Business
Merchants Bancorp Reports Third Quarter 2022 Results
Third quarter 2022 net income of $58.5 million was equal to the third quarter of 2021 and increased 8% compared to the second quarter of 2022Third quarter
About this update from Merchants Bancorp
Third quarter 2022 net income of $58.5 million was equal to the third quarter of 2021 and increased 8% compared to the second quarter of 2022 Third quarter 2022 diluted earnings per common share of $1.22 was equal to the third quarter of 2021 and increased 10% compared to the second quarter of 2022 Total assets of $12.0 billion increased 8% compared to June 30, 2022 , and increased 6% compared to December 31, 2021 Return on average assets was 2.05% in the third quarter of 2022 compared to 2.29% in the third quarter of 2021 and 2.20% in the second quarter of 2022 Net interest margin was 3.05% in the third quarter of 2022 compared to 2.73% in the third quarter of 2021 and 3.03% in the second quarter of 2022 Tangible book value per common share of $20.78 increased 23% compared to $16.91 in the third quarter of 2021 and increased 5% compared to $19.70 in the second quarter of 2022 Completed 8.25% Series D preferred stock offering in September 2022 , raising approximately $137.4 million of new capital, net of $5.1 million in offering costs Sold $1.2 billion of multi-family bridge loans into a private securitization via a real estate mortgage investment conduit (REMIC). As part of the transaction, purchased a $1.0 billion senior investment security that is expected to be held to maturity. CARMEL, Ind. , Oct. 27, 2022 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana , today reported third quarter 2022 net income of $58.5 million , or diluted earnings per common share of $1.22 . This compared to $58.5 million , or diluted earnings per common share of $1.22 in the third quarter of 2021, and compared to $53.9 million , or diluted earnings per common share of $1.11 in the second quarter of 2022. "We thrived during the third quarter, as our business model allowed us to quickly adapt to the changing interest rate landscape and we prepared ourselves with the additional capital and resources to continue our trajectory of profitable growth. With a tangible book value of $20.78 per share, an industry-leading return on average assets of 2.05% and efficiency ratio of 30.5% in the quarter, our momentum remains strong, and we are optimistic about the remainder of 2022 and beyond," said Michael F. Petrie , Chairman and CEO of Merchants. Michael J. Dunlap , President and Chief Operating Officer of Merchants, added, "As our company has continued to expand, we have made it a priority to ensure our team has the necessary tools and freedom to execute effectively for our customers. Their efforts have been the backbone of our company and their creativity and dedication will continue to be a leading factor in our ongoing success." Net income of $58.5 million for the third quarter 2022 was equal to the third quarter of 2021, but reflected a $16.5 million , or 24%, increase in net interest income that was offset by an $11.1 million , or 28%, decrease in noninterest income and a $5.5 million , or 19%, increase in noninterest expenses. Net income for the third quarter 2022 increased by $4.6 million , or 8%, compared to the second quarter of 2022, primarily driven by a $13.4 million , or 19%, increase in net interest income that was partially offset by a $10.0 million , or 25%, decrease in noninterest income and a $2.0 million , or 6%, increase in noninterest expense. Total Assets Total assets of $12.0 billion at September 30, 2022 increased 8%, compared to June 30, 2022 , and increased 6%, compared to December 31, 2021 . Increases compared to both periods were primarily due to significant growth in the multi-family loan portfolio, some of which were sold during the quarter. On September 22, 2022 , $1.2 billion in loans were sold as part of a securitization transaction that was partially offset by the purchase of a $1.0 billion held to maturity senior investment security that was established as part of the securitization transaction. Return on average assets was 2.05% for the third quarter of 2022 compared to 2.29% for the third quarter of 2021 and 2.20% for the second quarter of 2022. Asset Quality The allowance for credit losses on loans of $39.0 million at September 30, 2022 increased $1.5 million compared to June 30, 2022 and increased $7.7 million compared to December 31, 2021 . The increase compared to June 30, 2022 was primarily due to growth in the multi-family, commercial, residential, and healthcare loan portfolios, partially offset by the decrease in the multi-family portfolio associated with the $1.2 billion loan sale and securitization. As of September 30, 2022 , the Company had one loan remaining in a COVID-19 payment deferral arrangement, with an unpaid balance of $36.8 million . Non-performing loans were $26.6 million , or 0.38%, of loans receivable at September 30, 2022 , compared to 0.07% at June 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 $10.3 billion at September 30, 2022 increased $2.0 billion , or 24%, compared to June 30, 2022 , and increased $1.3 billion , or 15%, compared to December 31, 2021 . The increase compared to both periods was primarily due to an increase in certificates of deposit and demand accounts. Total brokered deposits of $2.2 billion at September 30, 2022 increased $994.0 million , or 81%, from June 30, 2022 and increased $58.9 million , or 3%, from December 31, 2021 . Brokered deposits represented 22% of total deposits at September 30, 2022 compared to 15% of total deposits at June 30, 2022 and 24% of total deposits at December 31, 2021 . As of September 30, 2022 , brokered certificates of deposit had a weighted average remaining duration of 84 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 $324.0 million at September 30, 2022 increased by $65.8 million compared to June 30, 2022 and decreased by $708.7 million compared to December 31, 2021 . The Company continues to have significant borrowing capacity, with unused lines of credit totaling $2.8 billion at September 30, 2022 compared to $1.7 billion at June 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 September 30, 2022 and 2021 Net Interest Income of $85.4 million increased $16.5 million , or 24% compared to $68.9 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 of deposits and borrowings. Interest rate spread of 2.77% increased 10 basis points compared to 2.67%. Net interest margin of 3.05% increased 32 basis points compared to 2.73%. Interest Income of $134.1 million increased 73% compared to $77.3 million , reflecting an increase in both yields and average balances of loans and loans held for sale. Average balances of $10.2 billion for loans and loans held for sale increased 18% compared to $8.7 billion . Average yield on loans and loans held for sale of 5.00% increased 167 basis points compared to 3.33%. Interest Expense of $48.7 million increased $40.3 million , or 478%, compared to $8.4 million . Interest expense on deposits of $45.0 million increased $38.0 million , or 545%, compared $7.0 million , primarily reflecting higher rates on interest bearing checking, money market, and certificates of deposit accounts. Average balances of $9.0 billion for interest-bearing deposits increased 15% compared to $7.8 billion . Average interest rates of 1.98% for interest-bearing deposits increased 163 basis points compared to 0.35%. Noninterest Income of $29.2 million decreased $11.1 million , or 28%, compared to $40.3 million , primarily due to a $15.7 million decrease in gain on sale of loans, partially offset by a $2.9 million increase in loan servicing rights, which included adjustments for higher values of servicing rights. The decrease in gain on sale of loans was associated with a business mix shift in multi-family lending, from volumes sold in the secondary market towards those maintained on the balance sheet. Loan servicing fees included a $4.6 million positive fair market value adjustment to mortgage servicing rights, of which $0.9 million was in the Banking segment and $3.7 million was in the Multi-family Mortgage Banking segment. This compared to a $3.0 million positive fair market value adjustment to mortgage servicing rights, of which $2.3 million was in the Banking segment and $0.7 million was in the Multi-family Mortgage Banking segment. Syndication and asset management fees of $3.1 million increased 378% and are becoming a meaningful source of noninterest income growth. Noninterest Expense of $35.0 million increased $5.5 million , or 19%, compared to $29.5 million , primarily due to increases in salaries and employee benefits to support business growth. The efficiency ratio of 30.51% increased 351 basis points compared to 27.00%. Comparison of Operating Results for the Three Months Ended September 30, 2022 and June 30, 2022 Net Interest Income of $85.4 million increased $13.4 million , or 19% compared to $72.0 million , reflecting higher yields and average balances on loans and loans held for sale that were partially offset by higher interest rates on deposits and borrowings. Interest rate spread of 2.77% decreased 13 basis points compared to 2.90%. Net interest margin of 3.05% increased 2 basis points compared to 3.03%. Interest Income of $134.1 million increased $44.8 million , or 50%, compared to $89.3 million , reflecting an increase in yields and average balances of loans and loans held for sale. Average balances of $10.2 billion for loans and loans held for sale increased $1.6 billion , or 19%, compared to $8.6 billion . Average yield on loans and loans held for sale of 5.00% increased 101 basis points compared to 3.99%. Interest Expense of $48.7 million increased $31.5 million , or 183%, compared to $17.2 million . Interest expense on deposits of $45.0 million increased $30.2 million , or 205%, compared to $14.8 million , reflecting higher interest rates on interest bearing checking, money market, and certificates of deposit accounts. Average balances of $9.0 billion for interest-bearing deposits increased $1.6 billion , or 22%, compared to $7.4 billion . Average interest rates of 1.98% for interest-bearing deposits increased 117 basis points compared to 0.81%. Noninterest Income of $29.2 million decreased $10.0 million , or 25%, compared $39.2 million , primarily due to a $8.2 million , or 38%, decrease in gain on sale of loans. The decrease in gain on sale of loans was associated with lower volume in the multi-family loan portfolios. Loan servicing fees included 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. This compared to a $7.7 million positive fair market value adjustment to servicing rights, of which $1.1 million was in the Banking segment and $6.6 million was in the Multi-family Mortgage Banking segment. Syndication and asset management fees of $3.1 million nearly doubled and are becoming a meaningful source of noninterest income growth. Noninterest Expense of $35.0 million increased $2.0 million , or 6%, compared to $33.0 million , primarily due to increases in professional fees as well as salaries and employee benefits to support business growth. The efficiency ratio of 30.51% increased 87 basis points compared to 29.64%. 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 lines of business, including multi-family housing and healthcare facility financing and servicing; mortgage warehouse financing; retail and correspondent residential mortgage banking; agricultural lending; and traditional community banking. Merchants Bancorp , with $12.0 billion in assets and $10.3 billion in deposits as of September 30, 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) September 30 , June 30 March 31 December 31 , September 30 , 2022 2022 2022 2021 2021 Assets Cash and due from banks $ 13,796 $ 10,714 $ 9,853 $ 14,030 $ 14,352 Interest-earning demand accounts 310,165 247,432 401,668 1,018,584 788,224 Cash and cash equivalents 323,961 258,146 411,521 1,032,614 802,576 Securities purchased under agreements to resell 3,497 3,520 4,798 5,888 5,923 Mortgage loans in process of securitization 137,448 323,046 324,280 569,239 634,027 Available for sale securities 322,069 336,814 314,266 310,629 301,119 Held to maturity securities 1,005,487 — — — — Federal Home Loan Bank (FHLB) stock 39,130 39,130 28,804 29,588 70,767 Loans held for sale (includes $68,785 , $41,991 , $14,567 , $48,583 and $26,296 , respectively, at fair value) 2,844,750 2,759,116 2,289,094 3,303,199 3,453,279 Loans receivable, net of allowance for credit losses on loans of $38,996 , $37,474 , $32,102 , $31,344 and $29,134 , respectively 6,919,128 7,033,203 5,976,960 5,751,319 5,431,227 Premises and equipment, net 35,492 35,085 34,559 31,212 31,423 Servicing rights 144,984 130,710 121,036 110,348 105,473 Interest receivable 40,170 26,184 23,499 24,103 21,894 Goodwill 15,845 15,845 15,845 15,845 15,845 Intangible assets, net 1,307 1,441 1,574 1,707 1,843 Other assets and receivables 145,454 123,815 104,356 92,947 76,637 Total assets $ 11,978,722 $ 11,086,055 $ 9,650,592 $ 11,278,638 $ 10,952,033 Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing $ 315,868 $ 444,461 $ 461,193 $ 641,442 $ 824,118 Interest-bearing 10,003,611 7,855,277 7,014,628 8,341,171 8,123,201 Total deposits 10,319,479 8,299,738 7,475,821 8,982,613 8,947,319 Borrowings 97,279 1,440,904 879,929 1,033,954 809,136 Deferred and current tax liabilities, net 19,124 19,414 30,695 19,170 21,681 Other liabilities 130,250 97,460 75,644 87,492 64,019 Total liabilities 10,566,132 9,857,516 8,462,089 10,123,229 9,842,155 Commitments and Contingencies Shareholders' Equity Common stock, without par value Authorized - 75,000,000 shares, 75,000,000 shares, 50,000,000 shares, 50,000,000 shares and 50,000,000 shares Issued and outstanding - 43,109,578 shares, 43,106,505 shares, 43,267,776 shares, 43,180,079 shares and 43,178,061 shares 137,226 136,671 137,882 137,565 137,200 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) 137,371 — — — — Retained earnings 787,530 737,789 694,776 657,149 610,267 Accumulated other comprehensive income (loss) (11,686) (8,070) (6,304) (1,454) 262 Total shareholders' equity 1,412,590 1,228,539 1,188,503 1,155,409 1,109,878 Total liabilities and shareholders' equity $ 11,978,722 $ 11,086,055 $ 9,650,592 $ 11,278,638 $ 10,952,033 Consolidated Statement of Income (Unaudited) (In thousands, except share data) Three Months Ended Change September 30 , June 30 , September 30 , 3Q22 3Q22 2022 2022 2021 vs. 2Q22 vs. 3Q21 Interest Income Loans $ 129,101 $ 85,994 $ 72,924 50 % 77 % Mortgage loans in process of securitization 2,162 1,449 2,868 49 % -25 % Investment securities: Available for sale - taxable 485 917 1,115 -47 % -57 % Available for sale - tax exempt — — 12 — -100 % Held to maturity 970 — — 100 % 100 % Federal Home Loan Bank stock 379 284 190 33 % 99 % Other 1,015 626 205 62 % 395 % Total interest income 134,112 89,270 77,314 50 % 73 % Interest Expense Deposits 45,002 14,768 6,981 205 % 545 % Borrowed funds 3,725 2,471 1,452 51 % 157 % Total interest expense 48,727 17,239 8,433 183 % 478 % Net Interest Income 85,385 72,031 68,881 19 % 24 % Provision for credit losses 2,225 6,212 1,079 -64 % 106 % Net Interest Income After Provision for Credit Losses 83,160 65,819 67,802 26 % 23 % Noninterest Income Gain on sale of loans 13,354 21,564 29,013 -38 % -54 % Loan servicing fees, net 8,169 9,607 5,313 -15 % 54 % Mortgage warehouse fees 1,105 1,350 2,732 -18 % -60 % Syndication and asset management fees 3,073 1,599 643 92 % 378 % Other income 3,485 5,051 2,570 -31 % 36 % Total noninterest income 29,186 39,171 40,271 -25 % -28 % Noninterest Expense Salaries and employee benefits 23,027 22,475 20,197 2 % 14 % Loan expenses 1,226 1,184 1,734 4 % -29 % Occupancy and equipment 1,967 2,011 1,861 -2 % 6 % Professional fees 2,429 1,594 901 52 % 170 % Deposit insurance expense 755 670 664 13 % 14 % Technology expense 1,325 1,304 1,169 2 % 13 % Other expense 4,222 3,719 2,946 14 % 43 % Total noninterest expense 34,951 32,957 29,472 6 % 19 % Income Before Income Taxes 77,395 72,033 78,601 7 % -2 % Provision for income taxes 18,907 18,098 20,098 4 % -6 % Net Income $ 58,488 $ 53,935 $ 58,503 8 % — Dividends on preferred stock (5,729) (5,729) (5,729) — — Net Income Allocated to Common Shareholders $ 52,759 $ 48,206 $ 52,774 9 % — Basic Earnings Per Share $ 1.22 $ 1.12 $ 1.22 9 % — Diluted Earnings Per Share $ 1.22 $ 1.11 $ 1.22 10 % — Weighted-Average Shares Outstanding Basic 43,107,975 43,209,824 43,176,296 Diluted 43,258,925 43,335,211 43,314,755 Consolidated Statement of Income (Unaudited) (In thousands, except share data) Nine Months Ended September 30 , September 30 , 2022 2021 Change Interest Income Loans $ 287,291 $ 216,717 33 % Mortgage loans in process of securitization 5,856 8,728 -33 % Investment securities: Available for sale - taxable 2,103 2,302 -9 % Available for sale - tax exempt — 32 -100 % Held to maturity 970 — 100 % Federal Home Loan Bank stock 932 966 -4 % Other 2,242 556 303 % Total interest income 299,394 229,301 31 % Interest Expense Deposits 68,583 19,764 247 % Borrowed funds 7,670 4,286 79 % Total interest expense 76,253 24,050 217 % Net Interest Income 223,141 205,251 9 % Provision for credit losses 10,888 2,427 349 % Net Interest Income After Provision for Credit Losses 212,253 202,824 5 % Noninterest Income Gain on sale of loans 52,883 82,755 -36 % Loan servicing fees, net 27,507 14,991 83 % Mortgage warehouse fees 4,313 9,927 -57 % Syndication and asset management fees 5,286 1,178 349 % Other income 12,965 8,211 58 % Total noninterest income 102,954 117,062 -12 % Noninterest Expense Salaries and employee benefits 66,795 60,340 11 % Loan expenses 3,621 6,178 -41 % Occupancy and equipment 5,792 5,296 9 % Professional fees 5,326 2,102 153 % Deposit insurance expense 2,184 1,986 10 % Technology expense 3,865 3,077 26 % Other expense 11,358 8,760 30 % Total noninterest expense 98,941 87,739 13 % Income Before Income Taxes 216,266 232,147 -7 % Provision for income taxes 53,701 60,244 -11 % Net Income $ 162,565 $ 171,903 -5 % Dividends on preferred stock (17,186) (15,145) 13 % Net Income Allocated to Common Shareholders $ 145,379 $ 156,758 -7 % Basic Earnings Per Share $ 3.37 $ 3.63 -7 % Diluted Earnings Per Share $ 3.36 $ 3.62 -7 % Weighted-Average Shares Outstanding Basic 43,182,380 43,169,618 Diluted 43,331,148 43,300,688 Key Operating Results (Unaudited) ($ in thousands, except share data) Three Months Ended Change September 30 , June 30 , September 30 , 3Q22 3Q22 2022 2022 2021 vs. 2Q22 vs. 3Q21 Noninterest expense $ 34,951 $ 32,957 $ 29,472 6 % 19 % Net interest income (before provision for credit losses) 85,385 72,031 68,881 19 % 24 % Noninterest income 29,186 39,171 40,271 -25 % -28 % Total income $ 114,571 $ 111,202 $ 109,152 3 % 5 % Efficiency ratio 30.51 % 29.64 % 27.00 % 87 bps 351 bps Average assets $ 11,437,805 $ 9,820,878 $ 10,236,491 16 % 12 % Net income $ 58,488 $ 53,935 $ 58,503 8 % — Return on average assets before annualizing 0.51 % 0.55 % 0.57 % Annualization factor 4.00 4.00 4.00 Return on average assets 2.05 % 2.20 % 2.29 % (15) bps (24) bps Return on average tangible common shareholders' equity (1) 23.92 % 23.05 % 29.83 % 87 bps (591) bps Tangible book value per common share (1) $ 20.78 $ 19.70 $ 16.91 5 % 23 % Tangible common shareholders' equity/tangible assets (1) 7.49 % 7.67 % 6.68 % (18) bps 81 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 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 September 30 , June 30 , September 30 , 3Q22 3Q22 2022 2022 2021 vs. 2Q22 vs. 3Q21 Net income $ 58,488 $ 53,935 $ 58,503 8 % — Less: preferred stock dividends (5,729) (5,729) (5,729) — — Net income available to common shareholders $ 52,759 $ 48,206 $ 52,774 9 % — Average shareholders' equity $ 1,267,160 $ 1,215,891 $ 1,087,675 4 % 17 % Less: average goodwill & intangibles (17,228) (17,361) (17,770) -1 % -3 % Less: average preferred stock (367,726) (362,149) (362,149) 2 % 2 % Tangible common shareholders' equity $ 882,206 $ 836,381 $ 707,756 5 % 25 % Annualization factor 4.00 4.00 4.00 Return on average tangible common shareholders' equity 23.92 % 23.05 % 29.83 % 87 bps (590) bps Total equity $ 1,412,590 $ 1,228,539 $ 1,109,878 15 % 27 % Less: goodwill and intangibles (17,152) (17,286) (17,688) -1 % -3 % Less: preferred stock (499,520) (362,149) (362,149) 38 % 38 % Tangible common shareholders' equity $ 895,918 $ 849,104 $ 730,041 6 % 23 % Assets $ 11,978,722 $ 11,086,055 $ 10,952,033 8 % 9 % Less: goodwill and intangibles (17,152) (17,286) (17,688) -1 % -3 % Tangible assets $ 11,961,570 $ 11,068,769 $ 10,934,345 8 % 9 % Ending common shares 43,109,578 43,106,505 43,178,061 — — Tangible book value per common share $ 20.78 $ 19.70 $ 16.91 5 % 23 % Tangible common shareholders' equity/tangible assets 7.49 % 7.67 % 6.68 % (18) bps 81 bps Key Operating Results (Unaudited) ($ in thousands, except share data) Nine Months Ended September 30 , September 30 , 2022 2021 Change Noninterest expense $ 98,941 $ 87,739 13 % Net interest income (before provision for credit losses) 223,141 205,251 9 % Noninterest income 102,954 117,062 -12 % Total income $ 326,095 $ 322,313 1 % Efficiency ratio 30.34 % 27.22 % 312 bps Average assets $ 10,568,712 $ 9,934,157 6 % Net income $ 162,565 $ 171,903 -5 % Return on average assets before annualizing 1.54 % 1.73 % Annualization factor 1.33 1.33 Return on average assets 2.05 % 2.30 % (25) bps Return on average tangible common shareholders' equity (1) 23.08 % 31.60 % (852) bps Tangible book value per common share (1) $ 20.78 $ 16.91 23 % Tangible common shareholders' equity/tangible assets (1) 7.49 % 6.68 % 81 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 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. Nine Months Ended September 30 , September 30 , 2022 2021 Change Net income $ 162,565 $ 171,903 -5 % Less: preferred stock dividends (17,186) (15,145) 13 % Net income available to common shareholders $ 145,379 $ 156,758 -7 % Average shareholders' equity $ 1,219,305 $ 991,467 23 % Less: average goodwill & intangibles (17,360) (17,913) -3 % Less: average preferred stock (364,028) (313,689) 16 % Tangible common shareholders' equity $ 837,917 $ 659,865 27 % Annualization factor 1.33 1.33 Return on average tangible common shareholders' equity 23.08 % 31.60 % (852) bps Total equity $ 1,412,590 $ 1,109,878 27 % Less: goodwill and intangibles (17,152) (17,688) -3 % Less: preferred stock (499,520) (362,149) 38 % Tangible common shareholders' equity $ 895,918 $ 730,041 23 % Assets $ 11,978,722 $ 10,952,033 9 % Less: goodwill and intangibles (17,152) (17,688) -3 % Tangible assets $ 11,961,570 $ 10,934,345 9 % Ending common shares 43,109,578 43,178,061 — Tangible book value per common share $ 20.78 $ 16.91 23 % Tangible common shareholders' equity/tangible assets 7.49 % 6.68 % 81 bps Merchants Bancorp Average Balance Analysis ($ in thousands) (Unaudited) Three Months Ended Three Months Ended Three Months Ended September 30, 2022 June 30, 2022 September 30, 2021 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets: Interest-bearing deposits, and other $ 211,653 $ 1,394 2.61 % $ 367,540 $ 910 0.99 % $ 580,397 $ 395 0.27 % Securities available for sale - taxable 331,796 485 0.58 % 330,759 917 1.11 % 308,476 1,115 1.43 % Securities available for sale - tax exempt — — — — 1,361 12 3.50 % Held to maturity securities 98,363 970 3.91 % — — — — Mortgage loans in process of securitization 235,230 2,162 3.65 % 198,349 1,449 2.93 % 437,601 2,868 2.60 % Loans and loans held for sale 10,245,294 129,101 5.00 % 8,643,276 85,994 3.99 % 8,689,144 72,924 3.33 % Total interest-earning assets 11,122,336 134,112 4.78 % 9,539,924 89,270 3.75 % 10,016,979 77,314 3.06 % Allowance for credit losses on loans (39,325) (33,401) (28,679) Noninterest-earning assets 354,794 314,355 248,191 Total assets $ 11,437,805 $ 9,820,878 $ 10,236,491 Liabilities & Shareholders' Equity: Interest-bearing checking 4,207,217 21,980 2.07 % 3,849,876 6,945 0.72 % 4,754,633 1,561 0.13 % Savings deposits 239,262 162 0.27 % # 238,944 62 0.10 % 211,494 39 0.07 % Money market 2,523,315 13,094 2.06 % # 2,626,973 6,567 1.00 % 2,259,786 4,394 0.77 % Certificates of deposit 2,030,152 9,766 1.91 % # 639,556 1,194 0.75 % 591,093 987 0.66 % Total interest-bearing deposits 8,999,946 45,002 1.98 % 7,355,349 14,768 0.81 % 7,817,006 6,981 0.35 % Borrowings 588,582 3,725 2.51 % 749,628 2,471 1.32 % 677,201 1,452 0.85 % Total interest-bearing liabilities 9,588,528 48,727 2.02 % 8,104,977 17,239 0.85 % 8,494,207 8,433 0.39 % Noninterest-bearing deposits 474,925 402,328 586,981 Noninterest-bearing liabilities 107,192 97,682 67,628 Total liabilities 10,170,645 8,604,987 9,148,816 Shareholders' equity 1,267,160 1,215,891 1,087,675 Total liabilities and shareholders' equity $ 11,437,805 $ 9,820,878 $ 10,236,491 Net interest income $ 85,385 $ 72,031 $ 68,881 Net interest spread 2.77 % 2.90 % 2.67 % Net interest-earning assets $ 1,533,808 $ 1,434,947 $ 1,522,772 Net interest margin 3.05 % 3.03 % 2.73 % Average interest-earning assets to average interest-bearing liabilities 116.00 % 117.70 % 117.93 % Supplemental Results (Unaudited) ($ in thousands) Net Income Net Income Three Months Ended Nine Months Ended September 30 , June 30 , September 30 , September 30 , 2022 2022 2021 2022 2021 Segment Multi-family Mortgage Banking $ 13,366 $ 19,556 $ 14,448 $ 44,414 $ 37,380 Mortgage Warehousing 11,801 11,868 23,217 36,828 73,848 Banking 39,344 25,932 23,463 94,040 68,229 Other (6,023) (3,421) (2,625) (12,717) (7,554) Total $ 58,488 $ 53,935 $ 58,503 $ 162,565 $ 171,903 Total Assets September 30 , June 30 , December 31 , 2022 2022 2021 Segment Multi-family Mortgage Banking $ 343,443 $ 330,676 $ 296,129 Mortgage Warehousing 2,735,278 2,836,998 3,977,537 Banking 8,760,416 7,835,152 6,929,565 Other 139,585 83,229 75,407 Total $ 11,978,722 $ 11,086,055 $ 11,278,638 Gain on Sale of Loans Gain on Sale of Loans Three Months Ended Nine Months Ended September 30 , June 30 , September 30 , September 30 , 2022 2022 2021 2022 2021 Loan Type Multi-family 12,002 $ 19,623 $ 24,309 $ 46,578 $ 68,553 Single-family 138 406 1,592 1,001 7,677 Small Business Association (SBA) 1,214 1,535 3,112 5,304 6,525 Total $ 13,354 $ 21,564 $ 29,013 $ 52,883 $ 82,755 Loans Receivable and Loans Held for Sale September 30 , June 30 , December 31 , 2022 2022 2021 Mortgage warehouse lines of credit $ 815,084 $ 900,585 $ 781,437 Residential real estate 1,030,075 876,652 843,101 Multi-family financing 2,766,950 3,236,917 2,702,042 Healthcare financing 1,429,675 1,262,424 826,157 Commercial and commercial real estate 810,731 695,158 520,199 Agricultural production and real estate 91,913 90,070 97,060 Consumer and margin loans 13,696 8,871 12,667 6,958,124 7,070,677 5,782,663 Less: Allowance for credit losses on loans 38,996 37,474 31,344 Loans receivable $ 6,919,128 $ 7,033,203 $ 5,751,319 Loans held for sale 2,844,750 2,759,116 3,303,199 Total loans, net of allowance $ 9,763,878 $ 9,792,319 $ 9,054,518 View original content to download multimedia: https://www.prnewswire.com/news-releases/merchants-bancorp-reports-third-quarter-2022-results-301661606.html SOURCE Merchants Bancorp