Merchants Bancorp Reports Third Quarter 2023 Results

Rhea-AI Summary

Merchants Bancorp reports Q3 2023 net income of $81.5 million, a 39% increase YoY. Total assets reach $16.5 billion, up 4% from Q2 2023. Efficiency ratio improves to 28.0%. Tangible book value per share increases 24% YoY. Company completes $303.6 million securitization of multi-family mortgage loans.

Positive

• Q3 2023 net income increases by 39% YoY to $81.5 million
• Total assets grow by 4% to $16.5 billion in Q3 2023
• Efficiency ratio improves to 28.0%
• Tangible book value per share increases by 24% YoY
• Company completes $303.6 million securitization of multi-family mortgage loans

Negative

• None.

• Third quarter 2023 net income of $81.5 million increased 39% compared to third quarter of 2022 and increased 25% compared to the second quarter 2023.
• Third quarter 2023 diluted earnings per common share of $1.68 increased 38% compared to the third quarter of 2022 and increased 28% compared to the second quarter of 2023.
• Total assets of $16.5 billion increased 4% compared to June 30, 2023, and increased 31% compared to December 31, 2022.
• As of September 30, 2023, the Company had $5.4 billion, or 32% 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 $10.7 billion, or 65%, of the $16.5 billion in total assets as of September 30, 2023.
• Uninsured deposits totaled approximately $2 billion as of September 30, 2023, representing less than 20% of total deposits.
• Loans receivable of $9.9 billion, net of allowance for credit losses on loans, increased $56.7 million, or 1%, compared to June 30, 2023, and increased $2.5 billion, or 33%, compared to December 31, 2022.
• Efficiency ratio was 28.0% in the third quarter of 2023 compared to 30.5% in the third quarter of 2022 and 32.7% in the second quarter of 2023.
• Tangible book value per common share of $25.82 increased 24% compared to $20.78 in the third quarter of 2022 and increased 7% compared to $24.14 in the second quarter of 2023.
• On August 31, 2023, the Company completed a $303.6 million securitization of 11 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction.
• On September 7, 2023, the Company entered into an agreement with Bank of Pontiac to sell its Farmers-Merchants Bank of Illinois branch locations in Paxton, Melvin, and Piper City, Illinois, and into an agreement with CBI Bank & Trust, to sell its Farmers-Merchants Bank of Illinois branch located in Joy, Illinois.

CARMEL, Ind., Oct. 26, 2023 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported third quarter 2023 net income of $81.5 million, or diluted earnings per common share of $1.68.  This compared to $58.5 million, or diluted earnings per common share of $1.22 in the third quarter of 2022, and compared to $65.3 million, or diluted earnings per common share of $1.31 in the second quarter of 2023.

"We could not be prouder to have achieved the highest earnings and asset levels in company history during the third quarter, along with tangible book value of $25.82 per share that grew 24% over the last year.  Our focus on growing our sales teams in new markets, conservative underwriting, cost controls, and effectively matching our asset and liability duration have positioned us well for sustainable earnings growth for the remainder of 2023 and beyond," said Michael F. Petrie, Chairman and CEO of Merchants. 

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Our team has continued to maximize sources of liquidity and capital efficiencies to ensure that our strong pipeline of loan growth can be effectively executed in various interest rate environments so we can meet the needs of our customers and continue to generate ongoing profitability.  We could not have achieved these record-setting milestones during the third quarter without the hard work and dedication of our entire team."

Net income of $81.5 million for the third quarter 2023 increased by $23.0 million, or 39%, compared to the third quarter of 2022, primarily driven by a $32.1 million, or 38%, increase in net interest income. Results for the third quarter 2023 included a $11.6 million positive fair market value adjustment to servicing rights compared to a $4.6 million positive adjustment in the third quarter of 2022.

Net income of $81.5 million for the third quarter 2023 increased by $16.2 million, or 25%, compared to the second quarter of 2023, primarily driven by an $11.8 million, or 11% increase, in net interest income, an $18.6 million decrease in provision for credit losses related to credit events in the second quarter 2023, and a $6.2 million, or 21% increase in noninterest income. These increases to net income were partially offset by a $21.8 million increase in the provision for income taxes following the $13.0 million tax benefit related to tax refunds and changes to state tax apportionment calculations that were recognized in the second quarter 2023.  Results for the third quarter 2023 included a $11.6 million positive fair market value adjustment to servicing rights compared to a $3.4 million positive adjustment in the second quarter of 2023.

Total Assets
Total assets of $16.5 billion at September 30, 2023 increased $620.4 million, or 4%, compared to June 30, 2023, and increased $3.9 billion, or 31%, compared to December 31, 2022.  The increase compared to December 31, 2022 was primarily due to significant growth in the healthcare, commercial lines of credit on collateralized mortgage servicing rights, multi-family, and warehouse loan portfolios. 

Return on average assets was 2.03% for the third quarter of 2023 compared to 2.05% for the third quarter of 2022 and 1.78% for the second quarter of 2023.

Asset Quality
The allowance for credit losses on loans of $66.9 million, as of September 30, 2023, increased $3.9 million, or 6%, compared to June 30, 2023 and increased $22.9 million, or 52%, compared to December 31, 2022.  The increase compared to June 30, 2023 was primarily in the multi-family, healthcare, and commercial portfolios due to a combination of changes in qualitative loss factors and loan growth.  The increase compared to December 31, 2022 was primarily due to loan growth in the period, as well as credit events and increases in qualitative factors and forecasted loss rates to reflect changes in industry conditions that were recorded during the second quarter 2023.  The Company experienced net recoveries of $10,000 during the third quarter 2023.

Non-performing loans were $60.2 million, or 0.60%, of loans receivable as of September 30, 2023, compared to 0.69% at June 30, 2023, and 0.36% at December 31, 2022.  The increase in non-performing loans compared to December 31, 2022 was primarily due to 3 customers.

Securities Available for Sale
Total securities available for sale of $624.6 million as of September 30, 2023 decreased $23.4 million, or 4%, compared to June 30, 2023, and increased $301.2 million, or 93%, compared to December 31, 2022.

As of September 30, 2023, Accumulated Other Comprehensive Losses ("AOCL") of $4.8 million, related to securities available for sale, decreased $2.3 million, or 32%, compared to June 30, 2023, and decreased $5.8 million, or 55%, compared to December 31, 2022.  The $4.8 million of AOCL as of September 30, 2023 represented less than 1% of total equity and less than 1% of total investment securities.

Total Deposits
Total deposits of $13.0 billion at September 30, 2023 decreased $52.5 million compared to June 30, 2023, and increased $2.9 billion, or 29%, compared to December 31, 2022. The changes for both periods were primarily due to changes in brokered certificates of deposit.

Total brokered deposits of $4.4 billion at September 30, 2023 decreased $350.8 million, or 7%, from June 30, 2023 and increased $1.6 billion, or 59%, from December 31, 2022.   Brokered deposits represented 34% of total deposits at September 30, 2023 compared to 36% of total deposits at June 30, 2023 and 27% of total deposits at December 31, 2022.  As of September 30, 2023, brokered certificates of deposit had a weighted average remaining duration of 49 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 September 30, 2023, deposit balances in Flex CD products increased by $294.3 million, or 201%, 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 $1.8 billion as of September 30, 2023 and has contributed to the Company's low level of uninsured deposits, which were below 20% of total deposits.

Liquidity
Cash balances of $407.2 million as of September 30, 2023 increased by $29.9 million compared to June 30, 2023 and increased by $181.1 million compared to December 31, 2022.  The Company continues to have significant borrowing capacity, with unused lines of credit totaling $5.4 billion as of September 30, 2023 compared to $5.3 billion at June 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
September 30, 2023 and 2022

Net Interest Income of $117.4 million increased $32.1 million, or 38%, reflecting higher yields and average balances on loans and loans held for sale, and higher 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 2.44% decreased 33 basis points compared to 2.77%.
• Net interest margin of 2.99% decreased 6 basis points compared to 3.05%.

Interest Income of $296.7 million increased $162.6 million, or 121%, compared to $134.1 million, reflecting an increase in both yields and average balances of loans and loans held for sale, as well as higher balances in securities held to maturity. 

• Average balances of $13.4 billion for loans and loans held for sale increased 31% compared to $10.2 billion.
• Average yield on loans and loans held for sale of 7.89% increased 289 basis points compared to 5.00%.

Interest Expense of $179.2 million increased $130.5 million, or 268%, compared to $48.7 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 higher rates on borrowings.

• Average balances of $13.2 billion for interest-bearing deposits increased 46% compared to $9.0 billion.
• Average interest rates of 4.90% for interest-bearing deposits increased 292 basis points compared to 1.98%.

Noninterest Income of $36.1 million increased $6.9 million, or 24%, compared to $29.2 million, primarily due to a $9.2 million, or 113%, increase in loan servicing fees that was offset by a $2.6 million, or 19%, decrease in gain on sale of loans.  

• Loan servicing fees included a $11.6 million positive fair market value adjustment to servicing rights, 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. This compared to a $4.6 million positive fair market value adjustment to mortgage servicing rights in the prior period, of which $0.9 million was in the Banking segment and $3.7 million was in the Multi-family Mortgage Banking segment.
• 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.

Noninterest Expense of $42.9 million increased $8.0 million, or 23%, primarily due to increases in salaries and employee benefits and deposit insurance expense.

• The efficiency ratio of 28.0% decreased 253 basis points compared to 30.5%.

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

Net Interest Income of $117.4 million increased $11.8 million, or 11%, compared to $105.6 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, as well as higher average balances on borrowings.

• Interest rate spread of 2.44% increased 3 basis points compared to 2.41%.
• Net interest margin of 2.99% increased 2 basis points compared to 2.97%.

Interest Income of $296.7 million increased $38.6 million, or 15%, compared to $258.1 million, reflecting an increase in average balances and yields on loans and loans held for sale.

• Average balances of $13.4 billion for loans and loans held for sale increased 12%, compared to $12.0 billion.
• Average yield on loans and loans held for sale of 7.89% increased 22 basis points compared to 7.67%.

Interest Expense of $179.2 million increased 18% compared to $152.5 million. The increase was primarily due to higher average balances and rates on certificates of deposit and interest-bearing checking accounts, as well as higher average balances on borrowings.  

• Average balances of $13.2 billion for interest-bearing deposits increased 10% compared to $12.0 billion.
• Average interest rates of 4.90% for interest-bearing deposits increased 30 basis points compared to 4.60%.

Noninterest Income of $36.1 million increased $6.2 million, or 21%, compared $29.9 million, primarily due to a $8.8 million, or 102%, increase in loan servicing fees.

• Loan servicing fees included a $11.6 million positive fair market value adjustment to servicing rights, 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. This compared to a $3.4 million positive fair market value adjustment to servicing rights in the prior period, 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.

Noninterest Expense of $42.9 million decreased $1.4 million, or 3%, primarily due to a decrease in professional fees and other miscellaneous expenses that were partially offset by higher salaries and employee benefits.

• The efficiency ratio of 28.0% decreased 474 basis points compared to 32.7%.

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 $16.5 billion in assets and $13.0 billion in deposits as of September 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 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)
		September 30,		June 30,		March 31,		December 31,		September 30,
		2023		2023		2023		2022		2022
Assets
Cash and due from banks		$                10,633		$                15,390		$                19,002		$                22,170		$                13,796
Interest-earning demand accounts		396,605		361,920		350,584		203,994		310,165
Cash and cash equivalents		407,238		377,310		369,586		226,164		323,961
Securities purchased under agreements to resell		3,385		3,412		3,438		3,464		3,497
Mortgage loans in process of securitization		476,047		298,907		197,074		154,194		137,448
Securities available for sale		624,586		648,003		679,518		323,337		322,069
Securities held to maturity (includes $1,010,745, $1,058,590, $1,106,582, $1,118,966 and $1,005,487 at fair value, respectively)		1,012,801		1,062,017		1,104,835		1,119,078		1,005,487
Federal Home Loan Bank (FHLB) stock		48,219		39,130		39,130		39,130		39,130
Loans held for sale (includes $90,875, $82,931, $85,516, $82,192 and $68,785 at fair value, respectively)		3,477,036		3,058,013		2,855,250		2,910,576		2,844,750
Loans receivable, net of allowance for credit losses on loans of $66,864, $62,986, $51,838, $44,014 and $38,996, respectively		9,910,681		9,854,018		8,575,210		7,426,858		6,919,128
Premises and equipment, net		36,730		36,947		35,793		35,438		35,492
Servicing rights		162,141		147,288		143,867		146,248		144,984
Interest receivable		78,401		70,509		64,282		56,262		40,170
Goodwill		15,845		15,845		15,845		15,845		15,845
Intangible assets, net		831		949		1,068		1,186		1,307
Other assets and receivables		241,295		262,524		156,070		157,447		145,454
Total assets		$         16,495,236		$         15,874,872		$         14,240,966		$         12,615,227		$         11,978,722
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing		$              287,846		$              349,387		$              313,733		$              326,875		$              315,868
Interest-bearing		12,719,492		12,710,477		11,031,498		9,744,470		10,003,611
Total deposits		13,007,338		13,059,864		11,345,231		10,071,345		10,319,479
Borrowings		1,654,075		1,016,836		1,233,762		930,392		97,279
Deferred and current tax liabilities, net		18,006		16,084		32,827		19,613		19,124
Other liabilities		183,102		221,788		123,462		134,138		130,250
Total liabilities		14,862,521		14,314,572		12,735,282		11,155,488		10,566,132
Commitments and  Contingencies
Shareholders' Equity
Common stock, without par value
Authorized - 75,000,000 shares
Issued and outstanding  - 43,240,212 shares, 43,237,300 shares, 43,233,618 shares, 43,113,127 shares and 43,109,578 shares		139,609		138,853		138,105		137,781		137,226
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		137,371
Retained earnings		998,252		928,875		875,700		832,871		787,530
Accumulated other comprehensive loss		(4,754)		(7,036)		(7,729)		(10,521)		(11,686)
Total shareholders' equity		1,632,715		1,560,300		1,505,684		1,459,739		1,412,590
Total liabilities and shareholders' equity		$         16,495,236		$         15,874,872		$         14,240,966		$         12,615,227		$         11,978,722

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Three Months Ended									Change
		September 30,			June 30,			September 30,			3Q23		3Q23
		2023			2023			2022			vs. 2Q23		vs. 3Q22
Interest Income
Loans		$	266,561		$	228,732		$	129,101		17 %		106 %
Mortgage loans in process of securitization			2,583			3,127			2,162		-17 %		19 %
Investment securities:
Available for sale - taxable			6,182			5,564			485		11 %		1175 %
Held to maturity			17,427			17,311			970		1 %		1697 %
Federal Home Loan Bank stock			572			471			379		21 %		51 %
Other			3,351			2,864			1,015		17 %		230 %
Total interest income			296,676			258,069			134,112		15 %		121 %
Interest Expense
Deposits			162,906			137,801			45,002		18 %		262 %
Borrowed funds			16,334			14,651			3,725		11 %		338 %
Total interest expense			179,240			152,452			48,727		18 %		268 %
Net Interest Income			117,436			105,617			85,385		11 %		38 %
Provision for credit losses			4,014			22,603			2,225		-82 %		80 %
Net Interest Income After Provision for Credit Losses			113,422			83,014			83,160		37 %		36 %
Noninterest Income
Gain on sale of loans			10,758			11,350			13,354		-5 %		-19 %
Loan servicing fees, net			17,384			8,616			8,169		102 %		113 %
Mortgage warehouse fees			1,858			2,865			1,105		-35 %		68 %
Syndication and asset management fees			2,368			3,896			3,073		-39 %		-23 %
Other income			3,700			3,155			3,485		17 %		6 %
Total noninterest income			36,068			29,882			29,186		21 %		24 %
Noninterest Expense
Salaries and employee benefits			27,052			25,724			23,027		5 %		17 %
Loan expenses			1,038			907			1,226		14 %		-15 %
Occupancy and equipment			2,196			2,456			1,967		-11 %		12 %
Professional fees			2,555			3,723			2,429		-31 %		5 %
Deposit insurance expense			3,568			3,806			755		-6 %		373 %
Technology expense			1,609			1,571			1,325		2 %		21 %
Other expense			4,912			6,133			4,222		-20 %		16 %
Total noninterest expense			42,930			44,320			34,951		-3 %		23 %
Income Before Income Taxes			106,560			68,576			77,395		55 %		38 %
Provision for income taxes			25,056			3,274			18,907		665 %		33 %
Net Income		$	81,504		$	65,302		$	58,488		25 %		39 %
Dividends on preferred stock			(8,668)			(8,668)			(5,729)		—		51 %
Net Income Allocated to Common Shareholders		$	72,836		$	56,634		$	52,759		29 %		38 %
Basic Earnings Per Share		$	1.68		$	1.31		$	1.22		28 %		38 %
Diluted Earnings Per Share		$	1.68		$	1.31		$	1.22		28 %		38 %
Weighted-Average Shares Outstanding
Basic			43,238,724			43,235,398			43,107,975
Diluted			43,351,208			43,309,393			43,258,925

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Nine Months Ended
		September 30,			September 30,
		2023			2022			Change
Interest Income
Loans		$	684,743		$	287,291		138 %
Mortgage loans in process of securitization			7,358			5,856		26 %
Investment securities:
Available for sale - taxable			14,012			2,103		566 %
Held to maturity			50,492			970		5105 %
Federal Home Loan Bank stock			1,470			932		58 %
Other			7,964			2,242		255 %
Total interest income			766,039			299,394		156 %
Interest Expense
Deposits			405,149			68,583		491 %
Borrowed funds			37,144			7,670		384 %
Total interest expense			442,293			76,253		480 %
Net Interest Income			323,746			223,141		45 %
Provision for credit losses			33,484			10,888		208 %
Net Interest Income After Provision for Credit Losses			290,262			212,253		37 %
Noninterest Income
Gain on sale of loans			28,841			52,883		-45 %
Loan servicing fees, net			28,360			27,507		3 %
Mortgage warehouse fees			5,751			4,313		33 %
Syndication and asset management fees			7,476			5,286		41 %
Other income			9,786			12,965		-25 %
Total noninterest income			80,214			102,954		-22 %
Noninterest Expense
Salaries and employee benefits			74,922			66,795		12 %
Loan expenses			2,749			3,621		-24 %
Occupancy and equipment			6,884			5,792		19 %
Professional fees			8,547			5,326		60 %
Deposit insurance expense			9,552			2,184		337 %
Technology expense			4,757			3,865		23 %
Other expense			14,611			11,358		29 %
Total noninterest expense			122,022			98,941		23 %
Income Before Income Taxes			248,454			216,266		15 %
Provision for income taxes			46,693			53,701		-13 %
Net Income		$	201,761		$	162,565		24 %
Dividends on preferred stock			(26,003)			(17,186)		51 %
Net Income Allocated to Common Shareholders		$	175,758		$	145,379		21 %
Basic Earnings Per Share		$	4.07		$	3.37		21 %
Diluted Earnings Per Share		$	4.06		$	3.36		21 %
Weighted-Average Shares Outstanding
Basic			43,218,125			43,182,380
Diluted			43,317,343			43,331,148

 

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Three Months Ended						Change
			September 30,		June 30,		September 30,		3Q23		3Q23
			2023		2023		2022		vs. 2Q23		vs. 3Q22
Noninterest expense			$                    42,930		$                      44,320		$             34,951		-3 %		23 %
Net interest income (before provision for credit losses)			117,436		105,617		85,385		11 %		38 %
Noninterest income			36,068		29,882		29,186		21 %		24 %
Total income			$                  153,504		$                    135,499		$           114,571		13 %		34 %
Efficiency ratio			27.97 %		32.71 %		30.51 %		(474)	bps	(254)	bps
Average assets			$             16,031,015		$               14,673,257		$      11,437,805		9 %		40 %
Net income			81,504		65,302		58,488		25 %		39 %
Return on average assets before annualizing			0.51 %		0.45 %		0.51 %
Annualization factor			4.00		4.00		4.00
Return on average assets			2.03 %		1.78 %		2.05 %		25	bps	(2)	bps
Return on average tangible common shareholders' equity (1)			26.69 %		22.03 %		23.92 %		466	bps	277	bps
Tangible book value per common share (1)			$                      25.82		$                        24.14		$               20.78		7 %		24 %
Tangible common shareholders' equity/tangible assets (1)			6.78 %		6.58 %		7.49 %		20	bps	(71)	bps
Consolidated ratios
Total capital/risk-weighted assets(2)			11.4	%	11.3	%	12.5	%
Tier I capital/risk-weighted assets(2)			10.9	%	10.8	%	12.1	%
Common Equity Tier I capital/risk-weighted assets(2)			7.5	%	7.3	%	7.8	%
Tier I capital/average assets(2)			10.1	%	10.6	%	12.3	%

(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:

(2) As defined by regulatory agencies; September 30, 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
			September 30,		June 30,		September 30,		3Q23		3Q23
			2023		2023		2022		vs. 2Q23		vs. 3Q22
Net income			$                    81,504		$                      65,302		$             58,488		25 %		39 %
Less: preferred stock dividends			(8,668)		(8,668)		(5,729)		—		51 %
Net income available to common shareholders			$                    72,836		$                      56,634		$             52,759		29 %		38 %
Average shareholders' equity			$               1,607,779		$                 1,544,976		$        1,267,160		4 %		27 %
Less: average goodwill & intangibles			(16,742)		(16,858)		(17,228)		-1 %		-3 %
Less: average preferred stock			(499,608)		(499,608)		(367,726)		—		36 %
Average tangible common shareholders' equity			$               1,091,429		$                 1,028,510		$           882,206		6 %		24 %
Annualization factor			4.00		4.00		4.00
Return on average tangible common shareholders' equity			26.69 %		22.03 %		23.92 %		466	bps	277	bps
Total equity			$               1,632,715		$                 1,560,300		$        1,412,590		5 %		16 %
Less: goodwill and intangibles			(16,676)		(16,794)		(17,152)		-1 %		-3 %
Less: preferred stock			(499,608)		(499,608)		(499,520)		—		—
Tangible common shareholders' equity			$               1,116,431		$                 1,043,898		$           895,918		7 %		25 %
Assets			$             16,495,236		$               15,874,872		$      11,978,722		4 %		38 %
Less: goodwill and intangibles			(16,676)		(16,794)		(17,152)		-1 %		-3 %
Tangible assets			$             16,478,560		$               15,858,078		$      11,961,570		4 %		38 %
Ending common shares			43,240,212		43,237,300		43,109,578
Tangible book value per common share			$                      25.82		$                        24.14		$               20.78		7 %		24 %
Tangible common shareholders' equity/tangible assets			6.78 %		6.58 %		7.49 %		20	bps	(71)	bps

 

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Nine Months Ended
			September 30,		September 30,
			2023		2022		Change
Noninterest expense			$           122,022		$            98,941		23 %
Net interest income (before provision for credit losses)			323,746		223,141		45 %
Noninterest income			80,214		102,954		-22 %
Total income			$           403,960		$          326,095		24 %
Efficiency ratio			30.21 %		30.34 %		(13)	bps
Average assets			$      14,541,523		$     10,568,712		38 %
Net income			201,761		162,565		24 %
Return on average assets before annualizing			1.39 %		1.54 %
Annualization factor			1.33		1.33
Return on average assets			1.85 %		2.05 %		(20)	bps
Return on average tangible common shareholders' equity (1)			22.61 %		23.08 %		(47)	bps
Tangible book value per common share (1)			$               25.82		$              20.78		24 %
Tangible common shareholders' equity/tangible assets (1)			6.78 %		7.49 %		(71)	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,
			2023		2022		Change
Net income			$           201,761		$          162,565		24 %
Less: preferred stock dividends			(26,003)		(17,186)		51 %
Net income available to common shareholders			$           175,758		$          145,379		21 %
Average shareholders' equity			$        1,550,196		$       1,219,305		27 %
Less: average goodwill & intangibles			(16,859)		(17,360)		-3 %
Less: average preferred stock			(499,608)		(364,028)		37 %
Average tangible common shareholders' equity			$        1,033,729		$          837,917		23 %
Annualization factor			1.33		1.33
Return on average tangible common shareholders' equity			22.61 %		23.08 %		(47)	bps
Total equity			$        1,632,715		$       1,412,590		16 %
Less: goodwill and intangibles			(16,676)		(17,152)		-3 %
Less: preferred stock			(499,608)		(499,520)		—
Tangible common shareholders' equity			$        1,116,431		$          895,918		25 %
Assets			$      16,495,236		$     11,978,722		38 %
Less: goodwill and intangibles			(16,676)		(17,152)		-3 %
Tangible assets			$      16,478,560		$     11,961,570		38 %
Ending common shares			43,240,212		43,109,578
Tangible book value per common share			$               25.82		$              20.78		24 %
Tangible common shareholders' equity/tangible assets			6.78 %		7.49 %		(71)	bps

 

Merchants Bancorp
Average Balance Analysis
($ in thousands)
(Unaudited)
	Three Months Ended				Three Months Ended				Three Months Ended
	Septmeber 30, 2023				June 30, 2023				September 30, 2022
	Average		Yield/		Average		Yield/		Average		Yield/
	Balance	Interest	Rate		Balance	Interest	Rate		Balance	Interest	Rate
Assets:
Interest-bearing deposits, and other	$      259,630	$     3,923	5.99 %		$      249,722	$    3,335	5.36 %		$        211,653	$    1,394	2.61 %
Securities available for sale - taxable	656,561	6,182	3.74 %		672,887	5,564	3.32 %		331,796	485	0.58 %
Securities held to maturity	1,040,070	17,427	6.65 %		1,093,018	17,311	6.35 %		98,363	970	3.91 %
Mortgage loans in process of securitization	208,767	2,583	4.91 %		280,092	3,127	4.48 %		235,230	2,162	3.65 %
Loans and loans held for sale	13,399,854	266,561	7.89 %		11,968,565	228,732	7.67 %		10,245,294	129,101	5.00 %
Total interest-earning assets	15,564,882	296,676	7.56 %		14,264,284	258,069	7.26 %		11,122,336	134,112	4.78 %
Allowance for credit losses on loans	(63,449)				(54,411)				(39,325)
Noninterest-earning assets	529,582				463,384				354,794
Total assets	$  16,031,015				$  14,673,257				$   11,437,805
Liabilities & Shareholders' Equity:
Interest-bearing checking	4,882,727	58,642	4.76 %		4,307,736	48,296	4.50 %		4,207,217	21,980	2.07 %
Savings deposits	241,861	340	0.56 %		236,012	299	0.51 %		239,262	162	0.27 %
Money market	2,798,325	33,235	4.71 %		2,749,594	30,521	4.45 %		2,523,315	13,094	2.06 %
Certificates of deposit	5,255,573	70,689	5.34 %		4,729,242	58,685	4.98 %		2,030,152	9,766	1.91 %
Total interest-bearing deposits	13,178,486	162,906	4.90 %		12,022,584	137,801	4.60 %		8,999,946	45,002	1.98 %
Borrowings	711,948	16,334	9.10 %		591,333	14,651	9.94 %		588,582	3,725	2.51 %
Total interest-bearing liabilities	13,890,434	179,240	5.12 %		12,613,917	152,452	4.85 %		9,588,528	48,727	2.02 %
Noninterest-bearing deposits	333,155				346,837				474,925
Noninterest-bearing liabilities	199,647				167,527				107,192
Total liabilities	14,423,236				13,128,281				10,170,645
Shareholders' equity	1,607,779				1,544,976				1,267,160
Total liabilities and shareholders' equity	$  16,031,015				$  14,673,257				$   11,437,805
Net interest income		$ 117,436				$ 105,617				$   85,385
Net interest spread			2.44 %				2.41 %				2.77 %
Net interest-earning assets	$    1,674,448				$   1,650,367				$     1,533,808
Net interest margin			2.99 %				2.97 %				3.05 %
Average interest-earning assets to average interest-bearing liabilities			112.05 %				113.08 %				116.00 %

 

Supplemental Results
(Unaudited)
($ in thousands)
				Net Income						Net Income
				Three Months Ended						Nine Months Ended
				September 30,		June 30,		September 30,		September 30,
				2023		2023		2022		2023		2022
Segment
Multi-family Mortgage Banking				$              14,685		$            11,242		$               13,366		$          27,893		$          44,414
Mortgage Warehousing				19,926		18,596		11,801		47,163		36,828
Banking				52,445		42,650		39,344		144,402		94,040
Other				(5,552)		(7,186)		(6,023)		(17,697)		(12,717)
Total				$              81,504		$            65,302		$               58,488		$        201,761		$        162,565
				Total Assets
				September 30,		June 30,		December 31,
				2023		2023		2022
Segment
Multi-family Mortgage Banking				$            392,754		$          373,680		$             351,274
Mortgage Warehousing				4,757,817		4,474,832		2,519,810
Banking				11,135,651		10,784,596		9,587,544
Other				209,014		241,764		156,599
Total				$       16,495,236		$     15,874,872		$        12,615,227
				Gain on Sale of Loans						Gain on Sale of Loans
				Three Months Ended						Nine Months Ended
				September 30,		June 30,		September 30,		September 30,
				2023		2023		2022		2023		2022
Loan Type
Multi-family				8,616		$            10,361		$               12,002		$          23,897		$          46,578
Single-family				951		202		138		1,430		1,001
Small Business Association (SBA)				1,191		787		1,214		3,514		5,304
Total				$              10,758		$            11,350		$               13,354		$          28,841		$          52,883
				Loans Receivable and Loans Held for Sale
				September 30,		June 30,		December 31,
				2023		2023		2022
Mortgage warehouse lines of credit				$         1,022,692		$       1,201,932		$             464,785
Residential real estate				1,358,908		1,342,586		1,178,401
Multi-family financing				3,709,320		3,746,333		3,135,535
Healthcare financing				2,218,559		2,128,378		1,604,341
Commercial and commercial real estate (1)(2)				1,560,031		1,394,256		978,661
Agricultural production and real estate				96,490		91,599		95,651
Consumer and margin loans				11,545		11,920		13,498
				9,977,545		9,917,004		7,470,872
Less: Allowance for credit losses on loans				66,864		62,986		44,014
Loans receivable				$         9,910,681		$       9,854,018		$          7,426,858
Loans held for sale				3,477,036		3,058,013		2,910,576
Total loans, net of allowance				$       13,387,717		$     12,912,031		$        10,337,434

(1)     Includes $1.0 billion, $894.7 million and $497.0 million of revolving  lines of credit collateralized primarily by mortgage servicing rights as of September 30, 2023, June 30, 2023 and December 31, 2022, respectively.

(2)     Includes only $8.1 million, $8.3 million and $12.8 million of non-owner occupied commerical real estate as of September 30, 2023, June 30, 2023 and December 31, 2022, respectively.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/merchants-bancorp-reports-third-quarter-2023-results-301969179.html

SOURCE Merchants Bancorp

FAQ

What is the net income for Q3 2023?

The net income for Q3 2023 is $81.5 million.

What is the total asset value for Q3 2023?

The total asset value for Q3 2023 is $16.5 billion.

What is the efficiency ratio for Q3 2023?

The efficiency ratio for Q3 2023 is 28.0%.

How much did the tangible book value per share increase by?

The tangible book value per share increased by 24% YoY.

What significant transaction did the company complete?

The company completed a $303.6 million securitization of multi-family mortgage loans.