CARMEL, Ind., April 30, 2018 /PRNewswire/ --

  • Net income of $15.1 million increased by 65% compared with March 31, 2017
  • Earnings of $0.50 per common share increased by 28% compared with March 31, 2017
  • Total assets of $3.7 billion increased by $282.7 million, or 8% compared to December 31, 2017
  • Return on average assets of 1.79% for three months ended March 31, 2018
  • Multi-family mortgage closings of $453.1 million for three months ended March 31, 2018
  • Closed its acquisition of Joy State Bank on January 2, 2018
  • Previously announced a 20% increase in dividends, to $.06 per common share

Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported first quarter 2018 net income of $15.1 million, or $0.50 per common share.  This compared with $9.1 million, or $0.39 per common share, in the first quarter of 2017. 

Each of the Company's business segments' net income increased in the first quarter, compared with the first quarter of 2017.  Multi-family Mortgage Banking income increased by 56%, Mortgage Warehousing increased by 22%, and Banking increased by 148%.

"Our businesses once again delivered strong results in the first quarter of 2018 with solid loan and deposit growth, while maintaining an industry-leading efficiency ratio and an innovative, consistent approach to loan origination that has built deep, long-term customer relationships.   We have also continued to implement our strategic plans to make Merchants even more successful into the future," said Michael Petrie, Chairman and CEO of Merchants. 

Total Assets
Total assets increased $282.7 million, or 8%, to $3.7 billion at March 31, 2018, compared with $3.4 billion at December 31, 2017. The increase was due primarily to increases in loans, loans held for sale, and trading securities.  Return on average assets was 1.79% for the three months ended March 31, 2018, compared with 1.39% at March 31, 2017.

Total loans receivable before allowance for loan losses increased $198.5 million, or 14%, to $1.6 billion at March 31, 2018, compared with $1.4 billion at December 31, 2017. This increase was primarily due to growth in multi-family and healthcare financing, as well as residential real estate loans.

Asset Quality
The allowance for loan losses increased by $1.4 million, to $9.7 million, at March 31, 2018, compared with $8.3 million at December 31, 2017.  The increase reflected higher loans held for investment, while non-performing loans increased to $4.9 million, or 0.31% of total loans at March 31, 2018, compared with $3.1 million, or .23% of total loans, at December 31, 2017. 

Total Deposits
Total deposits increased $119.0 million, or 4%, to $3.1 billion at March 31, 2018, compared with $2.9 billion at December 31, 2017. The increase was due primarily to growth in certificates of deposit and demand deposits during the quarter, while total brokered deposits declined by 5% to $897.4 million, or 29% of total deposits.

Interest Income
Interest income increased $10.0 million, or 53%, to $29.0 million for the three months ended March 31, 2018, compared with $19.0 million for the three months ended March 31, 2017. This increase was due to both loan growth and higher loan yields.  The average balance of loans, including loans held for sale, during the three months ended March 31, 2018, increased by $658.0 million, or 41%, to $2.2 billion, compared with $1.6 billion for the three months ended March 31, 2017.  The average yield on loans increased 41 basis points, to 4.44%, for the three months ended March 31, 2018, compared with 4.03% for the three months ended March 31, 2017.  Net interest margin increased to 2.52% for the three months ended March 31, 2018, compared with 2.17% for the three months ended March 31, 2017.

Interest Expense
Total interest expense increased $3.5 million, or 63%, to $8.9 million for the three months ended March 31, 2018, compared with the three months ended March 31, 2017. Interest expense on deposits increased $3.2 million, or 86%, to $7.0 million for the three months ended March 31, 2018, compared with the three months ended March 31, 2017. The increase was primarily due to a 41 basis point increase in the average cost of interest-bearing deposits, to 1.27%, for the three months ended March 31, 2018, compared with 0.86% for the same period in 2017, and an increase in the average balance of interest-bearing deposits of $467.8 million, or 26%, to $2.2 billion for the three months ended March 31, 2018. The increase in deposits was primarily due to growth in certificate of deposits and demand deposits, as well as custodial accounts of existing warehouse customers. The increase in the cost of deposits was due to the overall increase in interest rates since last year.

Net Interest Income
Net interest income increased $6.6 million, or 49%, to $20.1 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. The increase was due to a 23 basis point increase in our interest rate spread, to 2.06%, for the three months ended March 31, 2018 from 1.83% for the three months ended March 31, 2017, coupled with the overall growth in our interest-earning assets, particularly in loans and loans held for sale, period to period. Our net interest margin increased 35 basis points to 2.52% for the three months ended March 31, 2018 from 2.17% for the three months ended March 31, 2017.

Noninterest Income
Noninterest income increased by $3.2 million, or 40%, to $11.3 million for the three months ended March 31, 2018, compared with the three months ended March 31, 2017. The increase was due to an increase of $5.5 million, or 100%, in the gain on sale of loans, primarily associated with an increase in the volume of multi-family loan sales in the secondary market. These increases were partially offset by a $2.3 million decrease in loan servicing fees that were negatively impacted by a $893,000 fair market value adjustment in mortgage servicing rights.

Noninterest Expense
Noninterest expense increased $3.6 million, or 55%, to $10.3 million for the three months ended March 31, 2018, compared with $6.6 million for the three months ended March 31, 2017.  The increase was due primarily to a $2.6 million, or 67%, increase in salaries and employee benefits.  The increase in salaries and employee benefits was due primarily to an increase in the number of employees resulting from business growth, higher commissions related to higher multi-family volume, and additional hiring associated with becoming a publicly traded company.  Despite the increase in salaries and benefits, the efficiency ratio remained relatively stable at 32.7% in the first quarter of 2018, compared with 30.7% the first quarter of 2017.

Income Taxes
Income tax expense decreased $927,000, or 17%, to $4.7 million for the three months ended March 31, 2018, compared with the three months ended March 31, 2017.  The decrease was due primarily to the lower tax rates under the recent federal income tax reform legislation, partially offset by a 34% increase in pre-tax income over the same period.  The effective tax rate was 23.7% for the three months ended March 31, 2018 compared with 38.1% for the three months ended March 31, 2017.

About Merchants Bancorp
Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple lines of business with a focus on Federal Housing Administration ("FHA") 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 $3.7 billion in assets and $3.1 billion in deposits as of March 31, 2018, conducts its business through its direct and indirect subsidiaries, Merchants Bank of Indiana, P/R Mortgage and Investment Corp., Joy State Bank, RICHMAC Funding 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.merchantsbankofindiana.com.

Forward-Looking Statements 
This press release contains forward-looking statements which reflect our current views with respect to, among other things, future events and our 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 our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you 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 we believe 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 our actual results to differ materially from those indicated in these forward-looking statements, including those factors identified in "Risk Factors" or "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K.  Any forward-looking statements presented herein are made only as of the date of this press release, and we do 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)








March 31,


December 31,



2018


2017

Assets





Cash and due from banks


$           21,592


$          18,905

Interest-earning demand accounts


266,141


340,614

Cash and cash equivalents


287,733


359,519






Securities purchased under agreements to resell


7,003


7,043

Trading securities


200,030


140,837

Available for sale securities


413,457


408,371

Federal Home Loan Bank (FHLB) stock


7,711


7,539

Loans held for sale


1,081,376


995,319

Loans receivable, net of allowance for loan losses 





of $9,705 and $8,311, respectively


1,563,485


1,366,349

Premises and equipment, net


6,705


5,354

Mortgage servicing rights


67,268


66,079

Interest receivable


9,627


8,326

Goodwill 


5,139


3,902

Intangible assets 


1,915


1,512

Other assets and receivables


24,400


22,983






Total assets


$      3,675,849


$     3,393,133






Liabilities and Shareholders' Equity










  Liabilities





Deposits





Noninterest bearing


$         653,124


$        620,700

Interest bearing


2,409,476


2,322,861

Total deposits


3,062,600


2,943,561

Borrowings 


199,378


56,612

Deferred and current tax liabilities, net


15,555


12,422

Other liabilities


18,603


13,064

Total liabilities


3,296,136


3,025,659






Commitments and  Contingencies










Shareholders' Equity





Common stock, without par value





Authorized - 50,000,000 shares





Issued and outstanding - 28,692,206 shares at March 31, 2018  





  and 28,685,167 shares at December 31, 2017


134,941


134,891

Preferred stock - $1,000 per share, without par value





   Authorized - 5,000,000 shares





   Issued and outstanding - 41,625 shares 


41,581


41,581

Retained earnings


204,758


192,008

Accumulated other comprehensive loss


(1,567)


(1,006)

Total shareholders' equity


379,713


367,474






Total liabilities and shareholders' equity


$      3,675,849


$     3,393,133






 

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)





















Three Months Ended March 31, 






2018


2017

Interest Income








Loans





$                24,612


$          15,783

Investment securities:








Trading





989


1,376

Available for sale





1,542


894

Federal Home Loan Bank stock





129


81

Other





1,766


873

Total interest income





29,038


19,007









Interest Expense








Deposits





7,016


3,771

Borrowed funds





1,914


1,705

Total interest expense





8,930


5,476









Net interest income





20,108


13,531

Provision for loan losses





1,406


240









Net Interest Income After Provision for Loan Losses





18,702


13,291









Noninterest Income








Gain on sale of loans





10,892


5,442

Loan servicing fees (costs), net





(322)


1,989

Mortgage warehouse fees





486


596

Other income





257


64

Total noninterest income





11,313


8,091









Noninterest Expense








Salaries and employee benefits





6,487


3,892

Loan expenses





956


884

Occupancy and equipment





565


356

Professional fees





488


215

Deposit insurance expense





246


264

Technology expense





291


245

Other expense





1,237


785

Total noninterest expense





10,270


6,641









Income Before Income Taxes





19,745


14,741









Provision for Income Taxes





4,684


5,611









Net Income





$                15,061


$            9,130









Dividends on preferred stock





$                    (833)


$              (832)









Net income allocated to common shareholders





$                14,228


$            8,298









Basic earnings per common share





$                    0.50


$              0.39









Diluted earnings per common share





$                    0.50


$              0.39









Weighted-average common shares outstanding








Basic





28,690,876


21,114,400









Diluted





28,710,480


21,123,257









Dividends per common share





$                    0.06


$              0.05









 

Key Operating Results

(Unaudited)

($ in thousands)















Three Months Ended






March 31,


Dec. 31,


March 31,






2018


2017


2017












Noninterest Expense




10,270


10,800


6,641












Net Interest Income (before provision for losses)




20,108


18,952


13,531


Noninterest Income




11,313


14,907


8,091


Total Interest Income




31,421


33,859


21,622












Efficiency Ratio




32.69%


31.90%


30.71%






















Average Assets




3,364,165


3,204,660


2,630,108


Net Income




15,061


20,329


9,130


Return on Average Assets before annualizing




0.45%


0.63%


0.35%


Annualization factor




4.00


4.00


4.00


Return on Average Assets




1.79%


2.54%


1.39%












Return  on Average Tangible Common Equity (1)




17.38%


28.43%


19.49%












Tangible Book Value Per Common Share (1)




$        11.54


$         11.17


$         8.13












Tangible Common Equity/Tangible Assets (1)




9.02%


9.46%


6.13%












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











(1) Reconciliation of Non-GAAP Financial Measures


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






March 31,


Dec. 31,


March 31,






2018


2017


2017












Net Income




15,061


20,329


9,130


Less: Preferred Stock Dividends  




(833)


(833)


(832)


Net Income Available to Common Shareholders




14,228


19,496


8,298












Average Shareholders Equity




375,687


321,785


212,415


Less: Average Goodwill & Intangibles




(6,616)


(5,950)


(523)


Less: Average Preferred stock




(41,581)


(41,581)


(41,581)


Average Tangible Common Shareholder's Equity




327,490


274,254


170,311












Annualization Factor




4.00


4.00


4.00


Return on Average Tangible Common Equity




17.38%


28.43%


19.49%






















Total Equity




379,713


367,474


213,711


Less: Goodwill and Intangibles




(7,054)


(5,414)


(523)


Less: Preferrd Stock




(41,581)


(41,581)


(41,581)


Tangible Common Equity




331,078


320,479


171,607












Assets




3,675,849


3,393,133


2,800,681


Less: Goodwill and Intangibles




(7,054)


(5,414)


(523)


Tangible Assets




3,668,795


3,387,719


2,800,158












Ending common shares




28,692,206


28,685,167


21,114,400












Tangible Book Value per Common Share




$        11.54


$         11.17


$         8.13


Tangible Common Equity/Tangible Assets




9.02%


9.46%


6.13%












Merchants Bancorp

Average Balance Analysis

($ in thousands)

(Unaudited)














Three Months Ended


Three Months Ended


Three Months Ended


March 31, 2018


December 31, 2017


March 31, 2017


Average


Yield/


Average


Yield/


Average


Yield/


Balance

Int.

Rate 


Balance

Int.

Rate 


Balance

Int.

Rate 

Assets:
























Interest bearing deposits

$        457,235

$       1,895

1.68%


$        442,789

$        1,390

1.25%


$        436,223

$           954

0.89%

Securities available for sale

416,266

1,542

1.50%


414,895

1,356

1.30%


336,146

894

1.08%

Trading securities

121,029

989

3.31%


119,429

1,063

3.53%


170,038

1,376

3.28%

Loans and loans held for sale

2,247,890

24,612

4.44%


2,114,048

23,101

4.34%


1,589,938

15,783

4.03%

     Total Interest Earning Assets

3,242,420

29,038

3.63%


3,091,161

26,910

3.45%


2,532,345

19,007

3.04%

Allowance for loan losses

(9,071)




(7,551)




(6,400)



Noninterest-earning assets

130,816




121,050




104,163















Total assets

$      3,364,165




$     3,204,660




$     2,630,108



























Liabilities/Equity:
























Interest bearing checking

645,339

2,425

1.52%


612,674

2,153

1.39%


507,588

1,158

0.93%

Savings deposits

381,749

215

0.23%


357,363

143

0.16%


301,017

183

0.25%

Money market 

816,707

2,887

1.43%


778,837

2,582

1.32%


819,564

2,176

1.08%

Certificates of deposit

398,992

1,489

1.51%


292,142

955

1.30%


146,809

254

0.70%

    Total interest bearing deposits

2,242,787

7,016

1.27%


2,041,016

5,833

1.13%


1,774,978

3,771

0.86%













Borrowings

65,635

1,914

11.83%


76,505

2,125

11.02%


64,754

1,705

10.68%

    Total Interest Bearing Liabilities

2,308,422

8,930

1.57%


2,117,521

7,958

1.49%


1,839,732

5,476

1.21%













Noninterest bearing deposits

656,284




730,936




550,770



Noninterest-bearing liabilities

23,772




34,418




27,191















    Total liabilities

2,988,478




2,882,875




2,417,693















    Equity

375,687




321,785




212,415















Total liabilities and equity

$      3,364,165




$     3,204,660




$     2,630,108















Net Interest Income


$     20,108




$       18,952




$       13,531














Interest Rate Spread



2.06%




1.96%




1.83%













Net interest-earning assets

$        933,998




$        973,640




$        692,613















Net Interst Margin



2.52%




2.43%




2.17%













Average Interest Earning Assets to Average Interest Bearing Liabilities



140.46%




145.98%




137.65%

























Segment Results

(Unaudited)

($ in thousands)





























Net Income


Total Assets





Three Months Ended March 31,



March 31,


December 31,





2018


2017



2018


2017

Segment












Multi-family Mortgage Banking


5,484


3,517



141,703


134,390

Mortgage Warehousing


4,630


3,795



1,603,584


1,352,748

Banking




5,980


2,413



1,908,823


1,889,140

Other




(1,033)


(595)



21,739


16,855

Total




15,061


9,130



3,675,849


3,393,133













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SOURCE Merchants Bancorp


Source: Merchants Bancorp