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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 event reported): October 26, 2023

 

 

 

Merchants Bancorp

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Indiana   001-38258   20-5747400

(State or Other Jurisdiction

of Incorporation)

  

(Commission

File Number)

  

(IRS Employer

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
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
Depositary Shares, each representing a 1/40th interest in a share of Series C Preferred Stock, without par value MBINN NASDAQ
Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock, without par value MBINM NASDAQ

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

  Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On October 26, 2023, Merchants Bancorp issued a press release reporting its financial results for the third quarter of 2023. 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 26, 2023 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 26, 2023 By:    /s/ John F. Macke
    Name: John F. Macke
    Title: Chief Financial Officer

 

 

 

 

 

Exhibit 99.1

 

 

 

 

 

 

PRESS RELEASE

 

Merchants Bancorp Reports Third Quarter 2023 Results

 

For Release October 26, 2023

 

·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, Indiana – (PR Newswire) - 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.

 

Page 2

 

 

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.

 

Page 3

 

 

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%.

 

Page 4

 

 

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%.

 

Page 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%.

 

Page 6

 

 

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.

 

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

 

Page 7

 

 

 

 

 

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 

 

Page 8

 

 

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           

 

Page 9

 

 

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      

 

Page 10

 

 

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%   25bps   (2)bps
                          
Return on average tangible common shareholders' equity (1)   26.69%   22.03%   23.92%   466bps   277bps
                          
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%   20bps   (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%   466bps   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%   20bps   (71)bps

 

Page 11

 

 

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

 

Page 12

 

 

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%

 

Page 13

 

 

Supplemental Results

(Unaudited)

($ in thousands)

 

   Net Income   Net Income 
   Three Months Ended   Nine Months Ended 
   September 30,   June 30,   September 30,   September 30, 
Segment  2023   2023   2022   2023   2022 
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,                 
Segment  2023   2023   2022                 
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, 
Loan Type  2023   2023   2022   2023   2022 
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.    

 

Page 14

 

 

v3.23.3
Cover
Oct. 26, 2023
Document Information [Line Items]  
Document Type 8-K
Amendment Flag false
Document Period End Date Oct. 26, 2023
Entity File Number 001-38258
Entity Registrant Name Merchants Bancorp
Entity Central Index Key 0001629019
Entity Tax Identification Number 20-5747400
Entity Incorporation, State or Country Code IN
Entity Address, Address Line One 410 Monon Boulevard
Entity Address, City or Town Carmel
Entity Address, State or Province IN
Entity Address, Postal Zip Code 46032
City Area Code 317
Local Phone Number 569-7420
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Common Stock [Member]  
Document Information [Line Items]  
Title of 12(b) Security Common Stock, without par value
Trading Symbol MBIN
Security Exchange Name NASDAQ
Series A Preferred Stock [Member]  
Document Information [Line Items]  
Title of 12(b) Security Series A Preferred Stock, without par value
Trading Symbol MBINP
Security Exchange Name NASDAQ
Series B Preferred Stock [Member]  
Document Information [Line Items]  
Title of 12(b) Security Depositary Shares, each representing a 1/40th interest in a share of Series B Preferred Stock, without par value
Trading Symbol MBINO
Security Exchange Name NASDAQ
Series C Preferred Stock [Member]  
Document Information [Line Items]  
Title of 12(b) Security Depositary Shares, each representing a 1/40th interest in a share of Series C Preferred Stock, without par value
Trading Symbol MBINN
Security Exchange Name NASDAQ
Series D Preferred Stock [Member]  
Document Information [Line Items]  
Title of 12(b) Security Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock, without par value
Trading Symbol MBINM
Security Exchange Name NASDAQ
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