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 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, | 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 | 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, | ||||||||||
Issued and outstanding - 43,109,578 shares, 43,106,505 shares, | 137,226 | 136,671 | 137,882 | 137,565 | 137,200 | |||||
Preferred stock, without par value - 5,000,000 total shares | ||||||||||
7% Series A Preferred stock - $25 per share liquidation | ||||||||||
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 | ||||||||||
Authorized - 125,000 shares | ||||||||||
Issued and outstanding - 125,000 shares (equivalent to | 120,844 | 120,844 | 120,844 | 120,844 | 120,844 | |||||
6% Series C Preferred stock - $1,000 per share liquidation | ||||||||||
Authorized - 200,000 shares | ||||||||||
Issued and outstanding - 196,181 shares (equivalent to | 191,084 | 191,084 | 191,084 | 191,084 | 191,084 | |||||
8.25% Series D Preferred stock - $1,000 per share liquidation | ||||||||||
Authorized - 300,000 shares | ||||||||||
Issued and outstanding - 142,500 shares (equivalent to | 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 | ||||||||||||
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 | ||||||||
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 | 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 |
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SOURCE Merchants Bancorp
