Merchants Bancorp · NASDAQ:MBIN
Merchants Bancorp — IPO Roadshow (September 2022)
38 slides from Merchants Bancorp's IPO roadshow presentation, Sep 22, 2022
Slide 1: Preferred Stock Offering Investor Presentation
Preferred Stock Offering Investor Presentation September 2022 1
Slide 2: Disclaimers
Disclaimers Merchants Bancorp (the “Company” or the “Holding Company”) is conducting an offering of depositary shares of the Company’s Fixed Rate Reset Series D Non - Cumulative Perpetual Preferred Stock . This presentation may contain “forward - looking statements” within the meaning of meaning of
Slide 3: Terms of Perpetual Preferred Equity Offering
Terms of Perpetual Preferred Equity Offering Issuer Merchants Bancorp Security Series D Non-Cumulative Perpetual Preferred Stock (Depositary shares 1/40) Ticker MBINM Issuance Type SEC Registered Offering Size $100 Million Security Rating Ba3 from Moody's Investors Service Structure/Maturity Fixed-R
Slide 4: Key Highlights
Key Highlights x Merchants operates a unique business model that consists of well - diversified revenue streams and strong positioning through any economic or interest rate cycle x Three principal business lines of Multi - Family Mortgage Banking, Mortgage Warehousing, and Banking offer superior ret
Slide 5: Experienced Executive Management
Experienced Executive Management 5 Strong Industry Experience Michael Petrie Chairman 43 Years in Industry 32 Years with Company Randall Rogers Vice Chairman 52 Years in Industry 32 Years with Company Michael Dunlap President & CEO 30 Years in Industry 13 Years with Company Scott Evans Market Presid
Slide 6: Overview of Merchants Bancorp (MBIN)
Overview of Merchants Bancorp (MBIN) Overview of Merchants Summary of Merchants 1 • Merchants Bancorp (MBIN) is a diversified bank holding company headquartered in Carmel, IN o $11.1B in assets o $8.3B in deposits • Loan and deposit operations are conducted throughout the Country • Operates 10 tradi
Slide 7: Financial Highlights
Financial Highlights 1) Cash and Securities includes cash and cash equivalents, available for sale securities, securities purchased under agreements to resell, FHLB stock and mortgage loans in the process of securitization 2) Total loans include loans held for investment and loans held for sale for
Slide 8: Recent Company Awards / Accolades
Recent Company Awards / Accolades 8 Merchants Has Received Strong Industry Recognition 2022 Top 25 U.S. Banks Ranking Banking. #12 Best Performing Bank. Ranked on 5 metrics including: ROAA, ROAE, asset quality, capital adequacy, and total shareholder returns RANKED THE #1 BEST PERFORMING PUBLIC BANK
Slide 9: Key Business Lines
Key Business Lines Three principal business lines offer a balanced and diverse revenue stream that lessens earnings volatility through various economic, credit and interest rate cycles: 1 2 3 Multi - Family Mortgage Banking – 38.3% of net revenues¹ ($161.4M) – Lender to developers of multi - family
Slide 10: Multi-Family Mortgage Banking
Multi - Family Mortgage Banking 38.3% Net Revenue Contribution – 2022 x Merchants Capital is engaged in multi - family mortgage banking, specializing in originating and servicing loans for rental housing and healthcare facility financing • Differentiated focus on the affordable and workforce housing
Slide 11: Mortgage Warehousing
Mortgage Warehousing 24.6% of Net Revenue Contribution – 2022 x Merchants Bank saw an opportunity to start its warehouse lending business in 2009 and has grown to fund over $111B in 2020, $78B in 2021, a nd $18.2 billion for the six months ended June 30, 2022 • Nationwide focus x Offer multi - famil
Slide 12: Banking
Banking 36.1% of Net Revenue Contribution – 2022 1) MBI - Indianapolis serves the Indianapolis market as a community bank and provides funding arrangements for the multi - family mortgage banking segment. It also generates SBA and C&I loans • Holds loans comprised of multi - family construction and
Slide 13: National Reach – Employees in Many States
National Reach – Employees in Many States 13 Warehouse Customers Merchants Capital Customers CA 20% TX 7% FL 7% NJ 5% NC 5% Top 5 States Warehouse Loan Fundings YTD at 6/30/22 IN 24% NY 12% IL 9% TX 8% OH 8% Top 5 States MCC Servicing & Loan Balances at 6/30/22
Slide 14: Summary of Business Model Trends by Segment
Summary of Business Model Trends by Segment Balance of Net Revenue 1 ($MM) Balance of Net Income ($MM) $29.2 $51.5 $59.6 $106.3 $95.2 $69.6 $53.6 $90.9 $100.8 $180.5 $227.1 $217.8 2020 2021 LTM² Multi-family Mortgage Banking Mortgage Warehousing Banking $81.9 $142.6 $161.4 $156.1 $138.6 $103.7 $98.4
Slide 15: Diversified Revenue Base
Diversified Revenue Base Balance of Net Revenue 1 ($MM) LTM 2 Balance of Net Revenue 1 ($MM) $85.3 $118.4 $212.3 $273.0 $267.1 $49.6 $47.1 $127.5 $157.3 $154.3 $134.9 $165.5 $339.8 $430.3 $421.4 2018 2019 2020 2021 LTM² Net Interest Income After Provision Noninterest Income $95.2 $162.8 $161.4 $8.4
Slide 16: Profitability Trends Over Time
Profitability Trends Over Time Return on Average Assets Return on Average Tangible Common Equity Net Interest Margin Efficiency Ratio 1 1.71% 1.47% 2.12% 2.23% 2.06% 2018 2019 2020 2021 YTD 17.23% 17.56% 34.02% 30.10% 22.72% 2018 2019 2020 2021 YTD 2.54% 2.40% 2.69% 2.79% 2.82% 2018 2019 2020 2021 Y
Slide 17: Disciplined Growth Over Time
Disciplined Growth Over Time Total Assets ($MM) Total Gross Loans ($MM) Total Deposits ($MM) Net Income ($MM) $3,884 $6,372 $9,645 $11,279 $11,086 2018 2019 2020 2021 2Q22 $2,058 $3,028 $5,536 $5,783 $7,071 $833 $2,094 $3,070 $3,303 $2,759 $2,891 $5,122 $8,606 $9,086 $9,830 2018 2019 2020 2021 2Q22
Slide 18: Earnings Correlation to Interest Rates
Earnings Correlation to Interest Rates 1) Market yield curve spread reflects the difference between the average 30 - year mortgage rate and the average 1 - month LIBOR rate a s of June 30, 2022 2) LTM as of June 30, 2022 Net Income (in $millions) $54.7 $62.9 $77.3 $180.5 $227.1 $217.8 2.88% 2.52% 1.
Slide 19: Loan Securitizations
Loan Securitizations Merchants intends to sell ~$1.2 billion pool of on balance sheet, performing, multi - family mortgage loans to a trust The trust will issue multiple classes of certificates: a senior Class A, a subordinate Class B, and an interest - only strip Merchants will receive the Class A
Slide 20: Overview of Loan Portfolio
Overview of Loan Portfolio Note: Information as of June 30 , 2022 Mortgage Warehouse Lines of Credit (MTG WHLOC) • Provides warehouse financing arrangements to approved mortgage companies for the origination and sale of residential mortgage loans Residential Real Estate Loans (RES RE) • Secured by o
Slide 21: Highly Disciplined Credit Culture
Highly Disciplined Credit Culture Nonperforming Loans / Loans Held For Investment Nonperforming Assets / Total Assets Reserves / Loans Held For Investment Net Charge - Offs (Recoveries) / Average Loans 0.12% 0.15% 0.11% 0.01% 0.07% 2018 2019 2020 2021 2Q22 0.06% 0.08% 0.07% 0.01% 0.04% 2018 2019 202
Slide 22: Current Asset Quality Metrics
Current Asset Quality Metrics x Nonperforming loans to total loans held for investment consistently below 0.25% over the past five years x Approximately 96% of Merchants Bank’s loans reprice in 90 days or less x Loans are predominantly agency eligible with variable rates or short maturities, which i
Slide 23: Deposit Portfolio Summary
4,944 4,230 2,840 2,600 1,199 1,470 8,983 8,300 2021 2Q22 Demand Deposits Savings Deposits CDs - Deposit Portfolio Summary Deposit Growth Over Time Deposit Composition (Average YTD) 1 3,231 5,478 7,408 8,983 8,300 0 2,000 4,000 6,000 8,000 10,000 2018 2019 2020 2021 2Q22 Noninterest - bearing Demand
Slide 24: Funding Overview
Funding Overview Funding Sources x FHLB of Indianapolis and Chicago and FRB lines of unused capacity of $1.7B as of June 30, 2022 x Supplement funding with short duration² brokered deposits as needed o $1.2B of brokered deposits as of June 30, 2022 (15% of deposits) Source: S&P Capital IQ Pro 1) Dep
Slide 25: Bank & Holding Company Liquidity
Bank & Holding Company Liquidity 25 x Cash and cash equivalents decreased 75% to $258.1 million at June 30, 2022 from $1.0 billion at December 31, 2021. The 75% decrease reflected a reduction in brokered deposits to fund lending activities x The company also continues to have a significant borrowing
Slide 26: Recent Funding Strategy
Recent Funding Strategy x Make use of lines at the Federal Home Loan Bank, Federal Reserve, and AFX to lower interest expense x Grow multi - family custodial deposits from Merchants Capital Corp. originations and subservicing relationships x Expand custodial escrow relationships from warehouse custo
Slide 27: Capital Strategy
Capital Strategy 27 x Always maintain Well - Capitalized classification x Utilize multiple levers to manage asset levels on the Balance Sheet • Originate multi - family and warehouse lending, SBA, and Merchants Mortgage as Agency MBS • Multi - family bridge loans underwritten to Agency guidelines an
Slide 28: Pro Forma Capital Ratios
Pro Forma Capital Ratios 28 Holding Company Bank Level 7.7% 12.4% 7.3% 10.4% 10.8% 7.6% 13.3% 7.3% 11.3% 11.6% TCE / TA Leverage Ratio CET1 Capital Ratio Tier 1 Ratio Total Capital Ratio 10.8% 12.3% 10.3% 10.3% 10.6% 11.4% 13.0% 11.0% 11.0% 11.4% TCE / TA Leverage Ratio CET1 Capital Ratio Tier 1 Rat
Slide 29: Double Leverage and Interest Coverage
Double Leverage and Interest Coverage 29 As of or for the Period Ended, ($ in thousands) 2018Y 2019Y 2020Y 2021Y Q2 2022 YTD Investment in Subsidiaries $453,658 $665,382 $823,842 $1,160,471 $1,239,864 Consolidated Equity 421,237 653,728 810,621 1,155,409 1,228,539 Double Leverage Ratio 107.7% 101.8%
Slide 30: Appendix
Appendix 30
Slide 31: Strong Oversight by Executive Leadership
Strong Oversight by Executive Leadership 31 Robust Governance Framework Name Biography Michael Petrie Michael Petrie has served as a Director of Merchants Bank of Indiana and Chairman since 2002. He previously served as the Chairman and President of Merchants Capital (formerly PR Mortgage & Investme
Slide 32: Strong Alignment Between Our Investors and the Company
Strong Alignment Between Our Investors and the Company Loans Held For Investment Portfolio Over Time ($B) Ownership Summary 32 Strong Level of Insider Ownership – Merchants Team has ‘Skin - in - the - Game’ Insider Ownership Amount and Nature of Beneficial Ownership Holder Common Stock Equivalent He
Slide 33: Balance Sheet
Balance Sheet (Dollars in thousands) 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 6/30/2022 Assets Cash and due from banks 18,905 25,855 13,909 10,063 14,030 10,714 Interest-earning demand accounts 340,614 310,669 492,800 169,665 1,018,584 247,432 Cash and cash equivalents 359,519 336,524
Slide 34: Income Statement
Income Statement Twelve Months Ended Six Months Ended (Dollars in thousands) 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 6/30/2022 Interest Income Loans 79,922 119,457 186,428 263,915 293,830 158,190 Mortgage loans in process of securitization 5,187 5,012 6,690 11,122 12,746 3,694 Investm
Slide 35: Current Asset Quality Metrics
Current Asset Quality Metrics 35 Credit Quality Remains Strong (Dollars in thousands) Revolving 2022 2021 2020 2019 2018 Prior Loans TOTAL MTG WHLOC Acceptable and Above $— $— $— $— $— $— $900,585 $900,585 Total $— $— $— $— $— $— $900,585 $900,585 RES RE Acceptable and Above 10,316 36,482 49,380 3,3
Slide 36: Segment Financial Overview
Segment Financial Overview Net Income Net Revenue 1 36 Merchants Operates a Balanced Mix of Businesses 1) Net revenues equal to net interest income plus noninterest income, less provision for credit losses. This is a non – GAAP measur e. Please see “Reconciliation of Non – GAAP Measures” in the Appe
Slide 37: Non-GAAP Reconciliation
(Dollars in thousands) 2018 2019 2020 2021 2021 2022 Non-GAAP Reconciliation: Net Income Net income as reported per GAAP 62,874$ 77,329$ 180,533$ 227,104$ 113,400$ 104,077$ Less: preferred stock dividends 3,330 9,216 14,473 20,873 9,416 11,457 Net income available to common shareholders 59,544$ 68,1
Slide 38: Non-GAAP Reconciliation
(Dollars in thousands) 2018 2019 2020 2021 2021 2022 Non-GAAP Reconciliation: Return on Average Tangible Common Equity Average shareholders' equity per GAAP 396,350$ 537,946$ 719,630$ 1,028,834$ 942,566$ 1,194,981$ Less: average goodwill & intangibles (9,265) (20,243) (18,899) (17,841) (17,986) (17,