576



77,395


55 %


38 %

Provision for income taxes



25,056



3,274



18,907


665 %


33 %

Net Income


$

81,504


$

65,302


$

58,488


25 %


39 %

   Dividends on preferred stock



(8,668)



(8,668)



(5,729)


—


51 %

Net Income Allocated to Common Shareholders


$

72,836


$

56,634


$

52,759


29 %


38 %

Basic Earnings Per Share


$

1.68


$

1.31


$

1.22


28 %


38 %

Diluted Earnings Per Share


$

1.68


$

1.31


$

1.22


28 %


38 %

Weighted-Average Shares Outstanding














Basic



43,238,724



43,235,398



43,107,975





Diluted



43,351,208



43,309,393



43,258,925





 

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)












Nine Months Ended





September 30,


September 30,





2023


2022


Change

Interest Income









Loans


$

684,743


$

287,291


138 %

Mortgage loans in process of securitization



7,358



5,856


26 %

Investment securities:









Available for sale - taxable



14,012



2,103


566 %

Held to maturity



50,492



970


5105 %

Federal Home Loan Bank stock



1,470



932


58 %

Other



7,964



2,242


255 %

Total interest income



766,039



299,394


156 %

Interest Expense









Deposits



405,149



68,583


491 %

Borrowed funds



37,144



7,670


384 %

Total interest expense



442,293



76,253


480 %

Net Interest Income



323,746



223,141


45 %

Provision for credit losses



33,484



10,888


208 %

Net Interest Income After Provision for Credit Losses



290,262



212,253


37 %

Noninterest Income









Gain on sale of loans



28,841



52,883


-45 %

Loan servicing fees, net



28,360



27,507


3 %

Mortgage warehouse fees



5,751



4,313


33 %

Syndication and asset management fees



7,476



5,286


41 %

Other income



9,786



12,965


-25 %

Total noninterest income



80,214



102,954


-22 %

Noninterest Expense









Salaries and employee benefits



74,922



66,795


12 %

Loan expenses



2,749



3,621


-24 %

Occupancy and equipment



6,884



5,792


19 %

Professional fees



8,547



5,326


60 %

Deposit insurance expense



9,552



2,184


337 %

Technology expense



4,757



3,865


23 %

Other expense



14,611



11,358


29 %

Total noninterest expense



122,022



98,941


23 %

Income Before Income Taxes



248,454



216,266


15 %

Provision for income taxes



46,693



53,701


-13 %

Net Income


$

201,761


$

162,565


24 %

   Dividends on preferred stock



(26,003)



(17,186)


51 %

Net Income Allocated to Common Shareholders


$

175,758


$

145,379


21 %

Basic Earnings Per Share


$

4.07


$

3.37


21 %

Diluted Earnings Per Share


$

4.06


$

3.36


21 %

Weighted-Average Shares Outstanding









Basic



43,218,125



43,182,380



Diluted



43,317,343



43,331,148



 

Key Operating Results

(Unaudited)

($ in thousands, except share data)

















Three Months Ended


Change





September 30,


June 30,


September 30,


3Q23


3Q23





2023


2023


2022


vs. 2Q23


vs. 3Q22















Noninterest expense



$                    42,930


$                      44,320


$             34,951


-3 %


23 %















Net interest income (before provision for credit losses)



117,436


105,617


85,385


11 %


38 %


Noninterest income



36,068


29,882


29,186


21 %


24 %


Total income



$                  153,504


$                    135,499


$           114,571


13 %


34 %















Efficiency ratio



27.97 %


32.71 %


30.51 %


(474)

bps

(254)

bps



























Average assets



$             16,031,015


$               14,673,257


$      11,437,805


9 %


40 %


Net income



81,504


65,302


58,488


25 %


39 %


Return on average assets before annualizing



0.51 %


0.45 %


0.51 %






Annualization factor



4.00


4.00


4.00






Return on average assets



2.03 %


1.78 %


2.05 %


25

bps

(2)

bps














Return on average tangible common shareholders' equity (1)



26.69 %


22.03 %


23.92 %


466

bps

277

bps














Tangible book value per common share (1)



$                      25.82


$                        24.14


$               20.78


7 %


24 %















Tangible common shareholders' equity/tangible assets (1)



6.78 %


6.58 %


7.49 %


20

bps

(71)

bps














Consolidated ratios













Total capital/risk-weighted assets(2)



11.4

%

11.3

%

12.5

%




Tier I capital/risk-weighted assets(2)



10.9

%

10.8

%

12.1

%




Common Equity Tier I capital/risk-weighted assets(2)



7.5

%

7.3

%

7.8

%




Tier I capital/average assets(2)



10.1

%

10.6

%

12.3

%

















(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:























(2) As defined by regulatory agencies; September 30, 2023 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 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


Change





September 30,


June 30,


September 30,


3Q23


3Q23





2023


2023


2022


vs. 2Q23


vs. 3Q22















Net income



$                    81,504


$                      65,302


$             58,488


25 %


39 %


Less: preferred stock dividends  



(8,668)


(8,668)


(5,729)


—


51 %


Net income available to common shareholders



$                    72,836


$                      56,634


$             52,759


29 %


38 %















Average shareholders' equity



$               1,607,779


$                 1,544,976


$        1,267,160


4 %


27 %


Less: average goodwill & intangibles



(16,742)


(16,858)


(17,228)


-1 %


-3 %


Less: average preferred stock



(499,608)


(499,608)


(367,726)


—


36 %


Average tangible common shareholders' equity



$               1,091,429


$                 1,028,510


$           882,206


6 %


24 %















Annualization factor



4.00


4.00


4.00






Return on average tangible common shareholders' equity



26.69 %


22.03 %


23.92 %


466

bps

277

bps














Total equity



$               1,632,715


$                 1,560,300


$        1,412,590


5 %


16 %


Less: goodwill and intangibles



(16,676)


(16,794)


(17,152)


-1 %


-3 %


Less: preferred stock



(499,608)


(499,608)


(499,520)


—


—


Tangible common shareholders' equity



$               1,116,431


$                 1,043,898


$           895,918


7 %


25 %















Assets



$             16,495,236


$               15,874,872


$      11,978,722


4 %


38 %


Less: goodwill and intangibles



(16,676)


(16,794)


(17,152)


-1 %


-3 %


Tangible assets



$             16,478,560


$               15,858,078


$      11,961,570


4 %


38 %















Ending common shares



43,240,212


43,237,300


43,109,578



















Tangible book value per common share



$                      25.82


$                        24.14


$               20.78


7 %


24 %


Tangible common shareholders' equity/tangible assets



6.78 %


6.58 %


7.49 %


20

bps

(71)

bps

 

Key Operating Results

(Unaudited)

($ in thousands, except share data)













Nine Months Ended







September 30,


September 30,







2023


2022


Change











Noninterest expense



$           122,022


$            98,941


23 %











Net interest income (before provision for credit losses)



323,746


223,141


45 %


Noninterest income



80,214


102,954


-22 %


Total income



$           403,960


$          326,095


24 %











Efficiency ratio



30.21 %


30.34 %


(13)

bps



















Average assets



$      14,541,523


$     10,568,712


38 %


Net income



201,761


162,565


24 %


Return on average assets before annualizing



1.39 %


1.54 %




Annualization factor



1.33


1.33




Return on average assets



1.85 %


2.05 %


(20)

bps










Return on average tangible common shareholders' equity (1)



22.61 %


23.08 %


(47)

bps










Tangible book value per common share (1)



$               25.82


$              20.78


24 %











Tangible common shareholders' equity/tangible assets (1)



6.78 %


7.49 %


(71)

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,







2023


2022


Change











Net income



$           201,761


$          162,565


24 %


Less: preferred stock dividends  



(26,003)


(17,186)


51 %


Net income available to common shareholders



$           175,758


$          145,379


21 %











Average shareholders' equity



$        1,550,196


$       1,219,305


27 %


Less: average goodwill & intangibles



(16,859)


(17,360)


-3 %


Less: average preferred stock



(499,608)


(364,028)


37 %


Average tangible common shareholders' equity



$        1,033,729


$          837,917


23 %











Annualization factor



1.33


1.33




Return on average tangible common shareholders' equity



22.61 %


23.08 %


(47)

bps










Total equity



$        1,632,715


$       1,412,590


16 %


Less: goodwill and intangibles



(16,676)


(17,152)


-3 %


Less: preferred stock



(499,608)


(499,520)


—


Tangible common shareholders' equity



$        1,116,431


$          895,918


25 %











Assets



$      16,495,236


$     11,978,722


38 %


Less: goodwill and intangibles



(16,676)


(17,152)


-3 %


Tangible assets



$      16,478,560


$     11,961,570


38 %











Ending common shares



43,240,212


43,109,578













Tangible book value per common share



$               25.82


$              20.78


24 %


Tangible common shareholders' equity/tangible assets



6.78 %


7.49 %


(71)

bps

 

Merchants Bancorp

Average Balance Analysis

($ in thousands)

(Unaudited)














Three Months Ended


Three Months Ended


Three Months Ended


Septmeber 30, 2023


June 30, 2023


September 30, 2022


Average


Yield/


Average


Yield/


Average


Yield/


Balance

Interest

Rate 


Balance

Interest

Rate 


Balance

Interest

Rate 

Assets:
























Interest-bearing deposits, and other

$      259,630

$     3,923

5.99 %


$      249,722

$    3,335

5.36 %


$        211,653

$    1,394

2.61 %

Securities available for sale - taxable

656,561

6,182

3.74 %


672,887

5,564

3.32 %


331,796

485

0.58 %

Securities held to maturity

1,040,070

17,427

6.65 %


1,093,018

17,311

6.35 %


98,363

970

3.91 %

Mortgage loans in process of securitization

208,767

2,583

4.91 %


280,092

3,127

4.48 %


235,230

2,162

3.65 %

Loans and loans held for sale

13,399,854

266,561

7.89 %


11,968,565

228,732

7.67 %


10,245,294

129,101

5.00 %

     Total interest-earning assets

15,564,882

296,676

7.56 %


14,264,284

258,069

7.26 %


11,122,336

134,112

4.78 %

Allowance for credit losses on loans

(63,449)




(54,411)




(39,325)



Noninterest-earning assets

529,582




463,384




354,794















Total assets

$  16,031,015




$  14,673,257




$   11,437,805



























Liabilities & Shareholders' Equity:
























Interest-bearing checking

4,882,727

58,642

4.76 %


4,307,736

48,296

4.50 %


4,207,217

21,980

2.07 %

Savings deposits

241,861

340

0.56 %


236,012

299

0.51 %


239,262

162

0.27 %

Money market 

2,798,325

33,235

4.71 %


2,749,594

30,521

4.45 %


2,523,315

13,094

2.06 %

Certificates of deposit

5,255,573

70,689

5.34 %


4,729,242

58,685

4.98 %


2,030,152

9,766

1.91 %

    Total interest-bearing deposits

13,178,486

162,906

4.90 %


12,022,584

137,801

4.60 %


8,999,946

45,002

1.98 %













Borrowings

711,948

16,334

9.10 %


591,333

14,651

9.94 %


588,582

3,725

2.51 %

    Total interest-bearing liabilities

13,890,434

179,240

5.12 %


12,613,917

152,452

4.85 %


9,588,528

48,727

2.02 %













Noninterest-bearing deposits

333,155




346,837




474,925



Noninterest-bearing liabilities

199,647




167,527




107,192















    Total liabilities

14,423,236




13,128,281




10,170,645















    Shareholders' equity

1,607,779




1,544,976




1,267,160















Total liabilities and shareholders' equity

$  16,031,015




$  14,673,257




$   11,437,805















Net interest income


$ 117,436




$ 105,617




$   85,385














Net interest spread



2.44 %




2.41 %




2.77 %













Net interest-earning assets

$    1,674,448




$   1,650,367




$     1,533,808















Net interest margin



2.99 %




2.97 %




3.05 %













Average interest-earning assets to
average interest-bearing liabilities



112.05 %




113.08 %




116.00 %

 

Supplemental Results

(Unaudited)

($ in thousands)



















Net Income


Net Income






Three Months Ended


Nine Months Ended






September 30,


June 30,


September 30,


September 30,






2023


2023


2022


2023


2022


Segment














Multi-family Mortgage Banking




$              14,685


$            11,242


$               13,366


$          27,893


$          44,414


Mortgage Warehousing




19,926


18,596


11,801


47,163


36,828


Banking




52,445


42,650


39,344


144,402


94,040


Other




(5,552)


(7,186)


(6,023)


(17,697)


(12,717)


Total




$              81,504


$            65,302


$               58,488


$        201,761


$        162,565


































Total Assets










September 30,


June 30,


December 31,










2023


2023


2022






Segment














Multi-family Mortgage Banking




$            392,754


$          373,680


$             351,274






Mortgage Warehousing




4,757,817


4,474,832


2,519,810






Banking




11,135,651


10,784,596


9,587,544






Other




209,014


241,764


156,599






Total




$       16,495,236


$     15,874,872


$        12,615,227






































Gain on Sale of Loans


Gain on Sale of Loans






Three Months Ended


Nine Months Ended






September 30,


June 30,


September 30,


September 30,






2023


2023


2022


2023


2022


Loan Type














Multi-family




8,616


$            10,361


$               12,002


$          23,897


$          46,578


Single-family




951


202


138


1,430


1,001


Small Business Association (SBA)




1,191


787


1,214


3,514


5,304


Total




$              10,758


$            11,350


$               13,354


$          28,841


$          52,883


































Loans Receivable and Loans Held for Sale










September 30,


June 30,


December 31,










2023


2023


2022




















Mortgage warehouse lines of credit




$         1,022,692


$       1,201,932


$             464,785






Residential real estate




1,358,908


1,342,586


1,178,401






Multi-family financing




3,709,320


3,746,333


3,135,535






Healthcare financing




2,218,559


2,128,378


1,604,341






Commercial and commercial real estate (1)(2)




1,560,031


1,394,256


978,661






Agricultural production and real estate




96,490


91,599


95,651






Consumer and margin loans




11,545


11,920


13,498










9,977,545


9,917,004


7,470,872






    Less: Allowance for credit losses on loans



66,864


62,986


44,014






Loans receivable




$         9,910,681


$       9,854,018


$          7,426,858




















Loans held for sale




3,477,036


3,058,013


2,910,576






Total loans, net of allowance




$       13,387,717


$     12,912,031


$        10,337,434




















(1)     Includes $1.0 billion, $894.7 million and $497.0 million of revolving  lines of credit collateralized primarily by mortgage servicing rights as of September 30, 2023, June 30, 2023 and December 31, 2022, respectively.


(2)     Includes only $8.1 million, $8.3 million and $12.8 million of non-owner occupied commerical real estate as of September 30, 2023, June 30, 2023 and December 31, 2022, respectively.  


 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/merchants-bancorp-reports-third-quarter-2023-results-301969179.html

SOURCE Merchants Bancorp


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