PR Newswire | Jan 31, 2022 04:06PM EST

01/31 15:05 CST

Merchants Bancorp Reports Full Year and Fourth Quarter 2021 Results- Full year 2021 net income of $227.1 million increased 26% compared to 2020 and was the highest level reported in Company history- Full year 2021 diluted earnings per common share of $7.14 (or $4.76 after adjusting for the 3:2 stock split in January 2022) increased 24% compared to 2020- Fourth quarter 2021 net income of $55.2 million decreased 8% compared to the fourth quarter of 2020 and decreased 6% compared to the third quarter of 2021- Fourth quarter 2021 diluted earnings per common share of $1.71 (or $1.14 after adjusting for the 3:2 stock split in January 2022) decreased 12% compared to the fourth quarter of 2020 and decreased 7% compared to the third quarter of 2021- Assets reached another record level of $11.3 billion, increasing 3% compared to September 30, 2021, and increasing 17% compared to December 31, 2020- Prior to the stock split, tangible book value per common share reached $26.95 compared to $20.17 in the fourth quarter of 2020 and $25.36 in the third quarter of 2021- After adjusting for the stock split, tangible book value per common share reached $17.96 compared to $13.45 in the fourth quarter of 2020 and $16.91 in the third quarter of 2021- Credit quality remained strong, as nonperforming loans represented 0.01% of loans receivable compared to 0.05% at September 30, 2021 and 0.11% at December 31, 2020- On November 17, 2021, the Company approved a 3:2 common stock split for shareholders of record at the close of business on January 3, 2022. The additional shares were distributed on or around January 17, 2022. CARMEL, Ind., Jan. 31, 2022

CARMEL, Ind., Jan. 31, 2022 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported fourth quarter 2021 net income of $55.2 million, or diluted earnings per common share of $1.71 (or $1.14 after adjusting for its 3:2 stock split in January 2022). This compared to $59.8 million, or diluted earnings per common share of $1.95 ($1.30 split adjusted) in the fourth quarter of 2020, and compared to $58.5 million, or diluted earnings per common share of $1.83 ($1.22 split adjusted) in the third quarter of 2021.

"Execution and growth were the hallmarks of our performance during 2021. With record earnings and asset levels in a low interest rate environment, we have continued to demonstrate the strength of our business model that has focused on conservative underwriting, cost efficiency, and holding short-duration assets by originating loans to be sold in the secondary market," said Michael F. Petrie, Chairman and CEO of Merchants.

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "The entrepreneurial evolution of our businesses over the last year has resulted in Merchants becoming known as a one-stop-shop for borrowers with a broad array of product offerings that includes everything from multi-family, bridge, residential, SBA, agriculture, and mortgage warehouse financing, to traditional community banking and syndicated low-income housing tax credit and debt funds. We have expanded our platform of offerings across all our businesses and see many opportunities for future growth."

Net income for the fourth quarter 2021 decreased by $4.6 million, or 8%, compared to the fourth quarter of 2020, primarily driven by a $10.2 million, or 37%, increase in noninterest expense that reflected a 53% increase in salaries and employee benefits, including commissions. Also contributing to the lower net income was a $2.5 million, or 6%, decrease in noninterest income that reflected lower mortgage warehouse fees due to lower single family loan volume. Partially offsetting these items was a $5.0 million, or 8%, increase in net interest income after provision for loan losses, and a $3.0 million lower tax provision.

Net income for the fourth quarter 2021 decreased by $3.3 million, or 6%, compared to the third quarter of 2021, primarily driven by an $8.2 million, or 28%, increase in noninterest expense that reflected a 26% increase in salaries and employee benefits, including commissions. Also contributing to the lower net income was a $3.9 million, or 74%, decrease in loan servicing fees. Partially offsetting these items was a $4.6 million, or 143%, increase in other income from low-income housing tax syndication fees, a $2.4 million increase in net interest income after provision for loan losses, and a $2.5 million lower tax provision.

Total AssetsTotal assets of $11.3 billion at December 31, 2021 increased $326.6 million, or 3%, compared to September 30, 2021, and increased $1.6 billion, or 17%, compared to December 31, 2020.

Return on average assets was 2.02% for the fourth quarter of 2021 compared to 2.57% for the fourth quarter of 2020 and 2.29% for the third quarter of 2021.

Asset QualityThe allowance for loan losses of $31.3 million at December 31, 2021 increased $2.2 million compared to September 30, 2021 and increased $3.8 million compared to December 31, 2020. The increases compared to December 31, 2020 were primarily based on growth in the multi-family loan portfolio. The portion of the allowance associated with the COVID-19 pandemic has remained relatively steady since September 30, 2020, at approximately $0.8 million. As of December 31, 2021, the Company had only one loan remaining in a payment deferral arrangement, with an unpaid balance of $36.8 million.

Non-performing loans were $0.8 million, or 0.01%, of loans receivable at December 31, 2021, compared to $2.9 million, or 0.05% of loans receivable at September 30, 2021, and compared to $6.3 million, or 0.11% of loans receivable at December 31, 2020.

Total DepositsTotal deposits of $9.0 billion at December 31, 2021 increased $35.3 million compared to September 30, 2021, and increased $1.6 billion, or 21%, compared to December 31, 2020. The increase compared to December 31, 2020 was primarily due to growth in savings accounts and brokered certificates of deposits.

Total brokered deposits of $2.2 billion at December 31, 2021 increased $493.3 million, or 30%, from September 30, 2021 and increased $986.1 million, or 84%, from December 31, 2020. Brokered deposits represented 24% of total deposits at December 31, 2021 compared to 19% of total deposits at September 30, 2021 and 16% of total deposits at December 31, 2020. The increases reflected a continuation of the Company's shift from borrowing at the Federal Home Loan Bank of Indianapolis after a change in their collateral policy to eliminate certain agency eligible mortgage loan participations during the third quarter of 2021.

LiquidityCash balances of $1.0 billion at December 31, 2021 increased by $230.0 million compared to September 30, 2021 and increased by $852.9 million compared to December 31, 2020. The Company also continues to have significant borrowing capacity, with unused lines of credit at $2.4 billion at December 31, 2021 compared to $2.1 billion at September 30, 2021 and $2.6 billion at December 31, 2020. This liquidity enhances the ability to effectively manage interest expense and asset levels in the future.

Net Interest IncomeNet interest income of $72.7 million in the fourth quarter of 2021 increased $3.5 million, or 5%, compared to the fourth quarter of 2020 and increased $3.9 million, or 6%, compared to the third quarter of 2021.

The 5% increase in net interest income compared to the fourth quarter of 2020 reflected a 6% increase in interest income from higher loan balances that was partially offset by a 20% increase in the cost of deposits. The interest rate spread of 2.62% for the fourth quarter of 2021 decreased 33 basis points compared to 2.95% in the fourth quarter of 2020. The net interest margin of 2.70% for the fourth quarter of 2021 decreased 31 basis points compared to 3.01% for the fourth quarter of 2020. The decrease in net interest margin compared to the fourth quarter of 2020 reflected higher loan balances that were outpaced by lower interest rates on loans.

The 6% increase in net interest income compared to the third quarter of 2021 reflected higher loan balances and a modest increase in average loan yields. The interest rate spread of 2.62% for the fourth quarter of 2021 decreased 5 basis points compared to 2.67% in the third quarter of 2021. The net interest margin of 2.70% for the fourth quarter of 2021 also decreased 3 basis points compared to 2.73% for the third quarter of 2021.

Interest IncomeInterest income of $82.6 million in the fourth quarter of 2021 increased $4.7 million, or 6%, compared to the fourth quarter of 2020 and increased $5.3 million, or 7%, compared to the third quarter of 2021.

The 6% increase in interest income compared to the fourth quarter of 2020 was primarily due to significant loan growth that was partially offset by lower rates. The higher interest income reflected a $923.3 million, or 11%, increase in the average balance of loans, including loans held for sale, which reached $9.1 billion for the fourth quarter of 2021. The average yield on loans and loans held for sale of 3.37% for the fourth quarter of 2021 decreased 27 basis points compared to 3.64% for the fourth quarter of 2020.

The 7% increase in interest income compared to the third quarter of 2021 reflected a $375.7 million, or 4%, increase in the average balance of loans, including loans held for sale, which reached $9.1 billion for the fourth quarter of 2021. The average yield on loans and loans held for sale of 3.37% for the fourth quarter of 2021 increased 4 basis points compared to 3.33% for the third quarter of 2021.

Interest ExpenseTotal interest expense increased $1.2 million, or 13%, to $9.8 million for the fourth quarter of 2021 compared to the fourth quarter of 2020 and increased $1.4 million, or 17%, compared to the third quarter of 2021. Interest expense on deposits of $8.5 million for the fourth quarter of 2021 increased $1.4 million, or 20%, compared to the fourth quarter of 2020 and increased $1.5 million, or 22%, compared to the third quarter of 2021.

The 20% increase in interest expense on deposits compared to the fourth quarter of 2020 was primarily due to increases in average balances of money market accounts and certificates of deposits, which was partially offset by lower rates. The average balance of interest-bearing deposits of $8.3 billion for the fourth quarter of 2021 increased $1.5 billion, or 21%, compared to the fourth quarter of 2020. The average yield of interest-bearing deposits was 0.41% for the fourth quarter of 2021, which was the same as the fourth quarter of 2020.

The 22% increase in interest expense on deposits compared to the third quarter of 2021 was primarily due to higher balances of certificates of deposit and money market accounts, that were partially offset by lower rates on certificates of deposit. The average balance of interest-bearing deposits of $8.3 billion for the fourth quarter of 2021 increased $481.7 million, or 6%, compared to the third quarter of 2021. The average yield of interest-bearing deposits was 0.41% for the fourth quarter of 2021, which was a 6 basis point increase compared to 0.35% in the third quarter of 2021.

Noninterest IncomeNoninterest income of $40.3 million for the fourth quarter of 2021 decreased $2.5 million, or 6%, compared to the fourth quarter of 2020 and was consistent with the third quarter of 2021.

The 6% decrease in noninterest income compared to the fourth quarter of 2020 was primarily due to a $3.5 million decrease in mortgage warehouse fees. Included in loan servicing fees for the fourth quarter of 2021 was a $1.9 million positive fair market value adjustment to servicing rights, which compared to a $2.1 million positive fair market value adjustment for the fourth quarter of 2020.

Noninterest income was consistent with the third quarter of 2021 but included a $4.6 million increase in other income from low-income housing tax credit syndication fees that was mostly offset by a $3.9 million decrease in loan servicing fees. Included in loan servicing fees for the fourth quarter of 2021 was a $1.9 million positive fair market value adjustment to servicing rights, which compared to a $3.0 million positive fair market value adjustment for the third quarter of 2021.

At December 31, 2021, servicing rights were valued at $110.3 million, an increase of 34% compared to December 31, 2020 and an increase of 5% compared to September 30, 2021. These increases were driven by higher loan balances of serviced assets and higher interest rates that impacted fair market value adjustments in the fourth quarter of 2021. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments.

Noninterest ExpenseNoninterest expense of $37.6 million for the fourth quarter of 2021 increased $10.2 million, or 37%, compared to the fourth quarter of 2020 and increased $8.2 million, or 28%, compared to the third quarter of 2021.

The 37% increase in noninterest expense compared to the fourth quarter of 2020 was due primarily to a $8.8 million, or 53%, increase in salaries and employee benefits, including commissions, to support higher loan production volumes. The efficiency ratio of 33.3% for the fourth quarter of 2021 compared to 24.5% for the fourth quarter of 2020.

The 28% increase in noninterest expense compared to the third quarter of 2021 was primarily due to a $5.2 million, or 26%, increase in salaries and employee benefits that reflected higher commissions from higher loan volumes. The efficiency ratio of 33.3% for the fourth quarter of 2021 compared to 27.0% for the third quarter of 2021.

Segments

Multi-family Mortgage BankingFor the fourth quarter of 2021, net income of $14.1 million for Multi-family Mortgage Banking decreased 1% compared with the fourth quarter of 2020, primarily due to higher noninterest income from gain on sale of loans that was offset by higher noninterest expense from salaries and employee benefits, including commissions. Noninterest income reflected a positive fair market value adjustment of $1.0 million on servicing rights in the fourth quarter of 2021 compared to a positive fair market value adjustment of $2.7 million in the fourth quarter of 2020.

Compared to the third quarter of 2021, net income for this segment decreased 2%, reflecting higher gain on sale of loans and other income from low-income housing tax credit syndication fees that were offset by higher noninterest expense from salaries and employee benefits, including commissions. Included in loan servicing fees was a positive fair market value adjustment of $1.0 million on servicing rights in the fourth quarter of 2021 compared to a positive fair market value adjustment of $0.7 million in the third quarter of 2021.

BankingFor the fourth quarter of 2021, net income of $22.6 million for Banking increased 38% from the fourth quarter of 2020, reflecting higher net interest income and lower salaries and employee benefits that were partially offset by lower noninterest income from gains on sale of loans. Included in noninterest income for the fourth quarter of 2021 was a $0.9 million positive fair market value adjustment to servicing rights, which compared to a $0.5 million negative fair market value adjustment for the fourth quarter of 2020.

Net income for this segment decreased 4% from the third quarter of 2021 primarily due to lower noninterest income from gain on sale of loans that offset higher net interest income and lower salaries and employee benefits. Included in loan servicing fees for the fourth quarter of 2021 was a $0.9 million positive fair market value adjustment to servicing rights, which compared to a $2.3 million positive fair market value adjustment for the third quarter of 2021.

Mortgage WarehousingFor the fourth quarter of 2021, net income of $21.3 million for Mortgage Warehousing decreased 34% compared to the fourth quarter of 2020 and decreased 8% compared to the third quarter of 2021. The decreases compared to the prior periods reflected lower net interest income and mortgage warehouse fees as industry volumes declined.

About Merchants BancorpMerchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple lines of business, including 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 $11.3 billion in assets and $9.0 billion in deposits as of December 31, 2021, 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 StatementsThis 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 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)

December 31, September 30, June 30, March 31, December 31,

2021 2021 2021 2021 2020

Assets

Cash and due from banks $ 14,030 $ 14,352 $ 13,745 $ 12,003 $ 10,063

Interest-earning demand accounts 1,018,584 788,224 388,304 257,436 169,665

Cash and cash equivalents 1,032,614 802,576 402,049 269,439 179,728

Securities purchased under agreements to resell 5,888 5,923 6,507 6,544 6,580

Mortgage loans in process of securitization 569,239 634,027 461,914 432,063 338,733

Available for sale securities 310,629 301,119 315,260 241,691 269,802

Federal Home Loan Bank (FHLB) stock 29,588 70,767 70,767 70,656 70,656

Loans held for sale (includes $48,583, $26,296, $26,623, 3,303,199 3,453,279 2,955,390 2,749,662 3,070,154$57,998 and $40,044, respectively, at fair value)

Loans receivable, net of allowance for loan losses of $31,344, 5,751,319 5,431,227 5,444,227 5,710,291 5,507,926$29,134, $28,696, $29,091 and $27,500, respectively

Premises and equipment, net 31,212 31,423 31,384 31,261 29,761

Servicing rights 110,348 105,473 98,331 96,215 82,604

Interest receivable 24,103 21,894 22,068 22,111 21,770

Goodwill 15,845 15,845 15,845 15,845 15,845

Intangible assets, net 1,707 1,843 1,990 2,136 2,283

Other assets and receivables 92,947 76,637 55,800 57,346 49,533

Total assets $ 11,278,638 $ 10,952,033 $ 9,881,532 $ 9,705,260 $ 9,645,375

Liabilities and Shareholders' Equity

Liabilities

Deposits

Noninterest-bearing $ 641,442 $ 824,118 $ 814,567 $ 818,621 $ 853,648

Interest-bearing 8,341,171 8,123,201 7,225,011 7,244,560 6,554,418

Total deposits 8,982,613 8,947,319 8,039,578 8,063,181 7,408,066

Borrowings 1,033,954 809,136 701,373 545,160 1,348,256

Deferred and current tax liabilities, net 19,170 21,681 18,819 41,610 20,405

Other liabilities 87,492 64,019 62,698 44,054 58,027

Total liabilities 10,123,229 9,842,155 8,822,468 8,694,005 8,834,754

Commitments and Contingencies

Shareholders' Equity

Common stock, without par value

Authorized - 50,000,000 shares

Issued and outstanding prior to 2022 stock split - 28,786,719shares, 28,785,374 shares, 28,783,599 shares, 28,782,139shares, and 28,747,083 shares, respectively (as recast after 137,565 137,200 136,836 136,474 135,8572022 stock split - 43,180,079 shares, 43,178,061 shares,43,175,399 shares, 43,173,209 shares and 43,120,625 shares)

Preferred stock, without par value - 5,000,000 total shares authorized

8% Preferred stock - $1,000 per share liquidation preference

Authorized - 50,000 shares

Issued and outstanding - 0 shares, 0 shares, 0 shares, 41,625 shares and 41,625 - - - 41,581 41,581shares.

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 120,844 120,844 120,844 120,844 120,844shares)

6% Series C Preferred stock - $1,000 per share liquidation preference

Authorized - 250,000 shares

Issued and outstanding - 196,181 shares, 196,181 shares,196,181 shares, 150,000 shares, and 0 shares, respectively(equivalent to 7,847,233 depositary shares, 7,847,233 191,084 191,084 191,084 144,925 -depositary shares, 7,847,233 depositary shares, 6,000,000depositary shares, and 0 depositary shares)

Retained earnings 657,149 610,267 560,083 516,961 461,744

Accumulated other comprehensive income (1,454) 262 (4) 249 374

Total shareholders' equity 1,155,409 1,109,878 1,059,064 1,011,255 810,621

Total liabilities and shareholders' equity $ 11,278,638 $ 10,952,033 $ 9,881,532 $ 9,705,260 $ 9,645,375

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)

Three Months Ended Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,

2021 2021 2020 2021 2020

Interest Income

Loans $ 77,113 $ 72,924 $ 74,515 $ 293,830 $ 263,915

Mortgage loans in process of securitization 4,018 2,868 2,542 12,746 11,122

Investment securities:

Available for sale - taxable 1,007 1,115 422 3,309 3,147

Available for sale - tax exempt 9 12 11 41 123

Federal Home Loan Bank stock 177 190 341 1,143 1,558

Other 261 205 80 817 2,925

Total interest income 82,585 77,314 77,911 311,886 282,790

Interest Expense

Deposits 8,492 6,981 7,106 28,256 52,238

Borrowed funds 1,350 1,452 1,568 5,636 6,406

Total interest expense 9,842 8,433 8,674 33,892 58,644

Net Interest Income 72,743 68,881 69,237 277,994 224,146

Provision for loan losses 2,585 1,079 4,114 5,012 11,838

Net Interest Income After Provision for Loan Losses 70,158 67,802 65,123 272,982 212,308

Noninterest Income

Gain on sale of loans 28,430 29,013 28,830 111,185 96,578

Loan servicing fees, net 1,382 5,313 3,069 16,373 (1,801)

Mortgage warehouse fees 2,469 2,732 5,926 12,396 20,980

Gains on sale of investments available for sale ^(1) 191 - - 191 441

Other income 7,799 3,213 4,901 17,188 11,275

Total noninterest income 40,271 40,271 42,726 157,333 127,473

Noninterest Expense

Salaries and employee benefits 25,387 20,197 16,565 85,727 59,200

Loan expenses 1,479 1,734 2,938 7,657 9,085

Occupancy and equipment 2,069 1,861 1,438 7,365 5,733

Professional fees 3,325 901 1,657 5,427 3,664

Deposit insurance expense 705 664 759 2,691 5,800

Technology expense 1,123 1,169 832 4,200 3,061

Other expense 3,558 2,946 3,276 12,318 9,881

Total noninterest expense 37,646 29,472 27,465 125,385 96,424

Income Before Income Taxes 72,783 78,601 80,384 304,930 243,357

Provision for income taxes ^(2) 17,582 20,098 20,598 77,826 62,824

Net Income $ 55,201 $ 58,503 $ 59,786 $ 227,104 $ 180,533

Dividends on preferred stock (5,728) (5,729) (3,618) (20,873) (14,473)

Net Income Allocated to Common Shareholders $ 49,473 $ 52,774 $ 56,168 $ 206,231 $ 166,060

As reported prior to 2022 stock split:

Weighted-average diluted shares 28,932,709 28,876,503 28,812,009 28,883,535 28,778,075

Diluted earnings per common share $ 1.71 $ 1.83 $ 1.95 $ 7.14 $ 5.77

As recast after 2022 stock split:

Weighted-average diluted shares 43,399,064 43,314,755 43,218,014 43,325,303 43,167,113

Diluted earnings per common share $ 1.14 $ 1.22 $ 1.30 $ 4.76 $ 3.85

^(1)Includes $191, $0, $0, $191, and $441, respectively, related to accumulatedother comprehensive earnings reclassifications.

^(2) Includes $(46), $0, $0, $(46) and $(97), respectively, related to incometax (expense)/benefit for reclassification items.

Key Operating Results

(Unaudited)

($ in thousands, except share data)

Three Months Ended Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,

2021 2021 2020 2021 2020

Noninterest expense $ 37,646 $ 29,472 $ 27,465 $ 125,385 $ 96,424

Net interest income (before provision for losses) 72,743 68,881 69,237 277,994 224,146

Noninterest income 40,271 40,271 42,726 157,333 127,473

Total income $ 113,014 $ 109,152 $ 111,963 $ 435,327 $ 351,619

Efficiency ratio 33.31% 27.00% 24.53% 28.80% 27.42%

Average assets $ 10,945,026 $ 10,236,491 $ 9,317,570 $ 10,188,953 $ 8,509,847

Net income $ 55,201 $ 58,503 $ 59,786 $ 227,104 $ 180,533

Return on average assets before annualizing 0.50% 0.57% 0.64% 2.23% 2.12%

Annualization factor 4.00 4.00 4.00 1.00 1.00

Return on average assets 2.02% 2.29% 2.57% 2.23% 2.12%

Return on average tangible common shareholders' equity (1) 26.04% 29.83% 40.64% 30.10% 34.02%

Tangible book value per common share as reported prior to 2022 stock split (1) $ 26.95 $ 25.36 $ 20.17 $ 26.95 $ 20.17

Tangible book value per common share as recast after 2022 stock split (1) $ 17.96 $ 16.91 $ 13.45 $ 17.96 $ 13.45

Tangible common shareholders' equity/tangible assets (1) 6.89% 6.68% 6.02% 6.89% 6.02%

(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 managementand investors that is supplementary to the company's financial condition,results of operationsand cash flows computed in accordance with GAAP; however, they do have a numberof limitations. As such, the reader should not view these disclosures as asubstitute forresults determined in accordance with GAAP, and they are not necessarilycomparable to non-GAAP financial measures that other companies use. Areconciliation of GAAP tonon-GAAP financial measures is below. Net Income Available to CommonShareholders excludes preferred stock. Tangible common equity is calculated byexcluding thebalance of goodwill and other intangible assets and preferred stock from thecalculation of total assets. Tangible Assets is calculated by excluding thebalance of goodwill andintangible assets. Tangible book value per share is calculated by dividingtangible common equity by the number of shares outstanding.

Three Months Ended Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,

2021 2021 2020 2021 2020

Net income $ 55,201 $ 58,503 $ 59,786 $ 227,104 $ 180,533

Less: preferred stock dividends (5,728) (5,729) (3,618) (20,873) (14,473)

Net income available to common shareholders $ 49,473 $ 52,774 $ 56,168 $ 206,231 $ 166,060

Average shareholders' equity $ 1,139,714 $ 1,087,675 $ 783,837 $ 1,028,834 $ 719,630

Less: average goodwill & intangibles (17,626) (17,770) (18,334) (17,841) (18,899)

Less: average preferred stock (362,149) (362,149) (212,646) (325,904) (212,646)

Tangible common shareholders' equity $ 759,939 $ 707,756 $ 552,857 $ 685,089 $ 488,085

Annualization factor 4.00 4.00 4.00 1.00 1.00

Return on average tangible common shareholders' equity 26.04% 29.83% 40.64% 30.10% 34.02%

Total equity $ 1,155,409 $ 1,109,878 $ 810,621 $ 1,155,409 $ 810,621

Less: goodwill and intangibles (17,552) (17,688) (18,128) (17,552) (18,128)

Less: preferred stock (362,149) (362,149) (212,646) (362,149) (212,646)

Tangible common shareholders' equity $ 775,708 $ 730,041 $ 579,847 $ 775,708 $ 579,847

Assets $ 11,278,638 $ 10,952,033 $ 9,645,375 $ 11,278,638 $ 9,645,375

Less: goodwill and intangibles (17,552) (17,688) (18,128) (17,552) (18,128)

Tangible assets $ 11,261,086 $ 10,934,345 $ 9,627,247 $ 11,261,086 $ 9,627,247

Ending common shares as reported prior to 2022 stock split 28,786,719 28,785,374 28,747,083 28,786,719 28,747,083

Ending common shares as recast after 2022 stock split 43,180,079 43,178,061 43,120,625 43,180,079 43,120,625

Tangible book value per common share as reported prior to 2022 stock split $ 26.95 $ 25.36 $ 20.17 $ 26.95 $ 20.17

Tangible book value per common share as recast after 2022 stock split $ 17.96 $ 16.91 $ 13.45 $ 17.96 $ 13.45

Tangible common shareholders' equity/tangible assets 6.89% 6.68% 6.02% 6.89% 6.02%

Merchants Bancorp

Average Balance Analysis

($ in thousands)

(Unaudited)

Three Months Ended Three Months Ended Three Months Ended

December 31, 2021 September 30, 2021 December 31, 2020

Average Yield/ Average Yield/ Average Yield/

Balance Interest Rate Balance Interest Rate Balance Interest Rate

Assets:

Interest-bearing deposits, and other $ 698,263 $ 438 0.25% $ 580,397 $ 395 0.27% $ 328,635 $ 421 0.51%

Securities available for sale - taxable 308,581 1,007 1.29% 308,476 1,115 1.43% 276,358 422 0.61%

Securities available for sale - tax exempt 1,204 9 2.97% 1,361 12 3.50% 1,368 11 3.20%

Mortgage loans in process of securitization 621,946 4,018 2.56% 437,601 2,868 2.60% 397,237 2,542 2.55%

Loans and loans held for sale 9,064,880 77,113 3.37% 8,689,144 72,924 3.33% 8,141,559 74,515 3.64%

Total interest-earning assets 10,694,874 82,585 3.06% 10,016,979 77,314 3.06% 9,145,157 77,911 3.39%

Allowance for loan losses (29,801) (28,679) (24,684)

Noninterest-earning assets 279,953 248,191 197,097

Total assets $ 10,945,026 $ 10,236,491 $ 9,317,570

Liabilities & Shareholders' Equity:

Interest-bearing checking 4,325,991 2,094 0.19% 4,754,633 1,561 0.13% 4,301,607 1,256 0.12%

Savings deposits 223,912 35 0.06% 211,494 39 0.07% 185,515 41 0.09%

Money market 2,528,453 5,018 0.79% 2,259,786 4,394 0.77% 1,734,321 4,312 0.99%

Certificates of deposit 1,220,392 1,345 0.44% 591,093 987 0.66% 616,493 1,497 0.97%

Total interest-bearing deposits 8,298,748 8,492 0.41% 7,817,006 6,981 0.35% 6,837,936 7,106 0.41%

Borrowings 620,173 1,350 0.86% 677,201 1,452 0.85% 990,707 1,568 0.63%

Total interest-bearing liabilities 8,918,921 9,842 0.44% 8,494,207 8,433 0.39% 7,828,643 8,674 0.44%

Noninterest-bearing deposits 795,704 586,981 634,231

Noninterest-bearing liabilities 90,687 67,628 70,859

Total liabilities 9,805,312 9,148,816 8,533,733

Shareholders' equity 1,139,714 1,087,675 783,837

Total liabilities and shareholders' equity $ 10,945,026 $ 10,236,491 $ 9,317,570

Net interest income $ 72,743 $ 68,881 $ 69,237

Net interest spread 2.62% 2.67% 2.95%

Net interest-earning assets $ 1,775,953 $ 1,522,772 $ 1,316,514

Net interest margin 2.70% 2.73% 3.01%

Average interest-earning assets to average interest-bearing liabilities 119.91% 117.93% 116.82%

Supplemental Results

(Unaudited)

($ in thousands)

Net Income Net Income

Three Months Ended Twelve Months Ended

December 31, September 30, December 31, December 31,

2021 2021 2020 2021 2020

Segment

Multi-family Mortgage Banking $ 14,124 $ 14,448 $ 14,231 $ 51,504 $ 29,172

Mortgage Warehousing 21,311 23,217 32,387 95,159 106,329

Banking 22,629 23,463 16,389 90,858 53,637

Other (2,863) (2,625) (3,221) (10,417) (8,605)

Total $ 55,201 $ 58,503 $ 59,786 $ 227,104 $ 180,533

Total Assets

December 31, September 30, December 31,

2021 2021 2020

Segment

Multi-family Mortgage Banking $ 296,129 $ 280,927 $ 210,714

Mortgage Warehousing 3,977,537 4,685,037 4,893,513

Banking 6,929,565 5,950,316 4,498,880

Other 75,407 35,753 42,268

Total $ 11,278,638 $ 10,952,033 $ 9,645,375

Gain on Sale of Loans Gain on Sale of Loans

Three Months Ended Twelve Months Ended

December 31, September 30, December 31, December 31,

2021 2021 2020 2021 2020

Loan Type

Multi-family $ 24,797 $ 24,309 $ 17,070 $ 93,350 $ 57,633

Single-family 1,086 1,592 10,902 8,763 37,127

Small Business Association (SBA) 2,547 3,112 858 9,072 1,818

Total $ 28,430 $ 29,013 $ 28,830 $ 111,185 $ 96,578

Loans Receivable and Loans Held for Sale

December 31, September 30, December 31,

2021 2021 2020

Mortgage warehouse lines of credit $ 781,437 $ 891,605 $ 1,605,745

Residential real estate 843,101 828,950 678,848

Multi-family and healthcare financing 3,528,199 3,244,442 2,749,020

Commercial and commercial real estate 520,199 391,562 387,294

Agricultural production and real estate 97,060 92,113 101,268

Consumer and margin loans 12,667 11,689 13,251

5,782,663 5,460,361 5,535,426

Less: Allowance for loan losses 31,344 29,134 27,500

Loans receivable $ 5,751,319 $ 5,431,227 $ 5,507,926

Loans held for sale 3,303,199 3,453,279 3,070,154

Total loans, net of allowance $ 9,054,518 $ 8,884,506 $ 8,578,080

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SOURCE Merchants Bancorp