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Section 1: 10-Q (10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10‑Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended

September 30, 2017

 

 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to _______________

Commission File No. 001-38258

 

MERCHANTS BANCORP

 

 

(Exact name of registrant as specified in its charter)

 

 

 

Indiana

    

20‑5747400

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

 

 

11555 North Meridian Street, Suite 400 Carmel, Indiana

 

46032

(Address of principal

 

(Zip Code)

executive office)

 

 

 

(317) 569‑7420

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐  No ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☐

 

 

(Do not check if a smaller reporting company)

Emerging growth company ☒

 

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 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act.).
Yes ☐    No ☒

As of December 5, 2017, the latest practicable date, 28,685,167 shares of the registrant’s common stock, without par value, were issued and outstanding.

 

 

 


 

Table of Contents

Merchants Bancorp

Index to Quarterly Report on Form 10‑Q

PART I – FINANCIAL INFORMATION 

 

 

 

Item 1 Interim Financial Statements (Unaudited) 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 

3

 

 

Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2017 and 2016 

4

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016 

5

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2017 

6

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 

7

 

 

Notes to Condensed Consolidated Financial Statements 

8

 

 

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 

35

 

 

Item 3 Quantitative and Qualitative Disclosures About Market Risk 

49

 

 

Item 4 Controls and Procedures 

49

 

 

PART II – OTHER INFORMATION 

50

 

 

Item 1  Legal Proceedings 

50

 

 

Item 1A  Risk Factors 

50

 

 

Item 2  Unregistered Sales of Equity Securities and Use of Proceeds 

50

 

 

Item 3  Defaults Upon Senior Securities 

50

 

 

Item 4  Mine Safety Disclosures 

50

 

 

Item 5  Other Information 

50

 

 

Item 6  Exhibits 

51

 

 

SIGNATURES 

52

 

 

2


 

Table of Contents

Part I – Financial Information

Item 1. Financial Statements

Merchants Bancorp

Condensed Consolidated Balance Sheets

September 30, 2017 (Unaudited) and December 31, 2016

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

    

2017

    

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

 

See notes to condensed consolidated financial statements.

 

 

3


 

Table of Contents

Merchants Bancorp

Condensed Consolidated Statements of Income (Unaudited)

For the Three and Nine Months Ended September 30, 2017 and 2016

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

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

 

 

See notes to condensed consolidated financial statements.

 

 

4


 

Table of Contents

Merchants Bancorp

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

For the Three and Nine Months Ended September 30, 2017 and 2016

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

    

2017

    

2016

    

2017

    

2016

Net Income

 

$

10,467

 

$

11,599

 

$

34,355

 

$

24,373

Other Comprehensive Income (Loss):

 

 

  

 

 

  

 

 

  

 

 

  

Net change in unrealized losses on investment securities available for sale, net of (taxes) benefits of $(57),  $59,  $(105) and $(136), respectively

 

 

86

 

 

(89)

 

 

157

 

 

204

Less:  Reclassification adjustment for gains included in net income, net of tax expense of $0, $10, $0 and $10, respectively

 

 

 —

 

 

14

 

 

 —

 

 

14

Other comprehensive income (loss) for the period

 

 

86

 

 

(103)

 

 

157

 

 

190

Comprehensive Income

 

$

10,553

 

$

11,496

 

$

34,512

 

$

24,563

 

See notes to condensed consolidated financial statements.

 

 

5


 

Table of Contents

Merchants Bancorp

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

For the Nine Months Ended September 30, 2017

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Common Stock

 

Preferred Stock

 

Retained

 

Comprehensive

 

 

 

 

    

Shares

    

Amount

    

Shares

    

Amount

    

Earnings

    

Income (Loss)

    

Total

Balance, January 1, 2017

 

21,111,200

 

$

20,061

 

41,625

 

$

41,581

 

$

145,274

 

$

(628)

 

$

206,288

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

34,355

 

 

 —

 

 

34,355

Shares issued for stock compensation plan

 

3,200

 

 

42

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

42

Cash paid in lieu of fractional shares in stock split

 

(4)

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Shares issued for RICHMAC acquisition

 

383,271

 

 

8,127

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

8,127

Dividends on preferred stock

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(2,498)

 

 

 —

 

 

(2,498)

Dividends on common stock, $0.15 per share

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(3,186)

 

 

 —

 

 

(3,186)

Other comprehensive income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

157

 

 

157

Balance, September 30, 2017

 

21,497,667

 

$

28,230

 

41,625

 

$

41,581

 

$

173,945

 

$

(471)

 

$

243,285

 

See notes to condensed consolidated financial statements.

 

 

 

6


 

Table of Contents

Merchants Bancorp

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended September 30, 2017 and 2016

(In thousands)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30, 

 

    

2017

    

2016

Operating activities:

 

 

  

 

 

  

Net income

 

$

34,355

 

$

24,373

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

 

 

  

Depreciation

 

 

201

 

 

209

Provision for loan losses

 

 

1,072

 

 

720

Deferred tax, net

 

 

1,019

 

 

(511)

Gain on sale of securities

 

 

 —

 

 

(24)

Gain on sale of loans

 

 

(27,813)

 

 

(17,109)

Proceeds from sales of loans

 

 

14,380,078

 

 

14,496,755

Loans  and participations originated and purchased for sale

 

 

(14,394,235)

 

 

(14,813,694)

Change in mortgage servicing rights for paydowns and fair value adjustments

 

 

4,602

 

 

3,218

Net change in:

 

 

  

 

 

  

Trading securities

 

 

16,315

 

 

(112,229)

Other assets and receivables

 

 

11,504

 

 

(11,888)

Other liabilities

 

 

3,850

 

 

6,720

Other

 

 

721

 

 

55

Net cash provided by (used in) operating activities

 

 

31,669

 

 

(423,405)

Investing activities:

 

 

  

 

 

  

Net change in securities purchased under agreements to resell

 

 

(1,688)

 

 

94

Purchases of available-for-sale securities

 

 

(148,233)

 

 

(260,397)

Proceeds from sales of available-for-sale securities

 

 

 —

 

 

7,371

Proceeds from calls, maturities and paydowns of available-for-sale securities

 

 

43,779

 

 

185,862

Purchases of loans

 

 

(101,227)

 

 

(51,202)

Net change in loans receivable

 

 

(166,634)

 

 

(218,434)

Purchases of premises and equipment

 

 

(754)

 

 

(1,178)

Purchases of mortgage servicing rights

 

 

(1,209)

 

 

(1,252)

Purchase of limited partnership interests

 

 

(1,845)

 

 

 —

Cash received in acquisition of Richmac

 

 

363

 

 

 —

Other investing activities

 

 

111

 

 

(429)

Net cash used in investing activities

 

 

(377,337)

 

 

(339,565)

Financing activities:

 

 

  

 

 

  

Net change in deposits

 

 

472,843

 

 

745,432

Proceeds from Federal Home Loan Bank advances

 

 

464,250

 

 

100,000

Repayment of Federal Home Loan Bank advances

 

 

(464,632)

 

 

(100,473)

Proceeds from issuance of preferred stock

 

 

 —

 

 

31,581

Dividends

 

 

(5,684)

 

 

(4,336)

Net cash provided by financing activities

 

 

466,777

 

 

772,204

 

 

 

 

 

 

 

Net Change in Cash and Cash Equivalents

 

 

121,109

 

 

9,234

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

 

445,701

 

 

446,801

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$

566,810

 

$

456,035

Additional Cash Flows Information:

 

 

  

 

 

  

Interest paid

 

$

19,258

 

$

13,316

Income taxes paid

 

 

17,225

 

 

15,349

Supplemantal Disclosure of Noncash Investing Activities:

 

 

 

 

 

 

Acquisition

 

 

 

 

 

 

Fair value of assets acquired

 

$

12,666

 

$

 —

Fair value of common stock issued

 

 

8,127

 

 

 —

Fair value of liabilities assumed

 

 

4,539

 

 

 —

 

See notes to condensed consolidated financial statements.

 

 

 

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Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

Note 1:   Basis of Presentation

The condensed consolidated financial statements include Merchants Bancorp, a registered bank holding company (“Bancorp” or the “Company”) and its wholly owned subsidiary, Merchants Bank of Indiana (the “Bank”) and the Bank’s subsidiaries, P/R Mortgage and Investment Corp. (“P/RMIC”), Ash Realty Holdings, LLC (“Ash Realty”), Natty Mac Funding, Inc. (“NMF”), and MBI Midtown West, LLC (“MMW”), and P/RMIC’s subsidiary RICHMAC Funding LLC (“Richmac”) (collectively referred to as the “Company”).

The accompanying unaudited condensed consolidated balance sheet of the Company as of December 31, 2016, which has been derived from audited financial statements, and unaudited condensed consolidated financial statements of the Company as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016, were prepared in accordance with the instructions for Form 10‑Q and Article 10 of Regulation S-X and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company as of and for the year ended December 31, 2016 included in the Company’s prospectus dated October 26, 2017 that was filed with the Securities and Exchange Commission on October 30, 2017 in connection with our initial public offering (the “Prospectus”). Reference is made to the accounting policies of the Company described in the Notes to the Financial Statements contained in the Form S‑1.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included to present fairly the financial position as of September 30, 2017 and the results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016. All interim amounts have not been audited and the results of operations for the three and nine months ended September 30, 2017, herein are not necessarily indicative of the results of operations to be expected for the entire year.

Principles of Consolidation

The consolidated financial statements as of and for the periods ended September 30, 2017 and 2016, include the Company and its wholly owned subsidiary, the Bank, and its wholly owned subsidiaries, P/RMIC, Ash Realty, NMF, MMW and Richmac.  Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of mortgage servicing rights and fair values of financial instruments.

Stock Split

On July 5, 2017, the Company’s shareholders approved an increase of authorized common shares to 50.0 million shares, and the Company declared a 2.5-for-1 stock split effective July 6, 2017.  The presentation of authorized common shares has been retrospectively adjusted to give effect to the increase, and all share and per share amounts have been retrospectively adjusted to give effect to the stock split. 

8


 

Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

Acquisitions

Effective August 15, 2017, the Bank acquired 100% of the equity interests of RICHMAC Funding, LLC, (“Richmac”) a Delaware limited liability company, which is a national multifamily housing mortgage lender and servicer. The acquisition provides P/RMIC access to affordable multi-family finance programs through the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”), as well as servicing a portfolio of Government National Mortgage Association (“GNMA”), FNMA Delegated Underwriting and Servicing (“DUS”) and FHLMC loans. The acquisition allows P/RMIC to provide additional product offerings to current customers as well as broaden the origination network into attractive markets where the Bank did not previously have a presence. The purchase price was paid in shares of Company common stock with a value of $8.1 million. The Company recorded goodwill and intangible assets totaling $5.5 million and $1.6 million, respectively, in connection with the acquisition.  The acquisition did not materially impact the Company’s' financial position, results of operations or cash flows. 

On October 31, 2016, the Company entered into an Agreement and Plan of Merger to acquire Joy State Bank (“JSB”), an Illinois chartered bank located in Joy, Illinois.  Since the timing and approval of the transaction was uncertain due to the Company’s capital position at September 30, 2016, on December 22, 2016 the Agreement and Plan of Merger was amended and the parties agreed that two directors and senior executive officers of the Company, the Chairman and Chief Executive Officer and President and Chief Operating Officer, would acquire JSB.  The acquisition of JSB by the Company’s two directors and senior executive officers received appropriate regulatory approvals and closed on April 3, 2017.  On May 8, 2017, the Company entered into a Stock Purchase Agreement with the same two directors and senior executive officers to acquire JSB.  The Company has agreed to pay a purchase price of approximately $5.4 million plus $16,403 for each 30 days after June 30, 2017, prorated to the closing date.  The purchase price is equal to the price paid by the two directors and senior executive officers, plus expenses and a cost of funds equal to 3.75%.  The acquisition has been approved by the Federal Reserve Bank of Chicago, but remains subject to the approval of the Illinois Department of Financial and Professional Regulation, Division of Banking.  The Company expects to close this acquisition in the first quarter of 2018. 

Reclassifications

Certain reclassifications have been made to the 2016 financial statements to conform to the financial statement presentation as of and for the three and nine months ended September 30, 2017.  These reclassifications had no effect on net income.

Note 2:   Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

 

 

 

 

Gross

 

Gross

 

Approximate

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

    

Cost

    

Gains

    

Losses

    

Value

 

 

(In thousands)

Available-for-sale securities:

 

 

  

 

 

  

 

 

  

 

 

  

Treasury notes

 

$

1,000

 

$

 —

 

$

 3

 

$

997

Federal agencies

 

 

404,306

 

 

 1

 

 

790

 

 

403,517

Mortgage-backed - Government-sponsored entity (GSE) - residential

 

 

26,067

 

 

 —

 

 

 —

 

 

26,067

Total available-for-sale securities

 

$

431,373

 

$

 1

 

$

793

 

$

430,581

 

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Table of Contents

Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

 

 

 

Gross

 

Gross

 

Approximate

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

    

Cost

    

Gains

    

Losses

    

Value

 

 

(In thousands)

Available-for-sale securities:

 

 

  

 

 

  

 

 

  

 

 

  

Treasury notes

 

$

999

 

$

 —

 

$

 —

 

$

999

Federal agencies

 

 

290,050

 

 

 —

 

 

1,057

 

 

288,993

Municipals

 

 

9,500

 

 

 —

 

 

 —

 

 

9,500

Mortgage-backed - Government-sponsored entity (GSE) - residential

 

 

26,382

 

 

 —

 

 

 —

 

 

26,382

Total available-for-sale securities

 

$

326,931

 

$

 —

 

$

1,057

 

$

325,874

 

The amortized cost and fair value of available-for-sale securities at September 30, 2017 and December 31, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

December 31, 2016

 

 

Amortized

 

Fair

 

Amortized

 

Fair

Contractual Maturity

    

Cost

    

Value

    

Cost

    

Value

 

 

(In thousands)

Within one year

 

$

198,771

 

$

198,340

 

$

68,482

 

$

68,426

After one through five years

 

 

206,535

 

 

206,174

 

 

232,067

 

 

231,066

After five through ten years

 

 

 —

 

 

 —

 

 

 —

 

 

 —

After ten years

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

405,306

 

 

404,514

 

 

300,549

 

 

299,492

Mortgage-backed - Government-sponsored entity (GSE) - residential

 

 

26,067

 

 

26,067

 

 

26,382

 

 

26,382

 

 

$

431,373

 

$

430,581

 

$

326,931

 

$

325,874

 

Proceeds from the sale of securities available for sale during the nine months ended September 30, 2016 were $7.4 million, resulting in gross realized gains of $24,000.  No securities available-for-sale were sold during the nine months ended September 30, 2017.

The following tables show the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment

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Merchants Bancorp

Notes to Condensed Consolidated Financial Statements

class and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2017 and December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

12 Months or Longer

 

Total

 

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

September 30, 2017

 

(In thousands)

Available-for-sale securities:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Treasury notes

 

$

997

 

$

 3

 

$

 —

 

$

 —

 

$

997

 

$

 3

Federal agencies

 

 

275,570

 

 

511

 

 

112,946

 

 

279

 

 

388,516

 

 

790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

276,567

 

$

514

 

$

112,946

 

$

279

 

$

389,513

 

$

793

December 31, 2016

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Available-for-sale securities: