Merchants Bancorp Reports Second Quarter 2022 Results

• Second quarter 2022 net income of $53.9 million increased 5% compared to the second quarter of 2021 and increased 8% compared to the first quarter of 2022
• Second quarter 2022 diluted earnings per common share of $1.11 increased 5% compared to the second quarter of 2021 and increased 9% compared to the first quarter of 2022
• Total assets of $11.1 billion increased 15%, compared to March 31, 2022, and decreased 2% compared to December 31, 2021
• Return on average assets was 2.20% in the second quarter of 2022 compared to 2.14% in the second quarter of 2021 and 1.92% in the first quarter of 2022
• Net interest margin was 3.03% in the second quarter of 2022 compared to 2.75% in the second quarter of 2021 and 2.62% in the first quarter of 2022
• Tangible book value per common share of $19.70 increased 25% compared to $15.73 in the second quarter of 2021 and increased 5% compared to $18.70 in the first quarter of 2022
• Credit quality remained strong, as nonperforming loans represented 0.07% of loans receivable compared to 0.08% at March 31, 2022 and 0.01% at December 31, 2021
• During the second quarter 2022, the Company repurchased $3.9 million of its common shares
• On May 5, 2022, the Company completed a $214 million Commercial Mortgage Backed Securities (CMBS) securitization of 14 multifamily mortgage loans secured by 24 mortgaged properties through a Freddie Mac-sponsored Q-Series transaction

CARMEL, Ind., July 28, 2022 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported second quarter 2022 net income of $53.9 million, or diluted earnings per common share of $1.11.  This compared to $51.4 million, or diluted earnings per common share of $1.06 in the second quarter of 2021, and compared to $50.1 million, or diluted earnings per common share of $1.02 in the first quarter of 2022.

"We have continued to successfully manage our capital, liquidity, and resources to maximize returns in the second quarter as we expanded the reach of our products and services, while also minimizing our credit risk.  With a tangible book value of $19.70 per share, an industry-leading return on average assets of 2.20% and efficiency ratio of 29.6% in the quarter, we have established significant momentum and anticipate continued strength in the second half of 2022 and beyond," said Michael F. Petrie, Chairman and CEO of Merchants. 

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Achieving these superior results can be attributable to the tremendous efforts of our employees who operate with an entrepreneurial spirit and focus on continuous improvement.  Their successes have led to an expansion of our business platforms in a unique and powerful way that has benefited all our customers.  We also believe that we are still in the early stages of reaping all the revenue opportunities from our investments."

Net income of $53.9 million for the second quarter 2022 increased by $2.5 million, or 5%, compared to the second quarter of 2021, primarily driven by a $16.8 million, or 23%, increase in interest income and a $7.0 million higher fair market value adjustment to mortgage servicing rights.  These increases were partially offset by a $9.2 million increase in interest expense, a $6.5 million increase in the provision for credit losses, a $4.8 million increase in noninterest expense, and a $3.6 million decrease in gain on sale of loans.

Net income for the second quarter 2022 increased by $3.8 million, or 8%, compared to the first quarter of 2022, primarily driven by a $13.2 million, or 17%, increase in interest income and a $3.6 million increase in gain on sale of loans. These increases were partially offset by a $7.0 million increase in interest expense, a $3.8 million increase in the provision for credit losses, and a $1.9 million increase in noninterest expense.

Total Assets

Total assets of $11.1 billion at June 30, 2022 increased 15%, compared to March 31, 2022, and decreased 2%, compared to December 31, 2021. Both periods reflected significant increases in loans, primarily from growth in the multi-family and healthcare financing portfolio.

Return on average assets was 2.20% for the second quarter of 2022 compared to 1.92% for the first quarter of 2022 and 2.14% for the second quarter of 2021.

Asset Quality

The allowance for credit losses on loans of $37.5 million at June 30, 2022 increased $5.3 million compared to March 31, 2022 and increased $6.1 million compared to December 31, 2021.  The increases compared to both periods were primarily from growth in the multi-family and healthcare loan portfolios and also reflected a contingent reserve related to a Freddie Mac-sponsored Q-Series securitization transaction.  As of June 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 $4.8 million, or 0.07%, of loans receivable at June 30, 2022, compared to compared to 0.08% at March 31, 2022 and 0.01% at December 31, 2021.

Total Deposits

Total deposits of $8.3 billion at June 30, 2022 increased $823.9 million, or 11%, compared to March 31, 2022, and decreased $682.9 million, or 8%, compared to December 31, 2021. The increase compared to March 31, 2022 was primarily due to an increase in brokered certificates of deposits.  

Total brokered deposits of $1.2 billion at June 30, 2022 increased $844.8 million, or 222%, from March 31, 2022 and decreased $935.1 million, or 43%, from December 31, 2021.   Brokered deposits represented 15% of total deposits at June 30, 2022 compared to 5% of total deposits at March 31, 2022 and 24% of total deposits at December 31, 2021. 

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 $258.1 million at June 30, 2022 decreased by $153.4 million compared to March 31, 2022 and decreased by $774.5 million compared to December 31, 2021.  The Company continues to have significant borrowing capacity, with unused lines of credit totaling $1.7 billion at June 30, 2022 compared to $2.2 billion at March 31, 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 June 30, 2022 and 2021

Net Interest Income of $72.0 million increased $7.6 million, or 12% compared to $64.4 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 2.90% increased 22 basis points compared to 2.68%.
• Net interest margin of 3.03% increased 28 basis points compared to 2.75%.

Interest Income of $89.3 million increased 23% compared to $72.4 million, reflecting an increase in both yields and average balances of loans and loans held for sale, driven by increases in the multi-family and healthcare portfolios. 

• Average balances of $8.6 billion for loans and loans held for sale increased $737.5 million, or 9%, compared to $7.9 billion.
• Average yield on loans and loans held for sale of 3.99% increased 53 basis points compared to 3.46%.

Interest Expense of $17.2 million increased $9.2 million, or 115%, compared to $8.0 million.  Interest expense on deposits of $14.8 million increased $8.1 million, or 121%, compared $6.7 million, reflecting higher rates on interest bearing checking and money market accounts.

• Average balances of $7.4 billion for interest-bearing deposits decreased $33.9 million, essentially unchanged compared to $7.4 billion.
• Average interest rates of 0.81% for interest-bearing deposits increased 45 basis points compared to 0.36%.

Noninterest Income of $39.2 million increased $6.3 million, or 19%, compared to $32.9 million, primarily due to a $7.9 million increase in loan servicing fees, partially offset by a $3.6 million decrease in gain on sale of loans.

• Loan servicing fees included a $7.7 million positive fair market value adjustment to mortgage servicing rights, of which $1.1 million was in the Banking segment and $6.6 million was in the Multi-family Mortgage Banking segment. This compared to a $0.7 million positive fair market value adjustment to mortgage servicing rights, of which $0.6 million was in the Banking segment and $0.1 million was in the Multi-family Mortgage Banking segment.
• Syndication and asset management fees of $1.6 million more than tripled and are becoming a meaningful source of noninterest income growth.

Noninterest Expense of $33.0 million increased $4.8 million, or 17%, compared to $28.2 million, primarily due to increases in salaries and employee benefits to support business growth. 

• The efficiency ratio of 29.6% increased 66 basis points compared to 29.0%.

Comparison of Operating Results for the Three Months Ended June 30, 2022 and March 31, 2022

Net Interest Income of $72.0 million increased $6.3 million, or 10% compared to $65.7 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 2.90% increased 35 basis points compared to 2.55%.
• Net interest margin of 3.03% increased 41 basis points compared to 2.62%.

Interest Income of $89.3 million increased $13.3 million, or 17%, compared to $76.0 million, reflecting an increase in yields and average balances of loans and loans held for sale, driven by increases in the multi-family and healthcare portfolios.

• Average balances of $8.6 billion for loans and loans held for sale increased $593.4 million, or 7%, compared to $8.0 billion.
• Average yield on loans and loans held for sale of 3.99% increased 35 basis points compared to 3.64%.

Interest Expense of $17.2 million increased 68% compared to $10.3 million.  Interest expense on deposits of $14.8 million increased $6.0 million, or 68%, compared to $8.8 million, reflecting higher interest rates on interest bearing checking and money market accounts.

• Average balances of $7.4 billion for interest-bearing deposits decreased $682.5 million, or 8%, compared to $8.0 billion.
• Average interest rates of 0.81% for interest-bearing deposits increased 37 basis points compared to 0.44%.

Noninterest Income of $39.2 million increased $4.6 million, or 13%, compared $34.6 million, primarily due to a $3.6 million, or 20%, increase in gain on sale of loans. 

• Loan servicing fees included 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. This compared to a $7.6 million positive fair market value adjustment to servicing rights, of which $4.3 million was in the Banking segment and $3.3 million was in the Multi-family Mortgage Banking segment.
• Syndication and asset management fees of $1.6 million more than tripled and are becoming a meaningful source of noninterest income growth.

Noninterest Expense of $33.0 million increased 6% compared to $31.0 million, primarily due to increases in salaries and employee benefits to support business growth.

• The efficiency ratio of 29.6% decreased 129 basis points compared to 30.9%.

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 $11.1 billion in assets and $8.3 billion in deposits as of June 30, 2022, conducts its business primarily through its direct and indirect subsidiaries, Merchants Bank of Indiana, Merchants Capital Corp., Farmers-Merchants Bank of Illinois, Merchants Capital Servicing, 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, 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)
		June 30		March 31		December 31,		September 30,		June 30,
		2022		2022		2021		2021		2021
Assets
Cash and due from banks		$       10,714		$       9,853		$        14,030		$         14,352		$     13,745
Interest-earning demand accounts		247,432		401,668		1,018,584		788,224		388,304
Cash and cash equivalents		258,146		411,521		1,032,614		802,576		402,049
Securities purchased under agreements to resell		3,520		4,798		5,888		5,923		6,507
Mortgage loans in process of securitization		323,046		324,280		569,239		634,027		461,914
Available for sale securities		336,814		314,266		310,629		301,119		315,260
Federal Home Loan Bank (FHLB) stock		39,130		28,804		29,588		70,767		70,767
Loans held for sale (includes $16,801, $14,567, $48,583, $26,296 and $26,623, respectively, at fair value)		2,759,116		2,289,094		3,303,199		3,453,279		2,955,390
Loans receivable, net of allowance for credit losses on loans of $37,474, $32,102, $31,344, $29,134 and $28,696, respectively		7,033,203		5,976,960		5,751,319		5,431,227		5,444,227
Premises and equipment, net		35,085		34,559		31,212		31,423		31,384
Servicing rights		130,710		121,036		110,348		105,473		98,331
Interest receivable		26,184		23,499		24,103		21,894		22,068
Goodwill		15,845		15,845		15,845		15,845		15,845
Intangible assets, net		1,441		1,574		1,707		1,843		1,990
Other assets and receivables		123,815		104,356		92,947		76,637		55,800
Total assets		$11,086,055		$9,650,592		$ 11,278,638		$  10,952,033		$9,881,532
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing		$     444,461		$   461,193		$      641,442		$       824,118		$   814,567
Interest-bearing		7,855,277		7,014,628		8,341,171		8,123,201		7,225,011
Total deposits		8,299,738		7,475,821		8,982,613		8,947,319		8,039,578
Borrowings		1,440,904		879,929		1,033,954		809,136		701,373
Deferred and current tax liabilities, net		19,414		30,695		19,170		21,681		18,819
Other liabilities		97,460		75,644		87,492		64,019		62,698
Total liabilities		9,857,516		8,462,089		10,123,229		9,842,155		8,822,468
Commitments and  Contingencies
Shareholders' Equity
Common stock, without par value
Authorized - 75,000,000 shares, 50,000,000 shares, 50,000,000 shares, 50,000,000 shares and 50,000,000 shares
Issued and outstanding  - 43,106,505 shares, 43,267,776 shares, 43,180,079 shares, 43,178,061 shares and 43,175,399 shares		136,671		137,882		137,565		137,200		136,836
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 - 250,000 shares
Issued and outstanding - 196,181 shares (equivalent to 7,847,233 depositary share)		191,084		191,084		191,084		191,084		191,084
Retained earnings		737,789		694,776		657,149		610,267		560,083
Accumulated other comprehensive income		(8,070)		(6,304)		(1,454)		262		(4)
Total shareholders' equity		1,228,539		1,188,503		1,155,409		1,109,878		1,059,064
Total liabilities and shareholders' equity		$11,086,055		$9,650,592		$ 11,278,638		$  10,952,033		$9,881,532

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Three Months Ended									Change
		June 30,			March 31,			June 30,			2Q22		2Q22
		2022			2022			2021			vs. 1Q22		vs. 2Q21
Interest Income
Loans		$	85,994		$	72,196		$	68,276		19 %		26 %
Mortgage loans in process of securitization			1,449			2,245			2,724		-35 %		-47 %
Investment securities:
Available for sale - taxable			917			701			833		31 %		10 %
Available for sale - tax exempt			—			—			9		—		-100 %
Federal Home Loan Bank stock			284			269			392		6 %		-28 %
Other			626			601			204		4 %		207 %
Total interest income			89,270			76,012			72,438		17 %		23 %
Interest Expense
Deposits			14,768			8,813			6,683		68 %		121 %
Borrowed funds			2,471			1,474			1,348		68 %		83 %
Total interest expense			17,239			10,287			8,031		68 %		115 %
Net Interest Income			72,031			65,725			64,407		10 %		12 %
Provision (credit) for credit losses			6,212			2,451			(315)		153 %		-2072 %
Net Interest Income After Provision for Credit Losses			65,819			63,274			64,722		4 %		2 %
Noninterest Income
Gain on sale of loans			21,564			17,965			25,122		20 %		-14 %
Loan servicing fees, net			9,607			9,731			1,727		-1 %		456 %
Mortgage warehouse fees			1,350			1,858			3,079		-27 %		-56 %
Syndication and asset management fees			1,599			614			480		160 %		233 %
Other income			5,051			4,429			2,447		14 %		106 %
Total noninterest income			39,171			34,597			32,855		13 %		19 %
Noninterest Expense
Salaries and employee benefits			22,475			21,293			18,869		6 %		19 %
Loan expenses			1,184			1,211			1,921		-2 %		-38 %
Occupancy and equipment			2,011			1,814			1,808		11 %		11 %
Professional fees			1,594			1,303			779		22 %		105 %
Deposit insurance expense			670			759			651		-12 %		3 %
Technology expense			1,304			1,236			971		6 %		34 %
Other expense			3,719			3,417			3,184		9 %		17 %
Total noninterest expense			32,957			31,033			28,183		6 %		17 %
Income Before Income Taxes			72,033			66,838			69,394		8 %		4 %
Provision for income taxes			18,098			16,696			17,977		8 %		1 %
Net Income		$	53,935		$	50,142		$	51,417		8 %		5 %
Dividends on preferred stock			(5,729)			(5,728)			(5,659)		—		1 %
Net Income Allocated to Common Shareholders		$	48,206		$	44,414		$	45,758		9 %		5 %
Basic Earnings Per Share		$	1.12		$	1.03		$	1.06		9 %		6 %
Diluted Earnings Per Share		$	1.11		$	1.02		$	1.06		9 %		5 %
Weighted-Average Shares Outstanding
Basic			43,209,824			43,190,066			43,174,220
Diluted			43,335,211			43,360,034			43,311,488

 

Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)
		Six Months Ended
		June 30,			June 30,
		2022			2021			Change
Interest Income
Loans		$	158,190		$	143,793		10 %
Mortgage loans in process of securitization			3,694			5,860		-37 %
Investment securities:
Available for sale - taxable			1,618			1,187		36 %
Available for sale - tax exempt			—			20		-100 %
Federal Home Loan Bank stock			553			776		-29 %
Other			1,227			351		250 %
Total interest income			165,282			151,987		9 %
Interest Expense
Deposits			23,581			12,783		84 %
Borrowed funds			3,945			2,834		39 %
Total interest expense			27,526			15,617		76 %
Net Interest Income			137,756			136,370		1 %
Provision for credit losses			8,663			1,348		543 %
Net Interest Income After Provision for Credit Losses			129,093			135,022		-4 %
Noninterest Income
Gain on sale of loans			39,529			53,742		-26 %
Loan servicing fees, net			19,338			9,678		100 %
Mortgage warehouse fees			3,208			7,195		-55 %
Syndication and asset management fees			2,213			535		314 %
Other income			9,480			5,641		68 %
Total noninterest income			73,768			76,791		-4 %
Noninterest Expense
Salaries and employee benefits			43,768			40,143		9 %
Loan expenses			2,395			4,444		-46 %
Occupancy and equipment			3,825			3,435		11 %
Professional fees			2,897			1,201		141 %
Deposit insurance expense			1,429			1,322		8 %
Technology expense			2,540			1,908		33 %
Other expense			7,136			5,814		23 %
Total noninterest expense			63,990			58,267		10 %
Income Before Income Taxes			138,871			153,546		-10 %
Provision for income taxes			34,794			40,146		-13 %
Net Income		$	104,077		$	113,400		-8 %
Dividends on preferred stock			(11,457)			(9,416)		22 %
Net Income Allocated to Common Shareholders		$	92,620		$	103,984		-11 %
Basic Earnings Per Share		$	2.14		$	2.41		-11 %
Diluted Earnings Per Share		$	2.14		$	2.40		-11 %
Weighted-Average Shares Outstanding
Basic			43,220,198			43,166,223
Diluted			43,367,875			43,293,599

 

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Three Months Ended						Change
			June 30,		March 31,		June 30,		2Q22		2Q22
			2022		2022		2021		vs. 1Q22		vs. 2Q21
Noninterest expense			$        32,957		$        31,033		$      28,183		6 %		17 %
Net interest income (before provision for credit losses)			72,031		65,725		64,407		10 %		12 %
Noninterest income			39,171		34,597		32,855		13 %		19 %
Total income			$      111,202		$      100,322		$      97,262		11 %		14 %
Efficiency ratio			29.64 %		30.93 %		28.98 %		(129)	bps	66	bps
Average assets			$   9,820,878		$ 10,436,448		$ 9,609,957		-6 %		2 %
Net income			$        53,935		$        50,142		$      51,417		8 %		5 %
Return on average assets before annualizing			0.55 %		0.48 %		0.54 %
Annualization factor			4.00		4.00		4.00
Return on average assets			2.20 %		1.92 %		2.14 %		28	bps	6	bps
Return on average tangible common shareholders' equity (1)			23.05 %		22.37 %		27.61 %		68	bps	(456)	bps
Tangible book value per common share (1)			$          19.70		$          18.70		$        15.73		5 %		25 %
Tangible common shareholders' equity/tangible assets (1)			7.67 %		8.40 %		6.88 %		(73)	bps	79	bps
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:
Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the company's financial condition, results of operations and cash flows computed in accordance with GAAP; however, they do have a number of limitations.  As such, the reader should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable  to non-GAAP financial measures that other companies use.  A reconciliation of GAAP to non-GAAP financial measures is below.  Net Income Available to Common Shareholders excludes preferred stock.  Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total assets.  Tangible Assets is calculated by excluding the balance of goodwill and intangible assets.  Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding.
			Three Months Ended						Change
			June 30,		March 31,		June 30,		2Q22		2Q22
			2022		2022		2021		vs. 1Q22		vs. 2Q21
Net income			$        53,935		$        50,142		$      51,417		8 %		5 %
Less: preferred stock dividends			(5,729)		(5,728)		(5,659)		—		1 %
Net income available to common shareholders			$        48,206		$        44,414		$      45,758		9 %		5 %
Average shareholders' equity			$   1,215,891		$   1,173,837		$ 1,031,246		4 %		18 %
Less: average goodwill & intangibles			(17,361)		(17,495)		(17,916)		-1 %		-3 %
Less: average preferred stock			(362,149)		(362,149)		(350,320)		—		3 %
Tangible common shareholders' equity			$      836,381		$      794,193		$    663,010		5 %		26 %
Annualization factor			4.00		4.00		4.00
Return on average tangible common shareholders' equity			23.05 %		22.37 %		27.61 %		69	bps	(455)	bps
Total equity			$   1,228,539		$   1,188,503		$ 1,059,064		3 %		16 %
Less: goodwill and intangibles			(17,286)		(17,419)		(17,835)		-1 %		-3 %
Less: preferred stock			(362,149)		(362,149)		(362,149)		—		—
Tangible common shareholders' equity			$      849,104		$      808,935		$    679,080		5 %		25 %
Assets			$ 11,086,055		$   9,650,592		$ 9,881,532		15 %		12 %
Less: goodwill and intangibles			(17,286)		(17,419)		(17,835)		-1 %		-3 %
Tangible assets			$ 11,068,769		$   9,633,173		$ 9,863,697		15 %		12 %
Ending common shares			43,106,505		43,267,776		43,175,399		—		—
Tangible book value per common share			$          19.70		$          18.70		$        15.73		5 %		25 %
Tangible common shareholders' equity/tangible assets			7.67 %		8.40 %		6.88 %		(73)	bps	79	bps

   

Key Operating Results
(Unaudited)
($ in thousands, except share data)
			Six Months Ended
			June 30,		June 30,
			2022		2021		Change
Noninterest expense			$           63,990		$          58,267		10 %
Net interest income (before provision for credit losses)			137,756		136,370		1 %
Noninterest income			73,768		76,791		-4 %
Total income			$         211,524		$        213,161		-1 %
Efficiency ratio			30.25 %		27.33 %		292	bps
Average assets			$    10,126,963		$     9,780,487		4 %
Net income			$         104,077		$        113,400		-8 %
Return on average assets before annualizing			1.03 %		1.16 %
Annualization factor			2.00		2.00
Return on average assets			2.06 %		2.32 %		(26)	bps
Return on average tangible common shareholders' equity (1)			22.72 %		32.72 %		(1,000)	bps
Tangible book value per common share (1)			$             19.70		$            15.73		25 %
Tangible common shareholders' equity/tangible assets (1)			7.67 %		6.88 %		79	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,
			2022		2021		Change
Net income			$         104,077		$        113,400		-8 %
Less: preferred stock dividends			(11,457)		(9,416)		22 %
Net income available to common shareholders			$           92,620		$        103,984		-11 %
Average shareholders' equity			$      1,194,981		$        942,566		27 %
Less: average goodwill & intangibles			(17,428)		(17,986)		-3 %
Less: average preferred stock			(362,149)		(289,058)		25 %
Tangible common shareholders' equity			$         815,404		$        635,522		28 %
Annualization factor			2.00		2.00
Return on average tangible common shareholders' equity			22.72 %		32.72 %		(1,000)	bps
Total equity			$      1,228,539		$     1,059,064		16 %
Less: goodwill and intangibles			(17,286)		(17,835)		-3 %
Less: preferred stock			(362,149)		(362,149)		0 %
Tangible common shareholders' equity			$         849,104		$        679,080		25 %
Assets			$    11,086,055		$     9,881,532		12 %
Less: goodwill and intangibles			(17,286)		(17,835)		-3 %
Tangible assets			$    11,068,769		$     9,863,697		12 %
Ending common shares			43,106,505		43,175,399		—
Tangible book value per common share			$             19.70		$            15.73		25 %
Tangible common shareholders' equity/tangible assets			7.67 %		6.88 %		79	bps

 

Merchants Bancorp
Average Balance Analysis
($ in thousands)
(Unaudited)
	Three Months Ended				Three Months Ended				Three Months Ended
	June 30, 2022				March 31, 2022				June 30, 2021
	Average		Yield/		Average		Yield/		Average		Yield/
	Balance	Interest	Rate		Balance	Interest	Rate		Balance	Interest	Rate
Assets:
Interest-bearing deposits, and other	$   367,540	$     910	0.99 %		$  1,460,486	$     870	0.24 %		$   788,002	$     596	0.30 %
Securities available for sale - taxable	330,759	917	1.11 %		305,600	701	0.93 %		285,536	833	1.17 %
Securities available for sale - tax exempt	—	—			—	—			1,363	9	2.65 %
Mortgage loans in process of securitization	198,349	1,449	2.93 %		349,027	2,245	2.61 %		416,559	2,724	2.62 %
Loans and loans held for sale	8,643,276	85,994	3.99 %		8,049,877	72,196	3.64 %		7,905,766	68,276	3.46 %
Total interest-earning assets	9,539,924	89,270	3.75 %		10,164,990	76,012	3.03 %		9,397,226	72,438	3.09 %
Allowance for credit losses on loans	(33,401)				(31,023)				(28,778)
Noninterest-earning assets	314,355				302,481				241,509
Total assets	$9,820,878				$10,436,448				$9,609,957
Liabilities & Shareholders' Equity:
Interest-bearing checking	3,849,876	6,945	0.72 %		4,015,709	2,204	0.22 %		4,473,251	1,362	0.12 %
Savings deposits	238,944	62	0.10 %		230,702	33	0.06 %		205,884	38	0.07 %
Money market	2,626,973	6,567	1.00 %		2,710,961	5,252	0.79 %		2,197,750	4,175	0.76 %
Certificates of deposit	639,556	1,194	0.75 %		1,080,438	1,324	0.50 %		512,316	1,108	0.87 %
Total interest-bearing deposits	7,355,349	14,768	0.81 %		8,037,810	8,813	0.44 %		7,389,201	6,683	0.36 %
Borrowings	749,628	2,471	1.32 %		589,597	1,474	1.01 %		523,942	1,348	1.03 %
Total interest-bearing liabilities	8,104,977	17,239	0.85 %		8,627,407	10,287	0.48 %		7,913,143	8,031	0.41 %
Noninterest-bearing deposits	402,328				518,140				590,886
Noninterest-bearing liabilities	97,682				117,064				74,682
Total liabilities	8,604,987				9,262,611				8,578,711
Shareholders' equity	1,215,891				1,173,837				1,031,246
Total liabilities and shareholders' equity	$9,820,878				$10,436,448				$9,609,957
Net interest income		$72,031				$65,725				$64,407
Net interest spread			2.90 %				2.55 %				2.68 %
Net interest-earning assets	$1,434,947				$  1,537,583				$1,484,083
Net interest margin			3.03 %				2.62 %				2.75 %
Average interest-earning assets to average interest-bearing liabilities			117.70 %				117.82 %				118.75 %

 

Supplemental Results
(Unaudited)
($ in thousands)
				Net Income						Net Income
				Three Months Ended						Six Months Ended
				June 30,		March 31,		June 30,		June 30,
				2022		2022		2021		2022		2021
Segment
Multi-family Mortgage Banking				$        19,556		$      11,492		$        10,971		$   31,048		$   22,932
Mortgage Warehousing				11,868		13,159		21,448		25,027		50,631
Banking				25,932		28,764		21,741		54,696		44,766
Other				(3,421)		(3,273)		(2,743)		(6,694)		(4,929)
Total				$        53,935		$      50,142		$        51,417		$ 104,077		$ 113,400
				Total Assets
				June 30,		March 31,		December 31,
				2022		2022		2021
Segment
Multi-family Mortgage Banking				$      330,676		$    293,286		$      296,129
Mortgage Warehousing				2,836,998		2,863,907		3,977,537
Banking				7,835,152		6,409,943		6,929,565
Other				83,229		83,456		75,407
Total				$ 11,086,055		$ 9,650,592		$ 11,278,638
				Gain on Sale of Loans						Gain on Sale of Loans
				Three Months Ended						Six Months Ended
				June 30,		March 31,		June 30,		June 30,
				2022		2022		2021		2022		2021
Loan Type
Multi-family				19,623		$      14,953		$        21,408		$   34,576		$   44,244
Single-family				406		457		1,872		863		6,085
Small Business Association (SBA)				1,535		2,555		1,842		4,090		3,413
Total				$        21,564		$      17,965		$        25,122		$   39,529		$   53,742
				Loans Receivable and Loans Held for Sale
				June 30,		March 31,		December 31,
				2022		2022		2021
Mortgage warehouse lines of credit				$      900,585		$    752,447		$      781,437
Residential real estate				876,652		858,325		843,101
Multi-family financing				3,236,917		2,876,005		2,702,042
Healthcare financing				1,262,424		850,751		826,157
Commercial and commercial real estate				695,158		567,971		520,199
Agricultural production and real estate				90,070		90,688		97,060
Consumer and margin loans				8,871		12,875		12,667
				7,070,677		6,009,062		5,782,663
Less: Allowance for credit losses on loans				37,474		32,102		31,344
Loans receivable				$   7,033,203		$ 5,976,960		$   5,751,319
Loans held for sale				2,759,116		2,289,094		3,303,199
Total loans, net of allowance				$   9,792,319		$ 8,266,054		$   9,054,518

 

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SOURCE Merchants Bancorp