Merchants Bancorp Reports Fourth Quarter 2024 Results

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January 28, 2025 4:05 PM EST
  • Full year 2024 net income of $320.4 million set a new Company record, increasing 15% compared to 2023.
  • Full year 2024 diluted earnings per common share of $6.30 reached the highest level in Company history and increased 12% compared to 2023.
  • Fourth quarter 2024 net income of $95.7 million, increased 23% compared to fourth quarter of 2023 and increased 56% compared to the third quarter 2024, which reflected a $42.4 million, or 253%, increase in noninterest income.
  • Fourth quarter 2024 diluted earnings per common share of $1.85 increased 17% compared to the fourth quarter of 2023 and increased 58% compared to the third quarter of 2024.
  • Favorable fair market value adjustments to servicing rights on loans and interest rate floor derivatives of $10.4 million and $2.6 million, respectively, positively impacted results during the fourth quarter of 2024 by approximately $0.21 per diluted common share, essentially reversing the $0.24 per share impact of negative fair market value adjustments in the third quarter of 2024.
  • Total assets of $18.8 billion surpassed any level previously reported by the Company, increasing 1% compared to September 30, 2024, and increasing 11% compared to December 31, 2023.
  • Tangible book value per common share reached a record-high of $34.15 and increased 25% compared to $27.40 in the fourth quarter of 2023 and increased 5% compared to $32.38 in the third quarter of 2024.
  • As of December 31, 2024, the Company had $4.3 billion in unused borrowing capacity with the Federal Home Loan Bank and the Federal Reserve Discount window, representing 23% of total assets.
  • Loans receivable of $10.4 billion, net of allowance for credit losses on loans, increased $92.1 million, or 1%, compared to September 30, 2024, and increased $226.2 million, or 2%, compared to December 31, 2023.
  • Core deposits increased $1.3 billion, to $9.4 billion, compared to December 31, 2023, while brokered deposits decreased $3.4 billion, to $2.5 billion.
  • On November 25, 2024, the Company completed a 7.625% Series E Preferred Stock offering resulting in proceeds of $222.7 million, net of $7.3 million in offering costs.
  • On December 27, 2024, the Company executed a credit default swap on a $1.2 billion pool of warehouse loans, to reduce risk-based capital requirements and provide credit protection for the loan pool.
  • The Company redeemed all outstanding shares of the Series B Preferred Stock for approximately $125.0 million on January 2, 2025, at the liquidation preference of $1,000 per share (equivalent to $25 per depositary share).

CARMEL, Ind., Jan. 28, 2025 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank, today reported fourth quarter 2024 net income of $95.7 million, or diluted earnings per common share of $1.85. This compared to $77.5 million, or diluted earnings per common share of $1.58 in the fourth quarter of 2023, and compared to $61.3 million, or diluted earnings per common share of $1.17 in the third quarter of 2024.

"Our record-breaking performance in 2024, with net income of $320.4 million and earnings per share of $6.30, demonstrates that our superior business model provides for growth and higher earnings in any environment.  With total assets reaching the highest levels in company history, at $18.8 billion, and tangible book value per share increasing 25%, to an all-time high of $34.15 per share, we have remained focused on effectively managing capital and delivering exceptional value to our shareholders and stakeholders," said Michael F. Petrie, Chairman and CEO of Merchants.

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Looking ahead, we remain focused on leveraging our financial flexibility to drive sustainable growth. Despite increases in nonperforming loans over the last few quarters, delinquencies have declined, and charge-offs have been minimal. Our strategic initiatives, including the recent credit risk transfer transactions, as well as common and preferred stock offerings, strengthened our capital position and further mitigated risk.  We are confident in our exceptional team's ability to continue delivering profitable growth in the coming years."

Net income of $95.7 million for the fourth quarter of 2024 increased by $18.2 million, or 23%, compared to the fourth quarter of 2023, primarily driven by a $24.7 million, or 72%, increase in noninterest income and a $10.3 million, or 8%, increase in net interest income, which was partially offset by a $10.6 million, or 20%, increase in noninterest expense. Noninterest income included a $10.4 million positive fair market value adjustment to servicing rights and a $2.6 million positive fair market value adjustment to derivatives, which compared to a $7.6 million negative fair market value adjustment to servicing rights and a positive fair market value adjustment of $6.6 million to derivatives in the fourth quarter of 2023.

Net income of $95.7 million for the fourth quarter 2024 increased by $34.4 million, or 56%, compared to the third quarter of 2024, primarily driven by a $42.4 million, or 253%, increase in noninterest income that reflected higher gain on sale of loans, loan servicing fees, syndication and asset management fees, and other income. Noninterest income included a $10.4 million positive fair market value adjustment to servicing rights and a $2.6 million positive fair market value adjustment to derivatives, which compared to negative adjustments of $6.7 million and $7.7 million, respectively, in the third quarter of 2024.

Total Assets
Total assets of $18.8 billion at December 31, 2024 increased by $152.8 million, or 1%, compared to September 30, 2024, and increased by $1.9 billion, or 11%, compared to December 31, 2023.  The increase compared to December 31, 2023 was primarily due to growth in loans held for sale and in the warehouse, and multi-family loan portfolios. There was also an increase in securities held to maturity compared to December 31, 2023, reflecting the purchase of a security representing healthcare loans sold into a securitization in the third quarter of 2024 that was offset by a decline in loans in the healthcare portfolio that were sold into the securitization.

Return on average assets was 2.07% for the fourth quarter of 2024 compared to 1.86% for the fourth quarter of 2023 and 1.34% for the third quarter of 2024.  Return on average assets was 1.79% for the full year 2024 compared to 1.85% for the full year 2023.

Asset Quality
The allowance for credit losses on loans of $84.4 million, as of December 31, 2024, decreased by $163,000 compared to September 30, 2024, and increased by $12.6 million, or 18%, compared to December 31, 2023.  The $163,000 decrease compared to September 30, 2024 reflected an increase in provision for credit losses on loans in the multi-family portfolio that was essentially offset by a partial charge-off of one multi-family loan that was previously fully reserved. The increase compared to December 31, 2023 was driven by a $16.7 million increase in specific reserves, primarily related to five customers.  This increase was partially offset by lower loan balances due to the securitization of healthcare loans, which reduced the allowance by approximately $4.4 million.

The $84.4 million allowance for credit losses on loans as of December 31, 2024, compared to the net charge-offs of $10.5 million over the last twelve months ended December 31, 2024, could absorb eight years of losses, assuming recent loss levels continue.

The Company recorded charge-offs for three customers, primarily in the multi-family loan portfolio, totaling $4.2 million, and recorded $113,000 of recoveries during the fourth quarter 2024. This compares to $238,000 in charge-offs and $1,000 in recoveries during the fourth quarter of 2023 and to $2.1 million in charge-offs and $7,000 of recoveries in the third quarter of 2024.

As of December 31, 2024, non-performing loans were $279.7 million, or 2.68% of gross loans receivable, compared to $210.9 million, or 2.04%, as of September 30, 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 largely due to higher interest rates since the loans were originated and the financial deterioration of a few sponsors.  Delinquency levels on total loans have declined by $56.3 million, to $324.6 million, compared to September 30, 2024.

All substandard loans as of December 31, 2024 have been evaluated for impairment and these loans have specific reserves of $23.4 million, including $4.2 million added during the fourth quarter of 2024. Although there has been an increase in adversely classified loans, underlying asset values remain strong overall and loans are well-collateralized.

In addition to elevated reserves for credit losses on loans compared to December 2023, the Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019.  In April of 2023, as well as March and December of 2024, the Company strategically executed credit protection arrangements through a credit linked note and credit default swaps totaling $2.9 billion in loans to reduce risk of losses, with incremental coverage ranging from 13-14% of the unpaid principal balances for each arrangement.  Despite having credit protection on these loans, the Company also continues to carry an allowance for credit losses on loans held for investment. As of December 31, 2024, the balance of loans in credit protection arrangements was $2.3 billion.

Securities Available for Sale
Total securities available for sale of $980.0 million as of December 31, 2024 increased by $27.0 million, or 3%, compared to September 30, 2024, and decreased by $133.6 million, or 12%, compared to December 31, 2023.  The decrease was primarily due to maturities and repayments, as well as fair value adjustments that were partially offset by purchases.

Securities Held to Maturity
Total securities held to maturity of $1.7 billion as of December 31, 2024 decreased by $90.4 million, or 5%, compared to September 30, 2024, and increased $460.5 million, or 38%, compared to December 31, 2023. The decrease compared to September 30, 2024 was primarily due to repayments. The increase from December 31, 2023 was primarily due to purchases of senior investment securities backed by residential and healthcare loans retained as part of credit risk transfer securitization transactions originated by the Company.

Total Deposits
Total deposits of $11.9 billion at December 31, 2024 decreased by $971.9 million, or 8%, compared to September 30, 2024, and decreased by $2.1 billion, or 15%, compared to December 31, 2023. The change compared to both periods was driven by decreases in brokered certificates of deposit accounts and demand accounts.

Core deposits of $9.4 billion at December 31, 2024 decreased by $708.1 million, or 7%, from September 30, 2024 and increased by $1.3 billion, or 16%, from December 31, 2023. Core deposits represented 79% of total deposits at December 31, 2024, 78% of total deposits at September 30, 2024, and 58% of total deposits at December 31, 2023.

Total brokered deposits of $2.5 billion at December 31, 2024 decreased $263.8 million, or 9%, from September 30, 2024 and decreased $3.4 billion, or 58%, from December 31, 2023.   As of December 31, 2024, brokered certificates of deposit had a weighted average remaining duration of 49 days.

Liquidity
Cash balances of $476.6 million as of December 31, 2024 decreased by $125.3 million, or 21%, compared to September 30, 2024 and decreased by $107.8 million, or 18%, compared to December 31, 2023.  The Company continues to have significant borrowing capacity, with unused lines of credit totaling $4.3 billion as of December 31, 2024 compared to $5.1 billion at September 30, 2024 and $6.0 billion at December 31, 2023.  Furthermore, its $3.1 billion line of credit availability with the Federal Reserve Bank of Chicago alone could fund 111% of its uninsured deposits, which represented approximately 24% of total deposits as of December 31, 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

December 31, 2024 and 2023

Net Interest Income of $134.6 million increased $10.3 million, or 8%, compared to $124.3 million, primarily due to higher interest income reflecting increases in average balances in loans and loans held for sale, as well as securities held to maturity, which were partially offset by lower average yields on loans and loans held for sale.

  • Net interest margin of 2.99% decreased 6 basis points compared to 3.05%. The margin was negatively impacted by 5 basis points in the fourth quarter of 2024 from the net reversal of $2.1 million in accrued interest income associated with the movement of loans into nonaccrual status.
  • Interest rate spread of 2.46% decreased 2 basis points compared to 2.48%.

Interest Income of $321.3 million increased $9.6 million, or 3%, primarily reflecting an increase in average balances of loans and loans held for sale, securities held to maturity, partially offset by lower average yields on loans and loans held for sale.

  • Average balances of $14.3 billion for loans and loans held for sale increased $611.1 million, or 4% compared to $13.7 billion.
  • Average balances of $1.7 billion for securities held to maturity increased $559.9 million, or 49%, compared to $1.1 billion.
  • Average yields on loans and loans held for sale of 7.43% decreased 55 basis points compared to 7.98%.

Interest Expense of $186.7 million decreased $0.7 million compared to $187.4 million.  The decrease reflected higher average balances on borrowings at lower average rates and lower average balances on certificates of deposit at lower average rates.

  • Average balances of $3.0 billion for borrowings increased by $2.3 billion, or 323%, compared to $720.5 million.
  • Average interest rates of 5.58% for borrowings decreased by 288 basis points compared to 8.46%.
  • Average balances of $4.1 billion for certificates decreased by $908.0 million, or 18%, compared to $5.0 billion.
  • Average interest rates of 5.02% for certificates of deposit decreased by 41 basis points compared to 5.43%.

Noninterest Income of $59.1 million increased $24.7 million, or 72%, primarily due to a $17.1 million, or 792%, increase in net loan servicing fees, a $5.7 million, or 29%, increase in gain on sale of loans, and a $4.4 million, or 91%, increase in syndication and asset management fees.    

  • Loan servicing fees included a $10.4 million positive fair market value adjustment to servicing rights, with a $2.5 million positive adjustment in the Banking segment and a $7.9 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $7.6 million negative fair market value adjustment to servicing rights in the prior period with a $1.1 million negative adjustment in the Banking segment and a $6.5 million negative adjustment in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases in rising 10-year interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates on escrow deposits.
  • Gain on sale of loans increased $5.7 million, or 29%, reflecting higher volume in the multi-family loan portfolio.
  • Other income included a $2.6 million positive fair market value adjustment to derivatives compared to a $6.6 million positive fair market value adjustment in the prior period.

Noninterest Expense of $63.2 million increased $10.6 million, or 20%, compared to $52.6 million, primarily due to increases in salaries and employee benefits to support business growth, as well as a $2.4 million, or 61%, increase in deposit insurance expenses. The higher noninterest expense also reflected a $1.9 million increase in credit risk transfer premium expense associated with ongoing credit default swaps that were executed in March and December 2024.

  • The efficiency ratio of 32.62% decreased 49 basis points compared to 33.11%.

Comparison of Operating Results for the Three Months Ended

December 31, 2024 and September 30, 2024

Net Interest Income of $134.6 million increased $1.8 million, or 1%, compared to $132.8 million, primarily due to higher average balances on borrowings at lower average interest rates. Lower average balances on loans and loans held for sale and certificates of deposit continued to reprice at lower rates, which also contributed to higher net interest income.

  • Net interest margin of 2.99% remain unchanged. The margin was negatively impacted by 5 basis points in the fourth quarter of 2024 from the net reversal of $2.1 million in accrued interest income associated with the movement of loans into nonaccrual status. This compared to 6 basis points, or $2.9 million in accrued interest income in the third quarter of 2024.
  • Interest rate spread of 2.46% increased 3 basis points compared to 2.43%.

Interest Income of $321.3 million decreased $17.6 million, or 5%, compared to $338.9 million, primarily reflecting a decrease in average yield and balances on loans and loans held for sale, partially offset by increased average balances on securities held to maturity.

  • Average yields on loans and loans held for sale of 7.43% decreased 48 basis points compared to 7.91%.
  • Average balances of $14.3 billion for loans and loans held for sale decreased $317.9 million, or 2%, compared to $14.6 billion.
  • Average balances of $1.7 billion for securities held to maturity increased 413.1 million, or 32%, compared to $1.3 billion.

Interest Expense of $186.7 million decreased $19.4 million, or 9% compared to $206.1 million. The decrease was primarily driven by lower average balances and rates on certificates of deposit, as well as lower average rates on interest-bearing checking accounts. The decreases were partially offset by higher average balances on borrowings at lower average rates.  

  • Average balances of $4.1 billion for certificate of deposit accounts decreased $916.7 million, or 18%, compared to $5.0 billion.
  • Average interest rates of 5.02% for certificate of deposit accounts decreased 45 basis points compared to 5.47%.
  • Average interest rates of 4.19% for interest-bearing checking accounts decreased 51 basis points compared to 4.70%.
  • Average balances of $3.0 billion for borrowings increased $529.2 million, or 21%, compared to $2.5 billion.
  • Average interest rates of 5.58% for borrowings decreased 81 basis points compared to 6.39%.

Noninterest Income of $59.1 million increased $42.4 million, or 253%, compared $16.7 million, primarily due to a $16.5 million, or 1091%, increase in net loan servicing fees, a $10.4 million, or 536%, increase in other income, an $8.3 million, or 50%, increase in gain on sale of loans, and a $7.5 million, or 408%, increase in syndication and asset management fees. 

  • Loan servicing fees included a $10.4 million positive fair market value adjustment to servicing rights, with a $2.5 million positive adjustment in the Banking segment and a $7.9 million positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $6.7 million negative fair market value adjustment to servicing rights in the prior period, with a $1.6 million negative adjustment in the Banking segment and a $5.1 million negative adjustment in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases in rising 10-year interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates on escrow deposits.
  • Other income included a $2.6 million positive fair market value adjustment to derivatives compared to a $7.7 million negative fair market value adjustment to derivatives in the third quarter of 2024.
  • Gain on sale of loans increased $8.3 million reflecting higher volume in the multi-family loan portfolio.

Noninterest Expense of $63.2 million increased $1.9 million, or 3%, compared to $61.3 million, primarily driven by a $2.3 million, or 7%, increase in salaries and employee benefits reflecting higher commissions on higher production volume and a 49% increase in professional fees, which was partially offset by a 28% decrease in deposit insurance expense.

  • The efficiency ratio of 32.62% decreased 838 basis points compared to 41.00%.

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 $18.8 billion in assets and $11.9 billion in deposits as of December 31, 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)














December 31,


September 30,


June 30,


March 31,


December 31,



2024


2024


2024


2024


2023

Assets











Cash and due from banks


$              10,989


$              12,214


$              10,242


$              17,924


$              15,592

Interest-earning demand accounts


465,621


589,692


530,640


490,831


568,830

Cash and cash equivalents


476,610


601,906


540,882


508,755


584,422

Securities purchased under agreements to resell


1,559


3,279


3,304


3,329


3,349

Mortgage loans in process of securitization


428,206


430,966


209,244


142,629


110,599

Securities available for sale ($635,946, $682,975, $682,774,
$700,640 and $722,497 utilizing fair value option, respectively)


980,050


953,063


1,017,019


1,061,288


1,113,687

Securities held to maturity ($1,664,674, $1,756,203, $1,291,960,
$1,176,178 and $1,203,535 at fair value, respectively)


1,664,686


1,755,047


1,291,110


1,175,167


1,204,217

Federal Home Loan Bank (FHLB) stock and other equity securities


217,804


184,050


67,499


64,215


48,578

Loans held for sale (includes $78,170, $91,084, $102,873,
$84,513 and $86,663 at fair value, respectively)


3,771,510


3,808,234


3,483,076


3,503,131


3,144,756

Loans receivable, net of allowance for credit losses on loans
of $84,386, $84,549, $81,028, $75,712 and $71,752, respectively


10,354,002


10,261,890


10,933,189


10,690,513


10,127,801

Premises and equipment, net


58,617


53,161


46,833


42,450


42,342

Servicing rights


189,935


177,327


178,776


172,200


158,457

Interest receivable


83,409


86,612


90,360


90,303


91,346

Goodwill


8,014


8,014


8,014


8,014


15,845

Other assets and receivables


571,330


329,427


343,116


360,582


307,117

Total assets


$       18,805,732


$       18,652,976


$       18,212,422


$       17,822,576


$       16,952,516

Liabilities and Shareholders' Equity











  Liabilities











Deposits











Noninterest-bearing


$            239,005


$            311,386


$            383,260


$            319,872


$            520,070

Interest-bearing


11,680,971


12,580,501


14,533,807


13,655,789


13,541,390

Total deposits


11,919,976


12,891,887


14,917,067


13,975,661


14,061,460

Borrowings


4,386,122


3,568,721


1,159,206


1,835,985


964,127

Deferred tax liabilities


25,289


19,530


25,098


43,935


19,923

Other liabilities


231,035


233,731


222,904


190,527


205,922

Total liabilities


16,562,422


16,713,869


16,324,275


16,046,108


15,251,432

Commitments and  Contingencies











Shareholders' Equity











Common stock, without par value











Authorized - 75,000,000 shares











Issued and outstanding  - 45,767,166 shares, 45,764,023 shares,
45,757,567 shares, 43,354,718 shares and 43,242,928 shares


240,313


239,448


238,492


139,950


140,365

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 December 31, 2024, September 30, 2024
or June 30, 2024 and 3,500,000 shares at March 31, 2024 and December 31, 2023











Issued and outstanding - no shares at December 31, 2024, September 30, 2024
or June 30, 2024 and 2,081,800 shares at March 31, 2024 and December 31, 2023


—


—


—


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

7.625% Series E Preferred stock - $1,000 per share liquidation preference











Authorized - 230,000 shares











Issued and outstanding - 230,000 shares (equivalent to 9,200,000
depositary shares)


222,748


—


—


—


—

Retained earnings


1,330,995


1,250,176


1,200,778


1,138,083


1,063,599

Accumulated other comprehensive (loss) income


(133)


96


(510)


(1,173)


(2,488)

Total shareholders' equity


2,243,310


1,939,107


1,888,147


1,776,468


1,701,084

Total liabilities and shareholders' equity


$       18,805,732


$       18,652,976


$       18,212,422


$       17,822,576


$       16,952,516












 

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)

















Three Months Ended


Change



December 31,


September 30,


December 31,


4Q24


4Q24



2024


2024


2023


vs. 3Q24


vs. 4Q23

Interest Income














Loans


$

266,719


$

290,259


$

274,971


-8 %


-3 %

Mortgage loans in process of securitization



5,662



4,062



5,294


39 %


7 %

Investment securities:














Available for sale



13,453



14,855



7,609


-9 %


77 %

Held to maturity



27,673



22,081



19,491


25 %


42 %

FHLB stock and other equity securities (dividends)



4,123



3,128



735


32 %


461 %

Other



3,716



4,543



3,659


-18 %


2 %

Total interest income



321,346



338,928



311,759


-5 %


3 %

Interest Expense














Deposits



144,009



165,675



172,061


-13 %


-16 %

Borrowed funds



42,713



40,432



15,373


6 %


178 %

Total interest expense



186,722



206,107



187,434


-9 %


—

Net Interest Income



134,624



132,821



124,325


1 %


8 %

Provision for credit losses



2,689



6,898



6,747


-61 %


-60 %

Net Interest Income After Provision for Credit Losses



131,935



125,923



117,578


5 %


12 %

Noninterest Income














Gain on sale of loans



25,020



16,731



19,342


50 %


29 %

Loan servicing fees, net



14,953



(1,509)



(2,162)


1091 %


792 %

Mortgage warehouse fees



1,413



1,620



1,950


-13 %


-28 %

Syndication and asset management fees



9,323



1,834



4,879


408 %


91 %

Other income



8,436



(1,934)



10,445


536 %


-19 %

Total noninterest income



59,145



16,742



34,454


253 %


72 %

Noninterest Expense














Salaries and employee benefits



37,536



35,218



33,259


7 %


13 %

Loan expense



704



1,114



660


-37 %


7 %

Occupancy and equipment



2,284



2,231



2,336


2 %


-2 %

Professional fees



5,135



3,439



4,157


49 %


24 %

Deposit insurance expense



6,473



8,981



4,030


-28 %


61 %

Technology expense



2,038



2,068



1,758


-1 %


16 %

Credit risk transfer premium expense



1,947



2,079



—


-6 %


100 %

Other expense



7,085



6,188



6,379


14 %


11 %

Total noninterest expense



63,202



61,318



52,579


3 %


20 %

Income Before Income Taxes



127,878



81,347



99,453


57 %


29 %

Provision for income taxes



32,212



20,074



21,980


60 %


47 %

Net Income


$

95,666


$

61,273


$

77,473


56 %


23 %

   Dividends on preferred stock



(10,728)



(7,757)



(8,667)


38 %


24 %

Net Income Available to Common Shareholders


$

84,938


$

53,516


$

68,806


59 %


23 %

Basic Earnings Per Share


$

1.86


$

1.17


$

1.59


59 %


17 %

Diluted Earnings Per Share


$

1.85


$

1.17


$

1.58


58 %


17 %

Weighted-Average Shares Outstanding














Basic



45,765,458



45,759,667



43,241,600





Diluted



45,924,176



45,910,052



43,430,973



















 

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)












Twelve Months Ended





December 31,


December 31,





2024


2023


Change

Interest Income









Loans


$

1,113,397


$

959,714


16 %

Mortgage loans in process of securitization



14,488



12,652


15 %

Investment securities:









Available for sale



57,480



21,621


166 %

Held to maturity



90,075



69,983


29 %

FHLB stock and other equity securities (dividends)



9,372



2,205


325 %

Other



17,908



11,623


54 %

Total interest income



1,302,720



1,077,798


21 %

Interest Expense









Deposits



660,357



577,210


14 %

Borrowed funds



119,743



52,517


128 %

Total interest expense



780,100



629,727


24 %

Net Interest Income



522,620



448,071


17 %

Provision for credit losses



24,278



40,231


-40 %

Net Interest Income After Provision for Credit Losses



498,342



407,840


22 %

Noninterest Income









Gain on sale of loans



62,275



48,183


29 %

Loan servicing fees, net



43,673



26,198


67 %

Mortgage warehouse fees



5,539



7,701


-28 %

Loss on sale of investments available for sale (1)



(108)



—


-100 %

Syndication and asset management fees



19,693



12,355


59 %

Other income



17,040



20,231


-16 %

Total noninterest income



148,112



114,668


29 %

Noninterest Expense









Salaries and employee benefits



130,723



108,181


21 %

Loan expense



3,767



3,409


11 %

Occupancy and equipment



8,991



9,220


-2 %

Professional fees



16,229



12,704


28 %

Deposit insurance expense



26,158



13,582


93 %

Technology expense



7,819



6,515


20 %

Credit risk transfer premium expense



6,320



—


100 %

Other expense



23,805



20,990


13 %

Total noninterest expense



223,812



174,601


28 %

Income Before Income Taxes



422,642



347,907


21 %

Provision for income taxes (2)



102,256



68,673


49 %

Net Income


$

320,386


$

279,234


15 %

   Dividends on preferred stock



(34,909)



(34,670)


1 %

   Impact of preferred stock redemption



(1,823)



—


-100 %

Net Income Available to Common Shareholders


$

283,654


$

244,564


16 %

Basic Earnings Per Share


$

6.32


$

5.66


12 %

Diluted Earnings Per Share


$

6.30


$

5.64


12 %

Weighted-Average Shares Outstanding









Basic



44,855,100



43,224,042



Diluted



45,004,786



43,345,799












(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





December 31,


September 30,


December 31,


4Q24


4Q24





2024


2024


2023


vs. 3Q24


vs. 4Q23















Noninterest expense



$                  63,202


$                    61,318


$           52,579


3 %


20 %















Net interest income (before provision for credit losses)



134,624


132,821


124,325


1 %


8 %


Noninterest income



59,145


16,742


34,454


253 %


72 %


Total income



$                193,769


$                  149,563


$         158,779


30 %


22 %















Efficiency ratio



32.62 %


41.00 %


33.11 %


(838)

bps

(49)

bps



























Average assets



$           18,512,380


$             18,311,393


$    16,671,484


1 %


11 %


Net income



95,666


61,273


77,473


56 %


23 %


Return on average assets before annualizing



0.52 %


0.33 %


0.46 %






Annualization factor



4.00


4.00


4.00






Return on average assets



2.07 %


1.34 %


1.86 %


73

bps

21

bps














Return on average tangible common shareholders' equity (1)



22.10 %


14.43 %


23.60 %


767

bps

(150)

bps














Tangible book value per common share (1)



$                    34.15


$                      32.38


$             27.40


5 %


25 %















Tangible common shareholders' equity/tangible assets (1)



8.32 %


7.95 %


7.00 %


37

bps

132

bps














Consolidated ratios













Total capital/risk-weighted assets(2)



13.6

%

12.2

%

11.6

%





Tier I capital/risk-weighted assets(2)



13.0

%

11.6

%

11.1

%





Common Equity Tier I capital/risk-weighted assets(2)



9.1

%

8.9

%

7.8

%





Tier I capital/average assets(2)



12.1

%

10.5

%

10.1

%


















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





















(2) As defined by regulatory agencies; December 31, 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 dividends.  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





December 31,


September 30,


December 31,


4Q24


4Q24





2024


2024


2023


vs. 3Q24


vs. 4Q23















Net income



$                  95,666


$                    61,273


$           77,473


56 %


23 %


Less: preferred stock dividends 



(10,728)


(7,757)


(8,667)


38 %


24 %


Net income available to common shareholders



$                  84,938


$                    53,516


$           68,806


59 %


23 %















Average shareholders' equity



$             2,084,627


$               1,941,026


$      1,682,270


7 %


24 %


Less: average goodwill & intangibles



(8,076)


(8,092)


(16,629)


-0 %


-51 %


Less: average preferred stock



(538,970)


(449,387)


(499,608)


20 %


8 %


Average tangible common shareholders' equity



$             1,537,581


$               1,483,547


$      1,166,033


4 %


32 %















Annualization factor



4.00


4.00


4.00






Return on average tangible common shareholders' equity



22.10 %


14.43 %


23.60 %


767

bps

(150)

bps














Total equity



$             2,243,310


$               1,939,107


$      1,701,084


16 %


32 %


Less: goodwill and intangibles



(8,073)


(8,079)


(16,587)


—


-51 %


Less: preferred stock



(672,135)


(449,387)


(499,608)


50 %


35 %


Tangible common shareholders' equity



$             1,563,102


$               1,481,641


$      1,184,889


5 %


32 %















Assets



$           18,805,732


$             18,652,976


$    16,952,516


1 %


11 %


Less: goodwill and intangibles



(8,073)


(8,079)


(16,587)


—


-51 %


Tangible assets



$           18,797,659


$             18,644,897


$    16,935,929


1 %


11 %















Ending common shares



45,767,166


45,764,023


43,242,928



















Tangible book value per common share



$                    34.15


$                      32.38


$             27.40


5 %


25 %


Tangible common shareholders' equity/tangible assets



8.32 %


7.95 %


7.00 %


37

bps

132

bps














 

Key Operating Results

(Unaudited)

($ in thousands, except share data)













Twelve Months Ended







December 31,


December 31,







2024


2023


Change











Noninterest expense



$         223,812


$        174,601


28 %











Net interest income (before provision for credit losses)



522,620


448,071


17 %


Noninterest income



148,112


114,668


29 %


Total income



$         670,732


$        562,739


19 %











Efficiency ratio



33.37 %


31.03 %


234

bps



















Average assets



$    17,860,787


$   15,078,390


18 %


Net income



320,386


279,234


15 %


Return on average assets before annualizing



1.79 %


1.85 %




Annualization factor



1.00


1.00




Return on average assets



1.79 %


1.85 %


(6)

bps










Return on average tangible common shareholders' equity (1)



20.16 %


22.92 %


(276)

bps










Tangible book value per common share (1)



$             34.15


$            27.40


25 %











Tangible common shareholders' equity/tangible assets (1)



8.32 %


7.00 %


132

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 dividends.  Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total assets.  Tangible Assets is calculated by excluding the balance of goodwill and intangible assets.  Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding.    














Twelve Months Ended







December 31,


December 31,







2024


2023


Change











Net income



$         320,386


$        279,234


15 %


Less: preferred stock dividends 



(34,909)


(34,670)


1 %


Less: preferred stock redemption



(1,823)


-


-100 %


Net income available to common shareholders



$         283,654


$        244,564


16 %











Average shareholders' equity



$      1,900,130


$     1,583,485


20 %


Less: average goodwill & intangibles



(8,697)


(16,801)


-48 %


Less: average preferred stock



(484,391)


(499,608)


-3 %


Average tangible common shareholders' equity



$      1,407,042


$     1,067,076


32 %











Annualization factor



1.00


1.00




Return on average tangible common shareholders' equity



20.16 %


22.92 %


(276)

bps










Total equity



$      2,243,310


$     1,701,084


32 %


Less: goodwill and intangibles



(8,073)


(16,587)


-51 %


Less: preferred stock



(672,135)


(499,608)


35 %


Tangible common shareholders' equity



$      1,563,102


$     1,184,889


32 %











Assets



$    18,805,732


$   16,952,516


11 %


Less: goodwill and intangibles



(8,073)


(16,587)


-51 %


Tangible assets



$    18,797,659


$   16,935,929


11 %











Ending common shares



45,767,166


43,242,928













Tangible book value per common share



$             34.15


$            27.40


25 %


Tangible common shareholders' equity/tangible assets



8.32 %


7.00 %


132

bps










 

Merchants Bancorp

Average Balance Analysis

($ in thousands)

(Unaudited)














Three Months Ended


Three Months Ended


Three Months Ended


December 31, 2024


September 30, 2024


December 31, 2023


Average


Yield/


Average


Yield/


Average


Yield/


Balance

Interest

Rate


Balance

Interest

Rate


Balance

Interest

Rate

Assets:
























Interest-earning deposits, and other interest
or dividends

$       499,308

$     7,839

6.25 %


$      484,712

$     7,671

6.30 %


$        268,083

$     4,394

6.50 %

Securities available for sale

986,063

13,453

5.43 %


1,011,146

14,855

5.84 %


716,315

7,609

4.21 %

Securities held to maturity

1,701,595

27,673

6.47 %


1,288,466

22,081

6.82 %


1,141,664

19,491

6.77 %

Mortgage loans in process of securitization

414,883

5,662

5.43 %


308,362

4,062

5.24 %


380,645

5,294

5.52 %

Loans and loans held for sale

14,285,852

266,719

7.43 %


14,603,750

290,259

7.91 %


13,674,793

274,971

7.98 %

     Total interest-earning assets

17,887,701

321,346

7.15 %


17,696,436

338,928

7.62 %


16,181,500

311,759

7.64 %

Allowance for credit losses on loans

(85,772)




(81,178)




(67,114)



Noninterest-earning assets

710,451




696,135




557,098















Total assets

$  18,512,380




$  18,311,393




$    16,671,484



























Liabilities & Shareholders' Equity:
























Interest-bearing checking

$    5,579,688

58,781

4.19 %


$    5,297,908

62,603

4.70 %


5,607,744

68,899

4.87 %

Savings deposits

145,599

15

0.04 %


145,305

17

0.05 %


242,788

346

0.57 %

Money market

2,961,272

33,288

4.47 %


2,816,906

33,858

4.78 %


2,825,051

34,058

4.78 %

Certificates of deposit

4,115,462

51,925

5.02 %


5,032,159

69,197

5.47 %


5,023,434

68,758

5.43 %

    Total interest-bearing deposits

12,802,021

144,009

4.48 %


13,292,278

165,675

4.96 %


13,699,017

172,061

4.98 %













Borrowings

3,047,586

42,713

5.58 %


2,518,405

40,432

6.39 %


720,521

15,373

8.46 %

    Total interest-bearing liabilities

15,849,607

186,722

4.69 %


15,810,683

206,107

5.19 %


14,419,538

187,434

5.16 %













Noninterest-bearing deposits

352,374




327,930




366,152



Noninterest-bearing liabilities

225,772




231,754




203,524















    Total liabilities

16,427,753




16,370,367




14,989,214















    Shareholders' equity

2,084,627




1,941,026




1,682,270















Total liabilities and shareholders' equity

$  18,512,380




$  18,311,393




$    16,671,484















Net interest income


$  134,624




$ 132,821




$ 124,325














Net interest spread



2.46 %




2.43 %




2.48 %













Net interest-earning assets

$    2,038,094




$    1,885,753




$     1,761,962















Net interest margin



2.99 %




2.99 %




3.05 %













Average interest-earning assets to
average interest-bearing liabilities



112.86 %




111.93 %




112.22 %













 

Supplemental Results

(Unaudited)

($ in thousands)






















Net Income



Net Income






Three Months Ended



Twelve Months Ended






December 31,



September 30,



December 31,



December 31,






2024



2024



2023



2024


2023


Segment

















Multi-family Mortgage Banking




$            22,183



$            8,068



$               8,580



$         55,897


$         36,473


Mortgage Warehousing




24,402



15,940



26,362



82,802


73,525


Banking




56,287



44,983



49,996



210,073


194,398


Other




(7,206)



(7,718)



(7,465)



(28,386)


(25,162)


Total




$            95,666



$          61,273



$             77,473



$       320,386


$       279,234








































Total Assets











December 31, 2024


September 30, 2024


December 31, 2023










Amount

%


Amount

%


Amount

%






Segment

















Multi-family Mortgage Banking




$          479,099

2 %


$        453,281

2 %


$           411,097

2 %






Mortgage Warehousing




6,000,624

32 %


5,842,489

31 %


4,522,175

27 %






Banking




11,761,202

63 %


12,035,581

65 %


11,760,943

69 %






Other




564,807

3 %


321,625

2 %


258,301

2 %






Total




$     18,805,732

100 %


$   18,652,976

100 %


$      16,952,516

100 %












































Gain on Sale of Loans



Gain on Sale of Loans






Three Months Ended



Twelve Months Ended






December 31,



September 30,



December 31,



December 31,






2024



2024



2023



2024


2023


Loan Type

















Multi-family




$            24,026



$          15,302



$             19,082



$         56,834


$         42,979


Single-family




413



690



(183)



1,907


1,247


Small Business Association (SBA)




581



739



443



3,534


3,957


Total




$            25,020



$          16,731



$             19,342



$         62,275


$         48,183








































Servicing Rights



Servicing Rights






Three Months Ended



Twelve Months Ended






December 31,



September 30,



December 31,



December 31,






2024



2024



2023



2024


2023



















Balance, beginning of period




$          177,327



$        178,776



$           162,141



$       158,457


$       146,248


Additions

















Purchased servicing




-



-



513



$                   -


$              513


Originated servicing




5,373



7,370



5,591



$         18,670


$         14,755


Subtractions

















Paydowns




(3,172)



(2,090)



(2,190)



$          (9,901)


$          (7,621)


Changes in fair value




10,407



(6,729)



(7,598)



22,709


4,562


Balance, end of period




$          189,935



$        177,327



$           158,457



$       189,935


$       158,457



















 

Supplemental Results

(Unaudited)

($ in thousands)


















Loans Receivable and Loans Held for Sale







December 31,



September 30,



December 31,







2024



2024



2023
















Mortgage warehouse repurchase agreements




$       1,446,068



$     1,213,429



$           752,468



Residential real estate (1)




1,322,853



1,317,234



1,324,305



Multi-family financing




4,624,299



4,456,129



4,006,160



Healthcare financing




1,484,483



1,733,674



2,356,689



Commercial and commercial real estate (2)(3)




1,476,211



1,548,689



1,643,081



Agricultural production and real estate




77,631



71,391



103,150



Consumer and margin loans




6,843



5,893



13,700



Loans receivable




10,438,388



10,346,439



10,199,553



    Less: Allowance for credit losses on loans




84,386



84,549



71,752



Loans receivable, net




$     10,354,002



$   10,261,890



$      10,127,801
















Loans held for sale




3,771,510



3,808,234



3,144,756



Total loans, net of allowance




$     14,125,512



$   14,070,124



$      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 December 31, 2024, September 30, 2024 and December 31, 2023, respectively.

(2) Includes $0.9 billion, $0.9 billion and $1.1 billion of revolving  lines of credit collateralized primarily by mortgage servicing rights as of December 31, 2024, September 30, 2024 and December 31, 2023, respectively.

(3)  Includes only $18.7 million, $19.3 million and $8.4 million of non-owner occupied commercial real estate as of December 31, 2024, September 30, 2024 and December 31, 2023, respectively. 


















Loan Credit Risk Profile






December 31, 2024


September 30, 2024


December 31, 2023






Amount

%


Amount

%


Amount

%















Pass




$       9,741,087

93.4 %


$     9,707,205

93.8 %


$        9,879,659

96.9 %


Special mention




379,969

3.6 %


351,407

3.4 %


191,267

1.9 %


Substandard




317,332

3.0 %


287,827

2.8 %


128,577

1.2 %


Doubtful




—

—


—

—


50

—


Loans receivable




$     10,438,388

100.0 %


$   10,346,439

100.0 %


$      10,199,553

100.0 %


Charge-offs (year-to-date)




$            10,587



$            6,437



$               9,791



Recoveries (year-to-date)




$                 136



$                 23



$                    41




















Nonperforming Loans







December 31,



September 30,



December 31,







2024



2024



2023
















Nonaccrual loans




$          279,716



$        210,811



$             73,847



90 days past due and still accruing




6



91



8,168



Total nonperforming loans




$          279,722



$        210,902



$             82,015



Other real estate owned




$              8,209



$               896



—



Total nonperforming assets




$          287,931



$        211,798



$             82,015



Nonperforming loans to total loans receivable




2.68 %



2.04 %



0.80 %



Nonperforming assets to total assets




1.53 %



1.14 %



0.48 %




















Delinquent Loans







December 31,



September 30,



December 31,







2024



2024



2023
















Delinquent loans:













    Loans receivable




$          292,263



$        257,459



$           183,529



    Loans held for sale




32,343



123,445



16,500



Total delinquent loans




$          324,606



$        380,904



$           200,029



Total loans receivable and loans held for sale




$     14,209,898



$   14,154,673



$      13,344,309



   Delinquent loans to total loans




2.28 %



2.69 %



1.50 %
















 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/merchants-bancorp-reports-fourth-quarter-2024-results-302362362.html

SOURCE Merchants Bancorp


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