Merchants Bancorp Reports Second Quarter 2024 Results

• Second quarter 2024 net income of $76.4 million, increased 17% compared to second quarter of 2023 and decreased 12% compared to the first quarter 2024.
• Second quarter 2024 diluted earnings per common share of $1.49 increased 14% compared to the second quarter of 2023 and decreased 17% compared to the first quarter of 2024.
• Total assets of $18.2 billion surpassed any level previously reported by the Company, increasing 2% compared to March 31, 2024 and increasing 7% compared to December 31, 2023.
• On May 13, 2024, the Company completed a common stock offering of 2.4 million shares, resulting in net proceeds of $97.7 million, which contributed to the estimated 70 basis point increase in the common equity tier I capital ratio that reached 8.7% as of June 30, 2024.
• Tangible book value per common share reached a record-high of $31.27 and increased 30% compared to $24.14 in the second quarter of 2023 and increased 7% compared to $29.26 in the first quarter of 2024.
• As of June 30, 2024, the Company had $7.0 billion in unused borrowing capacity with the Federal Home Loan Bank and the Federal Reserve Discount window, representing 39% of total assets.
• The Company's most liquid assets are in unrestricted cash, short-term investments, including interest-earning 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 $12.6 billion, or 69%, of the $18.2 billion in total assets as of June 30, 2024.
• Loans receivable of $10.9 billion, net of allowance for credit losses on loans, increased $242.7 million, or 2%, compared to March 31, 2024, and increased $805.4 million, or 8%, compared to December 31, 2023.
• The efficiency ratio was 31.59% in the second quarter of 2024 compared to 32.71% in the second quarter of 2023 and 29.13% in the first quarter of 2024.
• On April 30, 2024, the Company completed a $324.6 million securitization of 13 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction.
• The Company redeemed all outstanding shares of the Series A Preferred Stock for $52 million on April 1, 2024, at the liquidation preference of $25.00 per share.

CARMEL, Ind., July 29, 2024 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank, today reported second quarter 2024 net income of $76.4 million, or diluted earnings per common share of $1.49. This compared to $65.3 million, or diluted earnings per common share of $1.31 in the second quarter of 2023, and compared to $87.1 million, or diluted earnings per common share of $1.80 in the first quarter of 2024.

"Results for the second quarter demonstrate our success in serving customers while also increasing shareholder value in any interest rate environment. Loan growth continued as we reached a new record of $18.2 billion in assets and we also achieved a record-high tangible book value of $31.27 per share, which reflected a 30% increase over the prior year.  Our originate-to-sell business model that minimizes interest rate risk has proven to be successful, and our priorities remain unchanged.  We have also focused on effectively managing our capital to execute our strategies for future growth by issuing common stock, entering into credit risk transfer transactions, and participating in securitizations.," said Michael F. Petrie, Chairman and CEO of Merchants. 

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "The market leading positions we hold across our businesses is a testament to the resilience and creativity that our team has demonstrated while working with customers to find effective solutions to their lending needs.  These strong relationships position us to be a lender of choice and provide us with significant growth opportunities."

Net income of $76.4 million for the second quarter 2024 increased by $11.1 million, or 17%, compared to the second quarter of 2023, primarily driven by:

• a $22.5 million, or 21%, increase in net interest income, and
• a $12.6 million, or 56%, decrease in the provision for credit losses related to lower loan charge-offs and relative changes to qualitative factors, which were partially offset by
• a $19.5 million, or 594%, increase in the provision for income tax, primarily due to a $13.0 million tax benefit recorded in the second quarter of 2023 that was related to tax refunds and changes in state tax apportionment calculations.

Net income of $76.4 million for the second quarter 2024 decreased by $10.7 million, or 12%, compared to the first quarter of 2024, primarily driven by:

• an $8.9 million lower fair market value positive adjustment to servicing rights. Results for the second quarter of 2024 included a $5.1 million positive fair market value adjustment to servicing rights compared to a $14.0 million positive fair market value adjustment to servicing rights in the first quarter of 2024, and
• a $5.2 million increase in the provision for credit losses that reflected higher loan charge-offs and specific reserves, as well as an increase in qualitative loss factors in the multi-family loan portfolio, which were offset by a decrease in loss rates of other portfolios during the second quarter of 2024.

Total Assets
Total assets of $18.2 billion at June 30, 2024 increased $389.8 million, or 2%, compared to March 31, 2024, and increased $1.3 billion, or 7%, compared to December 31, 2023.  The increase compared to December 31, 2023 was primarily due to growth in the warehouse, multi-family, and healthcare loan portfolios.

Return on average assets was 1.72% for the second quarter of 2024 compared to 1.78% for the second quarter of 2023 and 2.07% for the first quarter of 2024.

Asset Quality
The allowance for credit losses on loans of $81.0 million, as of June 30, 2024, increased $5.3 million, or 7%, compared to March 31, 2024, and increased $9.3 million, or 13%, compared to December 31, 2023.  The increase compared to both periods was primarily due to loan charge-offs, increases in specific reserves, loan growth, and changes to qualitative loss factors to reflect changes in industry conditions.

The Company recorded three charge-offs, primarily in the multi-family portfolio, for $3.5 million and recorded $15,000 of recoveries during the second quarter 2024. This compares to $9.5 million in charge-offs and $2,000 in recoveries during the second quarter of 2023 and to $0.9 million in charge-offs and $1,000 of recoveries in the first quarter of 2024.

As of June 30, 2024, non-performing loans were $143.5 million, or 1.30% of gross loans receivable, compared to $131.8 million, or 1.22%, as of March 31, 2024, and $82.0 million, or 0.80%, as of December 31, 2023.  The increase in non-performing loans compared to both periods was primarily driven by multi-family and healthcare customers with delinquent payments on variable rate loans that have required higher payments due to interest rates remaining at elevated levels. 

Securities Available for Sale
Total securities available for sale of $1.0 billion as of June 30, 2024 decreased $44.3 million, or 4%, compared to March 31, 2024, and decreased $96.7 million, or 9%, compared to December 31, 2023.  The decrease was primarily due to maturities, sales, and repayments that were partially offset by purchases. 

As of June 30, 2024, Accumulated Other Comprehensive Losses ("AOCL") of $0.5 million, related to securities available for sale, decreased $0.7 million, or 57%, compared to March 31, 2024, and decreased $2.0 million, or 80%, compared to December 31, 2023.  The $0.5 million of AOCL as of June 30, 2024 represented less than 1% of total equity and less than 1% of total investment securities.

Total Deposits
Total deposits of $14.9 billion at June 30, 2024 increased $941.4 million, or 7%, compared to March 31, 2024, and increased $855.6 million, or 6%, compared to December 31, 2023. The change compared to March 31, 2024 was primarily due to growth in core deposits, reflecting an increase in certificates of deposit and demand accounts. The change compared to December 31, 2023 was primarily due to growth in core deposit accounts, reflecting an increase in certificates of deposit accounts that was partially offset by a decrease in demand accounts.

Core deposits of $8.8 billion at June 30, 2024 increased $574.0 million, or 7%, from March 31, 2024 and increased $705.9 million, or 9%, from December 31, 2023. Core deposits represented 59% of total deposits at June 30, 2024 and March 31, 2024, and 58% of total deposits at December 31, 2023.

Total brokered deposits of $6.1 billion at June 30, 2024 increased $367.4 million, or 6%, from March 31, 2024 and increased $149.7 million, or 3%, from December 31, 2023.   As of June 30, 2024, brokered certificates of deposit had a weighted average remaining duration of 70 days.

Liquidity
Cash balances of $540.9 million as of June 30, 2024 increased by $32.1 million compared to March 31, 2024 and decreased by $43.5 million compared to December 31, 2023.  The Company continues to have significant borrowing capacity, with unused lines of credit totaling $7.0 billion as of June 30, 2024 compared to $5.6 billion at March 31, 2024 and $6.0 billion at December 31, 2023.  Furthermore, its $2.8 billion line of credit with the Federal Reserve Board alone could fund 118% of its uninsured deposits, which represented approximately 15% of total deposits as of June 30, 2024.

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
June 30, 2024 and 2023

Net Interest Income of $128.1 million increased $22.5 million, or 21%, compared to $105.6 million, primarily reflecting an increase in both average balances and yields on loans and loans held for sale, as well as higher average yields and balances of securities available for sale, which were partially offset by higher average balances and interest rates on deposits, as well as higher average balances on borrowings.

• Net interest margin of 2.99% increased 2 basis points compared to 2.97%. The margin was negatively impacted by approximately 6 basis points in the second quarter of 2024 from the net reversal of $2.5 million in accrued interest income associated with the movement of loans into nonaccrual status.
• Interest rate spread of 2.45% increased 4 basis points compared to 2.41%.

Interest Income of $328.3 million increased $70.2 million, or 27%, compared to $258.1 million, reflecting an increase in both average balances and higher yields of loans and loans held for sale, as well as securities available for sale.

• Average balances of $14.3 billion for loans and loans held for sale increased 20% compared to $12.0 billion.
• Average yield on loans and loans held for sale of 7.97% increased 30 basis points compared to 7.67%.
• Average balances of $1.0 billion for securities available for sale increased 54% compared to $672.9 million.
• Average yield on securities available for sale of 5.72% increased 240 basis points compared to 3.32%.

Interest Expense of $200.2 million increased $47.7 million, or 31%, compared to $152.5 million.  The increase reflected an increase in both average balances and rates on certificates of deposit and interest-bearing checking, as well as higher average balances on borrowings.

• Average balances of $6.5 billion for certificates of deposit increased 38% compared to $4.7 billion.
• Average interest rates of 5.43% for certificates of deposit increased 45 basis points compared to 4.98%.
• Average balances of $4.9 billion for interest-bearing checking increased 15% compared to $4.3 billion.
• Average interest rates of 4.74% for interest-bearing checking increased 24 basis points compared to 4.50%.
• Average balances of $1.0 billion for borrowings increased 74% compared to $591.3 million.

Noninterest Income of $31.4 million increased $1.5 million, or 5%, compared to $29.9 million, primarily due to a $2.2 million, or 26%, increase in net loan servicing fees and a $1.4 million, or 46%, increase in other income, partially offset by a $1.3 million, or 47%, decrease in mortgage warehouse fees.    

• Loan servicing fees included a $5.1 million positive fair market value adjustment to servicing rights, with a $0.6 million positive adjustment in the Banking segment and a $4.5 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $3.4 million positive fair market value adjustment to mortgage servicing rights in the prior period, of which $1.3 million positive adjustment in the Banking segment and $2.1 million positive adjustment in the Multi-family Mortgage Banking segment.

Noninterest Expense of $50.4 million increased $6.1 million, or 14%, compared to $44.3 million reflecting increases in salaries and employee benefits to support business growth and increases in deposit insurance expenses.  The higher noninterest expense also reflected a $1.6 million increase in other expenses primarily associated with ongoing premium expense for the credit default swap that was executed in March 2024.

• The efficiency ratio of 31.59% decreased 112 basis points compared to 32.71%.

Comparison of Operating Results for the Three Months Ended
June 30, 2024 and March 31, 2024 

Net Interest Income of $128.1 million increased 1%, compared to $127.1 million, primarily due to higher average balances on loans and loans held for sale, partially offset by higher average balances of deposits and on borrowings.

• Net interest margin of 2.99% decreased 15 basis points compared to 3.14%, primarily due to a shift in business mix that reflected significant growth in the mortgage warehouse portfolio. The margin was also negatively impacted by approximately 6 basis points in the second quarter of 2024 from the net reversal of $2.5 million in accrued interest income associated with the movement of loans into nonaccrual status.
• Interest rate spread of 2.45% decreased 13 basis points compared to 2.58%.

Interest Income of $328.3 million increased $14.1 million, or 4%, compared to $314.2 million, reflecting an increase in average balances on loans and loans held for sale, interest earning deposits, and mortgage loans in process or securitization. The increases in interest income were partially offset by a decrease in average yields on loans and loans held for sale.

• Average balances of $14.3 billion for loans and loans held for sale increased 6% compared to $13.5 billion.
• Average balances of $438.4 million on interest earning deposits increased 27% compared to $346.2 million.
• Average balances of $234.7 million for mortgage loans in process of securitization increased 70% compared to $137.9 million.
• Average yields on loans and loans held for sale of 7.97% decreased 14 basis points compared to 8.11%, reflecting a net $2.5 million reversal of accrued interest income associated with the movement of loans into nonaccrual status during the quarter.

Interest Expense of $200.2 million increased 7% compared to $187.1 million. The increase was primarily driven by higher average balances on certificate of deposit accounts and borrowings. These were partially offset by lower rates on borrowings, as well as lower average balances on interest-bearing checking accounts.  

• Average balances of $6.5 billion for certificate of deposit accounts increased 15% compared to $5.7 billion.
• Average balances of $1.0 billion for borrowings increased 44% compared to $716.9 million.
• Average interest rates of 8.00% for borrowings decreased 103 basis points compared to 9.03%.
• Average balances of $4.9 billion for interest-bearing checking accounts decreased 3% compared to $5.1 billion.

Noninterest Income of $31.4 million decreased $9.5 million, or 23%, compared $40.9 million, primarily due to an $8.6 million, or 44%, decrease in net loan servicing fees and a $2.1 million, or 39%, decrease in syndication and asset management fees.

• Loan servicing fees included a $5.1 million positive fair market value adjustment to servicing rights, with a $0.6 million positive adjustment in the Banking segment and a $4.5 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $14.0 million positive fair market value adjustment to servicing rights in the prior period, with a $0.8 million positive adjustment in the Banking segment and a $13.2 million positive adjustment in the Multi-family Mortgage Banking segment.

Noninterest Expense of $50.4 million increased $1.5 million, or 3%, compared to $48.9 million, driven by a $2.7 million, or 54%, increase in other expenses associated with ongoing premium expense for the credit default swap that was executed in March 2024. This increase was partially offset by a $1.2 million decrease in salaries and employee benefits

• The efficiency ratio of 31.59% increased 246 basis points compared to 29.13%.

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 $18.2 billion in assets and $14.9 billion in deposits as of June 30, 2024, 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)
		June 30,		March 31,		December 31,		September 30,		June 30,
		2024		2024		2023		2023		2023
Assets
Cash and due from banks		$       10,242		$       17,924		$          15,592		$           10,633		$       15,390
Interest-earning demand accounts		530,640		490,831		568,830		396,605		361,920
Cash and cash equivalents		540,882		508,755		584,422		407,238		377,310
Securities purchased under agreements to resell		3,304		3,329		3,349		3,385		3,412
Mortgage loans in process of securitization		209,244		142,629		110,599		476,047		298,907
Securities available for sale ($682,774, $700,640 and $722,497 utilizing fair value option at June 30, 2024, March 31, 2024 and December 31, 2023)		1,017,019		1,061,288		1,113,687		624,586		648,003
Securities held to maturity ($1,291,960, $1,176,178, $1,203,535, $1,010,745 and $1,058,590 at fair value, respectively)		1,291,110		1,175,167		1,204,217		1,012,801		1,062,017
Federal Home Loan Bank (FHLB) stock		67,499		64,215		48,578		48,219		39,130
Loans held for sale (includes $102,873, $84,513, $86,663, $90,875 and $82,931 at fair value, respectively)		3,483,076		3,503,131		3,144,756		3,477,036		3,058,013
Loans receivable, net of allowance for credit losses on loans of $81,028, $75,712, $71,752, $66,864 and $62,986, respectively		10,933,189		10,690,513		10,127,801		9,910,681		9,854,018
Premises and equipment, net		46,833		42,450		42,342		36,730		36,947
Servicing rights		178,776		172,200		158,457		162,141		147,288
Interest receivable		90,360		90,303		91,346		78,401		70,509
Goodwill		8,014		8,014		15,845		15,845		15,845
Other assets and receivables		343,116		360,582		307,117		242,126		263,473
Total assets		$18,212,422		$17,822,576		$   16,952,516		$    16,495,236		$15,874,872
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing		$     383,260		$     319,872		$        520,070		$         287,846		$     349,387
Interest-bearing		14,533,807		13,655,789		13,541,390		12,719,492		12,710,477
Total deposits		14,917,067		13,975,661		14,061,460		13,007,338		13,059,864
Borrowings		1,159,206		1,835,985		964,127		1,654,075		1,016,836
Deferred and current tax liabilities, net		25,098		43,935		19,923		18,006		16,084
Other liabilities		222,904		190,527		205,922		183,102		221,788
Total liabilities		16,324,275		16,046,108		15,251,432		14,862,521		14,314,572
Commitments and  Contingencies
Shareholders' Equity
Common stock, without par value
Authorized - 75,000,000 shares
Issued and outstanding  - 45,757,567 shares, 43,354,718 shares, 43,242,928 shares, 43,240,212 shares and 43,237,300 shares		238,492		139,950		140,365		139,609		138,853
Preferred stock, without par value - 5,000,000 total shares authorized
7% Series A Preferred stock - $25 per share liquidation preference
Authorized - no shares at June 30, 2024 and 3,500,000 shares at March 31, 2024 and all prior periods presented
Issued and outstanding - no shares at June 30, 2024 and  2,081,800 shares at March 31, 2024 and all prior periods presented		—		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		1,200,778		1,138,083		1,063,599		998,252		928,875
Accumulated other comprehensive loss		(510)		(1,173)		(2,488)		(4,754)		(7,036)
Total shareholders' equity		1,888,147		1,776,468		1,701,084		1,632,715		1,560,300
Total liabilities and shareholders' equity		$18,212,422		$17,822,576		$   16,952,516		$    16,495,236		$15,874,872

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Three Months Ended									Change
		June 30,			March 31,			June 30,			2Q24		2Q24
		2024			2024			2023			vs. 1Q24		vs. 2Q23
Interest Income
Loans		$	284,421		$	271,998		$	228,732		5 %		24 %
Mortgage loans in process of securitization			3,044			1,720			3,127		77 %		-3 %
Investment securities:
Available for sale			14,784			14,388			5,564		3 %		166 %
Held to maturity			19,799			20,522			17,311		-4 %		14 %
Federal Home Loan Bank stock			1,277			844			471		51 %		171 %
Other			4,948			4,701			2,864		5 %		73 %
Total interest income			328,273			314,173			258,069		4 %		27 %
Interest Expense
Deposits			179,651			171,022			137,801		5 %		30 %
Borrowed funds			20,503			16,095			14,651		27 %		40 %
Total interest expense			200,154			187,117			152,452		7 %		31 %
Net Interest Income			128,119			127,056			105,617		1 %		21 %
Provision for credit losses			9,965			4,726			22,603		111 %		-56 %
Net Interest Income After Provision for Credit Losses			118,154			122,330			83,014		-3 %		42 %
Noninterest Income
Gain on sale of loans			11,168			9,356			11,350		19 %		-2 %
Loan servicing fees, net			10,827			19,402			8,616		-44 %		26 %
Mortgage warehouse fees			1,524			982			2,865		55 %		-47 %
Loss on sale of investments available for sale (1)			—			(108)			—		-100 %		—
Syndication and asset management fees			3,233			5,303			3,896		-39 %		-17 %
Other income			4,599			5,939			3,155		-23 %		46 %
Total noninterest income			31,351			40,874			29,882		-23 %		5 %
Noninterest Expense
Salaries and employee benefits			28,373			29,596			25,724		-4 %		10 %
Loan expenses			993			956			907		4 %		9 %
Occupancy and equipment			2,239			2,237			2,456		—		-9 %
Professional fees			3,556			4,099			3,723		-13 %		-4 %
Deposit insurance expense			5,579			5,125			3,806		9 %		47 %
Technology expense			1,859			1,854			1,571		—		18 %
Other expense			7,781			5,045			6,133		54 %		27 %
Total noninterest expense			50,380			48,912			44,320		3 %		14 %
Income Before Income Taxes			99,125			114,292			68,576		-13 %		45 %
Provision for income taxes (2)			22,732			27,238			3,274		-17 %		594 %
Net Income		$	76,393		$	87,054		$	65,302		-12 %		17 %
Dividends on preferred stock			(7,757)			(8,667)			(8,668)		-10 %		-11 %
Impact of preferred stock redemption			(1,823)			—			—		-100 %		-100 %
Net Income Available to Common Shareholders		$	66,813		$	78,387		$	56,634		-15 %		18 %
Basic Earnings Per Share		$	1.50		$	1.81		$	1.31		-17 %		15 %
Diluted Earnings Per Share		$	1.49		$	1.80		$	1.31		-17 %		14 %
Weighted-Average Shares Outstanding
Basic			44,569,345			43,305,985			43,235,398
Diluted			44,698,324			43,466,647			43,309,393

(1) Includes $0, $(108), and $0 respectively, related to accumulated other comprehensive losses reclassifications.

(2) Includes $0, $26, and $0 respectively, related to income tax benefit for reclassification items.

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Six Months Ended
		June 30,			June 30,
		2024			2023			Change
Interest Income
Loans		$	556,419		$	418,182		33 %
Mortgage loans in process of securitization			4,764			4,775		—
Investment securities:
Available for sale			29,172			7,830		273 %
Held to maturity			40,321			33,065		22 %
Federal Home Loan Bank stock			2,121			898		136 %
Other			9,649			4,613		109 %
Total interest income			642,446			469,363		37 %
Interest Expense
Deposits			350,673			242,243		45 %
Borrowed funds			36,598			20,810		76 %
Total interest expense			387,271			263,053		47 %
Net Interest Income			255,175			206,310		24 %
Provision for credit losses			14,691			29,470		-50 %
Net Interest Income After Provision for Credit Losses			240,484			176,840		36 %
Noninterest Income
Gain on sale of loans			20,524			18,083		13 %
Loan servicing fees, net			30,229			10,976		175 %
Mortgage warehouse fees			2,506			3,893		-36 %
Loss on sale of investments available for sale (1)			(108)			—		-100 %
Syndication and asset management fees			8,536			5,108		67 %
Other income			10,538			6,086		73 %
Total noninterest income			72,225			44,146		64 %
Noninterest Expense
Salaries and employee benefits			57,969			47,870		21 %
Loan expenses			1,949			1,711		14 %
Occupancy and equipment			4,476			4,688		-5 %
Professional fees			7,655			5,992		28 %
Deposit insurance expense			10,704			5,984		79 %
Technology expense			3,713			3,148		18 %
Other expense			12,826			9,699		32 %
Total noninterest expense			99,292			79,092		26 %
Income Before Income Taxes			213,417			141,894		50 %
Provision for income taxes (2)			49,970			21,637		131 %
Net Income		$	163,447		$	120,257		36 %
Dividends on preferred stock			(16,424)			(17,335)		-5 %
Impact of preferred stock redemption			(1,823)			—		-100 %
Net Income Available to Common Shareholders		$	145,200		$	102,922		41 %
Basic Earnings Per Share		$	3.30		$	2.38		39 %
Diluted Earnings Per Share		$	3.29		$	2.38		38 %
Weighted-Average Shares Outstanding
Basic			43,937,665			43,207,655
Diluted			44,082,485			43,300,240

(1) Includes $(108) and $0 respectively, related to accumulated other comprehensive earnings reclassifications.

(2) Includes $26 and $0 respectively, related to income tax benefit for reclassification items.

 

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Three Months Ended						Change
			June 30,		March 31,		June 30,		2Q24		2Q24
			2024		2024		2023		vs. 1Q24		vs. 2Q23
Noninterest expense			$        50,380		$        48,912		$        44,320		3 %		14 %
Net interest income (before provision for credit losses)			128,119		127,056		105,617		1 %		21 %
Noninterest income			31,351		40,874		29,882		-23 %		5 %
Total income			$      159,470		$      167,930		$      135,499		-5 %		18 %
Efficiency ratio			31.59 %		29.13 %		32.71 %		246	bps	(112)	bps
Average assets			$ 17,814,191		$ 16,793,072		$ 14,673,257		6 %		21 %
Net income			76,393		87,054		65,302		-12 %		17 %
Return on average assets before annualizing			0.43 %		0.52 %		0.45 %
Annualization factor			4.00		4.00		4.00
Return on average assets			1.72 %		2.07 %		1.78 %		(35)	bps	(6)	bps
Return on average tangible common shareholders' equity (1)			19.55 %		25.34 %		22.03 %		(579)	bps	(248)	bps
Tangible book value per common share (1)			$          31.27		$          29.26		$          24.14		7 %		30 %
Tangible common shareholders' equity/tangible assets (1)			7.86 %		7.12 %		6.58 %		74	bps	128	bps
Consolidated ratios
Total capital/risk-weighted assets(2)			12.0	%	11.7	%	11.3	%
Tier I capital/risk-weighted assets(2)			11.4	%	11.2	%	10.8	%
Common Equity Tier I capital/risk-weighted assets(2)			8.7	%	8.0	%	7.3	%
Tier I capital/average assets(2)			10.6	%	10.5	%	10.6	%
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:
(2) As defined by regulatory agencies; June 30, 2024 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 shareholders' equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total equity.  Tangible Assets is calculated by excluding the balance of goodwill and intangible assets.  Tangible book value per share is calculated by dividing tangible common shareholders' equity by the number of shares outstanding.
			Three Months Ended						Change
			June 30,		March 31,		June 30,		2Q24		2Q24
			2024		2024		2023		vs. 1Q24		vs. 2Q23
Net income			$        76,393		$        87,054		$        65,302		-12 %		17 %
Less: preferred stock dividends			(7,757)		(8,667)		(8,668)		-10 %		-11 %
Less: preferred stock redemption			(1,823)		-		-		-100 %		-100 %
Net income available to common shareholders			$        66,813		$        78,387		$        56,634		-15 %		18 %
Average shareholders' equity			$   1,824,730		$   1,747,660		$   1,544,976		4 %		18 %
Less: average goodwill & intangibles			(8,140)		(10,494)		(16,858)		-22 %		-52 %
Less: average preferred stock			(449,387)		(499,608)		(499,608)		-10 %		-10 %
Average tangible common shareholders' equity			$   1,367,203		$   1,237,558		$   1,028,510		10 %		33 %
Annualization factor			4.00		4.00		4.00
Return on average tangible common shareholders' equity			19.55 %		25.34 %		22.03 %		(579)	bps	(248)	bps
Total equity			$   1,888,147		$   1,776,468		$   1,560,300		6 %		21 %
Less: goodwill and intangibles			(8,108)		(8,163)		(16,794)		-1 %		-52 %
Less: preferred stock			(449,387)		(499,608)		(499,608)		-10 %		-10 %
Tangible common shareholders' equity			$   1,430,652		$   1,268,697		$   1,043,898		13 %		37 %
Assets			$ 18,212,422		$ 17,822,576		$ 15,874,872		2 %		15 %
Less: goodwill and intangibles			(8,108)		(8,163)		(16,794)		-1 %		-52 %
Tangible assets			$ 18,204,314		$ 17,814,413		$ 15,858,078		2 %		15 %
Ending common shares			45,757,567		43,354,718		43,237,300
Tangible book value per common share			$          31.27		$          29.26		$          24.14		7 %		30 %
Tangible common shareholders' equity/tangible assets			7.86 %		7.12 %		6.58 %		74	bps	128	bps

 

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Six Months Ended
			June 30,		June 30,
			2024		2023		Change
Noninterest expense			$        99,292		$        79,092		26 %
Net interest income (before provision for credit losses)			255,175		206,310		24 %
Noninterest income			72,225		44,146		64 %
Total income			$      327,400		$      250,456		31 %
Efficiency ratio			30.33 %		31.58 %		(125)	bps
Average assets			$ 17,303,632		$ 13,784,434		26 %
Net income			163,447		120,257		36 %
Return on average assets before annualizing			0.94 %		0.87 %
Annualization factor			2.00		2.00
Return on average assets			1.89 %		1.74 %		15	bps
Return on average tangible common shareholders' equity (1)			22.30 %		20.49 %		181	bps
Tangible book value per common share (1)			$          31.27		$          24.14		30 %
Tangible common shareholders' equity/tangible assets (1)			7.86 %		6.58 %		128	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.
			Six Months Ended
			June 30,		June 30,
			2024		2023		Change
Net income			$      163,447		$      120,257		36 %
Less: preferred stock dividends			(16,424)		(17,335)		-5 %
Less: preferred stock redemption			(1,823)		-		-100 %
Net income available to common shareholders			$      145,200		$      102,922		41 %
Average shareholders' equity			$   1,786,195		$   1,520,927		17 %
Less: average goodwill & intangibles			(9,317)		(16,918)		-45 %
Less: average preferred stock			(474,497)		(499,608)		-5 %
Average tangible common shareholders' equity			$   1,302,381		$   1,004,401		30 %
Annualization factor			2.00		2.00
Return on average tangible common shareholders' equity			22.30 %		20.49 %		181	bps
Total equity			$   1,888,147		$   1,560,300		21 %
Less: goodwill and intangibles			(8,108)		(16,794)		-52 %
Less: preferred stock			(449,387)		(499,608)		-10 %
Tangible common shareholders' equity			$   1,430,652		$   1,043,898		37 %
Assets			$ 18,212,422		$ 15,874,872		15 %
Less: goodwill and intangibles			(8,108)		(16,794)		-52 %
Tangible assets			$ 18,204,314		$ 15,858,078		15 %
Ending common shares			45,757,567		43,237,300
Tangible book value per common share			$          31.27		$          24.14		30 %
Tangible common shareholders' equity/tangible assets			7.86 %		6.58 %		128	bps

 

Merchants Bancorp
Average Balance Analysis
($ in thousands)
(Unaudited)
	Three Months Ended				Three Months Ended				Three Months Ended
	June 30, 2024				March 31, 2024				June 30, 2023
	Average		Yield/		Average		Yield/		Average		Yield/
	Balance	Interest	Rate		Balance	Interest	Rate		Balance	Interest	Rate
Assets:
Interest-bearing deposits, and other	$     438,445	$    6,225	5.71 %		$     346,150	$    5,545	6.44 %		$     249,722	$    3,335	5.36 %
Securities available for sale	1,039,388	14,784	5.72 %		1,085,114	14,388	5.33 %		672,887	5,564	3.32 %
Securities held to maturity	1,160,170	19,799	6.86 %		1,196,633	20,522	6.90 %		1,093,018	17,311	6.35 %
Mortgage loans in process of securitization	234,706	3,044	5.22 %		137,890	1,720	5.02 %		280,092	3,127	4.48 %
Loans and loans held for sale	14,347,165	284,421	7.97 %		13,494,961	271,998	8.11 %		11,968,565	228,732	7.67 %
Total interest-earning assets	17,219,874	328,273	7.67 %		16,260,748	314,173	7.77 %		14,264,284	258,069	7.26 %
Allowance for credit losses on loans	(76,456)				(71,544)				(54,411)
Noninterest-earning assets	670,773				603,868				463,384
Total assets	$ 17,814,191				$ 16,793,072				$ 14,673,257
Liabilities & Shareholders' Equity:
Interest-bearing checking	$   4,935,123	58,128	4.74 %		$   5,070,393	60,688	4.81 %		$   4,307,736	48,296	4.50 %
Savings deposits	145,262	19	0.05 %		201,860	219	0.44 %		236,012	299	0.51 %
Money market	2,788,335	33,207	4.79 %		2,817,382	33,644	4.80 %		2,749,594	30,521	4.45 %
Certificates of deposit	6,535,651	88,297	5.43 %		5,694,933	76,471	5.40 %		4,729,242	58,685	4.98 %
Total interest-bearing deposits	14,404,371	179,651	5.02 %		13,784,568	171,022	4.99 %		12,022,584	137,801	4.60 %
Borrowings	1,031,180	20,503	8.00 %		716,853	16,095	9.03 %		591,333	14,651	9.94 %
Total interest-bearing liabilities	15,435,551	200,154	5.22 %		14,501,421	187,117	5.19 %		12,613,917	152,452	4.85 %
Noninterest-bearing deposits	331,246				332,172				346,837
Noninterest-bearing liabilities	222,664				211,819				167,527
Total liabilities	15,989,461				15,045,412				13,128,281
Shareholders' equity	1,824,730				1,747,660				1,544,976
Total liabilities and shareholders' equity	$ 17,814,191				$ 16,793,072				$ 14,673,257
Net interest income		$ 128,119				$ 127,056				$ 105,617
Net interest spread			2.45 %				2.58 %				2.41 %
Net interest-earning assets	$  1,784,323				$  1,759,327				$  1,650,367
Net interest margin			2.99 %				3.14 %				2.97 %
Average interest-earning assets to average interest-bearing liabilities			111.56 %				112.13 %				113.08 %

 

Supplemental Results
(Unaudited)
($ in thousands)
				Net Income									Net Income
				Three Months Ended									Six Months Ended
				June 30,			March 31,			June 30,			June 30,
				2024			2024			2023			2024		2023
Segment
Multi-family Mortgage Banking				$              9,037			$            16,609			$               11,242			$          25,646		$          13,208
Mortgage Warehousing				22,270			20,190			18,596			42,460		27,237
Banking				52,378			56,425			42,650			108,803		91,957
Other				(7,292)			(6,170)			(7,186)			(13,462)		(12,145)
Total				$            76,393			$            87,054			$               65,302			$        163,447		$        120,257
				Total Assets
				June 30, 2024			March 31, 2024			December 31, 2023
				Amount	%		Amount	%		Amount	%
Segment
Multi-family Mortgage Banking				$          428,299	2 %		$          416,454	2 %		$             411,097	2 %
Mortgage Warehousing				5,626,055	31 %		5,369,299	30 %		4,522,175	27 %
Banking				11,885,484	65 %		11,760,028	66 %		11,760,943	69 %
Other				272,584	2 %		276,795	2 %		258,301	2 %
Total				$     18,212,422	100 %		$     17,822,576	100 %		$        16,952,516	100 %
				Gain on Sale of Loans									Gain on Sale of Loans
				Three Months Ended									Six Months Ended
				June 30, 2024			March 31, 2024			June 30,			June 30,
				2024			2024			2023			2024		2023
Loan Type
Multi-family				$              9,083			$              8,423			$               10,361			$          17,506		$          15,281
Single-family				524			280			202			804		479
Small Business Association (SBA)				1,561			653			787			2,214		2,323
Total				$            11,168			$              9,356			$               11,350			$          20,524		$          18,083

 

Supplemental Results
(Unaudited)
($ in thousands)
				Loans Receivable and Loans Held for Sale
				June 30,			March 31,			December 31,
				2024			2024			2023
Mortgage warehouse repurchase agreements				$         1,369,965			$       1,142,994			$             752,468
Residential real estate (1)				1,345,656			1,321,300			1,324,305
Multi-family financing				4,160,420			4,096,606			4,006,160
Healthcare financing				2,495,910			2,464,685			2,356,689
Commercial and commercial real estate (2)(3)				1,566,809			1,666,751			1,643,081
Agricultural production and real estate				70,244			65,977			103,150
Consumer and margin loans				5,213			7,912			13,700
				11,014,217			10,766,225			10,199,553
Less: Allowance for credit losses on loans				81,028			75,712			71,752
Loans receivable				$       10,933,189			$     10,690,513			$        10,127,801
Loans held for sale				3,483,076			3,503,131			3,144,756
Total loans, net of allowance				$       14,416,265			$     14,193,644			$        13,272,557

(1) Includes $1.2 billion, $1.2 billion and $1.2 billion of All-In-One © first-lien home equity lines of credit as of June 30, 2024, March 31, 2024 and December 31, 2023, respectively.

(2) Includes $1.0 billion, $1.1 billion and $1.1 billion of revolving  lines of credit collateralized primarily by mortgage servicing rights as of June 30, 2024, March 31, 2024 and December 31, 2023, respectively.

(3) Includes only $6.8 million, $6.8 million and $8.4 million of non-owner occupied commercial real estate as of June 30, 2024, March 31, 2024  and December 31, 2023, respectively.

 

				Loan Credit Risk Profile
				June 30, 2024			March 31, 2024			December 31, 2023
				Amount	%		Amount	%		Amount	%
Pass				$       10,523,378	95.6 %		$     10,410,748	96.7 %		$          9,879,659	96.9 %
Special mention				244,000	2.2 %		232,122	2.2 %		191,267	1.9 %
Substandard				246,839	2.2 %		123,355	1.1 %		128,577	1.2 %
Doubtful				—	—		—	—		50	—
Loans receivable				$       11,014,217	100.0 %		$     10,766,225	100.0 %		$        10,199,553	100.0 %
Charge-offs (year-to-date)				$                4,377			$                 925			$                 9,791
Recoveries (year-to-date)				$                     16			$                     1			$                      41
				Nonperforming Loans
				June 30,			March 31,			December 31,
				2024			2024			2023
Nonaccrual loans				$            143,319			$            78,804			$               73,847
90 days past due and still accruing				133			52,982			8,168
Total nonperforming loans				$            143,452			$          131,786			$               82,015
As a percentage of loans receivable				1.30 %			1.22 %			0.80 %

 

 

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