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Section 1: 8-K (8-K)

 

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): December 7, 2017

 

 

Merchants Bancorp

(Exact Name of Registrant as Specified in its Charter)

 

 

Indiana

 

001-38258

 

20-5747400

(State or Other Jurisdiction
of Incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

11555 North Meridian Street, Suite 400

Carmel, Indiana 46032

(Address of Principal Executive Offices) (Zip Code)

(317) 569-7420

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable
(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company               x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.             ¨

 



 

Item 2.02. Results of Operations and Financial Condition.

 

On December 7, 2017, Merchants Bancorp issued a press release reporting its financial results for the third quarter of 2017. The press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit
No.

 

Description

 

 

 

   99.1

 

Press Release dated December 7, 2017 issued by Merchants Bancorp

 



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

MERCHANTS BANCORP

 

 

 

 

 

Date: December 7, 2017

By:

/s/ John F. Macke

 

 

Name: John F. Macke

 

 

Title: Chief Financial Officer

 


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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

PRESS RELEASE

 

Merchants Bancorp Reports Third Quarter 2017 Results

 

For Release December 7, 2017

 

·                 Income of $10.5 million for quarter, and $34.4 million for nine months ended September 30, 2017

 

·                 Earnings per share of $0.45 for quarter, and $1.50 for nine months ended September 30, 2017

 

·                 Return on Average Assets of 1.58% for nine months ended September 30, 2017

 

·                 Record multi-family mortgage closings of $1.2 billion for nine months ended September 30, 2017

 

·                 Closed the purchase of RICHMAC Funding, providing access to new products and markets

 

CARMEL, Indiana – (PR Newswire) - Merchants Bancorp (the “Company” or “Merchants”) (Nasdaq: MBIN), parent company of Merchants Bank of Indiana, today reported third quarter 2017 net income of $10.5 million, or $0.45 per share.  This compared with $11.6 million, or $0.51 per share, in the third quarter of 2016.

 

The Company also reported net income of $34.4 million for the nine months ended September 30, 2017.  This represented a $10.0 million, or 41% increase, compared with $24.4 million in the comparable period of 2016.  Earnings per share of $1.50 for the nine months ended September 30, 2017 increased by 36%, compared with $1.10 in the comparable period of 2016.

 

Each of the Company’s business segments has grown net income in the first nine months of 2017, compared with the same period of 2016.  Multi-family Mortgage Banking income increased by 83%, Mortgage Warehousing increased by 18%, and Banking increased by 25%.

 

MORE

 



 

MERCHANTS BANCORP ANNOUNCES THIRD QUARTER 2017 RESULTS

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“Our results through the third quarter of 2017 reflected continued momentum in providing our customers with the banking services they value.  We are pleased with the growth we’ve seen this year in all of our segments.  Clearly, our multi-family business is having a strong year and mortgage warehousing net income is up 18% when mortgage originations are down nationally,” said Michael Petrie, Chairman and CEO of Merchants.  “We’re also excited to add the RICHMAC team because it gives us new affordable multi-family housing products and an experienced presence in attractive new markets through offices in New York City and Minneapolis-Saint Paul.”

 

Total Assets

 

Total assets increased $519.0 million, or 19%, to $3.2 billion at September 30, 2017, compared with $2.7 billion at December 31, 2016. The increase was due primarily to increases in loans, including loans held for sale, of $299.7 million, cash and cash equivalents of $121.1 million, and available for sale securities of $104.7 million.

 

Interest Income

 

Interest income increased $6.2 million, or 31%, to $26.0 million for the three months ended September 30, 2017, compared with $19.8 million for the three months ended September 30, 2016. This increase was due to both growth in loans and an increase in the yield on those loans.  The average balance of loans, including loans held for sale, during the three months ended September 30, 2017, increased by $268.9 million, or 15%, to $2.1 billion, compared with $1.8 billion for the three months ended September 30, 2016.  The average yield on loans also increased 51 basis points, to 4.16%, for the three months ended September 30, 2017, compared with 3.65% for the three months ended September 30, 2016.

 

Interest income increased by 29%, to $67.5 million, for the nine months ended September 30, 2017, again primarily due to growth in average loans outstanding and an increase in yields. The average balance of loans, including loans held for sale, for the nine months ended September 30, 2017, increased by $217.4 million, or 13%, to $1.8 billion, compared with the comparable period in 2016.  The average yield on loans also increased 44 basis points, to 4.11%, for the nine months ended September 30, 2017, compared with 3.67% for the nine months ended September 30, 2016.

 

Interest Expense

 

Total interest expense increased $2.8 million, or 57%, to $7.6 million for the three months ended September 30, 2017, compared with the three months ended September 30, 2016. Interest expense on deposits increased $2.6 million, or 88%, to $5.7 million for the three months ended September 30, 2017, compared with the three months ended September 30, 2016. The increase was primarily due

 



 

MERCHANTS BANCORP ANNOUNCES THIRD QUARTER 2017 RESULTS

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to a 38 basis point increase in the average cost of interest-bearing deposits, to 1.05%, for the three months ended September 30, 2017, compared with 0.67% for the same period in 2016, and an increase in the average balance of interest-bearing deposits of $353.5 million, or 20%, to $2.1 billion for the three months ended September 30, 2017. The increase was primarily due to the addition of custodial and corporate deposits from existing Mortgage Warehousing segment customers. The increase in the cost of deposits was due to the overall increase in interest rates since last year.

 

The same factors drove total interest expense to increase $6.4 million, or 47%, to $19.8 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Interest expense on deposits increased $6.2 million, or 78%, to $14.2 million, for the nine months ended September 30, 2017, compared with the same period in 2016. The average cost of interest-bearing deposits was 0.97%, up from 0.66% for the same period in 2016, and the average balance of interest-bearing deposits increased $333.9 million, or 21%, to $2.0 billion for the nine months ended September 30, 2017, compared with the same period in 2016.

 

Net Interest Income

 

Net interest income increased $3.4 million, or 23%, to $18.4 million for the three months ended September 30, 2017, compared with the three months ended September 30, 2016. The increase was primarily due to a 22 basis point increase in the interest rate spread on the Company’s growing interest-earning asset base, to 1.98%, for the three months ended September 30, 2017, compared with 1.76% for the three months ended September 30, 2016. Net interest margin increased to 2.38% for the three months ended September 30, 2017, compared with 2.12% for the three months ended September 30, 2016.

 

For the nine months ended September 30, 2017, compared with the same period prior year, net interest income increased $8.9 million, or 23%, to $47.6 million.  The interest rate spread increased 21 basis points to 1.92%, and net interest margin increased 22 basis points to 2.28%.

 

Noninterest Income

 

Noninterest income decreased by $3.6 million, or 31%, to $8.1 million for the three months ended September 30, 2017, compared with the three months ended September 30, 2016. The decrease was primarily due to a decrease of $3.3 million in gain on sale of loans, and a $199 thousand decrease in net loan servicing fees.  The gain on sale of loans was $7.2 million during the three months ended September 30, 2017, compared with $10.5 million in the comparable period of 2016, a decrease of 31.4%.  This was due primarily to a decrease in the volume of loan sales in the

 



 

MERCHANTS BANCORP ANNOUNCES THIRD QUARTER 2017 RESULTS

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secondary market.  The decrease in loan servicing fees was due primarily to a $1.4 million reduction in the fair value of mortgage servicing rights, partially offset by an increase in servicing fee income.

 

Noninterest income increased $11.2 million, or 51.9%, to $32.8 million for the nine months ended September 30, 2017, compared with $21.6 million for the nine months ended September 30, 2016.  The increase was primarily due to an increase of $10.7 million in gain on sale of loans. The gain on sale of loans was $27.8 million during the nine months ended September 30, 2017, compared with $17.1 million in the comparable period of 2016, an increase of 62.6%.  This increase was due primarily to an increase in the volume of loan sales in the secondary market. The volume of loan originations increased to $1.2 billion for the nine months ended September 30, 2017, compared with $803.0 million for the nine months ended September 30, 2016.  The increase is due to growth within the existing customer base and the addition of new relationships.

 

Noninterest Expense

 

Noninterest expense increased $1.8 million, or 25%, to $8.9 million for the three months ended September 30, 2017, compared with $7.2 million for the three months ended September 30, 2016.  The increase was due primarily to a $1.6 million, or 41%, 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 reflects organic growth, the RICHMAC acquisition, and preparing for the initial public offering.

 

Noninterest expense increased $4.5 million, or 23%, to $23.8 million for the nine months ended September 30, 2017, compared with $19.3 million for the nine months ended September 30, 2016. The increase was primarily due to a $4.3 million, or 43%, increase in salaries and employee benefits.  The increase in salaries and employee benefits was primarily due to the aforementioned increase in staffing levels and a $1.6 million increase in loan commission expense, resulting from increased multi-family loan origination and sales volume.

 

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 $3.2 billion in assets and $2.9 billion in deposits as of September 30, 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

 



 

MERCHANTS BANCORP ANNOUNCES THIRD QUARTER 2017 RESULTS

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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.

 

Media Contact: Rebecca Marsh

Merchants Bancorp

Phone: (317) 805-4356

Email: rmarsh@merchantsbankofindiana.com

 

Investor Contact: John Macke

Merchants Bancorp

Phone: (317) 536-7421

Email: jmacke@merchantsbankofindiana.com

 



 

MERCHANTS BANCORP ANNOUNCES THIRD QUARTER 2017 RESULTS

 

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Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)

 

 

 

 

September 30,
2017

 

December 31,
2016

Assets

 

 

 

 

Cash and due from banks

 

 14,934

 

 10,036

Interest-earning demand accounts

 

551,876

 

435,665

Cash and cash equivalents

 

566,810

 

445,701

 

 

 

 

 

Securities purchased under agreements to resell

 

7,080

 

5,392

Trading securities

 

121,360

 

137,675

Available for sale securities

 

430,581

 

325,874

Federal Home Loan Bank (FHLB) stock

 

7,539

 

7,539

Loans held for sale

 

798,058

 

764,503

Loans receivable, net of allowance for loan losses of $7,457 and $6,250, respectively

 

1,201,695

 

935,546

Premises and equipment, net

 

5,138

 

4,851

Mortgage servicing rights

 

62,022

 

53,670

Interest receivable

 

7,196

 

5,368

Goodwill

 

6,037

 

523

Other assets and receivables

 

23,969

 

31,870

 

 

 

 

 

Total assets

 

 3,237,485

 

 2,718,512

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

Deposits

 

 

 

 

Noninterest bearing

 

 721,208

 

 566,631

Interest bearing

 

2,180,256

 

1,861,990

Total deposits

 

2,901,464

 

2,428,621

Borrowings

 

56,624

 

57,006

Interest payable

 

2,364

 

1,791

Deferred and current tax liabilities, net

 

21,022

 

17,363

Other liabilities

 

12,726

 

7,443

Total liabilities

 

2,994,200

 

2,512,224

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

Common stock, without par value

 

 

 

 

Authorized - 50,000,000 shares

 

 

 

 

Issued and outstanding - 21,497,667 shares at September 30, 2017 and 21,111,200 shares at December 31, 2016

 

28,230

 

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

 

173,945

 

145,274

Accumulated other comprehensive loss

 

(471)

 

(628)

Total shareholders’ equity

 

243,285

 

206,288

 

 

 

 

 

Total liabilities and shareholders’ equity

 

 3,237,485

 

 2,718,512

 


 

 


 

MERCHANTS BANCORP ANNOUNCES THIRD QUARTER 2017 RESULTS

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Condensed Consolidated Statement of Income
(Unaudited)
(In thousands, except share data)

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Interest Income

 

 

 

 

 

 

 

 

 

Loans

 

$

22,016

 

$

16,804

 

$

56,821

 

$

44,870

 

Investment securities:

 

 

 

 

 

 

 

 

 

Trading

 

1,300

 

1,516

 

4,124

 

3,015

 

Available for sale

 

1,259

 

825

 

3,175

 

2,393

 

Federal Home Loan Bank stock

 

80

 

80

 

240

 

240

 

Other

 

1,351

 

602

 

3,117

 

1,730

 

Total interest income

 

26,006

 

19,827

 

67,477

 

52,248

 

Interest Expense

 

 

 

 

 

 

 

 

 

Deposits

 

5,659

 

3,016

 

14,170

 

7,976

 

Borrowed funds

 

1,957

 

1,841

 

5,662

 

5,483

 

Total interest expense

 

7,616

 

4,857

 

19,832

 

13,459

 

Net interest income

 

18,390

 

14,970

 

47,645

 

38,789

 

Provision for loan losses

 

592

 

240

 

1,072

 

720

 

Net Interest Income After Provision for Loan Losses

 

17,798

 

14,730

 

46,573

 

38,069

 

Noninterest Income

 

 

 

 

 

 

 

 

 

Gain on sale of loans

 

7,204

 

10,499

 

27,813

 

17,109

 

Loan servicing fees (costs), net

 

(83)

 

116

 

2,301

 

2,207

 

Mortgage warehouse fees

 

749

 

890

 

2,007

 

2,068

 

Gains on sale of investments available for sale (includes $0, $24, $0 and $24, respectively, related to accumulated other comprehensive earnings reclassifications)

 

-

 

24

 

-

 

24

 

Other income

 

186

 

100

 

652

 

172

 

Total noninterest income

 

8,056

 

11,629

 

32,773

 

21,580

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

5,350

 

3,798

 

14,417

 

10,069

 

Loan expenses

 

1,119

 

1,171

 

3,072

 

3,077

 

Occupancy and equipment

 

326

 

331

 

1,080

 

1,003

 

Professional fees

 

561

 

204

 

1,091

 

943

 

Deposit insurance expense

 

230

 

324

 

704

 

914

 

Technology expense

 

325

 

276

 

831

 

697

 

Other expense

 

1,031

 

1,069

 

2,649

 

2,633

 

Total noninterest expense

 

8,942

 

7,173

 

23,844

 

19,336

 

Income Before Income Taxes

 

16,912

 

19,186

 

55,502

 

40,313

 

Provision for Income Taxes (includes $0, $10, $0 and $10, respectively, related to income tax expense for reclassification items)

 

6,445

 

7,587

 

21,147

 

15,940

 

Net Income

 

$

10,467

 

$

11,599

 

$

34,355

 

$

24,373

 

Basic earnings per share

 

$

0.45

 

$

0.51

 

$

1.50

 

$

1.10

 

Diluted earnings per share

 

$

0.45

 

$

0.51

 

$

1.50

 

$

1.10

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

21,310,199

 

21,111,200

 

21,180,384

 

21,111,200

 

Diluted

 

21,318,359

 

21,113,961

 

21,186,444

 

21,112,842

 

Dividends per share

 

$

0.05

 

$

0.05

 

$

0.15

 

$

0.15

 

 


 

 


 

MERCHANTS BANCORP ANNOUNCES THIRD QUARTER 2017 RESULTS

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Key Operating Results
(Unaudited)
($ in thousands)

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

8,942

 

7,173

 

23,844

 

19,336

 

 

 

 

 

 

 

 

 

Net Interest Income (before provision for losses)

 

18,390

 

14,970

 

47,645

 

38,789

Noninterest Income

 

8,056

 

11,629

 

32,773

 

21,580

Total Interest Income

 

26,446

 

26,599

 

80,418

 

60,369

 

 

 

 

 

 

 

 

 

Efficiency Ratio

 

33.81%

 

26.97%

 

29.65%

 

32.03%

 

 

 

Average Assets

 

3,178,887

 

2,882,892

 

2,895,743

 

2,583,852

Net Income

 

10,467

 

11,559

 

34,355

 

24,373

Return on Average Assets before annualizing

 

0.33%

 

0.40%

 

1.19%

 

0.94%

Annualization factor

 

4.00

 

4.00

 

1.33

 

1.33

Return on Average Assets

 

1.32%

 

1.60%

 

1.58%

 

1.26%

 

 

 

Segment Results
(Unaudited)
($ in thousands)

 

 

 

 

Net Income

 

Total Assets

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

September 30,

 

December 31,

 

 

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family Mortgage Banking

 

2,490

 

4,610

 

13,790

 

7,523

 

135,530

 

98,553

 

Mortgage Warehousing

 

5,546

 

4,849

 

13,964

 

11,854

 

1,192,377

 

1,060,723

 

Banking

 

3,339

 

2,731

 

8,793

 

7,034

 

1,964,083

 

1,545,783

 

Other

 

(908)

 

(591)

 

(2,192)

 

(2038)

 

(54,505)

 

13,453

 

Total

 

10,467

 

11,599

 

34,355

 

24,373

 

3,237,485

 

2,718,512

 

 


 

 

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