Merchants Bancorp Reports First Quarter 2023 Results

About this update from Merchants Bancorp

First quarter 2023 net income of $55.0 million increased 10% compared to first quarter of 2022 and decreased 4% compared to the fourth quarter 2022. First quarter 2023 diluted earnings per common share of $1.07 increased 5% compared to the first quarter of 2022 and decreased 4% compared to the fourth quarter of 2022. Total assets of $14.2 billion increased 48% compared to March 31, 2022 , and increased 13% compared to December 31, 2022 . Loans receivable of $8.6 billion , net of allowance for credit losses on loans, increased $2.6 billion , or 43%, compared to March 31, 2022 , and increased $1.1 billion , or 15% compared to December 31, 2022 . Net interest margin was 3.27% in the first quarter of 2023 compared to 2.62% in the first quarter of 2022 and 3.13% in the fourth quarter of 2022. Efficiency ratio was 30.3% in the first quarter of 2023 compared to 30.9% in the first quarter of 2022 and 31.3% in the fourth quarter of 2022. As of March 31, 2023 , the Company had $4.0 billion 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 $7.8 billion , or 55%, of the $14.2 billion in total assets as of March 31, 2023 . Uninsured deposits totaled approximately $2 billion as of March 31, 2023 , representing less than 25% of total deposits. Tangible book value per common share of $22.88 increased 22% compared to $18.70 in the first quarter of 2022 and increased 5% compared to $21.88 in the fourth quarter of 2022. Quarterly dividends were increased by 14%, to $.08 per common share. On March 30, 2023 , the Company issued and sold $158.1 million senior credit linked notes, due May 26, 2028 . The net proceeds of the offering were approximately $153.5 million and resulted in a reduction of risk-weighted assets, which will benefit regulatory capital ratios as the loan pipeline continues to expand. CARMEL, Ind. , April 27, 2023 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana , today reported first quarter 2023 net income of $55.0 million , or diluted earnings per common share of $1.07 . This compared to $50.1 million , or diluted earnings per common share of $1.02 in the first quarter of 2022, and compared to $57.2 million , or diluted earnings per common share of $1.12 in the fourth quarter of 2022. "We continued to deliver superior results in the first quarter by consistently minimizing interest rate and credit risk in a way that has differentiated Merchants though many economic cycles. Our strategy continues to focus on originating and selling adjustable-rate loans that typically reprice within 30 days. We have stayed short to the yield curve to conservatively match the duration of our assets and liabilities. We have also created a natural hedge between our lines of business to ensure we do well in rising or falling rate environments," said Michael F. Petrie , Chairman and CEO of Merchants. Michael J. Dunlap , President and Chief Operating Officer of Merchants, added, "Recent bank failures have had minimal impact to our deposit base or operations. Our liquidity continued to expand organically during the quarter, without the need to utilize the Fed's Bank Term Funding Program. Our unused borrowing capacity increased to $4.0 billion . Although more than 75% of our deposit balances were already insured through the FDIC as of March 31, 2023 , we have also seen an elevated interest in our Insured Cash Sweep, or ICS, program that extends FDIC protection up to $100 million ." Net income of $55.0 million for the first quarter 2023 increased by $4.8 million , or 10% compared to the first quarter of 2022, primarily driven by a $35.0 million , or 53% increase in net interest income that was partially offset by a $11.2 million , or 63%, decrease in gain on sale of loans, a $7.4 million , or 76%, decrease in loan servicing fees, and a $4.4 million , or 180%, increase in provision for credit losses. Results for the first quarter 2023 included a $2.9 million negative fair market value adjustment to servicing rights compared to a $7.6 million positive adjustment in the first quarter of 2022. Net income of $55.0 million for the first quarter 2023 decreased by $2.2 million , or 4%, compared to the fourth quarter of 2022, primarily driven by a $4.5 million , or 40%, decrease in gain on sale of loans and a $3.0 million decrease in syndication and asset management fees that were partially offset by a $5.3 million , or 6% increase in net interest income. Results for the first quarter of 2023 included a $2.9 million negative fair market value adjustment to servicing rights compared to a $0.2 million negative adjustment in the fourth quarter of 2022. Total Assets Total assets of $14.2 billion at March 31, 2023 increased $4.6 billion , or 48%, compared to March 31, 2022 , and increased $1.6 billion , or 13%, compared to December 31, 2022 . Increases compared to both periods were primarily due to significant growth in the multi-family and healthcare loan portfolios. Additionally, the increase compared to March 31, 2022 reflected new balances in securities held to maturity. Return on average assets was 1.71% for the first quarter of 2023 compared to 1.92% for the first quarter of 2022 and 1.84% for the fourth quarter of 2022. Asset Quality The allowance for credit losses on loans of $51.8 million as of March 31, 2023 increased $19.7 million , or 61%, compared to March 31, 2022 and increased $7.8 million , or 18%, compared to December 31, 2022 . The increases were primarily due to growth in the multi-family, commercial and commercial real estate, and healthcare loan portfolios. Non-performing loans were $65.3 million , or 0.76%, of loans receivable at March 31, 2023 , compared to 0.08% at March 31, 2022 and 0.36% at December 31, 2022 . The increase compared to March 31, 2022 was due to the delinquency of one multi-family customer and one healthcare customer. Securities Available for Sale Total securities available for sale of $679.5 million as of March 31, 2023 increased $365.3 million , or 116%, compared to March 31, 2022 , and increased $356.2 million , or 110%, compared to December 31, 2022 . As of March 31, 2023 , Accumulated Other Comprehensive Losses ("AOCI") of $7.7 million , related to securities available for sale, increased $1.4 million compared to March 31, 2022 , and decreased $2.8 million , or 28%, compared to December 31, 2022 . The $7.7 million of AOCI as of March 31, 2023 represented less than 1% of total equity and less than 1% of total investment securities. Total Deposits Total deposits of $11.3 billion at March 31, 2023 increased $3.9 billion , or 52%, compared to March 31, 2022 , and increased $1.3 billion , or 13%, compared to December 31, 2022 . The increase for both periods was primarily due to an increase in brokered certificates of deposit. Total brokered deposits of $3.7 billion at March 31, 2023 increased $3.4 billion , or 882%, from March 31, 2022 and increased $967.4 million , or 35%, from December 31, 2022 . Brokered deposits represented 33% of total deposits at March 31, 2023 compared to 5% of total deposits at March 31, 2022 and 27% of total deposits at December 31, 2022 . As of March 31, 2023 , brokered certificates of deposit had a weighted average remaining duration of 70 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. Additionally, the Company has offered its ICS program since 2018, which extends FDIC protection up to $100 million . This program has contributed to its low level of uninsured deposits, which were below 25% of total deposits as of March 31, 2023 . Liquidity Cash balances of $369.6 million as of March 31, 2023 decreased by $41.9 million compared to March 31, 2022 and increased by $143.4 million compared to December 31, 2022 . The Company continues to have significant borrowing capacity, with unused lines of credit totaling $4.0 billion as of March 31, 2023 compared to $2.2 billion at March 31, 2022 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 a significant portion of its loans, which provides flexibility in managing its liquidity. Comparison of Operating Results for the Three Months Ended March 31, 2023 and 2022 Net Interest Income of $100.7 million increased $35.0 million , or 53% compared to $65.7 million , reflecting higher yields and average balances on loans and loans held for sale, and new balances of securities held to maturity, which were partially offset by higher interest rates on deposits and borrowings. Interest rate spread of 2.76% increased 21 basis points compared to 2.55%. Net interest margin of 3.27% increased 65 basis points compared to 2.62%. Interest Income of $211.3 million increased 178% compared to $76.0 million , reflecting an increase in both yields and average balances of loans and loans held for sale, as well as new balances in securities held to maturity. Average balances of $10.6 billion for loans and loans held for sale increased 32% compared to $8.0 billion . Average yield on loans and loans held for sale of 7.25% increased 361 basis points compared to 3.64%. Interest Expense of $110.6 million increased $100.3 million , or 975%, compared to $10.3 million . Interest expense on deposits of $104.4 million increased $95.6 million , or 1,085%, compared $8.8 million , primarily reflecting higher rates on interest bearing checking, money market, and certificates of deposit accounts. Average balances of $10.5 billion for interest-bearing deposits increased 30% compared to $8.0 billion . Average interest rates of 4.05% for interest-bearing deposits increased 361 basis points compared to 0.44%. Noninterest Income of $14.3 million decreased $20.3 million , or 59%, compared to $34.6 million , primarily due to a $11.2 million , or 63%, decrease in gain on sale of loans, and a $7.4 million , or 76% decrease in loan servicing fees that included a $10.5 million lower fair market value adjustments to mortgage servicing rights. 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. Loan servicing fees included a $2.9 million negative fair market value adjustment to servicing rights, with a $0.7 million negative adjustment in the Banking segment and a $2.2 million negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $7.6 million positive fair market value adjustment to mortgage servicing rights, of which $4.3 million was in the Banking segment and $3.3 million was in the Multi-family Mortgage Banking segment. Noninterest Expense of $34.8 million increased $3.7 million , or 12%, compared to $31.0 million , primarily due to increases in deposit insurance expense and professional fees. The efficiency ratio of 30.25% decreased 68 basis points compared to 30.93%. Comparison of Operating Results for the Three Months Ended March 31, 2023 and December 31, 2022 Net Interest Income of $100.7 million increased $5.3 million , or 6% compared to $95.4 million , reflecting higher yields and average balances on loans and loans held for sale that were partially offset by higher interest rates and average balances on deposits and borrowings. Interest rate spread of 2.76% increased 7 basis points compared to 2.69%. Net interest margin of 3.27% increased 14 basis points compared to 3.13%. Interest Income of $211.3 million increased $29.9 million , or 16%, compared to $181.4 million , reflecting an increase in yields and average balances of loans and loans held for sale, as well securities held to maturity. Average balances of $10.6 billion for loans and loans held for sale increased $295.9 million , or 3%, compared to $10.3 billion . Average yield on loans and loans held for sale of 7.25% increased 91 basis points compared to 6.34%. Interest Expense of $110.6 million increased $24.6 million , or 29%, compared to $86.0 million . Interest expense on deposits of $104.4 million increased $23.4 million , or 29%, compared to $81.1 million , primarily due to higher interest rates on certificates of deposit, interest bearing checking, and money market accounts. Average balances of $10.5 billion for interest-bearing deposits increased $467.0 million , or 5%, compared to $10.0 billion . Average interest rates of 4.05% for interest-bearing deposits increased 83 basis points compared to 3.22%. Noninterest Income of $14.3 million decreased $8.7 million , or 38%, compared $23.0 million , primarily due to a $4.5 million , or 40%, decrease in gain on sale of loans and a $3.0 million , or 71% decrease in syndication and asset management fees. The decrease in gain on sale of loans was associated with lower volume in the secondary market for multi-family loans resulting from higher interest rates across the industry. Loan servicing fees included a $2.9 million negative fair market value adjustment to servicing rights, with a $0.7 million negative adjustment in the Banking segment and a $2.2 million negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $0.2 million negative fair market value adjustment to servicing rights, with a $0.6 million negative adjustment in the Banking segment and a $0.4 million positive adjustment in the Multi-family Mortgage Banking segment. Noninterest Expense of $34.8 million decreased $2.3 million , or 6%, compared to $37.1 million , primarily due to decreases in professional fees and lower commission expenses. The efficiency ratio of 30.3% decreased 109 basis points compared to 31.3%. 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 $14.2 billion in assets and $11.3 billion in deposits as of March 31, 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) March 31 , December 31 , September 30 , June 30 , March 31 , 2023 2022 2022 2022 2022 Assets Cash and due from banks $ 19,002 $ 22,170 $ 13,796 $ 10,714 $ 9,853 Interest-earning demand accounts 350,584 203,994 310,165 247,432 401,668 Cash and cash equivalents 369,586 226,164 323,961 258,146 411,521 Securities purchased under agreements to resell 3,438 3,464 3,497 3,520 4,798 Mortgage loans in process of securitization 197,074 154,194 137,448 323,046 324,280 Securities available for sale 679,518 323,337 322,069 336,814 314,266 Securities held to maturity (includes $1,106,582 , $1,118,966 , $1,005,487 , $0 and $0 at fair value, respectively) 1,104,835 1,119,078 1,005,487 — — Federal Home Loan Bank (FHLB) stock 39,130 39,130 39,130 39,130 28,804 Loans held for sale (includes $85,516 , $82,192 , $68,785 , $41,991 and $14,567 at fair value, respectively) 2,855,250 2,910,576 2,844,750 2,759,116 2,289,094 Loans receivable, net of allowance for credit losses on loans of $51,838 , $44,014 , $38,996 , $37,474 and $32,102 , respectively 8,575,210 7,426,858 6,919,128 7,033,203 5,976,960 Premises and equipment, net 35,793 35,438 35,492 35,085 34,559 Servicing rights 143,867 146,248 144,984 130,710 121,036 Interest receivable 64,282 56,262 40,170 26,184 23,499 Goodwill 15,845 15,845 15,845 15,845 15,845 Intangible assets, net 1,068 1,186 1,307 1,441 1,574 Other assets and receivables 156,070 157,447 145,454 123,815 104,356 Total assets $14,240,966 $ 12,615,227 $ 11,978,722 $11,086,055 $9,650,592 Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing $ 313,733 $ 326,875 $ 315,868 $ 444,461 $ 461,193 Interest-bearing 11,031,498 9,744,470 10,003,611 7,855,277 7,014,628 Total deposits 11,345,231 10,071,345 10,319,479 8,299,738 7,475,821 Borrowings 1,233,762 930,392 97,279 1,440,904 879,929 Deferred and current tax liabilities, net 32,827 19,613 19,124 19,414 30,695 Other liabilities 123,462 134,138 130,250 97,460 75,644 Total liabilities 12,735,282 11,155,488 10,566,132 9,857,516 8,462,089 Commitments and Contingencies Shareholders' Equity Common stock, without par value Authorized - 75,000,000 shares, 75,000,000 shares, 75,000,000 shares, 75,000,000 shares and 50,000,000 shares Issued and outstanding - 43,233,618 shares, 43,113,127 shares, 43,109,578 shares, 43,106,505 shares and 43,267,776 shares 138,105 137,781 137,226 136,671 137,882 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) 137,459 137,459 137,371 — — Retained earnings 875,700 832,871 787,530 737,789 694,776 Accumulated other comprehensive loss (7,729) (10,521) (11,686) (8,070) (6,304) Total shareholders' equity 1,505,684 1,459,739 1,412,590 1,228,539 1,188,503 Total liabilities and shareholders' equity $14,240,966 $ 12,615,227 $ 11,978,722 $11,086,055 $9,650,592 Consolidated Statement of Income (Unaudited) (In thousands, except share data) Three Months Ended Change March 31 , December 31 , March, 31 1Q23 1Q23 2023 2022 2022 vs. 4Q22 vs. 1Q22 Interest Income Loans $ 189,450 $ 164,682 $ 72,196 15 % 162 % Mortgage loans in process of securitization 1,648 2,551 2,245 -35 % -27 % Investment securities: Available for sale - taxable 2,266 704 701 222 % 223 % Held to maturity 15,754 11,412 — 38 % 100 % Federal Home Loan Bank stock 427 288 269 48 % 59 % Other 1,749 1,802 601 -3 % 191 % Total interest income 211,294 181,439 76,012 16 % 178 % Interest Expense Deposits 104,442 81,062 8,813 29 % 1085 % Borrowed funds 6,159 4,967 1,474 24 % 318 % Total interest expense 110,601 86,029 10,287 29 % 975 % Net Interest Income 100,693 95,410 65,725 6 % 53 % Provision for credit losses 6,867 6,407 2,451 7 % 180 % Net Interest Income After Provision for Credit Losses 93,826 89,003 63,274 5 % 48 % Noninterest Income Gain on sale of loans 6,733 11,267 17,965 -40 % -63 % Loan servicing fees, net 2,360 2,691 9,731 -12 % -76 % Mortgage warehouse fees 1,028 1,081 1,858 -5 % -45 % Syndication and asset management fees 1,212 4,207 614 -71 % 97 % Other income 2,931 3,736 4,429 -22 % -34 % Total noninterest income 14,264 22,982 34,597 -38 % -59 % Noninterest Expense Salaries and employee benefits 22,146 22,290 21,293 -1 % 4 % Loan expenses 804 1,082 1,211 -26 % -34 % Occupancy and equipment 2,232 2,377 1,814 -6 % 23 % Professional fees 2,269 3,739 1,303 -39 % 74 % Deposit insurance expense 2,178 1,279 759 70 % 187 % Technology expense 1,577 1,417 1,236 11 % 28 % Other expense 3,566 4,925 3,417 -28 % 4 % Total noninterest expense 34,772 37,109 31,033 -6 % 12 % Income Before Income Taxes 73,318 74,876 66,838 -2 % 10 % Provision for income taxes 18,363 17,720 16,696 4 % 10 % Net Income $ 54,955 $ 57,156 $ 50,142 -4 % 10 % Dividends on preferred stock (8,667) (8,797) (5,728) -1 % 51 % Net Income Allocated to Common Shareholders $ 46,288 $ 48,359 $ 44,414 -4 % 4 % Basic Earnings Per Share $ 1.07 $ 1.12 $ 1.03 -4 % 4 % Diluted Earnings Per Share $ 1.07 $ 1.12 $ 1.02 -4 % 5 % Weighted-Average Shares Outstanding Basic 43,179,604 43,111,353 43,190,066 Diluted 43,290,779 43,274,758 43,360,034 Key Operating Results (Unaudited) ($ in thousands, except share data) Three Months Ended Change March 31 , December 31 , March 31 , 1Q23 1Q23 2023 2022 2022 vs. 4Q22 vs. 1Q22 Noninterest expense $ 34,772 $ 37,109 $ 31,033 -6 % 12 % Net interest income (before provision for credit losses) 100,693 95,410 65,725 6 % 53 % Noninterest income 14,264 22,982 34,597 -38 % -59 % Total income $ 114,957 $ 118,392 $ 100,322 -3 % 15 % Efficiency ratio 30.25 % 31.34 % 30.93 % (109) bps (68) bps Average assets $ 12,885,735 $ 12,457,893 $ 10,436,448 3 % 23 % Net income 54,955 57,156 50,142 -4 % 10 % Return on average assets before annualizing 0.43 % 0.46 % 0.48 % Annualization factor 4.00 4.00 4.00 Return on average assets 1.71 % 1.84 % 1.92 % (13) bps (21) bps Return on average tangible common shareholders' equity (1) 18.89 % 20.81 % 22.37 % (192) bps (348) bps Tangible book value per common share (1) $ 22.88 $ 21.88 $ 18.70 5 % 22 % Tangible common shareholders' equity/tangible assets (1) 6.95 % 7.49 % 8.40 % (54) bps (145) bps Consolidated ratios Total capital/risk-weighted assets(2) 12.3 % 12.2 % N/A Tier I capital/risk-weighted assets(2) 11.8 % 11.7 % N/A Common Equity Tier I capital/risk-weighted assets(2) 7.9 % 7.7 % N/A Tier I capital/average assets(2) 11.6 % 11.7 % 11.3 % (1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below: (2) As defined by regulatory agencies; March 31, 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 March 31 , December 31 , March 31 , 1Q23 1Q23 2023 2022 2022 vs. 4Q22 vs. 1Q22 Net income $ 54,955 $ 57,156 $ 50,142 -4 % 10 % Less: preferred stock dividends (8,667) (8,797) (5,728) -1 % 51 % Net income available to common shareholders $ 46,288 $ 48,359 $ 44,414 -4 % 4 % Average shareholders' equity $ 1,496,610 $ 1,445,995 $ 1,173,837 4 % 27 % Less: average goodwill & intangibles (16,980) (17,094) (17,495) -1 % -3 % Less: average preferred stock (499,608) (499,529) (362,149) — 38 % Average tangible common shareholders' equity $ 980,022 $ 929,372 $ 794,193 5 % 23 % Annualization factor 4.00 4.00 4.00 Return on average tangible common shareholders' equity 18.89 % 20.81 % 22.37 % (192) bps (348) bps Total equity $ 1,505,684 $ 1,459,739 $ 1,188,503 3 % 27 % Less: goodwill and intangibles (16,913) (17,031) (17,419) -1 % -3 % Less: preferred stock (499,608) (499,608) (362,149) — 38 % Tangible common shareholders' equity $ 989,163 $ 943,100 $ 808,935 5 % 22 % Assets $ 14,240,966 $ 12,615,227 $ 9,650,592 13 % 48 % Less: goodwill and intangibles (16,913) (17,031) (17,419) -1 % -3 % Tangible assets $ 14,224,053 $ 12,598,196 $ 9,633,173 13 % 48 % Ending common shares 43,233,618 43,113,127 43,267,776 Tangible book value per common share $ 22.88 $ 21.88 $ 18.70 5 % 22 % Tangible common shareholders' equity/tangible assets 6.95 % 7.49 % 8.40 % (54) bps (145) bps Merchants Bancorp Average Balance Analysis ($ in thousands) (Unaudited) Three Months Ended Three Months Ended Three Months Ended March 31, 2023 December 31, 2022 March 31, 2022 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets: Interest-bearing deposits, and other $ 184,470 $ 2,176 4.78 % $ 225,274 $ 2,090 3.68 % $ 1,460,486 $ 870 0.24 % Securities available for sale - taxable 445,614 2,266 2.06 % 323,510 704 0.86 % 305,600 701 0.93 % Securities held to maturity 1,115,243 15,754 5.73 % 1,002,446 11,412 4.52 % — — Mortgage loans in process of securitization 159,333 1,648 4.19 % 234,248 2,551 4.32 % 349,027 2,245 2.61 % Loans and loans held for sale 10,595,669 189,450 7.25 % 10,299,795 164,682 6.34 % 8,049,877 72,196 3.64 % Total interest-earning assets 12,500,329 211,294 6.86 % 12,085,273 181,439 5.96 % 10,164,990 76,012 3.03 % Allowance for credit losses on loans (45,190) (40,339) (31,023) Noninterest-earning assets 430,596 412,959 302,481 Total assets $ 12,885,735 $ 12,457,893 $ 10,436,448 Liabilities & Shareholders' Equity: Interest-bearing checking 4,052,081 40,647 4.07 % 4,520,785 37,929 3.33 % 4,015,709 2,204 0.22 % Savings deposits 237,289 265 0.45 % 252,787 304 0.48 % 230,702 33 0.06 % Money market 2,848,500 28,608 4.07 % 2,745,904 23,958 3.46 % 2,710,961 5,252 0.79 % Certificates of deposit 3,322,991 34,922 4.26 % 2,474,427 18,871 3.03 % 1,080,438 1,324 0.50 % Total interest-bearing deposits 10,460,861 104,442 4.05 % 9,993,903 81,062 3.22 % 8,037,810 8,813 0.44 % Borrowings 482,723 6,159 5.17 % 451,467 4,967 4.36 % 589,597 1,474 1.01 % Total interest-bearing liabilities 10,943,584 110,601 4.10 % 10,445,370 86,029 3.27 % 8,627,407 10,287 0.48 % Noninterest-bearing deposits 304,119 419,008 518,140 Noninterest-bearing liabilities 141,422 147,520 117,064 Total liabilities 11,389,125 11,011,898 9,262,611 Shareholders' equity 1,496,610 1,445,995 1,173,837 Total liabilities and shareholders' equity $ 12,885,735 $ 12,457,893 $ 10,436,448 Net interest income $ 100,693 $ 95,410 $ 65,725 Net interest spread 2.76 % 2.69 % 2.55 % Net interest-earning assets $ 1,556,745 $ 1,639,903 $ 1,537,583 Net interest margin 3.27 % 3.13 % 2.62 % Average interest-earning assets to average interest-bearing liabilities 114.23 % 115.70 % 117.82 % Supplemental Results (Unaudited) ($ in thousands) Net Income Three Months Ended March 31 , December 31 , March 31 , 2023 2022 2022 Segment Multi-family Mortgage Banking $ 1,966 $ 10,228 $ 11,492 Mortgage Warehousing 8,641 11,776 13,159 Banking 49,307 40,181 28,764 Other (4,959) (5,029) (3,273) Total $ 54,955 $ 57,156 $ 50,142 Total Assets March 31 , December 31 , March 31 , 2023 2022 2022 Segment Multi-family Mortgage Banking $ 341,487 $ 351,274 $ 293,286 Mortgage Warehousing 3,318,491 2,519,810 2,863,907 Banking 10,430,293 9,587,544 6,409,943 Other 150,695 156,599 83,456 Total $ 14,240,966 $ 12,615,227 $ 9,650,592 Gain on Sale of Loans Three Months Ended March 31 , December 31 , March 31 , 2023 2022 2022 Loan Type Multi-family 4,920 $ 10,241 $ 14,953 Single-family 277 132 457 Small Business Association (SBA) 1,536 894 2,555 Total $ 6,733 $ 11,267 $ 17,965 Loans Receivable and Loans Held for Sale March 31 , December 31 , March 31 , 2023 2022 2022 Mortgage warehouse lines of credit $ 604,445 $ 464,785 $ 752,447 Residential real estate 1,215,252 1,178,401 858,325 Multi-family financing 3,566,530 3,135,535 2,876,005 Healthcare financing 1,941,204 1,604,341 850,751 Commercial and commercial real estate (1) 1,194,320 978,661 567,971 Agricultural production and real estate 89,516 95,651 90,688 Consumer and margin loans 15,781 13,498 12,875 8,627,048 7,470,872 6,009,062 Less: Allowance for credit losses on loans 51,838 44,014 32,102 Loans receivable $ 8,575,210 $ 7,426,858 $ 5,976,960 Loans held for sale 2,855,250 2,910,576 2,289,094 Total loans, net of allowance $ 11,430,460 $ 10,337,434 $ 8,266,054 (1) Includes $672.9 million and $497.0 million of revolving lines of credit collateralized primarily by single-family mortgage servicing rights as of March 31, 2023 and December 31, 2022 , respectively. 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