Business
Merchants Bancorp Reports Full Year and Fourth Quarter 2022 Results
Full year 2022 net income of $219.7 million decreased 3% compared to 2021Full year 2022 diluted earnings per common share of $4.47 decreased 6% compared to
About this update from Merchants Bancorp
Full year 2022 net income of $219.7 million decreased 3% compared to 2021 Full year 2022 diluted earnings per common share of $4.47 decreased 6% compared to 2021 Fourth quarter 2022 net income of $57.2 million increased 4% compared to fourth quarter of 2021 and decreased 2% compared to the third quarter 2022 Fourth quarter 2022 diluted earnings per common share of $1.12 decreased 2% compared to the fourth quarter of 2021 and decreased 8% compared to the third quarter of 2022 Total assets of $12.6 billion increased 5% compared to September 30, 2022 , and increased 12% compared to December 31, 2021 Loans receivable of $7.4 billion , net of allowance for credit losses on loans, increased $0.5 billion , or 7%, compared to September 30, 2022 , and increased $1.7 billion , or 29% compared to December 31, 2021 Net interest margin was 3.13% in the fourth quarter of 2022 compared to 2.70% in the fourth quarter of 2021 and 3.05% in the third quarter of 2022 Efficiency ratio was 31.3% in the fourth quarter of 2022 compared to 33.3% in the fourth quarter of 2021 and 30.5% in the third quarter of 2022 Tangible book value per common share of $21.88 increased 22% compared to $17.96 in the fourth quarter of 2021 and increased 5% compared to $20.78 in the third quarter of 2022 On November 3, 2022 , the Company completed a $284 million securitization of 16 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction CARMEL, Ind. , Jan. 30, 2023 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana , today reported fourth quarter 2022 net income of $57.2 million , or diluted earnings per common share of $1.12 . This compared to $55.2 million , or diluted earnings per common share of $1.14 in the fourth quarter of 2021, and compared to $58.5 million , or diluted earnings per common share of $1.22 in the third quarter of 2022. "We had a strong finish to 2022, on the heels of a $1.2 billion multi-family loan securitization and a $142.5 million preferred capital raise in the last quarter to support the loan growth in our pipeline. We continued our momentum of loan growth and executed our strategy to add shareholder value in any economic or interest rate environment. Tangible book value grew by 22%, to $21.88 per share during 2022 and our efficiency ratio remained at an industry-leading 31.3% for the year. The Company continues to enhance its product offerings and is well positioned to continue delivering superior results for the foreseeable future," said Michael F. Petrie , Chairman and CEO of Merchants. Michael J. Dunlap , President and Chief Operating Officer of Merchants, added, "Our team has surpassed all expectations in 2022 by providing strong results and new opportunities to add value to our customers. Their focus and dedication to executing well in a dynamic interest rate environment has led to our continued success and excitement about what is on the horizon in 2023." Net income for the fourth quarter 2022 increased by $2.0 million , or 4% compared to the fourth quarter of 2021, primarily driven by a $22.7 million , or 31% increase in net interest income that was partially offset by a $17.2 million , or 60%, decrease in gain on sale of loans and a $3.8 million , or 148%, increase in provision for credit losses. Net income for the fourth quarter 2022 decreased by $1.3 million , or 2%, compared to the third quarter of 2022, primarily driven by a $6.2 million , or 21%, decrease in noninterest income, a $4.2 million increase in provision for credit losses, and a $2.2 million , or 6%, increase in noninterest expense that was partially offset by a $10.0 million , or 12% increase in net interest income. Total Assets Total assets of $12.6 billion at December 31, 2022 increased 5%, compared to September 30, 2022 , and increased 12%, compared to December 31, 2021 . Increases compared to both periods were primarily due to significant growth in the multi-family and healthcare loan portfolios, as well as an increase in held to maturity securities that were acquired in connection with the Company's loan sales and securitizations. Return on average assets was 1.84% for the fourth quarter of 2022 compared to 2.02% for the fourth quarter of 2021 and 2.05% for the third quarter of 2022. Asset Quality The allowance for credit losses on loans of $44.0 million at December 31, 2022 increased $5.0 million compared to September 30, 2022 and increased $12.7 million compared to December 31, 2021 . The increases were primarily due to growth in the multi-family, commercial, residential, and healthcare loan portfolios, as well as revisions to market forecasts for unemployment and home price indices. Non-performing loans were $26.7 million , or 0.38%, of loans receivable at December 31, 2022 , compared to 0.38% at September 30, 2022 and 0.01% at December 31, 2021 . The increase compared to both periods was primarily due to the delinquency of one healthcare customer that is fully collateralized and full payment is expected. Total Deposits Total deposits of $10.1 billion at December 31, 2022 decreased $248.1 million , or 2%, compared to September 30, 2022 , and increased $1.1 billion , or 12%, compared to December 31, 2021 . The decrease compared September 30, 2022 , was primarily due to a decrease in demand deposit accounts that was partially offset by an increase in certificates of deposits. The increase compared to December 31, 2021 , was primarily due to an increase in brokered certificates of deposit that was partially offset by a decrease in demand accounts. Total brokered deposits of $2.8 billion at December 31, 2022 increased $544.1 million , or 25%, from September 30, 2022 and increased $603.0 million , or 28%, from December 31, 2021 . Brokered deposits represented 27% of total deposits at December 31, 2022 compared to 22% of total deposits at September 30, 2022 and 24% of total deposits at December 31, 2021 . As of December 31, 2022 , brokered certificates of deposit had a weighted average remaining duration of 73 days, with none exceeding 180 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 duration characteristics of its deposit and loan portfolios. Liquidity Cash balances of $226.2 million at December 31, 2022 decreased by $97.8 million compared to September 30, 2022 and decreased by $806.5 million compared to December 31, 2021 . The Company continues to have significant borrowing capacity, with unused lines of credit totaling $3.1 billion at December 31, 2022 compared to $2.8 billion at September 30, 2022 and $2.4 billion at December 31, 2021 . 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 December 31, 2022 and 2021 Net Interest Income of $95.4 million increased $22.7 million , or 31% compared to $72.7 million , reflecting higher yields and average balances on loans and loans held for sale, as well as securities held to maturity, which were partially offset by higher interest rates on deposits and borrowings. Interest rate spread of 2.69% increased 7 basis points compared to 2.62%. Net interest margin of 3.13% increased 43 basis points compared to 2.70%. Interest Income of $181.4 million increased 120% compared to $82.6 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 $10.3 billion for loans and loans held for sale increased 14% compared to $9.1 billion . Average yield on loans and loans held for sale of 6.34% increased 297 basis points compared to 3.37%. Interest Expense of $86.0 million increased $76.2 million , or 774%, compared to $9.8 million . Interest expense on deposits of $81.1 million increased $72.6 million , or 855%, compared $8.5 million , primarily reflecting higher rates on interest bearing checking, money market, and certificates of deposit accounts. Average balances of $10.0 billion for interest-bearing deposits increased 20% compared to $8.3 billion . Average interest rates of 3.22% for interest-bearing deposits increased 281 basis points compared to 0.41%. Noninterest Income of $23.0 million decreased $17.3 million , or 43%, compared to $40.3 million , primarily due to a $17.2 million decrease in gain on sale of loans, partially offset by a $1.3 million increase in loan servicing fees. 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 $0.2 million negative fair market value adjustment to mortgage 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. This compared to a $1.9 million positive fair market value adjustment to mortgage servicing rights, of which $0.9 million was in the Banking segment and $1.0 million was in the Multi-family Mortgage Banking segment. Noninterest Expense of $37.1 million decreased $0.5 million , or 1%, compared to $37.6 million , primarily due to decreases in salaries and employee benefits from lower commissions on gain on sale of loans. The efficiency ratio of 31.3% decreased 197 basis points compared to 33.3%. Comparison of Operating Results for the Three Months Ended December 31, 2022 and September 30, 2022 Net Interest Income of $95.4 million increased $10.0 million , or 12% compared to $85.4 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 2.69% decreased 8 basis points compared to 2.77%. Net interest margin of 3.13% increased 8 basis points compared to 3.05%. Interest Income of $181.4 million increased $47.3 million , or 35%, compared to $134.1 million , reflecting an increase in yields and average balances of loans and loans held for sale, as well as an increase in balances of securities held to maturity. Average balances of $10.3 billion for loans and loans held for sale increased $54.5 million , or 1%, compared to $10.2 billion . Average yield on loans and loans held for sale of 6.34% increased 134 basis points compared to 5.00%. Interest Expense of $86.0 million increased $37.3 million , or 77%, compared to $48.7 million . Interest expense on deposits of $81.1 million increased $36.1 million , or 80%, compared to $45.0 million , reflecting higher interest rates on interest bearing checking, money market, and certificates of deposit accounts. Average balances of $10.0 billion for interest-bearing deposits increased $1.0 billion , or 11%, compared to $9.0 billion . Average interest rates of 3.22% for interest-bearing deposits increased 124 basis points compared to 1.98%. Noninterest Income of $23.0 million decreased $6.2 million , or 21%, compared $29.2 million , primarily due to a $5.5 million , or 67% decrease in loan servicing fees related to lower fair market value adjustments to mortgage servicing rights, and a $2.1 million , or 16%, decrease in gain on sale of loans. The decrease in gain on sale of loans was associated with lower volume in the secondary market for multi-family loans. Loan servicing fees included a $0.2 million negative fair market value adjustment to mortgage 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. This compared to a $4.6 million positive fair market value adjustment to servicing rights, of which $0.9 million was in the Banking segment and $3.7 million was in the Multi-family Mortgage Banking segment. Noninterest Expense of $37.1 million increased $2.2 million , or 6%, compared to $35.0 million , primarily due to increases in professional fees related to growth in the low-income housing tax credit syndication business. The efficiency ratio of 31.3% increased 80 basis points compared to 30.5%. 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 offers multi-family housing and healthcare facility financing and servicing; Mortgage Warehousing that offers mortgage warehouse financing; and Banking that offers retail and correspondent residential mortgage banking, agricultural lending, and traditional community banking. Merchants Bancorp , with $12.6 billion in assets and $10.1 billion in deposits as of December 31, 2022 , 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, such as the potential impacts of the COVID-19 pandemic. 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 the COVID-19 pandemic, such as the severity, magnitude, duration and businesses' and governments' responses thereto, on the Company's operations and personnel, and on activity and demand across its businesses, and other 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 , 2022 2022 2022 2022 2021 Assets Cash and due from banks $ 22,170 $ 13,796 $ 10,714 $ 9,853 $ 14,030 Interest-earning demand accounts 203,994 310,165 247,432 401,668 1,018,584 Cash and cash equivalents 226,164 323,961 258,146 411,521 1,032,614 Securities purchased under agreements to resell 3,464 3,497 3,520 4,798 5,888 Mortgage loans in process of securitization 154,194 137,448 323,046 324,280 569,239 Securities available for sale 323,337 322,069 336,814 314,266 310,629 Securities held to maturity 1,119,078 1,005,487 — — — Federal Home Loan Bank (FHLB) stock 39,130 39,130 39,130 28,804 29,588 Loans held for sale (includes $82,192 , $68,785 , $41,991 , $14,567 and $48,583 , respectively, at fair value) 2,910,576 2,844,750 2,759,116 2,289,094 3,303,199 Loans receivable, net of allowance for credit losses on loans of $44,014 , $38,996 , $37,474 , $32,102 and $31,344 , respectively 7,426,858 6,919,128 7,033,203 5,976,960 5,751,319 Premises and equipment, net 35,438 35,492 35,085 34,559 31,212 Servicing rights 146,248 144,984 130,710 121,036 110,348 Interest receivable 56,262 40,170 26,184 23,499 24,103 Goodwill 15,845 15,845 15,845 15,845 15,845 Intangible assets, net 1,186 1,307 1,441 1,574 1,707 Other assets and receivables 157,447 145,454 123,815 104,356 92,947 Total assets $ 12,615,227 $ 11,978,722 $ 11,086,055 $ 9,650,592 $ 11,278,638 Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing $ 326,875 $ 315,868 $ 444,461 $ 461,193 $ 641,442 Interest-bearing 9,744,470 10,003,611 7,855,277 7,014,628 8,341,171 Total deposits 10,071,345 10,319,479 8,299,738 7,475,821 8,982,613 Borrowings 930,392 97,279 1,440,904 879,929 1,033,954 Deferred and current tax liabilities, net 19,613 19,124 19,414 30,695 19,170 Other liabilities 134,138 130,250 97,460 75,644 87,492 Total liabilities 11,155,488 10,566,132 9,857,516 8,462,089 10,123,229 Commitments and Contingencies Shareholders' Equity Common stock, without par value Authorized - 75,000,000 shares, 75,000,000 shares, 75,000,000shares, 50,000,000 shares and 50,000,000 shares Issued and outstanding - 43,113,127 shares, 43,109,578 shares,43,106,505 shares, 43,267,776 shares and 43,180,079 shares 137,781 137,226 136,671 137,882 137,565 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 liquidationpreference Authorized - 125,000 shares Issued and outstanding - 125,000 shares (equivalent to5,000,000 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 liquidationpreference Authorized - 300,000 shares Issued and outstanding - 142,500 shares (equivalent to 5,700,000 depositary shares) 137,459 137,371 — — — Retained earnings 832,871 787,530 737,789 694,776 657,149 Accumulated other comprehensive loss (10,521) (11,686) (8,070) (6,304) (1,454) Total shareholders' equity 1,459,739 1,412,590 1,228,539 1,188,503 1,155,409 Total liabilities and shareholders' equity $ 12,615,227 $ 11,978,722 $ 11,086,055 $ 9,650,592 $ 11,278,638 Consolidated Statement of Income (Unaudited) (In thousands, except share data) Three Months Ended Change December 31 , September 30 , December 31 , 4Q22 4Q22 2022 2022 2021 vs. 3Q22 vs. 4Q21 Interest Income Loans $ 164,682 $ 129,101 $ 77,113 28 % 114 % Mortgage loans in process of securitization 2,551 2,162 4,018 18 % -37 % Investment securities: Available for sale - taxable 704 485 1,007 45 % -30 % Available for sale - tax exempt — — 9 — -100 % Held to maturity 11,412 970 — 1076 % 100 % Federal Home Loan Bank stock 288 379 177 -24 % 63 % Other 1,802 1,015 261 78 % 590 % Total interest income 181,439 134,112 82,585 35 % 120 % Interest Expense Deposits 81,062 45,002 8,492 80 % 855 % Borrowed funds 4,967 3,725 1,350 33 % 268 % Total interest expense 86,029 48,727 9,842 77 % 774 % Net Interest Income 95,410 85,385 72,743 12 % 31 % Provision for credit losses 6,407 2,225 2,585 188 % 148 % Net Interest Income After Provision for Credit Losses 89,003 83,160 70,158 7 % 27 % Noninterest Income Gain on sale of loans 11,267 13,354 28,430 -16 % -60 % Loan servicing fees, net 2,691 8,169 1,382 -67 % 95 % Mortgage warehouse fees 1,081 1,105 2,469 -2 % -56 % Gains on sale of investments available for sale (1) — — 191 — -100 % Syndication and asset management fees 4,207 3,073 5,329 37 % -21 % Other income 3,736 3,485 2,470 7 % 51 % Total noninterest income 22,982 29,186 40,271 -21 % -43 % Noninterest Expense Salaries and employee benefits 22,290 23,027 25,387 -3 % -12 % Loan expenses 1,082 1,226 1,479 -12 % -27 % Occupancy and equipment 2,377 1,967 2,069 21 % 15 % Professional fees 3,739 2,429 3,325 54 % 12 % Deposit insurance expense 1,279 755 705 69 % 81 % Technology expense 1,417 1,325 1,123 7 % 26 % Other expense 4,925 4,222 3,558 17 % 38 % Total noninterest expense 37,109 34,951 37,646 6 % -1 % Income Before Income Taxes 74,876 77,395 72,783 -3 % 3 % Provision for income taxes (2) 17,720 18,907 17,582 -6 % 1 % Net Income $ 57,156 $ 58,488 $ 55,201 -2 % 4 % Dividends on preferred stock (8,797) (5,729) (5,728) 54 % 54 % Net Income Allocated to Common Shareholders $ 48,359 $ 52,759 $ 49,473 -8 % -2 % Basic Earnings Per Share $ 1.12 $ 1.22 $ 1.15 -8 % -3 % Diluted Earnings Per Share $ 1.12 $ 1.22 $ 1.14 -8 % -2 % Weighted-Average Shares Outstanding Basic 43,111,353 43,107,975 43,179,377 Diluted 43,274,758 43,258,925 43,399,064 (1) Includes $0 , $0 , and $191 respectively, related to accumulated other comprehensive earnings reclassifications. (2) Includes $0 , $0 , and $(46) respectively, related to income tax (expense)/benefit for reclassification items. Consolidated Statement of Income (Unaudited) (In thousands, except share data) Twelve Months Ended December 31 , December 31 , 2022 2021 Change Interest Income Loans $ 451,973 $ 293,830 54 % Mortgage loans in process of securitization 8,407 12,746 -34 % Investment securities: Available for sale - taxable 2,807 3,309 -15 % Available for sale - tax exempt — 41 -100 % Held to maturity 12,382 — 100 % Federal Home Loan Bank stock 1,220 1,143 7 % Other 4,044 817 395 % Total interest income 480,833 311,886 54 % Interest Expense Deposits 149,645 28,256 430 % Borrowed funds 12,637 5,636 124 % Total interest expense 162,282 33,892 379 % Net Interest Income 318,551 277,994 15 % Provision for credit losses 17,295 5,012 245 % Net Interest Income After Provision for Credit Losses 301,256 272,982 10 % Noninterest Income Gain on sale of loans 64,150 111,185 -42 % Loan servicing fees, net 30,198 16,373 84 % Mortgage warehouse fees 5,394 12,396 -56 % Gains on sale of investments available for sale (1) — 191 -100 % Syndication and asset management fees 9,493 6,507 46 % Other income 16,701 10,681 56 % Total noninterest income 125,936 157,333 -20 % Noninterest Expense Salaries and employee benefits 89,085 85,727 4 % Loan expenses 4,703 7,657 -39 % Occupancy and equipment 8,169 7,365 11 % Professional fees 9,065 5,427 67 % Deposit insurance expense 3,463 2,691 29 % Technology expense 5,282 4,200 26 % Other expense 16,283 12,318 32 % Total noninterest expense 136,050 125,385 9 % Income Before Income Taxes 291,142 304,930 -5 % Provision for income taxes (2) 71,421 77,826 -8 % Net Income $ 219,721 $ 227,104 -3 % Dividends on preferred stock (25,983) (20,873) 24 % Net Income Allocated to Common Shareholders $ 193,738 $ 206,231 -6 % Basic Earnings Per Share $ 4.49 $ 4.78 -6 % Diluted Earnings Per Share $ 4.47 $ 4.76 -6 % Weighted-Average Shares Outstanding Basic 43,164,477 43,172,078 Diluted 43,316,904 43,325,303 (1) Includes $0 and $191 respectively, related to accumulated other comprehensive earnings reclassifications. (2) Includes $0 and $(46) respectively, related to income tax (expense)/benefit for reclassification items. Key Operating Results (Unaudited) ($ in thousands, except share data) Three Months Ended Change December 31 , September 30 , December 31 , 4Q22 4Q22 2022 2022 2021 vs. 3Q22 vs. 4Q21 Noninterest expense $ 37,109 $ 34,951 $ 37,646 6 % -1 % Net interest income (before provision for credit losses) 95,410 85,385 72,743 12 % 31 % Noninterest income 22,982 29,186 40,271 -21 % -43 % Total income $ 118,392 $ 114,571 $ 113,014 3 % 5 % Efficiency ratio 31.34 % 30.51 % 33.31 % 83 bps (197) bps Average assets $ 12,457,893 $ 11,437,805 $ 10,945,026 9 % 14 % Net income 57,156 58,488 55,201 -2 % 4 % Return on average assets before annualizing 0.46 % 0.51 % 0.50 % Annualization factor 4.00 4.00 4.00 Return on average assets 1.84 % 2.05 % 2.02 % (21) bps (18) bps Return on average tangible common shareholders' equity (1) 20.81 % 23.92 % 26.04 % (311) bps (523) bps Tangible book value per common share (1) $ 21.88 $ 20.78 $ 17.96 5 % 22 % Tangible common shareholders' equity/tangible assets (1) 7.49 % 7.49 % 6.89 % - bps 60 bps Consolidated ratios Total capital/risk-weighted assets(2) 12.0 % 12.5 % N/A Tier I capital/risk-weighted assets(2) 11.6 % 12.1 % N/A Common Equity Tier I capital/risk-weighted assets(2) 7.6 % 7.8 % N/A Tier I capital/average assets(2) 11.7 % 12.3 % 10.4 % (1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below: (2) As defined by regulatory agencies; December 31, 2022 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 pershare is calculated by dividing tangible common equity by the number of shares outstanding. Three Months Ended Change December 31 , September 30 , December 31 , 4Q22 4Q22 2022 2022 2021 vs. 3Q22 vs. 4Q21 Net income $ 57,156 $ 58,488 $ 55,201 -2 % 4 % Less: preferred stock dividends (8,797) (5,729) (5,728) 54 % 54 % Net income available to common shareholders $ 48,359 $ 52,759 $ 49,473 -8 % -2 % Average shareholders' equity $ 1,445,995 $ 1,267,160 $ 1,139,714 14 % 27 % Less: average goodwill & intangibles (17,094) (17,228) (17,626) -1 % -3 % Less: average preferred stock (499,529) (367,726) (362,149) 36 % 38 % Average tangible common shareholders' equity $ 929,372 $ 882,206 $ 759,939 5 % 22 % Annualization factor 4.00 4.00 4.00 Return on average tangible common shareholders' equity 20.81 % 23.92 % 26.04 % (311) bps (523) bps Total equity $ 1,459,739 $ 1,412,590 $ 1,155,409 3 % 26 % Less: goodwill and intangibles (17,031) (17,152) (17,552) -1 % -3 % Less: preferred stock (499,608) (499,520) (362,149) — 38 % Tangible common shareholders' equity $ 943,100 $ 895,918 $ 775,708 5 % 22 % Assets $ 12,615,227 $ 11,978,722 $ 11,278,638 5 % 12 % Less: goodwill and intangibles (17,031) (17,152) (17,552) -1 % -3 % Tangible assets $ 12,598,196 $ 11,961,570 $ 11,261,086 5 % 12 % Ending common shares 43,113,127 43,109,578 43,180,079 Tangible book value per common share $ 21.88 $ 20.78 $ 17.96 5 % 22 % Tangible common shareholders' equity/tangible assets 7.49 % 7.49 % 6.89 % - bps 60 bps Key Operating Results (Unaudited) ($ in thousands, except share data) Twelve Months Ended December 31 , December 31 , 2022 2021 Change Noninterest expense $ 136,050 $ 125,385 9 % Net interest income (before provision for credit losses) 318,551 277,994 15 % Noninterest income 125,936 157,333 -20 % Total income $ 444,487 $ 435,327 2 % Efficiency ratio 30.61 % 28.80 % 181 bps Average assets $ 11,044,889 $ 10,188,953 8 % Net income 219,721 227,104 -3 % Return on average assets before annualizing 1.99 % 2.23 % Annualization factor 1.00 1.00 Return on average assets 1.99 % 2.23 % (24) bps Return on average tangible common shareholders' equity (1) 22.50 % 30.10 % (760) bps Tangible book value per common share (1) $ 21.88 $ 17.96 22 % Tangible common shareholders' equity/tangible assets (1) 7.49 % 6.89 % 60 bps (1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below: Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the company's financial condition, results of operations and cash flows computed in accordance with GAAP; however, they do have a number of limitations. As such, the reader should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. A reconciliation of GAAP to non-GAAP financial measures is below. Net Income Available to Common Shareholders excludes preferred stock. Tangible commonequity 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 iscalculated by dividing tangible common equity by the number of shares outstanding. Twelve Months Ended December 31 , December 31 , 2022 2021 Change Net income $ 219,721 $ 227,104 -3 % Less: preferred stock dividends (25,983) (20,873) 24 % Net income available to common shareholders $ 193,738 $ 206,231 -6 % Average shareholders' equity $ 1,276,443 $ 1,028,834 24 % Less: average goodwill & intangibles (17,293) (17,841) -3 % Less: average preferred stock (398,182) (325,904) 22 % Average tangible common shareholders' equity $ 860,968 $ 685,089 26 % Annualization factor 1.00 1.00 Return on average tangible common shareholders' equity 22.50 % 30.10 % (760) bps Total equity $ 1,459,739 $ 1,155,409 26 % Less: goodwill and intangibles (17,031) (17,552) -3 % Less: preferred stock (499,608) (362,149) 38 % Tangible common shareholders' equity $ 943,100 $ 775,708 22 % Assets $ 12,615,227 $ 11,278,638 12 % Less: goodwill and intangibles (17,031) (17,552) -3 % Tangible assets $ 12,598,196 $ 11,261,086 12 % Ending common shares 43,113,127 43,180,079 Tangible book value per common share $ 21.88 $ 17.96 22 % Tangible common shareholders' equity/tangible assets 7.49 % 6.89 % 60 bps Merchants Bancorp Average Balance Analysis ($ in thousands) (Unaudited) Three Months Ended Three Months Ended Three Months Ended December 31, 2022 September 30, 2022 December 31, 2021 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets: Interest-bearing deposits, and other $ 225,274 $ 2,090 3.68 % $ 211,653 $ 1,394 2.61 % $ 698,263 $ 438 0.25 % Securities available for sale - taxable 323,510 704 0.86 % 331,796 485 0.58 % 308,581 1,007 1.29 % Securities available for sale - tax exempt — — — — 1,204 9 2.97 % Securities held to maturity 1,002,446 11,412 4.52 % 98,363 970 3.91 % — — Mortgage loans in process of securitization 234,248 2,551 4.32 % 235,230 2,162 3.65 % 621,946 4,018 2.56 % Loans and loans held for sale 10,299,795 164,682 6.34 % 10,245,294 129,101 5.00 % 9,064,880 77,113 3.37 % Total interest-earning assets 12,085,273 181,439 5.96 % 11,122,336 134,112 4.78 % 10,694,874 82,585 3.06 % Allowance for credit losses on loans (40,339) (39,325) (29,801) Noninterest-earning assets 412,959 354,794 279,953 Total assets $ 12,457,893 $ 11,437,805 $ 10,945,026 Liabilities & Shareholders' Equity: Interest-bearing checking 4,520,785 37,929 3.33 % 4,207,217 21,980 2.07 % 4,325,991 2,094 0.19 % Savings deposits 252,787 304 0.48 % 239,262 162 0.27 % 223,912 35 0.06 % Money market 2,745,904 23,958 3.46 % 2,523,315 13,094 2.06 % 2,528,453 5,018 0.79 % Certificates of deposit 2,474,427 18,871 3.03 % 2,030,152 9,766 1.91 % 1,220,392 1,345 0.44 % Total interest-bearing deposits 9,993,903 81,062 3.22 % 8,999,946 45,002 1.98 % 8,298,748 8,492 0.41 % Borrowings 451,467 4,967 4.36 % 588,582 3,725 2.51 % 620,173 1,350 0.86 % Total interest-bearing liabilities 10,445,370 86,029 3.27 % 9,588,528 48,727 2.02 % 8,918,921 9,842 0.44 % Noninterest-bearing deposits 419,008 474,925 795,704 Noninterest-bearing liabilities 147,520 107,192 90,687 Total liabilities 11,011,898 10,170,645 9,805,312 Shareholders' equity 1,445,995 1,267,160 1,139,714 Total liabilities and shareholders' equity $ 12,457,893 $ 11,437,805 $ 10,945,026 Net interest income $ 95,410 $ 85,385 $ 72,743 Net interest spread 2.69 % 2.77 % 2.62 % Net interest-earning assets $ 1,639,903 $ 1,533,808 $ 1,775,953 Net interest margin 3.13 % 3.05 % 2.70 % Average interest-earning assets to average interest-bearing liabilities 115.70 % 116.00 % 119.91 % Supplemental Results (Unaudited) ($ in thousands) Net Income Net Income Three Months Ended Twelve Months Ended December 31 , September 30 , December 31 , December 31 , 2022 2022 2021 2022 2021 Segment Multi-family Mortgage Banking $ 10,228 $ 13,366 $ 14,124 $ 54,642 $ 51,504 Mortgage Warehousing 11,776 11,801 21,311 48,604 95,159 Banking 40,181 39,344 22,629 134,221 90,858 Other (5,029) (6,023) (2,863) (17,746) (10,417) Total $ 57,156 $ 58,488 $ 55,201 $ 219,721 $ 227,104 Total Assets December 31 , September 30 , December 31 , 2022 2022 2021 Segment Multi-family Mortgage Banking $ 351,274 $ 343,443 $ 296,129 Mortgage Warehousing 2,519,810 2,735,278 3,977,537 Banking 9,587,544 8,760,416 6,929,565 Other 156,599 139,585 75,407 Total $ 12,615,227 $ 11,978,722 $ 11,278,638 Gain on Sale of Loans Gain on Sale of Loans Three Months Ended Twelve Months Ended December 31 , September 30 , December 31 , December 31 , 2022 2022 2021 2022 2021 Loan Type Multi-family 10,241 $ 12,002 $ 24,797 $ 56,819 $ 93,350 Single-family 132 138 1,086 1,133 8,763 Small Business Association (SBA) 894 1,214 2,547 6,198 9,072 Total $ 11,267 $ 13,354 $ 28,430 $ 64,150 $ 111,185 Loans Receivable and Loans Held for Sale December 31 , September 30 , December 31 , 2022 2022 2021 Mortgage warehouse lines of credit $ 464,785 $ 815,084 $ 781,437 Residential real estate 1,178,401 1,030,075 843,101 Multi-family financing 3,135,535 2,766,950 2,702,042 Healthcare financing 1,604,341 1,429,675 826,157 Commercial and commercial real estate (1) 978,661 810,731 520,199 Agricultural production and real estate 95,651 91,913 97,060 Consumer and margin loans 13,498 13,696 12,667 7,470,872 6,958,124 5,782,663 Less: Allowance for credit losses on loans 44,014 38,996 31,344 Loans receivable $ 7,426,858 $ 6,919,128 $ 5,751,319 Loans held for sale 2,910,576 2,844,750 3,303,199 Total loans, net of allowance $ 10,337,434 $ 9,763,878 $ 9,054,518 (1) Includes $497.0 million and $209.8 million of revolving lines of credit collateralized primarily by single-family mortgage servicing rights as of December 31, 2022 and 2021, respectively. View original content to download multimedia: https://www.prnewswire.com/news-releases/merchants-bancorp-reports-full-year-and-fourth-quarter-2022-results-301733859.html SOURCE Merchants Bancorp