Merchants Bancorp Reports Fourth Quarter 2023 Results

Rhea-AI Summary

Merchants Bancorp (MBIN) reported record-setting financial results for full year 2023, with net income of $279.2 million, an increase of 27% compared to 2022. The diluted earnings per common share of $5.64 reached the highest level in the company's history, increasing 26% compared to 2022. The fourth quarter of 2023 saw a net income of $77.5 million, a 36% increase compared to the fourth quarter of 2022, but a 5% decrease compared to the third quarter of 2023. Total assets reached $17.0 billion, increasing 34% compared to December 31, 2022. The efficiency ratio was 33.1% in the fourth quarter of 2023. The Company also sold several Illinois bank branches in January 2024, which were granted regulatory approval.

Positive

• Record-setting net income and diluted earnings per common share for full year 2023
• Significant growth in total assets, reaching $17.0 billion
• Successful completion of the sale of several Illinois bank branches in January 2024

Negative

• Decrease in net income for the fourth quarter of 2023 compared to the third quarter of 2023
• Increase in noninterest expense for the fourth quarter of 2023 compared to the third quarter of 2023
• Increase in nonperforming loans

Insights

Financial Analyst

The reported net income growth of 27% and diluted earnings per share (EPS) increase of 26% for the full year 2023 are strong indicators of financial health and operational efficiency. The EPS growth, in particular, reflects positively on the company's profitability and may attract investor attention, potentially influencing the stock price. The growth in total assets by 34% also suggests successful expansion and asset accumulation, which could signal future earning potential. However, the increase in efficiency ratio from 31.3% to 33.1% indicates higher costs relative to revenue, which could be a concern if the trend continues.

Market Research Analyst

The company's strategic positioning, including the unused borrowing capacity of $6.0 billion and a liquidity ratio of 62%, provides a cushion against market volatility and enables flexibility in capital management. The record-level tangible book value per share of $27.40 represents a significant increase of 25% year-over-year, which is substantial compared to industry averages and may contribute to a stronger market valuation. The sale of several Illinois bank branches could streamline operations and focus on more profitable segments.

Risk Management Expert

The increase in allowance for credit losses on loans by 63% compared to the previous year indicates a prudent approach to risk management, particularly in an uncertain economic climate. However, the rise in non-performing loans to 0.80% of total loans receivable should be monitored closely as it could be a precursor to potential credit issues. The adoption of new products like adjustable-rate certificates of deposits and the insured cash sweep program demonstrates a strategic approach to minimizing interest rate risk and maintaining deposit stability.

• Full year 2023 net income of $279.2 million set a new Company record, increasing 27% compared to 2022.
• Full year 2023 diluted earnings per common share of $5.64 reached the highest level in Company history and increased 26% compared to 2022.
• Fourth quarter 2023 net income of $77.5 million increased 36% compared to fourth quarter of 2022 and decreased 5% compared to the third quarter 2023.
• Fourth quarter 2023 diluted earnings per common share of $1.58 increased 41% compared to the fourth quarter of 2022 and decreased 6% compared to the third quarter of 2023.
• Total assets of $17.0 billion surpassed any level previously reported by the Company, increasing 34% compared to December 31, 2022 and increasing 3% compared to September 30, 2023.
• As of December 31, 2023, the Company had a record-level of $6.0 billion in unused borrowing capacity with the Federal Home Loan Bank and the Federal Reserve Discount window, representing 36% of total assets.
• The Company's most liquid assets are in unrestricted cash, short-term investments, including interest-bearing demand deposits, mortgage loans in process of securitization, loans held for sale, and warehouse repurchase agreements included in loans receivable. Taken together, with unused borrowing capacity, these totaled $10.6 billion, or 62%, of the $17.0 billion in total assets as of December 31, 2023.
• Loans receivable of $10.1 billion, net of allowance for credit losses on loans, increased $217.1 million, or 2%, compared to September 30, 2023, and increased $2.7 billion, or 36%, compared to December 31, 2022.
• Efficiency ratio was 33.1% in the fourth quarter of 2023 compared to 31.3% in the fourth quarter of 2022 and 28.0% in the third quarter of 2023.
• Tangible book value per common share of $27.40 increased 25% compared to $21.88 in the fourth quarter of 2022 and increased 6% compared to $25.82 in the third quarter of 2023.
• The previously announced agreements to sell several Illinois bank branches were granted regulatory approval in January 2024 and the transactions were completed on January 26, 2024.

CARMEL, Ind., Jan. 29, 2024 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported fourth quarter 2023 net income of $77.5 million, or diluted earnings per common share of $1.58.  This compared to $57.2 million, or diluted earnings per common share of $1.12 in the fourth quarter of 2022, and compared to $81.5 million, or diluted earnings per common share of $1.68 in the third quarter of 2023.

"While 2023 was a turbulent environment for the financial industry, we continued to deliver unmatched financial solutions that improve the quality of life in the communities we serve.  Through the hard work of our entire Merchants team, we achieved significant success, with 34% growth in assets, 26% growth in earnings per share, and 25% growth in tangible book value that reached a record level of $27.40 per share, just to name a few. We strive to be at the forefront of industry trends and are poised to be strategically positioned for the future," said Michael F. Petrie, Chairman and CEO of Merchants. 

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "By continuously executing on our vision, mission and values throughout 2023, we achieved record results that surpassed our expectations. We are grateful to all our employees for fostering long-term relationships, providing innovative products, and delivering unparalleled service that adds value to our customers."

Net income of $77.5 million for the fourth quarter 2023 increased by $20.3 million, or 36%, compared to the fourth quarter of 2022, primarily driven by a $28.9 million, or 30%, increase in net interest income. Results for the fourth quarter 2023 included a $7.6 million negative fair market value adjustment to servicing rights compared to a $0.2 million negative adjustment in the fourth quarter of 2022.

Net income of $77.5 million for the fourth quarter 2023 decreased by $4.0 million, or 5%, compared to the third quarter of 2023, primarily driven by a $9.6 million, or 22%, increase in noninterest expense and a $1.6 million, or 4%, decrease in noninterest income that were partially offset by a $6.9 million, or 6%, increase in net interest income.  Noninterest income for the fourth quarter 2023 included a $7.6 million negative fair market value adjustment to servicing rights compared to a $11.6 million positive fair market value adjustment to servicing rights in the third quarter 2023.

Total Assets
Total assets of $17.0 billion at December 31, 2023 increased $457.3 million, or 3%, compared to September 30, 2023, and increased $4.3 billion, or 34%, compared to December 31, 2022.  The increase compared to December 31, 2022 was primarily due to significant growth in the multi-family, healthcare, commercial lines of credit on collateralized mortgage servicing rights, and warehouse repurchase agreement portfolios. 

Return on average assets was 1.86% for the fourth quarter of 2023 compared to 1.84% for the fourth quarter of 2022 and 2.03% for the third quarter of 2023.

Asset Quality
The allowance for credit losses on loans of $71.8 million, as of December 31, 2023, increased $4.9 million, or 7%, compared to September 30, 2023 and increased $27.7 million, or 63%, compared to December 31, 2022.  The increase compared to September 30, 2023 was primarily in the healthcare financing portfolio, due to a combination of specific reserves, loan growth, and changes in qualitative loss factors.  The increase compared to December 31, 2022 was primarily due to loan growth in the period, as well as increases in qualitative factors to reflect changes in industry conditions, in addition to credit events that were recorded during the second quarter 2023.  The Company experienced charge offs of $238,000 and recoveries of $1,000 during the fourth quarter 2023.

Non-performing loans were $82.0 million, or 0.80% of loans receivable before the allowance for credit losses on loans, as of December 31, 2023 compared to $60.2 million, or 0.60%, as of September 30, 2023, and $26.7 million, or 0.36%, as of December 31, 2022.  The increase in non-performing loans compared to September 30, 2023 was primarily due to three customers.

Securities Available for Sale
Total securities available for sale of $1.1 billion as of December 31, 2023 increased $489.1 million, or 78%, compared to September 30, 2023, and increased $790.4 million, or 244%, compared to December 31, 2022.

The increases in securities available for sale compared to both periods were primarily associated with the acquisition of certain securities from a warehouse customer that provide protective put options and interest rate floor derivatives to prevent losses in value.

As of December 31, 2023, Accumulated Other Comprehensive Losses ("AOCL") of $2.5 million, related to securities available for sale, decreased $2.3 million, or 48%, compared to September 30, 2023, and decreased $8.0 million, or 76%, compared to December 31, 2022.  The $2.5 million of AOCL as of December 31, 2023 represented less than 1% of total equity and less than 1% of total investment securities.

Total Deposits
Total deposits of $14.1 billion at December 31, 2023 increased $1.1 billion compared to September 30, 2023, and increased $4.0 billion, or 40%, compared to December 31, 2022. The change compared to September 30, 2023 was primarily due to increases in brokered demand deposit accounts.  The change compared to December 31, 2022 was primarily due to increases in brokered certificates of deposit accounts.

Total brokered deposits of $6.0 billion at December 31, 2023 increased $1.6 billion, or 36%, from September 30, 2023 and increased $3.2 billion, or 116%, from December 31, 2022.   Brokered deposits represented 42% of total deposits at December 31, 2023 compared to 34% of total deposits at September 30, 2023 and 27% of total deposits at December 31, 2022.  As of December 31, 2023, brokered certificates of deposit had a weighted average remaining duration of 55 days.

The Company continues to offer new products, such as adjustable-rate certificates of deposits, to minimize interest rate risks by aligning the rate and short duration characteristics of its deposit and loan portfolios.  As of December 31, 2023, deposit balances in Flex CD products increased by $324.8 million, or 222%, compared to December 31, 2022.  Additionally, the Company has offered an insured cash sweep program since 2018, which extends FDIC protection up to $100 million per depositor. The balance of deposits in this program was $1.6 billion as of December 31, 2023 compared to $1.8 billion at September 30, 2023 and $1.5 billion at December 31, 2022, and has contributed to the Company's low level of uninsured deposits, which were below 20% of total deposits.

Liquidity
Cash balances of $584.4 million as of December 31, 2023 increased by $177.2 million compared to September 30, 2023 and increased by $358.3 million compared to December 31, 2022.  The Company continues to have significant borrowing capacity, with unused lines of credit totaling $6.0 billion as of December 31, 2023 compared to $5.4 billion at September 30, 2023 and $3.1 billion at December 31, 2022. 

This liquidity enhances the ability to effectively manage interest expense and asset levels in the future. Additionally, the Company's business model is designed to continuously sell or securitize a significant portion of its loans, which provides flexibility in managing its liquidity.

Comparison of Operating Results for the Three Months Ended
December 31, 2023 and 2022

Net Interest Income of $124.3 million increased $28.9 million, or 30%, compared to $95.4 million, reflecting higher yields and average balances on loans and loans held for sale, and higher average balances of securities held to maturity, which were partially offset by higher rates and average balances on deposits, as well as higher rates on borrowings that were primarily related to the credit linked notes issued by the Company during the first quarter of 2023.

• Interest rate spread of 2.48% decreased 21 basis points compared to 2.69%.
• Net interest margin of 3.05% decreased 8 basis points compared to 3.13%.

Interest Income of $311.8 million increased 72% compared to $181.4 million, reflecting an increase in both yields and average balances of loans and loans held for sale, as well as higher yields in securities held to maturity and securities available for sale. 

• Average balances of $13.7 billion for loans and loans held for sale increased 33% compared to $10.3 billion.
• Average yield on loans and loans held for sale of 7.98% increased 164 basis points compared to 6.34%.

Interest Expense of $187.4 million increased $101.4 million, or 118%, compared to $86.0 million.  The increase was primarily due to higher rates on certificates of deposit, interest-bearing checking, and money market accounts, as well higher average balances of certificates of deposit and interest-bearing checking accounts.

• Average balances of $13.7 billion for interest-bearing deposits increased 37% compared to $10.0 billion.
• Average interest rates of 4.98% for interest-bearing deposits increased 176 basis points compared to 3.22%.

Noninterest Income of $34.5 million increased $11.5 million, or 50%, compared to $23.0 million, primarily due to an $8.1 million, or 72%, increase in gain on sale of loans and a $6.7 million, or 180%, increase in other income.  These increases were partially offset by a $4.9 million, or 180%, decrease in loan servicing fees.  

• The increase in gain on sale of loans was associated with significant growth in production volume of multi-family loans that were sold in the secondary market.
• The increase in other income reflected a $6.6 million benefit to record the value of a protective interest rate floor derivative that was provided with the acquisition of certain securities available for sale.
• Loan servicing fees included a $7.6 million negative fair market value adjustment to servicing rights, with a $1.1 million negative adjustment in the Banking segment and a $6.5 million negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $0.2 million negative fair market value adjustment to mortgage servicing rights in the prior period, of which $0.6 million negative adjustment in the Banking segment and $0.4 million positive adjustment in the Multi-family Mortgage Banking segment.

Noninterest Expense of $52.6 million increased $15.5 million, or 42%, compared to $37.1 million primarily due to increases in salaries and employee benefits associated with higher commissions on higher production volume, as well as increases in deposit insurance expense.

• The efficiency ratio of 33.1% increased 177 basis points compared to 31.3%.

Comparison of Operating Results for the Three Months Ended
December 31, 2023 and September 30, 2023

Net Interest Income of $124.3 million increased $6.9 million, or 6%, compared to $117.4 million, reflecting higher average balances and yields on loans and loans held for sale, which were partially offset by higher average balances and rates and on deposits.

• Interest rate spread of 2.48% increased 4 basis points compared to 2.44%.
• Net interest margin of 3.05% increased 6 basis points compared to 2.99%.

Interest Income of $311.8 million increased $15.1 million, or 5%, compared to $296.7 million, reflecting an increase in average balances and yields on loans and loans held for sale.

• Average balances of $13.7 billion for loans and loans held for sale increased 2% compared to $13.4 billion.
• Average yield on loans and loans held for sale of 7.98% increased 9 basis points compared to 7.89%.

Interest Expense of $187.4 million increased $8.2 million, or 5%, compared to $179.2 million. The increase was primarily due to higher average balances and rates on interest-bearing checking accounts, as well as higher rates on certificates of deposit.  The increases were partially offset by lower average balances of certificates of deposits and lower rates on borrowings.  

• Average balances of $13.7 billion for interest-bearing deposits increased 4% compared to $13.2 billion.
• Average interest rates of 4.98% for interest-bearing deposits increased 8 basis points compared to 4.90%.

Noninterest Income of $34.5 million decreased $1.6 million, or 4%, compared $36.1 million, primarily due to a $19.6 million, or 112%, decrease in loan servicing fees, partially offset by an increase of $8.6 million, or 80%, in gain on sale and a $6.7 million, or 182%, increase in other income.

• Loan servicing fees included a $7.6 million negative fair market value adjustment to servicing rights, with a $1.1 million negative adjustment in the Banking segment and a $6.5 million negative adjustment in the Multi-family Mortgage Banking segment. This compared to a $11.6 million positive fair market value adjustment to servicing rights in the prior period, with a $1.2 million positive adjustment in the Banking segment and a $10.4 million positive adjustment in the Multi-family Mortgage Banking segment.
• The increase in gain on sale of loans was associated with significant growth in production volume of multi-family loans that were sold in the secondary market.
• The increase in other income reflected a $6.6 million benefit to record the value of a protective interest rate floor derivative that was provided with the acquisition of certain securities available for sale.

Noninterest Expense of $52.6 million increased $9.6 million, or 22%, primarily due to increases in salaries and employee benefits associated with higher commissions on higher production volume, as well as increases in professional fees.

• The efficiency ratio of 33.1% increased 514 basis points compared to 28.0%.

About Merchants Bancorp
Ranked as a top performing U.S. public bank by S&P Global Market Intelligence, Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple segments, including Multi-family Mortgage Banking that primarily offers multi-family housing and healthcare facility financing and servicing (through this segment it also serves as a syndicator of low-income housing tax credit and debt funds); Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers retail and correspondent residential mortgage banking, agricultural lending, and traditional community banking.  Merchants Bancorp, with $17.0 billion in assets and $14.1 billion in deposits as of December 31, 2023, conducts its business primarily through its direct and indirect subsidiaries, Merchants Bank of Indiana, Merchants Capital Corp., Merchants Capital Investments, LLC, Merchants Capital Servicing, LLC, Merchants Asset Management, LLC, and Merchants Mortgage, a division of Merchants Bank of Indiana. For more information and financial data, please visit Merchants' Investor Relations page at investors.merchantsbancorp.com.

Forward-Looking Statements
This press release contains forward-looking statements which reflect management's current views with respect to, among other things, future events and financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, management cautions that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.  A number of important factors could cause actual results to differ materially from those indicated in these forward-looking statements, including the impacts of factors identified in "Risk Factors" or "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.  Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

 

Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
		December 31,		September 30,		June 30,		March 31,		December 31,
		2023		2023		2023		2023		2022
Assets
Cash and due from banks		$              15,592		$              10,633		$              15,390		$              19,002		$              22,170
Interest-earning demand accounts		568,830		396,605		361,920		350,584		203,994
Cash and cash equivalents		584,422		407,238		377,310		369,586		226,164
Securities purchased under agreements to resell		3,349		3,385		3,412		3,438		3,464
Mortgage loans in process of securitization		110,599		476,047		298,907		197,074		154,194
Securities available for sale ($722,497 utilizing fair value option at December 31, 2023)		1,113,687		624,586		648,003		679,518		323,337
Securities held to maturity ($1,203,535, $1,010,745, $1,058,590, $1,106,582 and $1,118,966 at fair value, respectively)		1,204,217		1,012,801		1,062,017		1,104,835		1,119,078
Federal Home Loan Bank (FHLB) stock		48,578		48,219		39,130		39,130		39,130
Loans held for sale (includes $86,663, $90,875, $82,931, $85,516 and $82,192 at fair value, respectively)		3,144,756		3,477,036		3,058,013		2,855,250		2,910,576
Loans receivable, net of allowance for credit losses on loans of $71,752, $66,864, $62,986, $51,838 and $44,014, respectively		10,127,801		9,910,681		9,854,018		8,575,210		7,426,858
Premises and equipment, net		42,342		36,730		36,947		35,793		35,438
Servicing rights		158,457		162,141		147,288		143,867		146,248
Interest receivable		91,346		78,401		70,509		64,282		56,262
Goodwill		15,845		15,845		15,845		15,845		15,845
Intangible assets, net		742		831		949		1,068		1,186
Other assets and receivables		306,375		241,295		262,524		156,070		157,447
Total assets		$       16,952,516		$       16,495,236		$       15,874,872		$       14,240,966		$       12,615,227
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing		$            520,070		$            287,846		$            349,387		$            313,733		$            326,875
Interest-bearing		13,541,390		12,719,492		12,710,477		11,031,498		9,744,470
Total deposits		14,061,460		13,007,338		13,059,864		11,345,231		10,071,345
Borrowings		964,127		1,654,075		1,016,836		1,233,762		930,392
Deferred and current tax liabilities, net		19,923		18,006		16,084		32,827		19,613
Other liabilities		205,922		183,102		221,788		123,462		134,138
Total liabilities		15,251,432		14,862,521		14,314,572		12,735,282		11,155,488
Commitments and  Contingencies
Shareholders' Equity
Common stock, without par value
Authorized - 75,000,000 shares
Issued and outstanding  - 43,242,928 shares, 43,240,212 shares, 43,237,300 shares, 43,233,618 shares and 43,113,127 shares		140,365		139,609		138,853		138,105		137,781
Preferred stock, without par value - 5,000,000 total shares authorized
7% Series A Preferred stock - $25 per share liquidation preference
Authorized - 3,500,000 shares
Issued and outstanding - 2,081,800 shares		50,221		50,221		50,221		50,221		50,221
6% Series B Preferred stock - $1,000 per share liquidation preference
Authorized - 125,000 shares
Issued and outstanding - 125,000 shares (equivalent to 5,000,000 depositary shares)		120,844		120,844		120,844		120,844		120,844
6% Series C Preferred stock - $1,000 per share liquidation preference
Authorized - 200,000 shares
Issued and outstanding - 196,181 shares (equivalent to 7,847,233 depositary shares)		191,084		191,084		191,084		191,084		191,084
8.25% Series D Preferred stock - $1,000 per share liquidation preference
Authorized - 300,000 shares
Issued and outstanding - 142,500 shares (equivalent to 5,700,000 depositary shares)		137,459		137,459		137,459		137,459		137,459
Retained earnings		1,063,599		998,252		928,875		875,700		832,871
Accumulated other comprehensive loss		(2,488)		(4,754)		(7,036)		(7,729)		(10,521)
Total shareholders' equity		1,701,084		1,632,715		1,560,300		1,505,684		1,459,739
Total liabilities and shareholders' equity		$       16,952,516		$       16,495,236		$       15,874,872		$       14,240,966		$       12,615,227

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Three Months Ended									Change
		December 31,			September 30,			December 31,			4Q23		4Q23
		2023			2023			2022			vs. 3Q23		vs. 4Q22
Interest Income
Loans		$	274,971		$	266,561		$	164,682		3 %		67 %
Mortgage loans in process of securitization			5,294			2,583			2,551		105 %		108 %
Investment securities:
Available for sale			7,609			6,182			704		23 %		981 %
Held to maturity			19,491			17,427			11,412		12 %		71 %
Federal Home Loan Bank stock			735			572			288		28 %		155 %
Other			3,659			3,351			1,802		9 %		103 %
Total interest income			311,759			296,676			181,439		5 %		72 %
Interest Expense
Deposits			172,061			162,906			81,062		6 %		112 %
Borrowed funds			15,373			16,334			4,967		-6 %		210 %
Total interest expense			187,434			179,240			86,029		5 %		118 %
Net Interest Income			124,325			117,436			95,410		6 %		30 %
Provision for credit losses			6,747			4,014			6,407		68 %		5 %
Net Interest Income After Provision for Credit Losses			117,578			113,422			89,003		4 %		32 %
Noninterest Income
Gain on sale of loans			19,342			10,758			11,267		80 %		72 %
Loan servicing fees, net			(2,162)			17,384			2,691		-112 %		-180 %
Mortgage warehouse fees			1,950			1,858			1,081		5 %		80 %
Syndication and asset management fees			4,879			2,368			4,207		106 %		16 %
Other income			10,445			3,700			3,736		182 %		180 %
Total noninterest income			34,454			36,068			22,982		-4 %		50 %
Noninterest Expense
Salaries and employee benefits			33,259			27,052			22,290		23 %		49 %
Loan expenses			660			1,038			1,082		-36 %		-39 %
Occupancy and equipment			2,336			2,196			2,377		6 %		-2 %
Professional fees			4,157			2,555			3,739		63 %		11 %
Deposit insurance expense			4,030			3,568			1,279		13 %		215 %
Technology expense			1,758			1,609			1,417		9 %		24 %
Other expense			6,379			4,912			4,925		30 %		30 %
Total noninterest expense			52,579			42,930			37,109		22 %		42 %
Income Before Income Taxes			99,453			106,560			74,876		-7 %		33 %
Provision for income taxes			21,980			25,056			17,720		-12 %		24 %
Net Income		$	77,473		$	81,504		$	57,156		-5 %		36 %
Dividends on preferred stock			(8,667)			(8,668)			(8,797)		—		-1 %
Net Income Allocated to Common Shareholders		$	68,806		$	72,836		$	48,359		-6 %		42 %
Basic Earnings Per Share		$	1.59		$	1.68		$	1.12		-5 %		42 %
Diluted Earnings Per Share		$	1.58		$	1.68		$	1.12		-6 %		41 %
Weighted-Average Shares Outstanding
Basic			43,241,600			43,238,724			43,111,353
Diluted			43,430,973			43,351,208			43,274,758

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Twelve Months Ended
		December 31,			December 31,
		2023			2022			Change
Interest Income
Loans		$	959,714		$	451,973		112 %
Mortgage loans in process of securitization			12,652			8,407		50 %
Investment securities:
Available for sale			21,621			2,807		670 %
Held to maturity			69,983			12,382		465 %
Federal Home Loan Bank stock			2,205			1,220		81 %
Other			11,623			4,044		187 %
Total interest income			1,077,798			480,833		124 %
Interest Expense
Deposits			577,210			149,645		286 %
Borrowed funds			52,517			12,637		316 %
Total interest expense			629,727			162,282		288 %
Net Interest Income			448,071			318,551		41 %
Provision for credit losses			40,231			17,295		133 %
Net Interest Income After Provision for Credit Losses			407,840			301,256		35 %
Noninterest Income
Gain on sale of loans			48,183			64,150		-25 %
Loan servicing fees, net			26,198			30,198		-13 %
Mortgage warehouse fees			7,701			5,394		43 %
Syndication and asset management fees			12,355			9,493		30 %
Other income			20,231			16,701		21 %
Total noninterest income			114,668			125,936		-9 %
Noninterest Expense
Salaries and employee benefits			108,181			89,085		21 %
Loan expenses			3,409			4,703		-28 %
Occupancy and equipment			9,220			8,169		13 %
Professional fees			12,704			9,065		40 %
Deposit insurance expense			13,582			3,463		292 %
Technology expense			6,515			5,282		23 %
Other expense			20,990			16,283		29 %
Total noninterest expense			174,601			136,050		28 %
Income Before Income Taxes			347,907			291,142		19 %
Provision for income taxes			68,673			71,421		-4 %
Net Income		$	279,234		$	219,721		27 %
Dividends on preferred stock			(34,670)			(25,983)		33 %
Net Income Allocated to Common Shareholders		$	244,564		$	193,738		26 %
Basic Earnings Per Share		$	5.66		$	4.49		26 %
Diluted Earnings Per Share		$	5.64		$	4.47		26 %
Weighted-Average Shares Outstanding
Basic			43,224,042			43,164,477
Diluted			43,345,799			43,316,904

 

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Three Months Ended						Change
			December 31,		September 30,		December 31,		4Q23		4Q23
			2023		2023		2022		vs. 3Q23		vs. 4Q22
Noninterest expense			$                  52,579		$                    42,930		$           37,109		22 %		42 %
Net interest income (before provision for credit losses)			124,325		117,436		95,410		6 %		30 %
Noninterest income			34,454		36,068		22,982		-4 %		50 %
Total income			$                158,779		$                  153,504		$         118,392		3 %		34 %
Efficiency ratio			33.11 %		27.97 %		31.34 %		514	bps	177	bps
Average assets			$           16,671,484		$             16,031,015		$    12,457,893		4 %		34 %
Net income			77,473		81,504		57,156		-5 %		36 %
Return on average assets before annualizing			0.46 %		0.51 %		0.46 %
Annualization factor			4.00		4.00		4.00
Return on average assets			1.86 %		2.03 %		1.84 %		(17)	bps	2	bps
Return on average tangible common shareholders' equity (1)			23.60 %		26.69 %		20.81 %		(309)	bps	279	bps
Tangible book value per common share (1)			$                    27.40		$                      25.82		$             21.88		6 %		25 %
Tangible common shareholders' equity/tangible assets (1)			7.00 %		6.78 %		7.49 %		22	bps	(49)	bps
Consolidated ratios
Total capital/risk-weighted assets(2)			11.6	%	11.5	%	12.2	%
Tier I capital/risk-weighted assets(2)			11.1	%	10.9	%	11.7	%
Common Equity Tier I capital/risk-weighted assets(2)			7.8	%	7.6	%	7.7	%
Tier I capital/average assets(2)			10.1	%	10.1	%	11.7	%
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:
(2) As defined by regulatory agencies; December 31, 2023 shown as estimates and prior periods shown as reported.
Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the company's financial condition, results of 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
			December 31,		September 30,		December 31,		4Q23		4Q23
			2023		2023		2022		vs. 3Q23		vs. 4Q22
Net income			$                  77,473		$                    81,504		$           57,156		-5 %		36 %
Less: preferred stock dividends			(8,667)		(8,668)		(8,797)		—		-1 %
Net income available to common shareholders			$                  68,806		$                    72,836		$           48,359		-6 %		42 %
Average shareholders' equity			$             1,682,270		$               1,607,779		$      1,445,995		5 %		16 %
Less: average goodwill & intangibles			(16,629)		(16,742)		(17,094)		-1 %		-3 %
Less: average preferred stock			(499,608)		(499,608)		(499,529)		—		—
Average tangible common shareholders' equity			$             1,166,033		$               1,091,429		$         929,372		7 %		25 %
Annualization factor			4.00		4.00		4.00
Return on average tangible common shareholders' equity			23.60 %		26.69 %		20.81 %		(309)	bps	279	bps
Total equity			$             1,701,084		$               1,632,715		$      1,459,739		4 %		17 %
Less: goodwill and intangibles			(16,587)		(16,676)		(17,031)		-1 %		-3 %
Less: preferred stock			(499,608)		(499,608)		(499,608)		—		—
Tangible common shareholders' equity			$             1,184,889		$               1,116,431		$         943,100		6 %		26 %
Assets			$           16,952,516		$             16,495,236		$    12,615,227		3 %		34 %
Less: goodwill and intangibles			(16,587)		(16,676)		(17,031)		-1 %		-3 %
Tangible assets			$           16,935,929		$             16,478,560		$    12,598,196		3 %		34 %
Ending common shares			43,242,928		43,240,212		43,113,127
Tangible book value per common share			$                    27.40		$                      25.82		$             21.88		6 %		25 %
Tangible common shareholders' equity/tangible assets			7.00 %		6.78 %		7.49 %		22	bps	(49)	bps

 

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Twelve Months Ended
			December 31,		December 31,
			2023		2022		Change
Noninterest expense			$         174,601		$        136,050		28 %
Net interest income (before provision for credit losses)			448,071		318,551		41 %
Noninterest income			114,668		125,936		-9 %
Total income			$         562,739		$        444,487		27 %
Efficiency ratio			31.03 %		30.61 %		42	bps
Average assets			$    15,078,390		$   11,044,889		37 %
Net income			279,234		219,721		27 %
Return on average assets before annualizing			1.85 %		1.99 %
Annualization factor			1.00		1.00
Return on average assets			1.85 %		1.99 %		(14)	bps
Return on average tangible common shareholders' equity (1)			22.92 %		22.50 %		42	bps
Tangible book value per common share (1)			$             27.40		$            21.88		25 %
Tangible common shareholders' equity/tangible assets (1)			7.00 %		7.49 %		(49)	bps
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:
Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the company'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.
			Twelve Months Ended
			December 31,		December 31,
			2023		2022		Change
Net income			$         279,234		$        219,721		27 %
Less: preferred stock dividends			(34,670)		(25,983)		33 %
Net income available to common shareholders			$         244,564		$        193,738		26 %
Average shareholders' equity			$      1,583,485		$     1,276,443		24 %
Less: average goodwill & intangibles			(16,801)		(17,293)		-3 %
Less: average preferred stock			(499,608)		(398,182)		25 %
Average tangible common shareholders' equity			$      1,067,076		$        860,968		24 %
Annualization factor			1.00		1.00
Return on average tangible common shareholders' equity			22.92 %		22.50 %		42	bps
Total equity			$      1,701,084		$     1,459,739		17 %
Less: goodwill and intangibles			(16,587)		(17,031)		-3 %
Less: preferred stock			(499,608)		(499,608)		—
Tangible common shareholders' equity			$      1,184,889		$        943,100		26 %
Assets			$    16,952,516		$   12,615,227		34 %
Less: goodwill and intangibles			(16,587)		(17,031)		-3 %
Tangible assets			$    16,935,929		$   12,598,196		34 %
Ending common shares			43,242,928		43,113,127
Tangible book value per common share			$             27.40		$            21.88		25 %
Tangible common shareholders' equity/tangible assets			7.00 %		7.49 %		(49)	bps

 

Merchants Bancorp
Average Balance Analysis
($ in thousands)
(Unaudited)
	Three Months Ended				Three Months Ended				Three Months Ended
	December 31, 2023				September 30, 2023				December 31, 2022
	Average		Yield/		Average		Yield/		Average		Yield/
	Balance	Interest	Rate		Balance	Interest	Rate		Balance	Interest	Rate
Assets:
Interest-bearing deposits, and other	$       268,083	$     4,394	6.50 %		$      259,630	$     3,923	5.99 %		$        225,274	$     2,090	3.68 %
Securities available for sale	716,315	7,609	4.21 %		656,561	6,182	3.74 %		323,510	704	0.86 %
Securities held to maturity	1,141,664	19,491	6.77 %		1,040,070	17,427	6.65 %		1,002,446	11,412	4.52 %
Mortgage loans in process of securitization	380,645	5,294	5.52 %		208,767	2,583	4.91 %		234,248	2,551	4.32 %
Loans and loans held for sale	13,674,793	274,971	7.98 %		13,399,854	266,561	7.89 %		10,299,795	164,682	6.34 %
Total interest-earning assets	16,181,500	311,759	7.64 %		15,564,882	296,676	7.56 %		12,085,273	181,439	5.96 %
Allowance for credit losses on loans	(67,114)				(63,449)				(40,339)
Noninterest-earning assets	557,098				529,582				412,959
Total assets	$  16,671,484				$  16,031,015				$    12,457,893
Liabilities & Shareholders' Equity:
Interest-bearing checking	5,607,744	68,899	4.87 %		4,882,727	58,642	4.76 %		4,520,785	37,929	3.33 %
Savings deposits	242,788	346	0.57 %	#	241,861	340	0.56 %		252,787	304	0.48 %
Money market	2,825,051	34,058	4.78 %	#	2,798,325	33,235	4.71 %		2,745,904	23,958	3.46 %
Certificates of deposit	5,023,434	68,758	5.43 %	#	5,255,573	70,689	5.34 %		2,474,427	18,871	3.03 %
Total interest-bearing deposits	13,699,017	172,061	4.98 %		13,178,486	162,906	4.90 %		9,993,903	81,062	3.22 %
Borrowings	720,521	15,373	8.46 %		711,948	16,334	9.10 %		451,467	4,967	4.36 %
Total interest-bearing liabilities	14,419,538	187,434	5.16 %		13,890,434	179,240	5.12 %		10,445,370	86,029	3.27 %
Noninterest-bearing deposits	366,152				333,155				419,008
Noninterest-bearing liabilities	203,524				199,647				147,520
Total liabilities	14,989,214				14,423,236				11,011,898
Shareholders' equity	1,682,270				1,607,779				1,445,995
Total liabilities and shareholders' equity	$  16,671,484				$  16,031,015				$    12,457,893
Net interest income		$  124,325				$ 117,436				$   95,410
Net interest spread			2.48 %				2.44 %				2.69 %
Net interest-earning assets	$    1,761,962				$    1,674,448				$     1,639,903
Net interest margin			3.05 %				2.99 %				3.13 %
Average interest-earning assets to average interest-bearing liabilities			112.22 %				112.05 %				115.70 %

 

Supplemental Results
(Unaudited)
($ in thousands)
				Net Income						Net Income
				Three Months Ended						Twelve Months Ended
				December 31,		September 30,		December 31,		December 31,
				2023		2023		2022		2023		2022
Segment
Multi-family Mortgage Banking				$              8,580		$          14,685		$             10,228		$         36,473		$         54,642
Mortgage Warehousing				26,362		19,926		11,776		73,525		48,604
Banking				49,996		52,445		40,181		194,398		134,221
Other				(7,465)		(5,552)		(5,029)		(25,162)		(17,746)
Total				$            77,473		$          81,504		$             57,156		$       279,234		$       219,721
				Total Assets
				December 31,		September 30,		December 31,
				2023		2023		2022
Segment
Multi-family Mortgage Banking				$          411,097		$        392,754		$           351,274
Mortgage Warehousing				4,522,175		4,757,817		2,519,810
Banking				11,760,943		11,135,651		9,587,544
Other				258,301		209,014		156,599
Total				$     16,952,516		$   16,495,236		$      12,615,227
				Gain on Sale of Loans						Gain on Sale of Loans
				Three Months Ended						Twelve Months Ended
				December 31,		September 30,		December 31,		December 31,
				2023		2023		2022		2023		2022
Loan Type
Multi-family				19,082		$            8,616		$             10,241		$         42,979		$         56,819
Single-family				(183)		951		132		1,247		1,133
Small Business Association (SBA)				443		1,191		894		3,957		6,198
Total				$            19,342		$          10,758		$             11,267		$         48,183		$         64,150
				Loans Receivable and Loans Held for Sale
				December 31,		September 30,		December 31,
				2023		2023		2022
Mortgage warehouse repurchase agreements				$          752,468		$     1,022,692		$           464,785
Residential real estate (1)				1,324,305		1,358,908		1,178,401
Multi-family financing				4,006,160		3,709,320		3,135,535
Healthcare financing				2,356,689		2,218,559		1,604,341
Commercial and commercial real estate (2)(3)				1,643,081		1,560,031		978,661
Agricultural production and real estate				103,150		96,490		95,651
Consumer and margin loans				13,700		11,545		13,498
				10,199,553		9,977,545		7,470,872
Less: Allowance for credit losses on loans				71,752		66,864		44,014
Loans receivable				$     10,127,801		$     9,910,681		$        7,426,858
Loans held for sale				3,144,756		3,477,036		2,910,576
Total loans, net of allowance				$     13,272,557		$   13,387,717		$      10,337,434
(1)     Includes $1.2 billion, $1.2 billion and $1.1 billion of All-In-One © first-lien home equity lines of credit as of December 31, 2023, September 30, 2023 and December 31, 2022, respectively.
(2)     Includes $1.1 billion, $1.0 billion and $497.0 million of revolving  lines of credit collateralized primarily by mortgage servicing rights as of December 31, 2023, September 30, 2023 and December 31, 2022, respectively.
(3)     Includes only $8.4 million, $8.1 million and $12.8 million of non-owner occupied commercial real estate as of December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

 

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SOURCE Merchants Bancorp

FAQ

What is the ticker symbol for Merchants Bancorp?

The ticker symbol for Merchants Bancorp is MBIN.

What was the net income for full year 2023?

The net income for full year 2023 was $279.2 million.

What was the diluted earnings per common share for full year 2023?

The diluted earnings per common share for full year 2023 was $5.64.

What was the net income for the fourth quarter of 2023?

The net income for the fourth quarter of 2023 was $77.5 million.

What was the total assets at December 31, 2023?

The total assets at December 31, 2023 were $17.0 billion.

What was the efficiency ratio in the fourth quarter of 2023?

The efficiency ratio in the fourth quarter of 2023 was 33.1%.

When were the Illinois bank branches sold?

The Illinois bank branches were sold in January 2024.