Merchants Bancorp Reports Fourth Quarter 2023 Results

About this update from Merchants Bancorp

Full year 2023 net income of $279.2 million set a new Company record, increasing 27% compared to 2022. Full year 2023 diluted earnings per common share of $5.64 reached the highest level in Company history and increased 26% compared to 2022. Fourth quarter 2023 net income of $77.5 million increased 36% compared to fourth quarter of 2022 and decreased 5% compared to the third quarter 2023. Fourth quarter 2023 diluted earnings per common share of $1.58 increased 41% compared to the fourth quarter of 2022 and decreased 6% compared to the third quarter of 2023. Total assets of $17.0 billion surpassed any level previously reported by the Company, increasing 34% compared to December 31, 2022 and increasing 3% compared to September 30, 2023 . As of December 31, 2023 , the Company had a record-level of $6.0 billion in unused borrowing capacity with the Federal Home Loan Bank and the Federal Reserve Discount window, representing 36% of total assets. 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 repurchase agreements included in loans receivable. Taken together, with unused borrowing capacity, these totaled $10.6 billion , or 62%, of the $17.0 billion in total assets as of December 31, 2023 . Loans receivable of $10.1 billion , net of allowance for credit losses on loans, increased $217.1 million , or 2%, compared to September 30, 2023 , and increased $2.7 billion , or 36%, compared to December 31, 2022 . Efficiency ratio was 33.1% in the fourth quarter of 2023 compared to 31.3% in the fourth quarter of 2022 and 28.0% in the third quarter of 2023. Tangible book value per common share of $27.40 increased 25% compared to $21.88 in the fourth quarter of 2022 and increased 6% compared to $25.82 in the third quarter of 2023. The previously announced agreements to sell several Illinois bank branches were granted regulatory approval in January 2024 and the transactions were completed on January 26, 2024 . CARMEL, Ind. , Jan. 29, 2024 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana , today reported fourth quarter 2023 net income of $77.5 million , or diluted earnings per common share of $1.58 . This compared to $57.2 million , or diluted earnings per common share of $1.12 in the fourth quarter of 2022, and compared to $81.5 million , or diluted earnings per common share of $1.68 in the third quarter of 2023. "While 2023 was a turbulent environment for the financial industry, we continued to deliver unmatched financial solutions that improve the quality of life in the communities we serve. Through the hard work of our entire Merchants team, we achieved significant success, with 34% growth in assets, 26% growth in earnings per share, and 25% growth in tangible book value that reached a record level of $27.40 per share, just to name a few. We strive to be at the forefront of industry trends and are poised to be strategically positioned for the future," said Michael F. Petrie , Chairman and CEO of Merchants. Michael J. Dunlap , President and Chief Operating Officer of Merchants, added, "By continuously executing on our vision, mission and values throughout 2023, we achieved record results that surpassed our expectations. We are grateful to all our employees for fostering long-term relationships, providing innovative products, and delivering unparalleled service that adds value to our customers." Net income of $77.5 million for the fourth quarter 2023 increased by $20.3 million , or 36%, compared to the fourth quarter of 2022, primarily driven by a $28.9 million , or 30%, increase in net interest income. Results for the fourth quarter 2023 included a $7.6 million negative fair market value adjustment to servicing rights compared to a $0.2 million negative adjustment in the fourth quarter of 2022. Net income of $77.5 million for the fourth quarter 2023 decreased by $4.0 million , or 5%, compared to the third quarter of 2023, primarily driven by a $9.6 million , or 22%, increase in noninterest expense and a $1.6 million , or 4%, decrease in noninterest income that were partially offset by a $6.9 million , or 6%, increase in net interest income. Noninterest income for the fourth quarter 2023 included a $7.6 million negative fair market value adjustment to servicing rights compared to a $11.6 million positive fair market value adjustment to servicing rights in the third quarter 2023. Total Assets Total assets of $17.0 billion at December 31, 2023 increased $457.3 million , or 3%, compared to September 30, 2023 , and increased $4.3 billion , or 34%, compared to December 31, 2022 . The increase compared to December 31, 2022 was primarily due to significant growth in the multi-family, healthcare, commercial lines of credit on collateralized mortgage servicing rights, and warehouse repurchase agreement portfolios. Return on average assets was 1.86% for the fourth quarter of 2023 compared to 1.84% for the fourth quarter of 2022 and 2.03% for the third quarter of 2023. Asset Quality The allowance for credit losses on loans of $71.8 million , as of December 31, 2023 , increased $4.9 million , or 7%, compared to September 30, 2023 and increased $27.7 million , or 63%, compared to December 31, 2022 . The increase compared to September 30, 2023 was primarily in the healthcare financing portfolio, due to a combination of specific reserves, loan growth, and changes in qualitative loss factors. The increase compared to December 31, 2022 was primarily due to loan growth in the period, as well as increases in qualitative factors to reflect changes in industry conditions, in addition to credit events that were recorded during the second quarter 2023. The Company experienced charge offs of $238,000 and recoveries of $1,000 during the fourth quarter 2023. Non-performing loans were $82.0 million , or 0.80% of loans receivable before the allowance for credit losses on loans, as of December 31, 2023 compared to $60.2 million , or 0.60%, as of September 30, 2023 , and $26.7 million , or 0.36%, as of December 31, 2022 . The increase in non-performing loans compared to September 30, 2023 was primarily due to three customers. Securities Available for Sale Total securities available for sale of $1.1 billion as of December 31, 2023 increased $489.1 million , or 78%, compared to September 30, 2023 , and increased $790.4 million , or 244%, compared to December 31, 2022 . The increases in securities available for sale compared to both periods were primarily associated with the acquisition of certain securities from a warehouse customer that provide protective put options and interest rate floor derivatives to prevent losses in value. As of December 31, 2023 , Accumulated Other Comprehensive Losses ("AOCL") of $2.5 million , related to securities available for sale, decreased $2.3 million , or 48%, compared to September 30, 2023 , and decreased $8.0 million , or 76%, compared to December 31, 2022 . The $2.5 million of AOCL as of December 31, 2023 represented less than 1% of total equity and less than 1% of total investment securities. Total Deposits Total deposits of $14.1 billion at December 31, 2023 increased $1.1 billion compared to September 30, 2023 , and increased $4.0 billion , or 40%, compared to December 31, 2022 . The change compared to September 30, 2023 was primarily due to increases in brokered demand deposit accounts. The change compared to December 31, 2022 was primarily due to increases in brokered certificates of deposit accounts. Total brokered deposits of $6.0 billion at December 31, 2023 increased $1.6 billion , or 36%, from September 30, 2023 and increased $3.2 billion , or 116%, from December 31, 2022 . Brokered deposits represented 42% of total deposits at December 31, 2023 compared to 34% of total deposits at September 30, 2023 and 27% of total deposits at December 31, 2022 . As of December 31, 2023 , brokered certificates of deposit had a weighted average remaining duration of 55 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 December 31, 2023 , deposit balances in Flex CD products increased by $324.8 million , or 222%, 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 $1.6 billion as of December 31, 2023 compared to $1.8 billion at September 30, 2023 and $1.5 billion at December 31, 2022 , and has contributed to the Company's low level of uninsured deposits, which were below 20% of total deposits. Liquidity Cash balances of $584.4 million as of December 31, 2023 increased by $177.2 million compared to September 30, 2023 and increased by $358.3 million compared to December 31, 2022 . The Company continues to have significant borrowing capacity, with unused lines of credit totaling $6.0 billion as of December 31, 2023 compared to $5.4 billion at September 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 December 31, 2023 and 2022 Net Interest Income of $124.3 million increased $28.9 million , or 30%, compared to $95.4 million , reflecting higher yields and average balances on loans and loans held for sale, and higher average 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 2.48% decreased 21 basis points compared to 2.69%. Net interest margin of 3.05% decreased 8 basis points compared to 3.13%. Interest Income of $311.8 million increased 72% compared to $181.4 million , reflecting an increase in both yields and average balances of loans and loans held for sale, as well as higher yields in securities held to maturity and securities available for sale. Average balances of $13.7 billion for loans and loans held for sale increased 33% compared to $10.3 billion . Average yield on loans and loans held for sale of 7.98% increased 164 basis points compared to 6.34%. Interest Expense of $187.4 million increased $101.4 million , or 118%, compared to $86.0 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 interest-bearing checking accounts. Average balances of $13.7 billion for interest-bearing deposits increased 37% compared to $10.0 billion . Average interest rates of 4.98% for interest-bearing deposits increased 176 basis points compared to 3.22%. Noninterest Income of $34.5 million increased $11.5 million , or 50%, compared to $23.0 million , primarily due to an $8.1 million , or 72%, increase in gain on sale of loans and a $6.7 million , or 180%, increase in other income. These increases were partially offset by a $4.9 million , or 180%, decrease in loan servicing fees. The increase in gain on sale of loans was associated with significant growth in production volume of multi-family loans that were sold in the secondary market. The increase in other income reflected a $6.6 million benefit to record the value of a protective interest rate floor derivative that was provided with the acquisition of certain securities available for sale. Loan servicing fees included a $7.6 million negative fair market value adjustment to servicing rights, with a $1.1 million negative adjustment in the Banking segment and a $6.5 million negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $0.2 million negative fair market value adjustment to mortgage servicing rights in the prior period, of which $0.6 million negative adjustment in the Banking segment and $0.4 million positive adjustment in the Multi-family Mortgage Banking segment. Noninterest Expense of $52.6 million increased $15.5 million , or 42%, compared to $37.1 million primarily due to increases in salaries and employee benefits associated with higher commissions on higher production volume, as well as increases in deposit insurance expense. The efficiency ratio of 33.1% increased 177 basis points compared to 31.3%. Comparison of Operating Results for the Three Months Ended December 31, 2023 and September 30, 2023 Net Interest Income of $124.3 million increased $6.9 million , or 6%, compared to $117.4 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. Interest rate spread of 2.48% increased 4 basis points compared to 2.44%. Net interest margin of 3.05% increased 6 basis points compared to 2.99%. Interest Income of $311.8 million increased $15.1 million , or 5%, compared to $296.7 million , reflecting an increase in average balances and yields on loans and loans held for sale. Average balances of $13.7 billion for loans and loans held for sale increased 2% compared to $13.4 billion . Average yield on loans and loans held for sale of 7.98% increased 9 basis points compared to 7.89%. Interest Expense of $187.4 million increased $8.2 million , or 5%, compared to $179.2 million . The increase was primarily due to higher average balances and rates on interest-bearing checking accounts, as well as higher rates on certificates of deposit. The increases were partially offset by lower average balances of certificates of deposits and lower rates on borrowings. Average balances of $13.7 billion for interest-bearing deposits increased 4% compared to $13.2 billion . Average interest rates of 4.98% for interest-bearing deposits increased 8 basis points compared to 4.90%. Noninterest Income of $34.5 million decreased $1.6 million , or 4%, compared $36.1 million , primarily due to a $19.6 million , or 112%, decrease in loan servicing fees, partially offset by an increase of $8.6 million , or 80%, in gain on sale and a $6.7 million , or 182%, increase in other income. Loan servicing fees included a $7.6 million negative fair market value adjustment to servicing rights, with a $1.1 million negative adjustment in the Banking segment and a $6.5 million negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $11.6 million positive fair market value adjustment to servicing rights in the prior period, 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. The increase in gain on sale of loans was associated with significant growth in production volume of multi-family loans that were sold in the secondary market. The increase in other income reflected a $6.6 million benefit to record the value of a protective interest rate floor derivative that was provided with the acquisition of certain securities available for sale. Noninterest Expense of $52.6 million increased $9.6 million , or 22%, primarily due to increases in salaries and employee benefits associated with higher commissions on higher production volume, as well as increases in professional fees. The efficiency ratio of 33.1% increased 514 basis points compared to 28.0%. 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 $17.0 billion in assets and $14.1 billion in deposits as of December 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 , 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) December 31 , September 30 , June 30 , March 31 , December 31 , 2023 2023 2023 2023 2022 Assets Cash and due from banks $ 15,592 $ 10,633 $ 15,390 $ 19,002 $ 22,170 Interest-earning demand accounts 568,830 396,605 361,920 350,584 203,994 Cash and cash equivalents 584,422 407,238 377,310 369,586 226,164 Securities purchased under agreements to resell 3,349 3,385 3,412 3,438 3,464 Mortgage loans in process of securitization 110,599 476,047 298,907 197,074 154,194 Securities available for sale ( $722,497 utilizing fair value option at December 31, 2023 ) 1,113,687 624,586 648,003 679,518 323,337 Securities held to maturity ( $1,203,535 , $1,010,745 , $1,058,590 , $1,106,582 and $1,118,966 at fair value, respectively) 1,204,217 1,012,801 1,062,017 1,104,835 1,119,078 Federal Home Loan Bank (FHLB) stock 48,578 48,219 39,130 39,130 39,130 Loans held for sale (includes $86,663 , $90,875 , $82,931 , $85,516 and $82,192 at fair value, respectively) 3,144,756 3,477,036 3,058,013 2,855,250 2,910,576 Loans receivable, net of allowance for credit losses on loans of $71,752 , $66,864 , $62,986 , $51,838 and $44,014 , respectively 10,127,801 9,910,681 9,854,018 8,575,210 7,426,858 Premises and equipment, net 42,342 36,730 36,947 35,793 35,438 Servicing rights 158,457 162,141 147,288 143,867 146,248 Interest receivable 91,346 78,401 70,509 64,282 56,262 Goodwill 15,845 15,845 15,845 15,845 15,845 Intangible assets, net 742 831 949 1,068 1,186 Other assets and receivables 306,375 241,295 262,524 156,070 157,447 Total assets $ 16,952,516 $ 16,495,236 $ 15,874,872 $ 14,240,966 $ 12,615,227 Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing $ 520,070 $ 287,846 $ 349,387 $ 313,733 $ 326,875 Interest-bearing 13,541,390 12,719,492 12,710,477 11,031,498 9,744,470 Total deposits 14,061,460 13,007,338 13,059,864 11,345,231 10,071,345 Borrowings 964,127 1,654,075 1,016,836 1,233,762 930,392 Deferred and current tax liabilities, net 19,923 18,006 16,084 32,827 19,613 Other liabilities 205,922 183,102 221,788 123,462 134,138 Total liabilities 15,251,432 14,862,521 14,314,572 12,735,282 11,155,488 Commitments and Contingencies Shareholders' Equity Common stock, without par value Authorized - 75,000,000 shares Issued and outstanding - 43,242,928 shares, 43,240,212 shares, 43,237,300 shares, 43,233,618 shares and 43,113,127 shares 140,365 139,609 138,853 138,105 137,781 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) 137,459 137,459 137,459 137,459 137,459 Retained earnings 1,063,599 998,252 928,875 875,700 832,871 Accumulated other comprehensive loss (2,488) (4,754) (7,036) (7,729) (10,521) Total shareholders' equity 1,701,084 1,632,715 1,560,300 1,505,684 1,459,739 Total liabilities and shareholders' equity $ 16,952,516 $ 16,495,236 $ 15,874,872 $ 14,240,966 $ 12,615,227 Consolidated Statement of Income (Unaudited) (In thousands, except share data) Three Months Ended Change December 31 , September 30 , December 31 , 4Q23 4Q23 2023 2023 2022 vs. 3Q23 vs. 4Q22 Interest Income Loans $ 274,971 $ 266,561 $ 164,682 3 % 67 % Mortgage loans in process of securitization 5,294 2,583 2,551 105 % 108 % Investment securities: Available for sale 7,609 6,182 704 23 % 981 % Held to maturity 19,491 17,427 11,412 12 % 71 % Federal Home Loan Bank stock 735 572 288 28 % 155 % Other 3,659 3,351 1,802 9 % 103 % Total interest income 311,759 296,676 181,439 5 % 72 % Interest Expense Deposits 172,061 162,906 81,062 6 % 112 % Borrowed funds 15,373 16,334 4,967 -6 % 210 % Total interest expense 187,434 179,240 86,029 5 % 118 % Net Interest Income 124,325 117,436 95,410 6 % 30 % Provision for credit losses 6,747 4,014 6,407 68 % 5 % Net Interest Income After Provision for Credit Losses 117,578 113,422 89,003 4 % 32 % Noninterest Income Gain on sale of loans 19,342 10,758 11,267 80 % 72 % Loan servicing fees, net (2,162) 17,384 2,691 -112 % -180 % Mortgage warehouse fees 1,950 1,858 1,081 5 % 80 % Syndication and asset management fees 4,879 2,368 4,207 106 % 16 % Other income 10,445 3,700 3,736 182 % 180 % Total noninterest income 34,454 36,068 22,982 -4 % 50 % Noninterest Expense Salaries and employee benefits 33,259 27,052 22,290 23 % 49 % Loan expenses 660 1,038 1,082 -36 % -39 % Occupancy and equipment 2,336 2,196 2,377 6 % -2 % Professional fees 4,157 2,555 3,739 63 % 11 % Deposit insurance expense 4,030 3,568 1,279 13 % 215 % Technology expense 1,758 1,609 1,417 9 % 24 % Other expense 6,379 4,912 4,925 30 % 30 % Total noninterest expense 52,579 42,930 37,109 22 % 42 % Income Before Income Taxes 99,453 106,560 74,876 -7 % 33 % Provision for income taxes 21,980 25,056 17,720 -12 % 24 % Net Income $ 77,473 $ 81,504 $ 57,156 -5 % 36 % Dividends on preferred stock (8,667) (8,668) (8,797) — -1 % Net Income Allocated to Common Shareholders $ 68,806 $ 72,836 $ 48,359 -6 % 42 % Basic Earnings Per Share $ 1.59 $ 1.68 $ 1.12 -5 % 42 % Diluted Earnings Per Share $ 1.58 $ 1.68 $ 1.12 -6 % 41 % Weighted-Average Shares Outstanding Basic 43,241,600 43,238,724 43,111,353 Diluted 43,430,973 43,351,208 43,274,758 Consolidated Statement of Income (Unaudited) (In thousands, except share data) Twelve Months Ended December 31 , December 31 , 2023 2022 Change Interest Income Loans $ 959,714 $ 451,973 112 % Mortgage loans in process of securitization 12,652 8,407 50 % Investment securities: Available for sale 21,621 2,807 670 % Held to maturity 69,983 12,382 465 % Federal Home Loan Bank stock 2,205 1,220 81 % Other 11,623 4,044 187 % Total interest income 1,077,798 480,833 124 % Interest Expense Deposits 577,210 149,645 286 % Borrowed funds 52,517 12,637 316 % Total interest expense 629,727 162,282 288 % Net Interest Income 448,071 318,551 41 % Provision for credit losses 40,231 17,295 133 % Net Interest Income After Provision for Credit Losses 407,840 301,256 35 % Noninterest Income Gain on sale of loans 48,183 64,150 -25 % Loan servicing fees, net 26,198 30,198 -13 % Mortgage warehouse fees 7,701 5,394 43 % Syndication and asset management fees 12,355 9,493 30 % Other income 20,231 16,701 21 % Total noninterest income 114,668 125,936 -9 % Noninterest Expense Salaries and employee benefits 108,181 89,085 21 % Loan expenses 3,409 4,703 -28 % Occupancy and equipment 9,220 8,169 13 % Professional fees 12,704 9,065 40 % Deposit insurance expense 13,582 3,463 292 % Technology expense 6,515 5,282 23 % Other expense 20,990 16,283 29 % Total noninterest expense 174,601 136,050 28 % Income Before Income Taxes 347,907 291,142 19 % Provision for income taxes 68,673 71,421 -4 % Net Income $ 279,234 $ 219,721 27 % Dividends on preferred stock (34,670) (25,983) 33 % Net Income Allocated to Common Shareholders $ 244,564 $ 193,738 26 % Basic Earnings Per Share $ 5.66 $ 4.49 26 % Diluted Earnings Per Share $ 5.64 $ 4.47 26 % Weighted-Average Shares Outstanding Basic 43,224,042 43,164,477 Diluted 43,345,799 43,316,904 Key Operating Results (Unaudited) ($ in thousands, except share data) Three Months Ended Change December 31 , September 30 , December 31 , 4Q23 4Q23 2023 2023 2022 vs. 3Q23 vs. 4Q22 Noninterest expense $ 52,579 $ 42,930 $ 37,109 22 % 42 % Net interest income (before provision for credit losses) 124,325 117,436 95,410 6 % 30 % Noninterest income 34,454 36,068 22,982 -4 % 50 % Total income $ 158,779 $ 153,504 $ 118,392 3 % 34 % Efficiency ratio 33.11 % 27.97 % 31.34 % 514 bps 177 bps Average assets $ 16,671,484 $ 16,031,015 $ 12,457,893 4 % 34 % Net income 77,473 81,504 57,156 -5 % 36 % Return on average assets before annualizing 0.46 % 0.51 % 0.46 % Annualization factor 4.00 4.00 4.00 Return on average assets 1.86 % 2.03 % 1.84 % (17) bps 2 bps Return on average tangible common shareholders' equity (1) 23.60 % 26.69 % 20.81 % (309) bps 279 bps Tangible book value per common share (1) $ 27.40 $ 25.82 $ 21.88 6 % 25 % Tangible common shareholders' equity/tangible assets (1) 7.00 % 6.78 % 7.49 % 22 bps (49) bps Consolidated ratios Total capital/risk-weighted assets(2) 11.6 % 11.5 % 12.2 % Tier I capital/risk-weighted assets(2) 11.1 % 10.9 % 11.7 % Common Equity Tier I capital/risk-weighted assets(2) 7.8 % 7.6 % 7.7 % Tier I capital/average assets(2) 10.1 % 10.1 % 11.7 % (1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below: (2) As defined by regulatory agencies; December 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 operationsand 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 forresults 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 December 31 , September 30 , December 31 , 4Q23 4Q23 2023 2023 2022 vs. 3Q23 vs. 4Q22 Net income $ 77,473 $ 81,504 $ 57,156 -5 % 36 % Less: preferred stock dividends (8,667) (8,668) (8,797) — -1 % Net income available to common shareholders $ 68,806 $ 72,836 $ 48,359 -6 % 42 % Average shareholders' equity $ 1,682,270 $ 1,607,779 $ 1,445,995 5 % 16 % Less: average goodwill & intangibles (16,629) (16,742) (17,094) -1 % -3 % Less: average preferred stock (499,608) (499,608) (499,529) — — Average tangible common shareholders' equity $ 1,166,033 $ 1,091,429 $ 929,372 7 % 25 % Annualization factor 4.00 4.00 4.00 Return on average tangible common shareholders' equity 23.60 % 26.69 % 20.81 % (309) bps 279 bps Total equity $ 1,701,084 $ 1,632,715 $ 1,459,739 4 % 17 % Less: goodwill and intangibles (16,587) (16,676) (17,031) -1 % -3 % Less: preferred stock (499,608) (499,608) (499,608) — — Tangible common shareholders' equity $ 1,184,889 $ 1,116,431 $ 943,100 6 % 26 % Assets $ 16,952,516 $ 16,495,236 $ 12,615,227 3 % 34 % Less: goodwill and intangibles (16,587) (16,676) (17,031) -1 % -3 % Tangible assets $ 16,935,929 $ 16,478,560 $ 12,598,196 3 % 34 % Ending common shares 43,242,928 43,240,212 43,113,127 Tangible book value per common share $ 27.40 $ 25.82 $ 21.88 6 % 25 % Tangible common shareholders' equity/tangible assets 7.00 % 6.78 % 7.49 % 22 bps (49) bps Key Operating Results (Unaudited) ($ in thousands, except share data) Twelve Months Ended December 31 , December 31 , 2023 2022 Change Noninterest expense $ 174,601 $ 136,050 28 % Net interest income (before provision for credit losses) 448,071 318,551 41 % Noninterest income 114,668 125,936 -9 % Total income $ 562,739 $ 444,487 27 % Efficiency ratio 31.03 % 30.61 % 42 bps Average assets $ 15,078,390 $ 11,044,889 37 % Net income 279,234 219,721 27 % Return on average assets before annualizing 1.85 % 1.99 % Annualization factor 1.00 1.00 Return on average assets 1.85 % 1.99 % (14) bps Return on average tangible common shareholders' equity (1) 22.92 % 22.50 % 42 bps Tangible book value per common share (1) $ 27.40 $ 21.88 25 % Tangible common shareholders' equity/tangible assets (1) 7.00 % 7.49 % (49) 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'sfinancial 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. Twelve Months Ended December 31 , December 31 , 2023 2022 Change Net income $ 279,234 $ 219,721 27 % Less: preferred stock dividends (34,670) (25,983) 33 % Net income available to common shareholders $ 244,564 $ 193,738 26 % Average shareholders' equity $ 1,583,485 $ 1,276,443 24 % Less: average goodwill & intangibles (16,801) (17,293) -3 % Less: average preferred stock (499,608) (398,182) 25 % Average tangible common shareholders' equity $ 1,067,076 $ 860,968 24 % Annualization factor 1.00 1.00 Return on average tangible common shareholders' equity 22.92 % 22.50 % 42 bps Total equity $ 1,701,084 $ 1,459,739 17 % Less: goodwill and intangibles (16,587) (17,031) -3 % Less: preferred stock (499,608) (499,608) — Tangible common shareholders' equity $ 1,184,889 $ 943,100 26 % Assets $ 16,952,516 $ 12,615,227 34 % Less: goodwill and intangibles (16,587) (17,031) -3 % Tangible assets $ 16,935,929 $ 12,598,196 34 % Ending common shares 43,242,928 43,113,127 Tangible book value per common share $ 27.40 $ 21.88 25 % Tangible common shareholders' equity/tangible assets 7.00 % 7.49 % (49) bps Merchants Bancorp Average Balance Analysis ($ in thousands) (Unaudited) Three Months Ended Three Months Ended Three Months Ended December 31, 2023 September 30, 2023 December 31, 2022 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets: Interest-bearing deposits, and other $ 268,083 $ 4,394 6.50 % $ 259,630 $ 3,923 5.99 % $ 225,274 $ 2,090 3.68 % Securities available for sale 716,315 7,609 4.21 % 656,561 6,182 3.74 % 323,510 704 0.86 % Securities held to maturity 1,141,664 19,491 6.77 % 1,040,070 17,427 6.65 % 1,002,446 11,412 4.52 % Mortgage loans in process of securitization 380,645 5,294 5.52 % 208,767 2,583 4.91 % 234,248 2,551 4.32 % Loans and loans held for sale 13,674,793 274,971 7.98 % 13,399,854 266,561 7.89 % 10,299,795 164,682 6.34 % Total interest-earning assets 16,181,500 311,759 7.64 % 15,564,882 296,676 7.56 % 12,085,273 181,439 5.96 % Allowance for credit losses on loans (67,114) (63,449) (40,339) Noninterest-earning assets 557,098 529,582 412,959 Total assets $ 16,671,484 $ 16,031,015 $ 12,457,893 Liabilities & Shareholders' Equity: Interest-bearing checking 5,607,744 68,899 4.87 % 4,882,727 58,642 4.76 % 4,520,785 37,929 3.33 % Savings deposits 242,788 346 0.57 % # 241,861 340 0.56 % 252,787 304 0.48 % Money market 2,825,051 34,058 4.78 % # 2,798,325 33,235 4.71 % 2,745,904 23,958 3.46 % Certificates of deposit 5,023,434 68,758 5.43 % # 5,255,573 70,689 5.34 % 2,474,427 18,871 3.03 % Total interest-bearing deposits 13,699,017 172,061 4.98 % 13,178,486 162,906 4.90 % 9,993,903 81,062 3.22 % Borrowings 720,521 15,373 8.46 % 711,948 16,334 9.10 % 451,467 4,967 4.36 % Total interest-bearing liabilities 14,419,538 187,434 5.16 % 13,890,434 179,240 5.12 % 10,445,370 86,029 3.27 % Noninterest-bearing deposits 366,152 333,155 419,008 Noninterest-bearing liabilities 203,524 199,647 147,520 Total liabilities 14,989,214 14,423,236 11,011,898 Shareholders' equity 1,682,270 1,607,779 1,445,995 Total liabilities and shareholders' equity $ 16,671,484 $ 16,031,015 $ 12,457,893 Net interest income $ 124,325 $ 117,436 $ 95,410 Net interest spread 2.48 % 2.44 % 2.69 % Net interest-earning assets $ 1,761,962 $ 1,674,448 $ 1,639,903 Net interest margin 3.05 % 2.99 % 3.13 % Average interest-earning assets to average interest-bearing liabilities 112.22 % 112.05 % 115.70 % Supplemental Results (Unaudited) ($ in thousands) Net Income Net Income Three Months Ended Twelve Months Ended December 31 , September 30 , December 31 , December 31 , 2023 2023 2022 2023 2022 Segment Multi-family Mortgage Banking $ 8,580 $ 14,685 $ 10,228 $ 36,473 $ 54,642 Mortgage Warehousing 26,362 19,926 11,776 73,525 48,604 Banking 49,996 52,445 40,181 194,398 134,221 Other (7,465) (5,552) (5,029) (25,162) (17,746) Total $ 77,473 $ 81,504 $ 57,156 $ 279,234 $ 219,721 Total Assets December 31 , September 30 , December 31 , 2023 2023 2022 Segment Multi-family Mortgage Banking $ 411,097 $ 392,754 $ 351,274 Mortgage Warehousing 4,522,175 4,757,817 2,519,810 Banking 11,760,943 11,135,651 9,587,544 Other 258,301 209,014 156,599 Total $ 16,952,516 $ 16,495,236 $ 12,615,227 Gain on Sale of Loans Gain on Sale of Loans Three Months Ended Twelve Months Ended December 31 , September 30 , December 31 , December 31 , 2023 2023 2022 2023 2022 Loan Type Multi-family 19,082 $ 8,616 $ 10,241 $ 42,979 $ 56,819 Single-family (183) 951 132 1,247 1,133 Small Business Association (SBA) 443 1,191 894 3,957 6,198 Total $ 19,342 $ 10,758 $ 11,267 $ 48,183 $ 64,150 Loans Receivable and Loans Held for Sale December 31 , September 30 , December 31 , 2023 2023 2022 Mortgage warehouse repurchase agreements $ 752,468 $ 1,022,692 $ 464,785 Residential real estate (1) 1,324,305 1,358,908 1,178,401 Multi-family financing 4,006,160 3,709,320 3,135,535 Healthcare financing 2,356,689 2,218,559 1,604,341 Commercial and commercial real estate (2)(3) 1,643,081 1,560,031 978,661 Agricultural production and real estate 103,150 96,490 95,651 Consumer and margin loans 13,700 11,545 13,498 10,199,553 9,977,545 7,470,872 Less: Allowance for credit losses on loans 71,752 66,864 44,014 Loans receivable $ 10,127,801 $ 9,910,681 $ 7,426,858 Loans held for sale 3,144,756 3,477,036 2,910,576 Total loans, net of allowance $ 13,272,557 $ 13,387,717 $ 10,337,434 (1) Includes $1.2 billion , $1.2 billion and $1.1 billion of All-In-One © first-lien home equity lines of credit as of December 31, 2023 , September 30, 2023 and December 31, 2022 , respectively. (2) Includes $1.1 billion , $1.0 billion and $497.0 million of revolving lines of credit collateralized primarily by mortgage servicing rights as of December 31 , 2023, September 30, 2023 and December 31, 2022 , respectively. (3) Includes only $8.4 million , $8.1 million and $12.8 million of non-owner occupied commercial real estate as of December 31, 2023 , September 30, 2023 and December 31, 2022 , respectively. View original content to download multimedia: https://www.prnewswire.com/news-releases/merchants-bancorp-reports-fourth-quarter-2023-results-302047122.html SOURCE Merchants Bancorp

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