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08.02.2018 22:05:00
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Merchants Bancorp Reports Fourth Quarter and Full Year 2017 Results
CARMEL, Ind., Feb. 8, 2018 /PRNewswire/ --
- Full year 2017 record net income of $54.7 million, and $20.3 million for the fourth quarter
- Full year 2017 earnings per common share reached $2.28, and $0.73 for the fourth quarter
- Total assets at December 31, 2017 grew by $676.7 million, or 25% compared to 2016
- Return on average assets of 1.84% for twelve months ended December 31, 2017
- Record multi-family mortgage closings of $1.7 billion for full year 2017
- Successfully completed initial public offering, raising $115 million in new capital
Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported fourth quarter 2017 net income of $20.3 million, or $0.73 per common share. This compared with $8.8 million, or $0.38 per common share, in the fourth quarter of 2016. Fourth quarter 2017 results included a one-time $6.9 million tax benefit associated with changes to the Company's deferred tax liability, under the recent federal income tax reform legislation.
The Company also reported net income of $54.7 million for the twelve months ended December 31, 2017. This represented a $21.6 million, or 65% increase, compared with $33.1 million in the comparable period of 2016. Earnings per common share of $2.28 for the twelve months ended December 31, 2017 increased by 55%, compared with $1.47 in the comparable period of 2016.
Each of the Company's business segments' net income increased in 2017, compared with 2016. Multi-family Mortgage Banking income increased by 205%, Mortgage Warehousing increased by 8%, and Banking increased by 20%.
"2017 was another record year for Merchants Bancorp. We achieved record assets, loans, deposits, and net income, while maintaining well capitalized capital ratios that were increased by the proceeds of our initial public offering," said Michael Petrie, Chairman and CEO of Merchants. "We look forward to building on our success during 2018, which will be enhanced with the continued integration of RICHMAC Funding, and a more favorable tax environment. The additional equity from the IPO and the benefit of a lower tax rate will provide us with the capital needed to support additional growth in all of our segments."
Total Assets
Total assets increased $676.7 million, or 25%, to $3.4 billion at December 31, 2017, compared with $2.7 billion at December 31, 2016. The increase was due primarily to increases in loans, loans held for sale, and available for sale securities. Return on average assets was 1.84% for the full year 2017, compared with 1.24% in 2016.
Total loans receivable before allowance for loan losses increased $432.9 million, or 46%, to $1.4 billion at December 31, 2017, compared with $941.8 million at December 31, 2016. This increase was primarily due to growth in multi-family and healthcare financing, as well as commercial and commercial real estate loans.
Asset Quality
The allowance for loan losses increased by $2.1 million, to $8.3 million, reflecting higher loans for investment, compared with December 31, 2016, while non-performing loans 90 days or more past due were $3.1 million, or 0.23% of total loans.
Total Deposits
Total deposits increased $514.9 million, or 21%, to $2.9 billion at December 31, 2017, compared with $2.4 billion at December 31, 2016. The increase was due primarily to growth in certificates of deposit and demand deposits during the year.
Interest Income
Interest income increased $6.2 million, or 30%, to $26.9 million for the three months ended December 31, 2017, compared with $20.7 million for the three months ended December 31, 2016. This increase was due to both growth in loans and an increase in loan yields. The average balance of loans, including loans held for sale, during the three months ended December 31, 2017, increased by $217.3 million, or 11%, to $2.1 billion, compared with $1.9 billion for the three months ended December 31, 2016. The average yield on loans also increased 63 basis points, to 4.34%, for the three months ended December 31, 2017, compared with 3.71% for the three months ended December 31, 2016. Net interest margin increased to 2.43% for the three months ended December 31, 2017, compared with 2.11% for the three months ended December 31, 2016.
Interest Expense
Total interest expense increased $2.4 million, or 44%, to $8.0 million for the three months ended December 31, 2017, compared with the three months ended December 31, 2016. Interest expense on deposits increased $2.1 million, or 58%, to $5.8 million for the three months ended December 31, 2017, compared with the three months ended December 31, 2016. The increase was primarily due to a 30 basis point increase in the average cost of interest-bearing deposits, to 1.13%, for the three months ended December 31, 2017, compared with 0.83% for the same period in 2016, and an increase in the average balance of interest-bearing deposits of $276.9 million, or 16%, to $2.0 billion for the three months ended December 31, 2017. The increase in deposits was primarily due to growth in savings account 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.
Noninterest Income
Noninterest income increased by $8.0 million, or 115%, to $14.9 million for the three months ended December 31, 2017, compared with the three months ended December 31, 2016. The increase was primarily due to an increase of $5.9 million in loan servicing fees and an increase of $2.3 million in gain on sale of loans. The increase in loan servicing fees was positively impacted by a $3.7 million fair market value adjustment in mortgage servicing rights. The 30% increase in gain on sale of loans was due primarily to an increase in the volume of multi-family loan sales in the secondary market.
Noninterest Expense
Noninterest expense increased $3.4 million, or 46%, to $10.8 million for the three months ended December 31, 2017, compared with $7.4 million for the three months ended December 31, 2016. The increase was due primarily to a $2.8 million, or 66%, increase in salaries and employee benefits. The increase in salaries and employee benefits was due primarily to an increase in the number of employees that reflected organic growth, the RICHMAC acquisition, and additional hiring associated with becoming a publicly traded company. Despite the increase in salaries and benefits, the efficiency ratio declined by 150 basis points, to 31.9% in the fourth quarter of 2017, compared with the fourth quarter of 2016.
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 $3.4 billion in assets and $2.9 billion in deposits as of December 31, 2017, conducts its business through its direct and indirect subsidiaries, Merchants Bank of Indiana, P/R Mortgage and Investment Corp., 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 prospectus dated October 26, 2017 that was filed with the Securities and Exchange Commissions (the "SEC") on October 30, 2017 in connection with our initial public offering and in our subsequent filings with the SEC. 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, | December 31, | |||
2017 | 2016 | |||
Assets | ||||
Cash and due from banks | $ 18,905 | $ 10,036 | ||
Interest-earning demand accounts | 340,614 | 435,665 | ||
Cash and cash equivalents | 359,519 | 445,701 | ||
Securities purchased under agreements to resell | 7,043 | 5,392 | ||
Trading securities | 140,837 | 137,675 | ||
Available for sale securities | 408,371 | 325,874 | ||
Federal Home Loan Bank (FHLB) stock | 7,539 | 7,539 | ||
Loans held for sale | 995,319 | 764,503 | ||
Loans receivable, net of allowance for loan losses | ||||
of $8,311 and $6,250, respectively | 1,366,349 | 935,546 | ||
Premises and equipment, net | 5,354 | 4,851 | ||
Mortgage servicing rights | 66,079 | 53,670 | ||
Interest receivable | 8,326 | 5,368 | ||
Goodwill | 6,030 | 523 | ||
Intangible Assets | 1,512 | - | ||
Other assets and receivables | 22,983 | 31,870 | ||
Total assets | $ 3,395,261 | $ 2,718,512 | ||
Liabilities and Shareholders' Equity | ||||
Liabilities | ||||
Deposits | ||||
Noninterest bearing | $ 620,700 | $ 566,631 | ||
Interest bearing | 2,322,861 | 1,861,990 | ||
Total deposits | 2,943,561 | 2,428,621 | ||
Borrowings | 56,612 | 57,006 | ||
Interest payable | 2,153 | 1,791 | ||
Deferred and current tax liabilities, net | 14,550 | 17,363 | ||
Other liabilities | 10,911 | 7,443 | ||
Total liabilities | 3,027,787 | 2,512,224 | ||
Commitments and Contingencies | ||||
Shareholders' Equity | ||||
Common stock, without par value | ||||
Authorized - 50,000,000 shares | ||||
Issued and outstanding - 28,685,167 shares at December 31, 2017 | ||||
and 21,111,200 shares at December 31, 2016 | 134,891 | 20,061 | ||
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 | 192,008 | 145,274 | ||
Accumulated other comprehensive loss | (1,006) | (628) | ||
Total shareholders' equity | 367,474 | 206,288 | ||
Total liabilities and shareholders' equity | $ 3,395,261 | $ 2,718,512 | ||
Consolidated Statement of Income | ||||||||
(Unaudited) | ||||||||
(In thousands, except share data) | ||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
2017 | 2016 | 2017 | 2016 | |||||
Interest Income | ||||||||
Loans | $ 23,101 | $ 17,693 | $ 79,922 | $ 62,563 | ||||
Investment securities: | ||||||||
Trading | 1,063 | 1,501 | 5,187 | 4,516 | ||||
Available for sale | 1,356 | 856 | 4,531 | 3,249 | ||||
Federal Home Loan Bank stock | 81 | 80 | 321 | 320 | ||||
Other | 1,309 | 561 | 4,426 | 2,291 | ||||
Total interest income | 26,910 | 20,691 | 94,387 | 72,939 | ||||
Interest Expense | ||||||||
Deposits | 5,833 | 3,687 | 20,003 | 11,663 | ||||
Borrowed funds | 2,125 | 1,822 | 7,787 | 7,305 | ||||
Total interest expense | 7,958 | 5,509 | 27,790 | 18,968 | ||||
Net interest income | 18,952 | 15,182 | 66,597 | 53,971 | ||||
Provision for loan losses | 1,400 | 240 | 2,472 | 960 | ||||
Net Interest Income After Provision for Loan Losses | 17,552 | 14,942 | 64,125 | 53,011 | ||||
Noninterest Income | ||||||||
Gain on sale of loans | 9,977 | 7,646 | 37,790 | 24,755 | ||||
Loan servicing fees (costs), net | 3,972 | (1,927) | 6,273 | 280 | ||||
Mortgage warehouse fees | 601 | 947 | 2,608 | 3,015 | ||||
Gains on sale of investments available for sale (includes $0, $0, $0 and $24, | ||||||||
respectively, related to accumulated other comprehensive earnings | ||||||||
reclassifications) | - | - | - | 24 | ||||
Other income | 357 | 258 | 1,009 | 430 | ||||
Total noninterest income | 14,907 | 6,924 | 47,680 | 28,504 | ||||
Noninterest Expense | ||||||||
Salaries and employee benefits | 7,055 | 4,244 | 21,472 | 14,313 | ||||
Loan expenses | 1,025 | 1,174 | 4,097 | 4,251 | ||||
Occupancy and equipment | 522 | 341 | 1,602 | 1,344 | ||||
Professional fees | 425 | 355 | 1,516 | 1,298 | ||||
Deposit insurance expense | 226 | 235 | 930 | 1,149 | ||||
Technology expense | 340 | 288 | 1,171 | 985 | ||||
Other expense | 1,207 | 747 | 3,856 | 3,380 | ||||
Total noninterest expense | 10,800 | 7,384 | 34,644 | 26,720 | ||||
Income Before Income Taxes | 21,659 | 14,482 | 77,161 | 54,795 | ||||
Provision for Income Taxes (includes $0, $10, $0 and $10, respectively, | ||||||||
related to income tax expense for reclassification items) | 1,330 | 5,728 | 22,477 | 21,668 | ||||
Net Income | $ 20,329 | $ 8,754 | $ 54,684 | $ 33,127 | ||||
Dividends on preferred stock | $ (833) | $ (833) | $ (3,330) | $ (2,002) | ||||
Net income allocated to common shareholders | $ 19,496 | $ 7,921 | $ 51,354 | $ 31,125 | ||||
Basic earnings per common share | $ 0.73 | $ 0.38 | $ 2.28 | $ 1.47 | ||||
Diluted earnings per common share | $ 0.73 | $ 0.38 | $ 2.28 | $ 1.47 | ||||
Weighted-average common shares outstanding | ||||||||
Basic | 26,619,950 | 21,111,235 | 22,551,452 | 21,111,208 | ||||
Diluted | 26,637,452 | 21,111,818 | 22,569,472 | 21,113,435 | ||||
Dividends per common share | $ 0.05 | $ 0.05 | $ 0.20 | $ 0.20 | ||||
Key Operating Results | |||||||||
(Unaudited) | |||||||||
($ in thousands) | |||||||||
Three Months Ended | Twelve Months Ended | ||||||||
Dec. 31, | Sept, 30 | Dec. 31, | Dec. 31, | Dec. 31, | |||||
2017 | 2017 | 2016 | 2017 | 2016 | |||||
Noninterest Expense | 10,800 | 8,942 | 7,384 | 34,644 | 26,720 | ||||
Net Interest Income (before provision for losses) | 18,952 | 18,390 | 15,182 | 66,597 | 53,971 | ||||
Noninterest Income | 14,907 | 8,056 | 6,924 | 47,680 | 28,504 | ||||
Total Interest Income | 33,859 | 26,446 | 22,106 | 114,277 | 82,475 | ||||
Efficiency Ratio | 31.90% | 33.81% | 33.40% | 30.32% | 32.40% | ||||
Average Assets | 3,204,660 | 3,178,887 | 2,965,044 | 2,973,607 | 2,679,671 | ||||
Net Income | 20,329 | 10,467 | 8,754 | 54,684 | 33,127 | ||||
Return on Average Assets before annualizing | 0.63% | 0.33% | 0.30% | 1.84% | 1.24% | ||||
Annualization factor | 4.00 | 4.00 | 4.00 | 1.00 | 1.00 | ||||
Return on Average Assets | 2.54% | 1.32% | 1.18% | 1.84% | 1.24% | ||||
Return on Average Tangible Common Equity (1) | 28.60% | 19.92% | 19.29% | 25.14% | 20.50% | ||||
Tangible Book Value Per Common Share (1) | $ 11.10 | $ 9.03 | $ 7.78 | ||||||
Tangible Common Equity/Tangible Assets (1) | 9.40% | 6.01% | 6.04% | ||||||
(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 | Twelve Months Ended | ||||||||
Dec. 31, | Sept, 30 | Dec. 31, | Dec. 31, | Dec. 31, | |||||
2017 | 2017 | 2016 | 2017 | 2016 | |||||
Net Income | 20,329 | 10,467 | 8,754 | 54,684 | 33,127 | ||||
Less: Preferred Stock Dividends | (833) | (833) | (833) | (3,330) | (2,002) | ||||
Net Income Available to Common Shareholders | 19,496 | 9,634 | 7,921 | 51,354 | 31,125 | ||||
Average Shareholders Equity | 321,785 | 237,009 | 206,339 | 248,515 | 177,370 | ||||
Less: Average Goodwill & Intangibles | (7,552) | (1,981) | (523) | (2,662) | (523) | ||||
Less: Average Preferred stock | (41,581) | (41,581) | (41,581) | (41,581) | (25,038) | ||||
Average Tangible Common Shareholder's Equity | 272,652 | 193,447 | 164,235 | 204,272 | 151,809 | ||||
Annualization Factor | 4.00 | 4.00 | 4.00 | 1.00 | 1.00 | ||||
Return on Average Tangible Common Equity | 28.60% | 19.92% | 19.29% | 25.14% | 20.50% | ||||
Total Equity | 367,474 | 243,285 | 206,288 | ||||||
Less: Goodwill and Intangibles | (7,542) | (7,604) | (523) | ||||||
Less: Preferred Stock | (41,581) | (41,581) | (41,581) | ||||||
Tangible Common Equity | 318,351 | 194,100 | 164,184 | ||||||
Assets | 3,395,261 | 3,237,485 | 2,718,512 | ||||||
Less: Goodwill and Intangibles | (7,542) | (7,604) | (523) | ||||||
Tangible Assets | 3,387,719 | 3,229,881 | 2,717,989 | ||||||
Ending common shares | 28,685,167 | 21,497,667 | 21,111,200 | ||||||
Tangible Book Value per Common Share | $ 11.10 | $ 9.03 | $ 7.78 | ||||||
Tangible Common Equity/Tangible Assets | 9.40% | 6.01% | 6.04% | ||||||
Merchants Bancorp | |||||||||||
Average Balance Analysis | |||||||||||
($ in thousands) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | |||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||
Balance | Int. | Rate | Balance | Int. | Rate | Balance | Int. | Rate | |||
Assets: | |||||||||||
Interest bearing deposits | $ 442,789 | $ 1,390 | 1.25% | $ 412,663 | $ 1,431 | 1.38% | $ 457,985 | $ 641 | 0.56% | ||
Securities available for sale | 414,895 | 1,356 | 1.30% | 406,517 | 1,259 | 1.23% | 322,968 | 856 | 1.05% | ||
Trading securities | 119,429 | 1,063 | 3.53% | 152,799 | 1,300 | 3.38% | 191,491 | 1,501 | 3.12% | ||
Loans and loans held for sale | 2,114,048 | 23,101 | 4.34% | 2,100,028 | 22,016 | 4.16% | 1,896,729 | 17,693 | 3.71% | ||
Total Interest Earning Assets | 3,091,161 | 26,910 | 3.45% | 3,072,007 | 26,006 | 3.36% | 2,869,173 | 20,691 | 2.87% | ||
Allowance for loan losses | (7,551) | (7,073) | (6,152) | ||||||||
Noninterest-earning assets | 121,050 | 113,953 | 102,023 | ||||||||
Total assets | $ 3,204,660 | $ 3,178,887 | $ 2,965,044 | ||||||||
Liabilities/Equity: | |||||||||||
Interest bearing checking | 612,674 | 2,153 | 1.39% | 623,893 | 1,757 | 1.12% | 407,466 | 1,284 | 1.25% | ||
Savings deposits | 357,363 | 143 | 0.16% | 344,922 | 223 | 0.26% | 290,813 | 104 | 0.14% | ||
Money market | 778,837 | 2,582 | 1.32% | 866,010 | 2,787 | 1.28% | 767,333 | 1,840 | 0.95% | ||
Certificates of deposit | 292,142 | 955 | 1.30% | 296,288 | 892 | 1.19% | 298,514 | 459 | 0.61% | ||
Total interest bearing deposits | 2,041,016 | 5,833 | 1.13% | 2,131,113 | 5,659 | 1.05% | 1,764,126 | 3,687 | 0.83% | ||
Borrowings | 76,505 | 2,125 | 11.02% | 64,509 | 1,957 | 12.04% | 59,188 | 1,822 | 12.25% | ||
Total Interest Bearing Liabilities | 2,117,521 | 7,958 | 1.49% | 2,195,622 | 7,616 | 1.38% | 1,823,314 | 5,509 | 1.20% | ||
Noninterest bearing deposits | 730,936 | 715,346 | 903,425 | ||||||||
Noninterest-bearing liabilities | 34,418 | 30,910 | 31,966 | ||||||||
Total liabilities | 2,882,875 | 2,941,878 | 2,758,705 | ||||||||
Equity | 321,785 | 237,009 | 206,339 | ||||||||
Total liabilities and equity | $ 3,204,660 | $ 3,178,887 | $ 2,965,044 | ||||||||
Net Interest Income | $ 18,952 | $ 18,390 | $ 15,182 | ||||||||
Interest Rate Spread | 1.96% | 1.98% | 1.67% | ||||||||
Net interest-earning assets | $ 973,640 | $ 876,385 | $ 1,045,859 | ||||||||
Net Interest Margin | 2.43% | 2.38% | 2.11% | ||||||||
Average Interest Earning Assets to | 145.98% | 139.92% | 157.36% | ||||||||
Segment Results | ||||||||||||||
(Unaudited) | ||||||||||||||
($ in thousands) | ||||||||||||||
Net Income | Total Assets | |||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | December 31, | December 31, | |||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||
Segment | ||||||||||||||
Multi-family Mortgage Banking | 14,871 | 1,885 | 28,661 | 9,408 | 136,518 | 98,553 | ||||||||
Mortgage Warehousing | 4,277 | 4,985 | 18,241 | 16,839 | 1,352,748 | 1,060,723 | ||||||||
Banking | 2,617 | 2,458 | 11,410 | 9,492 | 1,889,140 | 1,545,783 | ||||||||
Other | (1,436) | (574) | (3,628) | (2,612) | 16,855 | 13,453 | ||||||||
Total | 20,329 | 8,754 | 54,684 | 33,127 | 3,395,261 | 2,718,512 | ||||||||
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SOURCE Merchants Bancorp
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