Merchants Bancorp · NASDAQ:MBIN
Merchants Bancorp — Q3 2022 Earnings Presentation
41 slides from Merchants Bancorp's earnings presentation, November 2022
Slide 1: Investor Overview Third Quarter 2022
Investor Overview Third Quarter 2022
Slide 2: Forward-Looking Statements / Disclaimers
Forward-Looking Statements / Disclaimers ar This presentation may contain “forward-looking statements” within the meaning of meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. Th
Slide 3: Merchants Bancorp Overview
$ Va 1- LTM Revenues refers to net interest income plus noninterest income, less provision for loan losses for the last twelve months ended September 30,2022 and LTM Net Income refers to the same period. 2- As of oF for nine months ended September 30, 2022; Market Cap includes preferred shares. 3-20
Slide 4: Top 3 US public banks 2021 per S&P Global
1st Merchants Bancorp (MBIN) 2nd Carmel, IN Total assets: $11.28B Western Alliance Bancorp Performance score*: (WAL) 151.4% Phoenix, AZ Total assets: $55.98B Performance score*: 31d 130.1% Customers Bancorp Inc. Top 3 es West Reading, PA US public banks, aerate 2021 - per S&P Global 105.1% Source: S
Slide 5: Exceptional Performance
Exceptional Performance MBIN Peer Average* MBIN Ranking? Net Income 39% 15% #6 Highest Assets 35% 13% #2 Highest Goss Loans? 38% 12% #2 Highest Deposits 36% 15% #3 Highest Earnings Per Common Share 27% 15% #9 Highest P/E Multiples — a MBIN Peer Average*> _ MBIN Ranking™> Price/LTM Earnings Per Share
Slide 6: Tangible Book Value Per Share and Annual Dividends Per Share
ar R : ; 2 2020 2021 2022 | og 018 ©2019 Tangible Book Value Per Share Annual Dividends Per Share = 1- Peer group includes publicly held US banks and thrifts with assets of $5B to S1SB, and excludes results deemed as “not meaningful” or “not available” by SGP Global - source S&P Global.
Slide 7: Share Price Change Since Merchants Bancorp IPO
Share Price Change SinceMerchants Bancorp IPO on 10/26/2017 ——NBIN (+123%) —— NASDAQ Bank Index (+8%) —— KBW Nas¢bg Bank index(+5%) ‘D/4/2017 6/5/2018 1/30/2018 = 6/4/2099 1/29/2019 6/¥2020 nspom spon §=6nasn = 5/2422 ‘Source - S&P Global as of November 18, 2022. Price Change (%)
Slide 8: P/E Multiple - Price/LTM EPS
- 50% nN + 40% 3 oO + 30% 2 wo <= e L 20% 3 - « S * 1 10% & ' : . . 0% 0.0 5.0 10.0 15.0 20.0 P/E Multiple — Price/LTM EPS? 1- Peer group includes publicty held US banks and thrifts with assets of $5B to $15B, and excludes results deemed as “nat meaningful” or “nat available” by S&P Global - source
Slide 9: Unique Operating Model
s . ar~ Unique Operating Model > Consistent Profitablity and Growth That is Less Dependent on Interest Rate Cycles Than Peers >» Diverse Business Mix With Growth Opportunities > Maximizing Operating Efficiency with Minimal Branch Network and Higher Concentration of Variable Costs >» Enviable Funding
Slide 10: Net Income by Segment
$217.8 eae } Primarily from gain on sale of loans resold to federal bs agencies such as GNMA, FHLMC, or FNMA, as well as plier hte servicing fees on the loans sold or retained. Mortgage Banking Mortgage Warehousing Primarily from interest income and fees earned during pxniieg the time that loans ori
Slide 11: Net Interest Margin and Net Income vs Yield Curve Spread
ar 4 $227. is $200.0 5 3.25% & 5150.0 286% é 2.54% . 2.90% wv $50.0 aa 172% $00 + ; 2018 2019 2020 2021 9/30/22 - LIM 2 —Market Yield Curve Spread' © ——MBINNet Interest Margin — MBIN Net Income 1- Market yield curve spread reflects the difference between the average 30-year mortgage (source: http://
Slide 12: Maximizing Operating Efficiency
Maximizing Operating Effidency 1 MBIN @=™—@Peer Average ——Top 10 Peers’ Efficiency driven by low 58.9% 582% 56.9% y ra 55.9% 56.0% fixed costs and ial —s 45.4% #2 lowest a be a 41.8% [ae concentration 365% 37.4% peers! of variable 74% 28.8% 303% costs that adjust with revenue and 2018 2099 ©2020 202
Slide 13: Balance Sheet - High Growth
Balance Sheet - High Growth ' 4 (Dollars in millions) September 30, 2021 December 31,2021 September 30, 2022 Total Assets $10,952 $11,279 $11,979 Total Loans ' net $8,885 $9,055 $9,764 Total Deposits $8,947 $8,983 $10,319 Total Equity $1,110 $1,155 $148 Tangible Equity / Tangible Assets - 9.99% 10.1
Slide 14: What is Unique About Merchants Bancorp?
What is Unique About Merchants Bancorp?
Slide 15: Consistent Profitability and Growth Less Dependent on Interest Rate Cycles
Consistent Profitablity and Growth That is Less Dependent on Interest Rate Cycles Than Peers y a
Slide 16: Net Income and Return on Average TCE
===MBIN eePeer Average 34.27% 15.00% 15.70% we 12.93% 10.66% 1020 2021 "30n- ym ” Net Income ($M) Return on Average TCE 34 1- Peer group includes publicly held US banks and thrifts with assets of $5B to $15B, and excludes results deemed as “not meaningful” or “not available” by S&P Global - source S
Slide 17: Total Assets and Return on Average Assets
ar #3 out of 93° peers 2.12% = 2.05% 1.71% 1.47 120% 126% 1.24% 0.87% em BIN eeempPeer Average 2021 9/30/2022 20271 +=3Q22-YTD Total Assets (SM) Return on Average Assets 1- Peer group includes publicly held US banks and thrifts with assets of $5B to $158, and excludes results deemed as “not meaningf
Slide 18: Total Gross Loans and Total Deposits
ar Loans Held for Investment ~ Loans Held for Sale Total Gross Loans ($M) | I Total Deposits ($M) 1- Peer group includes publicly held US banks and thrifts with assets of $58 to $15B, and excludes results deemed as “not meaningful” or “not available" by S&P Global - source S&P Global.
Slide 19: Diverse Business Mix With Opportunity for Additional Growth
ar. Diverse Business Mix With Opportunity for Additional Growth
Slide 20: National Reach - Employees in Many States
National Reach - Employees in Many States s#« ~*~ gq Top 5 States ‘ MCC Servicing & Loan Top 5 States : > Balances Warehouse Loan “ Fundings ’ N 2S NY 1% CA 23% IL 10% TX 8% TX 8% FL 7% OH 7% NJ 5% AZ 4% (1) As of jane 30, 2022 \ 20
Slide 21: Consolidated Net Revenue and LTM Net Revenue by Segment
$425.6 ($143.2 Noninterest Income Net Interest Income 2021 © 9/30/22-LTM? Multi-family Warehouse Banking Mortgage —— Financing Net Interest Income Noninterest Income Banking | Consolidated Net Revenue? (SM) | 9/30/22-LTM Net Revenue! (SM) | 1— The sum of the individual segments will nat equal tatal
Slide 22: Raised nearly $500 million of additional capital since 2019
ar. Raised nearly $500 million of additional capital, net of expenses, since 2019 that is being utilized to generate revenues across all lines of business Low Income Housing Tax Credit (LIHTC) and Debt Financing platform enhanced in 2021 to generate ongoing asset management and servicing fees withou
Slide 23: Maximizing Operating Efficiency with Minimal Branch Network
with Minimal Branch Network and Higher Concentration of Variable Costs
Slide 24: Maximizing Operating Efficiency
Maximizing Operating Effidency 1 MBIN @=™—@Peer Average ——Top 10 Peers’ Efficiency driven by low 58.9% 582% 56.9% y ra 55.9% 56.0% fixed costs and a higher 46.1% 46.8% 45.4% - 43.6% 41.8% [eee concentration 365% 37.4% peers! of variable vam 28.8% 303% costs that adjust with revenue and 2018 2019 202
Slide 25: Enviable Funding Options and Liquidity
ar Enviable Funding Options and Liquidity to Support Fast- Turning, Short Duration Lending Model
Slide 26: Flexible Options to Obtain Lowest Cost Funding
V VVVV V WV ar Flexible Options to Obtain Lowest Cost Make use of lines at the Federal Home Loan Bank, Federal Reserve, and AFX to lower interest expense Grow multi-family custodial deposits from Merchants Capital Corp. originations and subservicing relationships Expand custodial escrow relationship
Slide 27: Deposit Balances and Average Rates
For the Nine Months Ended Avg. Balance Weighted September 30, 2022 (Sin millions) Avg. Rate Noninterest-Bearing Demand $465 0.00% Interest-Bearing Demand $4,025 1.03% Money Market Savings $2,620 127% Certificates of Deposit $1254 131% Savings $236 0.15% Total Deposits $8,600 1.06% 1- Deposit balance
Slide 28: Multiple Funding Sources and Options
Multiple Funding Sources and Options > Self-funding mechanisms in place. $10.8M of loans and securities were funded by $9.5M of deposits. Warehouse segment uses lines of credit and short term brokered deposits to match duration; other businesses are funded by core deposits. Loans & Securities $7,882
Slide 29: Conservative, Low Risk Underwriting and Minimal Loan Losses
ar Conservative, Low Risk Underwriting and Track Record of Minimal Loan Losses
Slide 30: Loans predominantly agency eligible with variable rates or short maturities
Loans are predominantly agency eligible with variable rates or short maturities Approximately 94% of Merchants Bank's loans reprice in 30 days or less Nonperforming loans to total loans held for investment consistently low Minimal direct exposure to industries adversely impacted by COVID-19 Customer
Slide 31: Net Charge-offs and Nonperforming Loans
2018 =20199 2020 202% 3Q2- YTD Net Charge-offs/Average Loans | Nonperforming* Loans/Total Loans HFF | Reserves/Nonperforming? Assets ] 1- Peer group includes publicly held US banks and thrifts with assets of $SB to $1SB, and excludes results deemed as “nat meaningful” or “not available” by S&P Globa
Slide 32: Compelling Shareholder Value Proposition
Compelling Shareholder Value Proposition
Slide 33: Maximizing Operating Efficiency
Maximizing Operating Effidency 1 MBIN @=™—@Peer Average ——Top 10 Peers’ Efficiency driven by low 58.9% 582% 56.9% y ra 55.9% 56.0% fixed costs and a higher 46.1% 46.8% 45.4% - 43.6% 41.8% [eee concentration 365% 37.4% peers! of variable vam 28.8% 303% costs that adjust with revenue and 2018 2019 202
Slide 34: Conservative underwriting ensures loans can be sold to Federal Agencies
Conservative underwriting ensures loans Nonperforming? Assets/Total Assets can be sold to Federal Agencies —_ Loniai ed > Shorter duration lending minimizes . oOwest out 0} . ed 0.49% 0.49% interest rate risk — > Fast-turning loan portfolio reprices ~ 94% of loans within 30 days and multiple 0.22% f
Slide 35: P/E Multiple - Price/LTM EPS
- 50% nN + 40% 3 oO + 30% 2 wo <= e L 20% 3 - « S * 1 10% & ' : . . 0% 0.0 5.0 10.0 15.0 20.0 P/E Multiple — Price/LTM EPS? 1- Peer group includes publicty held US banks and thrifts with assets of $5B to $15B, and excludes results deemed as “nat meaningful” or “nat available” by S&P Global - source
Slide 36: Share Price Change Since Merchants Bancorp IPO
Share Price Change SinceMerchants Bancorp IPO on 10/26/2017 ——NBIN (+123%) —— NASDAQ Bank Index (+8%) —— KBW Nas¢bg Bank index(+5%) ‘D/4/2017 6/5/2018 1/30/2018 = 6/4/2099 1/29/2019 6/¥2020 nspom spon §=6nasn = 5/2422 ‘Source - S&P Global as of November 18, 2022. Price Change (%)
Slide 37: Tangible Book Value Per Share and Annual Dividends Per Share
ar R : ; 2 2020 2021 2022 | og 018 ©2019 Tangible Book Value Per Share Annual Dividends Per Share _ 1- Peer group includes publicly held US banks and thrifts with assets of $5B to S1SB, and excludes results deemed as “not meaningful” or “not available” by SGP Global - source S&P Global.
Slide 38: Unique Operating Model
s . ar~ Unique Operating Model > Consistent Profitablity and Growth That is Less Dependent on Interest Rate Cycles Than Peers >» Diverse Business Mix With Growth Opportunities > Maximizing Operating Efficiency with Minimal Branch Network and Variable Costs >» Enviable Funding Options and Liquidity t
Slide 39: Appendix
Appendix
Slide 40: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures thousands, except per share amounts) Ator for the Nine Ator for the Year Ended December 31, Months Ended September 30, m9 2020 2021 2022 P Reconciliation: Net Income Net income as reported per GAAP $ 62874 $ 729 $ 18058 $ D104 171,903 $ 1256 Less: preferred stock
Slide 41: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures At or for the Nine (Dollars in thous except per share amounts) At or for the Year EndedDecember 31, Months Ended September 30, 2019 2020 2021 2022 Non-GAAP Reconciliation: Return on Average Tangible Common Equity Average shareholders’ equity per GAAP $ 6350 $ 537,