On July 29, 2024, Merchants Bancorp (MBIN, Financial) released its 8-K filing reporting its financial results for the second quarter of 2024. Merchants Bancorp, a U.S.-based bank holding company, operates in multiple segments including multi-family mortgage banking, mortgage warehousing, and traditional community banking.
Performance Overview
Merchants Bancorp reported a net income of $76.4 million for Q2 2024, translating to diluted earnings per share (EPS) of $1.49. This represents a 17% increase in net income compared to $65.3 million in Q2 2023, but a 12% decrease from $87.1 million in Q1 2024. The reported EPS missed the analyst estimate of $1.57.
Revenue for the quarter stood at $159.5 million, missing the analyst estimate of $160.70 million. This marks an 18% increase from $135.5 million in Q2 2023, although it represents a 5% decline from $167.9 million in Q1 2024.
Key Financial Metrics
Merchants Bancorp's total assets reached $18.2 billion as of June 30, 2024, a 2% increase from $17.8 billion at the end of Q1 2024, and a 7% rise from $16.9 billion at the end of 2023. The company's return on average assets was 1.72% for Q2 2024, down from 2.07% in Q1 2024 and 1.78% in Q2 2023.
The allowance for credit losses on loans increased to $81.0 million, up 7% from Q1 2024 and 13% from the end of 2023. Non-performing loans rose to $143.5 million, or 1.30% of gross loans receivable, compared to $131.8 million (1.22%) in Q1 2024 and $82.0 million (0.80%) at the end of 2023.
Income and Expense Analysis
Net interest income for Q2 2024 was $128.1 million, a 21% increase from $105.6 million in Q2 2023 and a 1% rise from $127.1 million in Q1 2024. Interest income grew by 27% year-over-year to $328.3 million, while interest expense increased by 31% to $200.2 million.
Noninterest income for Q2 2024 was $31.4 million, up 5% from $29.9 million in Q2 2023 but down 23% from $40.9 million in Q1 2024. Noninterest expense rose by 14% year-over-year to $50.4 million, driven by higher salaries, employee benefits, and deposit insurance expenses.
Liquidity and Capital Management
Merchants Bancorp's total deposits increased to $14.9 billion, a 7% rise from Q1 2024 and a 6% increase from the end of 2023. Core deposits grew by 7% from Q1 2024 and 9% from the end of 2023, representing 59% of total deposits. The company's liquidity position remains strong, with cash balances of $540.9 million and unused lines of credit totaling $7.0 billion as of June 30, 2024.
Commentary from Management
"Results for the second quarter demonstrate our success in serving customers while also increasing shareholder value in any interest rate environment. Loan growth continued as we reached a new record of $18.2 billion in assets and we also achieved a record-high tangible book value of $31.27 per share, which reflected a 30% increase over the prior year," said Michael F. Petrie, Chairman and CEO of Merchants.
"The market leading positions we hold across our businesses is a testament to the resilience and creativity that our team has demonstrated while working with customers to find effective solutions to their lending needs. These strong relationships position us to be a lender of choice and provide us with significant growth opportunities," added Michael J. Dunlap, President and Chief Operating Officer of Merchants.
Conclusion
Despite missing EPS estimates, Merchants Bancorp demonstrated solid year-over-year growth in net income and revenue. The company's robust asset growth, strong liquidity position, and effective capital management strategies underscore its resilience in a challenging interest rate environment. However, the increase in non-performing loans and higher interest expenses are areas that warrant close monitoring.
Explore the complete 8-K earnings release (here) from Merchants Bancorp for further details.
