- Second quarter 2023 net income of $65.3 million increased 21% compared to second quarter of 2022 and increased 19% compared to the first quarter 2023.
- Second quarter 2023 diluted earnings per common share of $1.31 increased 18% compared to the second quarter of 2022 and increased 22% compared to the first quarter of 2023.
- During the second quarter 2023, the Company recorded a $13.0 million tax benefit related to tax refunds and changes to its state tax apportionment calculations, which was offset by credit events that totaled approximately $14.8 million, primarily for the impact of a multi-family loan charge-off, an increase in specific reserves for a healthcare customer, and changes to qualitative factors and forecasted loss rates.
- Total assets of $15.9 billion increased 11% compared to March 31, 2023, and increased 26% compared to December 31, 2022.
- As of June 30, 2023, the Company had $5.3 billion, or 34% of total assets, 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 $10.2 billion, or 64%, of the $15.9 billion in total assets as of June 30, 2023.
- Uninsured deposits totaled approximately $2 billion as of June 30, 2023, representing less than 20% of total deposits.
- Loans receivable of $9.9 billion, net of allowance for credit losses on loans, increased $1.3 billion, or 15%, compared to March 31, 2023, and increased $2.4 billion, or 33%, compared to December 31, 2022.
- Efficiency ratio was 32.7% in the second quarter of 2023 compared to 29.6% in the second quarter of 2022 and 30.3% in the first quarter of 2023.
- Tangible book value per common share of $24.14 increased 23% compared to $19.70 in the second quarter of 2022 and increased 6% compared to $22.88 in the first quarter of 2023.
CARMEL, Ind., July 27, 2023 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported second quarter 2023 net income of $65.3 million, or diluted earnings per common share of $1.31. This compared to $53.9 million, or diluted earnings per common share of $1.11 in the second quarter of 2022, and compared to $55.0 million, or diluted earnings per common share of $1.07 in the first quarter of 2023.
"We have continued to garner accolades for our performance and were honored to be named this month by American Banker Magazine as the #1 top-performing bank with assets between $10-50 billion. Our results in the second quarter reflected that ongoing strength as we delivered profitable loan growth and our noninterest income gained momentum from diverse sources. We have effectively managed our expenses and capital during this time of economic uncertainty, while maintaining an expense ratio of 32.7%, a return on average assets of 1.78%, and increasing tangible book value to $24.14 per share," said Michael F. Petrie, Chairman and CEO of Merchants.
Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Our liquidity remains strong, with unused borrowing capacity that increased to $5.3 billion during the quarter, which positions us well to execute our plans for future growth. Our relationship-focused teams are working hard every day to meet the needs of our loyal customers and improve communities across the country."
Net income of $65.3 million for the second quarter 2023 increased by $11.4 million, or 21%, compared to the second quarter of 2022, driven by:
- a $33.6 million, or 47%, increase in net interest income,
- a $14.8 million, or 82%, decrease in the Provision for Income Tax, reflecting a $13.0 million tax benefit related to tax refunds and changes to its state tax apportionment calculations described in the Provision for Income Tax section,
- a $16.4 million, or 264%, increase in provision for credit losses, primarily due to credit events that totaled approximately $14.8 million for the impact of a multi-family loan charge-off, an increase in specific reserves for a healthcare customer, and changes to qualitative factors and forecasted loss rates, described in the Asset Quality section,
- an $11.4 million, 34%, increase in noninterest expense, and
- a $10.2 million, or 47%, decrease in gain on sale of loans.
Net income of $65.3 million for the second quarter 2023 increased by $10.3 million, or 19%, compared to the first quarter of 2023, primarily driven by:
- a $15.6 million, or 109%, increase in noninterest income reflecting higher gain on sale of loans, loan servicing fees and syndication and asset management fees,
- a $15.1 million, or 82%, decrease in the Provision for Income Tax, reflecting a $13.0 million tax benefit related to tax refunds and changes to its state tax apportionment calculations described in the Provision for Income Tax section,
- a $4.9 million, or 5%, increase in net interest income,
- a $15.7 million, or 229%, increase in provision for credit losses, primarily due to credit events that totaled approximately $14.8 million for the impact of a multi-family loan charge-off, an increase in specific reserves for a healthcare customer, and changes to qualitative factors and forecasted loss rates, described in the Asset Quality section, and
- a $9.5 million, 27%, increase in noninterest expense.
Total AssetsTotal assets of $15.9 billion at June 30, 2023 increased $1.6 billion, or 11%, compared to March 31, 2023, and increased $3.3 billion, or 26%, compared to December 31, 2022. Increases compared to both periods were primarily due to significant growth in the mortgage warehouse, multi-family and healthcare loan portfolios.
Return on average assets was 1.78% for the second quarter of 2023 compared to 2.20% for the second quarter of 2022 and 1.71% for the first quarter of 2023.
Asset QualityThe allowance for credit losses on loans of $63.0 million as of June 30, 2023 increased $11.1 million, or 22%, compared to March 31, 2023 and increased $19.0 million, or 43%, compared to December 31, 2022. The increases were primarily due to the following:
- replenishment of $8.2 million related to the charge-off of a loan in the multi-family portfolio,
- a $2.0 million increase in net specific reserves, primarily related to a loan in the healthcare portfolio,
- a $4.6 million increase related to changes in qualitative factors and forecasted loss rates to reflect changes in industry conditions, such as the impact of higher interest rates, and
- loan growth in the period.
The increases to the allowance for credit losses were partially offset by charge-offs of $9.5 million during the second quarter of 2023, which compared to no charge-offs in the first quarter of 2023 and $47 thousand of charge-offs in the second quarter of 2022.
Non-performing loans were $68.4 million, or 0.69%, of loans receivable as of June 30, 2023, compared to 0.76% at March 31, 2023, and 0.36% at December 31, 2022. The increase in non-performing loans compared to both periods was primarily due to 3 customers.
Securities Available for Sale Total securities available for sale of $648.0 million as of June 30, 2023 decreased $31.5 million, or 5%, compared to March 31, 2023, and increased $324.7 million, or 100%, compared to December 31, 2022.
As of June 30, 2023, Accumulated Other Comprehensive Losses ("AOCL") of $7.0 million, related to securities available for sale, decreased $0.7 million, or 9%, compared to March 31, 2023, and decreased $3.5 million, or 33%, compared to December 31, 2022. The $7.0 million of AOCL as of June 30, 2023 represented less than 1% of total equity and less than 1% of total investment securities.
Total DepositsTotal deposits of $13.1 billion at June 30, 2023 increased $1.7 billion, or 15%, compared to March 31, 2023, and increased $3.0 billion, or 30%, 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 $4.8 billion at June 30, 2023 increased $1.0 billion, or 27%, from March 31, 2023 and increased $2.0 billion, or 72%, from December 31, 2022. Brokered deposits represented 36% of total deposits at June 30, 2023 compared to 33% of total deposits at March 31, 2023 and 27% of total deposits at December 31, 2022. As of June 30, 2023, brokered certificates of deposit had a weighted average remaining duration of 51 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 insured cash sweep program since 2018, which extends FDIC protection up to $100 million. This program has contributed to the Company's low level of uninsured deposits, which were below 20% of total deposits as of June 30, 2023.
LiquidityCash balances of $377.3 million as of June 30, 2023 increased by $7.7 million compared to March 31, 2023 and increased by $151.1 million compared to December 31, 2022. The Company continues to have significant borrowing capacity, with unused lines of credit totaling $5.3 billion as of June 30, 2023 compared to $4.0 billion at March 31, 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 a significant portion of its loans, which provides flexibility in managing its liquidity.
Comparison of Operating Results for the Three Months Ended
June 30, 2023 and 2022
Net Interest Income of $105.6 million increased $33.6 million, or 47%, compared to $72.0 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 higher average rates on borrowings, primarily related to the credit linked notes issued by the Company during the first quarter of 2023.
- Interest rate spread of 2.41% decreased 49 basis points compared to 2.90%.
- Net interest margin of 2.97% decreased 6 basis points compared to 3.03%.
Interest Income of $258.1 million increased $168.8 million, or 189%, compared to $89.3 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 $12.0 billion for loans and loans held for sale increased 38% compared to $8.6 billion.
- Average yield on loans and loans held for sale of 7.67% increased 368 basis points compared to 3.99%.
Interest Expense of $152.5 million increased 784% compared to $17.2 million. Interest expense on deposits of $137.8 million increased $123.0 million, or 833%, compared $14.8 million, primarily reflecting higher rates on certificates of deposit, interest-bearing checking, and money market accounts, as well as higher average rates on borrowings, primarily related to the credit linked notes issued by the Company during the first quarter of 2023.
- Average balances of $12.0 billion for interest-bearing deposits increased 63% compared to $7.4 billion.
- Average interest rates of 4.60% for interest-bearing deposits increased 379 basis points compared to 0.81%.
Provision for Credit Losses of $22.6 million increased $16.4 million compared to $6.2 million, primarily reflecting the impact of charge-offs, an increase in specific reserves, changes to qualitative and loss factors, as well as loan growth described in the Asset Quality section above.
Noninterest Income of $29.9 million decreased $9.3 million, or 24%, compared to $39.2 million, primarily due to a $10.2 million, or 47%, decrease in gain on sale of loans.
- 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 $3.4 million positive fair market value adjustment to servicing rights, with a $1.3 million positive adjustment in the Banking segment and a $2.1 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $7.7 million positive fair market value adjustment to mortgage servicing rights, of which $1.1 million was in the Banking segment and $6.6 million was in the Multi-family Mortgage Banking segment.
Noninterest Expense of $44.3 million increased $11.4 million, or 34%, compared to $33.0 million, primarily due to increases in salaries and employee benefits, deposit insurance expense, and professional fees.
- The efficiency ratio of 32.7% increased 307 basis points compared to 29.6%.
Provision for Income Taxes of $3.3 million decreased $14.8 million compared to $18.1 million, reflecting a $13.0 million tax benefit related to tax refunds and changes to state tax apportionment calculations.
During the second quarter of 2023, the Company received an advisory letter it requested from the State of Indiana related to certain state tax apportionment provisions in the Indiana Financial Institution Tax Code and Regulations. The advisory letter provided guidance related to the methodology used to determine and source the receipts in the state of Indiana for the Company's mortgage origination and warehousing service lines. In effect, the guidance provided the Company the ability to revise its state income tax apportionment calculation to reduce its Indiana tax and related deferred tax liabilities. As such, the Company will amend several of its state returns and request the respective refunds. Additionally, the change in methodology is expected to result in a 1.0% to 1.5% reduction in the Company's overall effective tax rate in the future.
Comparison of Operating Results for the Three Months Ended
June 30, 2023 and March 31, 2023
Net Interest Income of $105.6 million increased $4.9 million, or 5%, compared to $100.7 million, reflecting higher average balances and yields on loans and loans held for sale, which were partially offset by higher interest rates and average balances on deposits and borrowings.
- Interest rate spread of 2.41% decreased 35 basis points compared to 2.76%.
- Net interest margin of 2.97% decreased 30 basis points compared to 3.27%.
Interest Income of $258.1 million increased $46.8 million, or 22%, compared to $211.3 million, reflecting an increase in average balances and yields on loans and loans held for sale.
- Average balances of $12.0 billion for loans and loans held for sale increased 13%, compared to $10.6 billion.
- Average yield on loans and loans held for sale of 7.67% increased 42 basis points compared to 7.25%.
Interest Expense of $152.5 million increased $41.9 million, or 38%, compared to $110.6 million. Interest expense on deposits of $137.8 million increased $33.4 million, or 32%, compared to $104.4 million, primarily due to higher average balances and interest rates on certificates of deposit and interest-bearing checking, accounts, as well as higher average rates on borrowings, primarily related to the credit linked notes issued by the Company during the first quarter of 2023.
- Average balances of $12.0 billion for interest-bearing deposits increased 15% compared to $10.5 billion.
- Average interest rates of 4.60% for interest-bearing deposits increased 55 basis points compared to 4.05%.
Provision for Credit Losses of $22.6 million increased $15.7 million compared to $6.9 million, primarily reflecting the impact of charge-offs, an increase in specific reserves, changes to qualitative and loss factors, as well as loan growth described in the Asset Quality section above.
Noninterest Income of $29.9 million increased $15.6 million, or 109%, compared $14.3 million, primarily due to a $6.3 million, or 265%, increase in loan servicing fees, a $4.6 million, or 69%, increase in gain on sale of loans, and a $2.7 million, or 221% increase in syndication and asset management fees.
- Loan servicing fees included a $3.4 million positive fair market value adjustment to servicing rights, with a $1.3 million positive adjustment in the Banking segment and a $2.1 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to 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.
Noninterest Expense of $44.3 million increased $9.5 million, or 27%, compared to $34.8 million, primarily due to increases in salaries and employee benefits, deposit insurance expense and professional fees.
- The efficiency ratio of 32.7% increased 246 basis points compared to 30.3%.
Provision for Income Taxes of $3.3 million decreased $15.1 million compared to $18.4 million, reflecting the $13.0 million tax benefit related to the tax refunds and changes to state tax apportionment calculations described in the Comparison of Operating Results for the Three Months Ended June 30, 2023 and March 31, 2023 section above.
About Merchants BancorpRanked 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 $15.9 billion in assets and $13.1 billion in deposits as of June 30, 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 StatementsThis 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) | ||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||
2023 | 2023 | 2022 | 2022 | 2022 | ||||||
Assets | ||||||||||
Cash and due from banks | $ 15,390 | $ 19,002 | $ 22,170 | $ 13,796 | $ 10,714 | |||||
Interest-earning demand accounts | 361,920 | 350,584 | 203,994 | 310,165 | 247,432 | |||||
Cash and cash equivalents | 377,310 | 369,586 | 226,164 | 323,961 | 258,146 | |||||
Securities purchased under agreements to resell | 3,412 | 3,438 | 3,464 | 3,497 | 3,520 | |||||
Mortgage loans in process of securitization | 298,907 | 197,074 | 154,194 | 137,448 | 323,046 | |||||
Securities available for sale | 648,003 | 679,518 | 323,337 | 322,069 | 336,814 | |||||
Securities held to maturity (includes $1,058,590, $1,106,582,$1,118,966, $1,005,487 and $0 at fair value, respectively) | 1,062,017 | 1,104,835 | 1,119,078 | 1,005,487 | — | |||||
Federal Home Loan Bank (FHLB) stock | 39,130 | 39,130 | 39,130 | 39,130 | 39,130 | |||||
Loans held for sale (includes $82,931, $85,516, $82,192, $68,785and $41,991 at fair value, respectively) | 3,058,013 | 2,855,250 | 2,910,576 | 2,844,750 | 2,759,116 | |||||
Loans receivable, net of allowance for credit losses on loans of$62,986, $51,838, $44,014, $38,996 and $37,474, respectively | 9,854,018 | 8,575,210 | 7,426,858 | 6,919,128 | 7,033,203 | |||||
Premises and equipment, net | 36,947 | 35,793 | 35,438 | 35,492 | 35,085 | |||||
Servicing rights | 147,288 | 143,867 | 146,248 | 144,984 | 130,710 | |||||
Interest receivable | 70,509 | 64,282 | 56,262 | 40,170 | 26,184 | |||||
Goodwill | 15,845 | 15,845 | 15,845 | 15,845 | 15,845 | |||||
Intangible assets, net | 949 | 1,068 | 1,186 | 1,307 | 1,441 | |||||
Other assets and receivables | 262,524 | 156,070 | 157,447 | 145,454 | 123,815 | |||||
Total assets | $ 15,874,872 | $ 14,240,966 | $ 12,615,227 | $ 11,978,722 | $ 11,086,055 | |||||
Liabilities and Shareholders' Equity | ||||||||||
Liabilities | ||||||||||
Deposits | ||||||||||
Noninterest-bearing | $ 349,387 | $ 313,733 | $ 326,875 | $ 315,868 | $ 444,461 | |||||
Interest-bearing | 12,710,477 | 11,031,498 | 9,744,470 | 10,003,611 | 7,855,277 | |||||
Total deposits | 13,059,864 | 11,345,231 | 10,071,345 | 10,319,479 | 8,299,738 | |||||
Borrowings | 1,016,836 | 1,233,762 | 930,392 | 97,279 | 1,440,904 | |||||
Deferred and current tax liabilities, net | 16,084 | 32,827 | 19,613 | 19,124 | 19,414 | |||||
Other liabilities | 221,788 | 123,462 | 134,138 | 130,250 | 97,460 | |||||
Total liabilities | 14,314,572 | 12,735,282 | 11,155,488 | 10,566,132 | 9,857,516 | |||||
Commitments and Contingencies | ||||||||||
Shareholders' Equity | ||||||||||
Common stock, without par value | ||||||||||
Authorized - 75,000,000 shares | ||||||||||
Issued and outstanding - 43,237,300 shares, 43,233,618 shares,43,113,127 shares, 43,109,578 shares and 43,106,505 shares | 138,853 | 138,105 | 137,781 | 137,226 | 136,671 | |||||
Preferred stock, without par value - 5,000,000 total sharesauthorized | ||||||||||
7% Series A Preferred stock - $25 per share liquidationpreference | ||||||||||
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 liquidationpreference | ||||||||||
Authorized - 200,000 shares | ||||||||||
Issued and outstanding - 196,181 shares (equivalent to7,847,233 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 to5,700,000 depositary shares) | 137,459 | 137,459 | 137,459 | 137,371 | — | |||||
Retained earnings | 928,875 | 875,700 | 832,871 | 787,530 | 737,789 | |||||
Accumulated other comprehensive loss | (7,036) | (7,729) | (10,521) | (11,686) | (8,070) | |||||
Total shareholders' equity | 1,560,300 | 1,505,684 | 1,459,739 | 1,412,590 | 1,228,539 | |||||
Total liabilities and shareholders' equity | $ 15,874,872 | $ 14,240,966 | $ 12,615,227 | $ 11,978,722 | $ 11,086,055 | |||||
Consolidated Statement of Income | |||||||||||||
(Unaudited) | |||||||||||||
(In thousands, except share data) | |||||||||||||
Three Months Ended | Change | ||||||||||||
June 30, | March 31, | June 30, | 2Q23 | 2Q23 | |||||||||
2023 | 2023 | 2022 | vs. 1Q23 | vs. 2Q22 | |||||||||
Interest Income | |||||||||||||
Loans | $ | 228,732 | $ | 189,450 | $ | 85,994 | 21 % | 166 % | |||||
Mortgage loans in process of securitization | 3,127 | 1,648 | 1,449 | 90 % | 116 % | ||||||||
Investment securities: | |||||||||||||
Available for sale - taxable | 5,564 | 2,266 | 917 | 146 % | 507 % | ||||||||
Held to maturity | 17,311 | 15,754 | — | 10 % | 100 % | ||||||||
Federal Home Loan Bank stock | 471 | 427 | 284 | 10 % | 66 % | ||||||||
Other | 2,864 | 1,749 | 626 | 64 % | 358 % | ||||||||
Total interest income | 258,069 | 211,294 | 89,270 | 22 % | 189 % | ||||||||
Interest Expense | |||||||||||||
Deposits | 137,801 | 104,442 | 14,768 | 32 % | 833 % | ||||||||
Borrowed funds | 14,651 | 6,159 | 2,471 | 138 % | 493 % | ||||||||
Total interest expense | 152,452 | 110,601 | 17,239 | 38 % | 784 % | ||||||||
Net Interest Income | 105,617 | 100,693 | 72,031 | 5 % | 47 % | ||||||||
Provision for credit losses | 22,603 | 6,867 | 6,212 | 229 % | 264 % | ||||||||
Net Interest Income After Provision for Credit Losses | 83,014 | 93,826 | 65,819 | -12 % | 26 % | ||||||||
Noninterest Income | |||||||||||||
Gain on sale of loans | 11,350 | 6,733 | 21,564 | 69 % | -47 % | ||||||||
Loan servicing fees, net | 8,616 | 2,360 | 9,607 | 265 % | -10 % | ||||||||
Mortgage warehouse fees | 2,865 | 1,028 | 1,350 | 179 % | 112 % | ||||||||
Syndication and asset management fees | 3,896 | 1,212 | 1,599 | 221 % | 144 % | ||||||||
Other income | 3,155 | 2,931 | 5,051 | 8 % | -38 % | ||||||||
Total noninterest income | 29,882 | 14,264 | 39,171 | 109 % | -24 % | ||||||||
Noninterest Expense | |||||||||||||
Salaries and employee benefits | 25,724 | 22,146 | 22,475 | 16 % | 14 % | ||||||||
Loan expenses | 907 | 804 | 1,184 | 13 % | -23 % | ||||||||
Occupancy and equipment | 2,456 | 2,232 | 2,011 | 10 % | 22 % | ||||||||
Professional fees | 3,723 | 2,269 | 1,594 | 64 % | 134 % | ||||||||
Deposit insurance expense | 3,806 | 2,178 | 670 | 75 % | 468 % | ||||||||
Technology expense | 1,571 | 1,577 | 1,304 | — | 20 % | ||||||||
Other expense | 6,133 | 3,566 | 3,719 | 72 % | 65 % | ||||||||
Total noninterest expense | 44,320 | 34,772 | 32,957 | 27 % | 34 % | ||||||||
Income Before Income Taxes | 68,576 | 73,318 | 72,033 | -6 % | -5 % | ||||||||
Provision for income taxes | 3,274 | 18,363 | 18,098 | -82 % | -82 % | ||||||||
Net Income | $ | 65,302 | $ | 54,955 | $ | 53,935 | 19 % | 21 % | |||||
Dividends on preferred stock | (8,668) | (8,667) | (5,729) | — | 51 % | ||||||||
Net Income Allocated to Common Shareholders | $ | 56,634 | $ | 46,288 | $ | 48,206 | 22 % | 17 % | |||||
Basic Earnings Per Share | $ | 1.31 | $ | 1.07 | $ | 1.12 | 22 % | 17 % | |||||
Diluted Earnings Per Share | $ | 1.31 | $ | 1.07 | $ | 1.11 | 22 % | 18 % | |||||
Weighted-Average Shares Outstanding | |||||||||||||
Basic | 43,235,398 | 43,179,604 | 43,209,824 | ||||||||||
Diluted | 43,309,393 | 43,290,779 | 43,335,211 | ||||||||||
Consolidated Statement of Income | ||||||||
(Unaudited) | ||||||||
(In thousands, except share data) | ||||||||
Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2023 | 2022 | Change | ||||||
Interest Income | ||||||||
Loans | $ | 418,182 | $ | 158,190 | 164 % | |||
Mortgage loans in process of securitization | 4,775 | 3,694 | 29 % | |||||
Investment securities: | ||||||||
Available for sale - taxable | 7,830 | 1,618 | 384 % | |||||
Held to maturity | 33,065 | — | 100 % | |||||
Federal Home Loan Bank stock | 898 | 553 | 62 % | |||||
Other | 4,613 | 1,227 | 276 % | |||||
Total interest income | 469,363 | 165,282 | 184 % | |||||
Interest Expense | ||||||||
Deposits | 242,243 | 23,581 | 927 % | |||||
Borrowed funds | 20,810 | 3,945 | 428 % | |||||
Total interest expense | 263,053 | 27,526 | 856 % | |||||
Net Interest Income | 206,310 | 137,756 | 50 % | |||||
Provision for credit losses | 29,470 | 8,663 | 240 % | |||||
Net Interest Income After Provision for Credit Losses | 176,840 | 129,093 | 37 % | |||||
Noninterest Income | ||||||||
Gain on sale of loans | 18,083 | 39,529 | -54 % | |||||
Loan servicing fees, net | 10,976 | 19,338 | -43 % | |||||
Mortgage warehouse fees | 3,893 | 3,208 | 21 % | |||||
Syndication and asset management fees | 5,108 | 2,213 | 131 % | |||||
Other income | 6,086 | 9,480 | -36 % | |||||
Total noninterest income | 44,146 | 73,768 | -40 % | |||||
Noninterest Expense | ||||||||
Salaries and employee benefits | 47,870 | 43,768 | 9 % | |||||
Loan expenses | 1,711 | 2,395 | -29 % | |||||
Occupancy and equipment | 4,688 | 3,825 | 23 % | |||||
Professional fees | 5,992 | 2,897 | 107 % | |||||
Deposit insurance expense | 5,984 | 1,429 | 319 % | |||||
Technology expense | 3,148 | 2,540 | 24 % | |||||
Other expense | 9,699 | 7,136 | 36 % | |||||
Total noninterest expense | 79,092 | 63,990 | 24 % | |||||
Income Before Income Taxes | 141,894 | 138,871 | 2 % | |||||
Provision for income taxes | 21,637 | 34,794 | -38 % | |||||
Net Income | $ | 120,257 | $ | 104,077 | 16 % | |||
Dividends on preferred stock | (17,335) | (11,457) | 51 % | |||||
Net Income Allocated to Common Shareholders | $ | 102,922 | $ | 92,620 | 11 % | |||
Basic Earnings Per Share | $ | 2.38 | $ | 2.14 | 11 % | |||
Diluted Earnings Per Share | $ | 2.38 | $ | 2.14 | 11 % | |||
Weighted-Average Shares Outstanding | ||||||||
Basic | 43,207,655 | 43,220,198 | ||||||
Diluted | 43,300,240 | 43,367,875 | ||||||
Key Operating Results | ||||||||||||
(Unaudited) | ||||||||||||
($ in thousands, except share data) | ||||||||||||
Three Months Ended | Change | |||||||||||
June 30, | March 31, | June 30, | 2Q23 | 2Q23 | ||||||||
2023 | 2023 | 2022 | vs. 1Q23 | vs. 2Q22 | ||||||||
Noninterest expense | $ 44,320 | $ 34,772 | $ 32,957 | 27 % | 34 % | |||||||
Net interest income (before provision for credit losses) | 105,617 | 100,693 | 72,031 | 5 % | 47 % | |||||||
Noninterest income | 29,882 | 14,264 | 39,171 | 109 % | -24 % | |||||||
Total income | $ 135,499 | $ 114,957 | $ 111,202 | 18 % | 22 % | |||||||
Efficiency ratio | 32.71 % | 30.25 % | 29.64 % | 246 | bps | 307 | bps | |||||
Average assets | $ 14,673,257 | $ 12,885,735 | $ 9,820,878 | 14 % | 49 % | |||||||
Net income | 65,302 | 54,955 | 53,935 | 19 % | 21 % | |||||||
Return on average assets before annualizing | 0.45 % | 0.43 % | 0.55 % | |||||||||
Annualization factor | 4.00 | 4.00 | 4.00 | |||||||||
Return on average assets | 1.78 % | 1.71 % | 2.20 % | 7 | bps | (42) | bps | |||||
Return on average tangible common shareholders' equity (1) | 22.03 % | 18.89 % | 23.05 % | 314 | bps | (102) | bps | |||||
Tangible book value per common share (1) | $ 24.14 | $ 22.88 | $ 19.70 | 6 % | 23 % | |||||||
Tangible common shareholders' equity/tangible assets (1) | 6.58 % | 6.95 % | 7.67 % | (37) | bps | (109) | bps | |||||
Consolidated ratios | ||||||||||||
Total capital/risk-weighted assets(2) | 11.3 | % | 12.4 | % | N/A | |||||||
Tier I capital/risk-weighted assets(2) | 10.8 | % | 11.9 | % | N/A | |||||||
Common Equity Tier I capital/risk-weighted assets(2) | 7.3 | % | 7.9 | % | N/A | |||||||
Tier I capital/average assets(2) | 10.6 | % | 11.6 | % | 12.4 | % | ||||||
(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 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 tonon-GAAP financial measures is below. Net Income Available to Common Shareholders excludes preferred stock. Tangible common equity is calculated by excluding thebalance 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 andintangible assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. | ||||||||||||
Three Months Ended | Change | |||||||||||
June 30, | March 31, | June 30, | 2Q23 | 2Q23 | ||||||||
2023 | 2023 | 2022 | vs. 1Q23 | vs. 2Q22 | ||||||||
Net income | $ 65,302 | $ 54,955 | $ 53,935 | 19 % | 21 % | |||||||
Less: preferred stock dividends | (8,668) | (8,667) | (5,729) | — | 51 % | |||||||
Net income available to common shareholders | $ 56,634 | $ 46,288 | $ 48,206 | 22 % | 17 % | |||||||
Average shareholders' equity | $ 1,544,976 | $ 1,496,610 | $ 1,215,891 | 3 % | 27 % | |||||||
Less: average goodwill & intangibles | (16,858) | (16,980) | (17,361) | -1 % | -3 % | |||||||
Less: average preferred stock | (499,608) | (499,608) | (362,149) | — | 38 % | |||||||
Average tangible common shareholders' equity | $ 1,028,510 | $ 980,022 | $ 836,381 | 5 % | 23 % | |||||||
Annualization factor | 4.00 | 4.00 | 4.00 | |||||||||
Return on average tangible common shareholders' equity | 22.03 % | 18.89 % | 23.05 % | 314 | bps | (102) | bps | |||||
Total equity | $ 1,560,300 | $ 1,505,684 | $ 1,228,539 | 4 % | 27 % | |||||||
Less: goodwill and intangibles | (16,794) | (16,913) | (17,286) | -1 % | -3 % | |||||||
Less: preferred stock | (499,608) | (499,608) | (362,149) | — | 38 % | |||||||
Tangible common shareholders' equity | $ 1,043,898 | $ 989,163 | $ 849,104 | 6 % | 23 % | |||||||
Assets | $ 15,874,872 | $ 14,240,966 | $ 11,086,055 | 11 % | 43 % | |||||||
Less: goodwill and intangibles | (16,794) | (16,913) | (17,286) | -1 % | -3 % | |||||||
Tangible assets | $ 15,858,078 | $ 14,224,053 | $ 11,068,769 | 11 % | 43 % | |||||||
Ending common shares | 43,237,300 | 43,233,618 | 43,106,505 | |||||||||
Tangible book value per common share | $ 24.14 | $ 22.88 | $ 19.70 | 6 % | 23 % | |||||||
Tangible common shareholders' equity/tangible assets | 6.58 % | 6.95 % | 7.67 % | (37) | bps | (109) | bps | |||||
Key Operating Results | ||||||||
(Unaudited) | ||||||||
($ in thousands, except share data) | ||||||||
Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2023 | 2022 | Change | ||||||
Noninterest expense | $ 79,092 | $ 63,990 | 24 % | |||||
Net interest income (before provision for credit losses) | 206,310 | 137,756 | 50 % | |||||
Noninterest income | 44,146 | 73,768 | -40 % | |||||
Total income | $ 250,456 | $ 211,524 | 18 % | |||||
Efficiency ratio | 31.58 % | 30.25 % | 133 | bps | ||||
Average assets | $ 13,784,434 | $ 10,126,963 | 36 % | |||||
Net income | 120,257 | 104,077 | 16 % | |||||
Return on average assets before annualizing | 0.87 % | 1.03 % | ||||||
Annualization factor | 2.00 | 2.00 | ||||||
Return on average assets | 1.74 % | 2.06 % | (32) | bps | ||||
Return on average tangible common shareholders' equity (1) | 20.49 % | 22.72 % | (223) | bps | ||||
Tangible book value per common share (1) | $ 24.14 | $ 19.70 | 23 % | |||||
Tangible common shareholders' equity/tangible assets (1) | 6.58 % | 7.67 % | (109) | 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 notnecessarily comparable to non-GAAP financial measures that other companies use. A reconciliation of GAAP to non-GAAP financialmeasures is below. Net Income Available to Common Shareholders excludes preferred stock. Tangible common equity is calculated byexcluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total assets. Tangible Assets iscalculated by excluding the balance of goodwill and intangible assets. Tangible book value per share is calculated by dividing tangiblecommon equity by the number of shares outstanding | ||||||||
Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2023 | 2022 | Change | ||||||
Net income | $ 120,257 | $ 104,077 | 16 % | |||||
Less: preferred stock dividends | (17,335) | (11,457) | 51 % | |||||
Net income available to common shareholders | $ 102,922 | $ 92,620 | 11 % | |||||
Average shareholders' equity | $ 1,520,927 | $ 1,194,981 | 27 % | |||||
Less: average goodwill & intangibles | (16,918) | (17,428) | -3 % | |||||
Less: average preferred stock | (499,608) | (362,149) | 38 % | |||||
Average tangible common shareholders' equity | $ 1,004,401 | $ 815,404 | 23 % | |||||
Annualization factor | 2.00 | 2.00 | ||||||
Return on average tangible common shareholders' equity | 20.49 % | 22.72 % | (223) | bps | ||||
Total equity | $ 1,560,300 | $ 1,228,539 | 27 % | |||||
Less: goodwill and intangibles | (16,794) | (17,286) | -3 % | |||||
Less: preferred stock | (499,608) | (362,149) | 38 % | |||||
Tangible common shareholders' equity | $ 1,043,898 | $ 849,104 | 23 % | |||||
Assets | $ 15,874,872 | $ 11,086,055 | 43 % | |||||
Less: goodwill and intangibles | (16,794) | (17,286) | -3 % | |||||
Tangible assets | $ 15,858,078 | $ 11,068,769 | 43 % | |||||
Ending common shares | 43,237,300 | 43,106,505 | ||||||
Tangible book value per common share | $ 24.14 | $ 19.70 | 23 % | |||||
Tangible common shareholders' equity/tangible assets | 6.58 % | 7.67 % | (109) | bps | ||||
Merchants Bancorp | |||||||||||
Average Balance Analysis | |||||||||||
($ in thousands) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | |||||||||
June 30, 2023 | March 31, 2023 | June 30, 2022 | |||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||
Assets: | |||||||||||
Interest-bearing deposits, and other | $ 249,722 | $ 3,335 | 5.36 % | $ 184,470 | $ 2,176 | 4.78 % | $ 367,540 | $ 910 | 0.99 % | ||
Securities available for sale - taxable | 672,887 | 5,564 | 3.32 % | 445,614 | 2,266 | 2.06 % | 330,759 | 917 | 1.11 % | ||
Securities held to maturity | 1,093,018 | 17,311 | 6.35 % | 1,115,243 | 15,754 | 5.73 % | — | — | |||
Mortgage loans in process of securitization | 280,092 | 3,127 | 4.48 % | 159,333 | 1,648 | 4.19 % | 198,349 | 1,449 | 2.93 % | ||
Loans and loans held for sale | 11,968,565 | 228,732 | 7.67 % | 10,595,669 | 189,450 | 7.25 % | 8,643,276 | 85,994 | 3.99 % | ||
Total interest-earning assets | 14,264,284 | 258,069 | 7.26 % | 12,500,329 | 211,294 | 6.86 % | 9,539,924 | 89,270 | 3.75 % | ||
Allowance for credit losses on loans | (54,411) | (45,190) | (33,401) | ||||||||
Noninterest-earning assets | 463,384 | 430,596 | 314,355 | ||||||||
Total assets | $ 14,673,257 | $ 12,885,735 | $ 9,820,878 | ||||||||
Liabilities & Shareholders' Equity: | |||||||||||
Interest-bearing checking | 4,307,736 | 48,296 | 4.50 % | 4,052,081 | 40,647 | 4.07 % | 3,849,876 | 6,945 | 0.72 % | ||
Savings deposits | 236,012 | 299 | 0.51 % | # | 237,289 | 265 | 0.45 % | 238,944 | 62 | 0.10 % | |
Money market | 2,749,594 | 30,521 | 4.45 % | # | 2,848,500 | 28,608 | 4.07 % | 2,626,973 | 6,567 | 1.00 % | |
Certificates of deposit | 4,729,242 | 58,685 | 4.98 % | # | 3,322,991 | 34,922 | 4.26 % | 639,556 | 1,194 | 0.75 % | |
Total interest-bearing deposits | 12,022,584 | 137,801 | 4.60 % | 10,460,861 | 104,442 | 4.05 % | 7,355,349 | 14,768 | 0.81 % | ||
Borrowings | 591,333 | 14,651 | 9.94 % | 482,723 | 6,159 | 5.17 % | 749,628 | 2,471 | 1.32 % | ||
Total interest-bearing liabilities | 12,613,917 | 152,452 | 4.85 % | 10,943,584 | 110,601 | 4.10 % | 8,104,977 | 17,239 | 0.85 % | ||
Noninterest-bearing deposits | 346,837 | 304,119 | 402,328 | ||||||||
Noninterest-bearing liabilities | 167,527 | 141,422 | 97,682 | ||||||||
Total liabilities | 13,128,281 | 11,389,125 | 8,604,987 | ||||||||
Shareholders' equity | 1,544,976 | 1,496,610 | 1,215,891 | ||||||||
Total liabilities and shareholders' equity | $ 14,673,257 | $ 12,885,735 | $ 9,820,878 | ||||||||
Net interest income | $ 105,617 | $ 100,693 | $ 72,031 | ||||||||
Net interest spread | 2.41 % | 2.76 % | 2.90 % | ||||||||
Net interest-earning assets | $ 1,650,367 | $ 1,556,745 | $ 1,434,947 | ||||||||
Net interest margin | 2.97 % | 3.27 % | 3.03 % | ||||||||
Average interest-earning assets to averageinterest-bearing liabilities | 113.08 % | 114.23 % | 117.70 % | ||||||||
Supplemental Results | |||||||||||||||
(Unaudited) | |||||||||||||||
($ in thousands) | |||||||||||||||
Net Income | Net Income | ||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||
Segment | |||||||||||||||
Multi-family Mortgage Banking | $ 11,242 | $ 1,966 | $ 19,556 | $ 13,208 | $ 31,048 | ||||||||||
Mortgage Warehousing | 18,596 | 8,641 | 11,868 | 27,237 | 25,027 | ||||||||||
Banking | 42,650 | 49,307 | 25,932 | 91,957 | 54,696 | ||||||||||
Other | (7,186) | (4,959) | (3,421) | (12,145) | (6,694) | ||||||||||
Total | $ 65,302 | $ 54,955 | $ 53,935 | $ 120,257 | $ 104,077 | ||||||||||
Total Assets | |||||||||||||||
June 30, | March 31, | December 31, | |||||||||||||
2023 | 2023 | 2022 | |||||||||||||
Segment | |||||||||||||||
Multi-family Mortgage Banking | $ 373,680 | $ 341,487 | $ 351,274 | ||||||||||||
Mortgage Warehousing | 4,474,832 | 3,318,491 | 2,519,810 | ||||||||||||
Banking | 10,784,596 | 10,430,293 | 9,587,544 | ||||||||||||
Other | 241,764 | 150,695 | 156,599 | ||||||||||||
Total | $ 15,874,872 | $ 14,240,966 | $ 12,615,227 | ||||||||||||
Gain on Sale of Loans | Gain on Sale of Loans | ||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||
Loan Type | |||||||||||||||
Multi-family | 10,361 | $ 4,920 | $ 19,623 | $ 15,281 | $ 34,576 | ||||||||||
Single-family | 202 | 277 | 406 | 479 | 863 | ||||||||||
Small Business Association (SBA) | 787 | 1,536 | 1,535 | 2,323 | 4,090 | ||||||||||
Total | $ 11,350 | $ 6,733 | $ 21,564 | $ 18,083 | $ 39,529 | ||||||||||
Loans Receivable and Loans Held for Sale | |||||||||||||||
June 30, | March 31, | December 31, | |||||||||||||
2023 | 2023 | 2022 | |||||||||||||
Mortgage warehouse lines of credit | $ 1,201,932 | $ 604,445 | $ 464,785 | ||||||||||||
Residential real estate | 1,342,586 | 1,215,252 | 1,178,401 | ||||||||||||
Multi-family financing | 3,746,333 | 3,566,530 | 3,135,535 | ||||||||||||
Healthcare financing | 2,128,378 | 1,941,204 | 1,604,341 | ||||||||||||
Commercial and commercial real estate (1)(2) | 1,394,256 | 1,194,320 | 978,661 | ||||||||||||
Agricultural production and real estate | 91,599 | 89,516 | 95,651 | ||||||||||||
Consumer and margin loans | 11,920 | 15,781 | 13,498 | ||||||||||||
9,917,004 | 8,627,048 | 7,470,872 | |||||||||||||
Less: Allowance for credit losses on loans | 62,986 | 51,838 | 44,014 | ||||||||||||
Loans receivable | $ 9,854,018 | $ 8,575,210 | $ 7,426,858 | ||||||||||||
Loans held for sale | 3,058,013 | 2,855,250 | 2,910,576 | ||||||||||||
Total loans, net of allowance | $ 12,912,031 | $ 11,430,460 | $ 10,337,434 | ||||||||||||
(1) Includes $894.7 million, $672.9 million and $497.0 million of revolving lines of credit collateralized primarily by mortgage servicing rights as of June 30,2023, March 31, 2023 and December 31, 2022, respectively | |||||||||||||||
(2) Includes only $8.3 million, $9.1 million and $12.8 million of non-owner occupied commercial real estate as of June 30, 2023, March 31, 2023 andDecember 31, 2022, respectively | |||||||||||||||
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SOURCE Merchants Bancorp