Merchants Bancorp
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
MBIN$51.76-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0001558370-24-007783
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001558370-24-011741
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 137 previous paragraphs and 173 current paragraphs.
48 unchanged; 64 reworded; 51 added; 19 removed; 6 previous and 10 current paragraphs rearranged.
Tables are not compared: 33 previous and 32 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (51)
Current report
Other Assets and Receivables. Other assets and receivables of $343.1 million at June 30, 2024 increased $36.0 million, or 12%, compared to December 31,2023. The increase in other assets and receivables was primarily due to the acquisition of low-income housing tax credit investments.
Current report
Deposits. Deposits of $14.9 billion at June 30, 2024 increased $855.6 million, or 6%, compared to $14.1 billion at December 31, 2023. The increase was primarily due to a $1.7 billion increase in certificates of deposit that was partially offset by a $738.3 million decrease in demand deposits and a decrease of $104.2 million in savings deposits. As of June 30,2024, approximately 79% of the total deposits reprice within three months.
Current report
Loans classified as Special Mention totaled $244.0 million at June 30, 2024, compared to $191.3 million at December 31, 2023. The increase was primarily due to the increase in interest rates for our borrowers and the related levels of net operating income on certain properties in the healthcare financing loan portfolio.
Current report
Loans classified as Substandard totaled $246.8 million at June 30, 2024, compared to $128.6 million at December 31, 2023. The increase was primarily due to the increase in interest rates for our borrowers and the related levels of net operating income on certain properties in the multi-family financing loan portfolio.
Current report
For the six months ended June 30, 2024, there were $4.4 million of charge-offs and $16,000 of recoveries, compared to $9.5 million of charge-offs and $9,000 of recoveries for the six months ended June 30, 2023.
Current report
General. Net income of $76.4 million for the three months ended June 30, 2024 increased by $11.1 million, or 17%, compared with $65.3 million for the three months ended June 30, 2023. The increase was primarily driven by a $22.5 million, or 21%, increase in net interest income and a $12.6 million, or 56%, decrease in provision for credit losses, partially offset by a $19.5 million, or 594%, increase in provision for income tax.
Current report
Our net interest margin increased 2 basis points, to 2.99%, for the three months ended June 30, 2024 compared to 2.97% for the three months ended June 30,2023. The margin was negatively impacted by approximately 6 basis points in the second quarter of 2024 from the net reversal of $2.5 million in accrued interest income associated with the movement of loans into nonaccrual status.
Current report
Interest income of $6.2 million for the three months ended June 30, 2024 on interest-earning deposits and other increased $2.9 million, or 87%, compared to $3.3 million for the three months ended June 30, 2023. The average balance of interest-earning deposits and other of $438.4 million increased $188.7 million, or 76%, compared to $249.7 million for the three months ended June 30, 2023. The average yield increased 35 basis points, to 5.71% for the three months ended June 30, 2024, compared to 5.36% for the three months ended June 30, 2023.
Current report
Interest expense of $88.3 million for the three months ended June 30, 2024 on certificates of deposit increased $29.6 million, or 50%, compared to $58.7 million for the three months ended June 30, 2023. The average balance of certificates of deposit of $6.5 billion for the three months ended June 30, 2024 increased $1.8 billion, or 38%, compared to the three months ended June 30, 2023. The average rate on certificates of deposit was 5.43% for the three months ended June 30, 2024, which was a 45 basis point increase compared to 4.98% for three months ended June 30, 2023.
Current report
Interest expense of $58.1 million for the three months ended June 30, 2024 on interest-bearing checking accounts increased $9.8 million, or 20%, compared to $48.3 million for the three months ended June 30, 2023. The average balance of interest-bearing checking accounts of $4.9 billion for the three months ended June 30, 2024 increased $627.4 million, or 15%, compared to $4.3 billion for the three months ended June 30, 2023. The average yield of interest-bearing checking accounts was 4.74% for the three months ended June 30, 2024, which was a 24 basis point increase compared to 4.50% for three months ended June 30, 2023.
Current report
Provision for Credit Losses. We recorded a total provision for credit losses of $10.0 million for the three months ended June 30, 2024, a decrease of $12.6 million, or 56%, compared to the three months ended June 30, 2023. The 56% decrease was primarily due to lower loan charge-offs and relative changes to qualitative factors.
Current report
The provision for the three months ended June 30, 2024 reflected $3.5 million related to charge-offs, $3.8 million for specific reserves, and loan growth.
Current report
The provision for the three months ended June 30, 2023 included $8.2 million related to charge-offs, an increase of $4.6 million related to changes in qualitative factors and loss rates as well as $2.0 million for specific reserves.
Current report
Noninterest Income. Noninterest income of $31.4 million for the three months ended June 30, 2024 increased $1.5 million, or 5%, compared to $29.9 million for the three months ended June 30, 2023. The increase was primarily due to a $2.2 million, or 26%, increase in net loan servicing fees and a $1.4 million, or 46%, increase in other income, that was partially offset by a $1.3 million, or 47%, decrease in mortgage warehouse fees.
Current report
General. Net income of $163.4 million for the six months ended June 30, 2024 increased $43.2 million, or 36%, compared to the six months ended June 30, 2023. The increase was primarily due to a $48.9 million increase in net interest income, a $28.1 million increase in noninterest income, and a $14.8 million decrease in the provision for credit losses, partially offset by a $28.3 million increase in the provision for income taxes and a $20.2 million increase in noninterest expense.
Current report
Net Interest Income. Net interest income of $255.2 million for the six months ended June 30, 2024 increased $48.9 million, or 24%, compared to $206.3 million for the six months ended June 30, 2023. The increase reflected an increase in interest income primarily from both higher average balances and average yields on loans, securities available for sale, and securities held to maturity, partially offset by an increase in interest expense from both higher average balances and rates on certificates of deposit accounts, interest-bearing checking, and borrowings. The interest rate spread of 2.52% for the six months ended June 30, 2024 decreased 5 basis points compared to 2.57% for the six months ended June 30,2023.
Current report
Our net interest margin decreased 4 basis points, to 3.07% for the six months ended June 30, 2024 from 3.11% for the six months ended June 30,2023. The margin was negatively impacted by approximately 3 basis points from the net reversal of $2.8 million in accrued interest income associated with the movement of loans into nonaccrual status.
Current report
Interest Income. Interest income of $642.4 million for the six months ended June 30, 2024 increased $173.1 million, or 37%, compared to the six months ended June 30,2023. This increase was primarily attributable to an increase in average balances and higher yields of loans and loans held for sale, securities available for sale, and securities held to maturity.
Current report
Interest income of $556.4 million for the six months ended June 30, 2024 on loans and loans held for sale increased $138.2 million, or 33%, compared to the six months ended June 30, 2023. The average balance of loans, including loans held for sale, during the six months ended June 30, 2024 increased $2.6 billion, or 23%, to $13.9 billion compared to $11.3 billion for the six months ended June 30, 2023, and the average yield on loans increased 57 basis points, to 8.04% for the six months ended June 30, 2024, compared to 7.47% for the six months ended June 30, 2023.
Current report
Interest income of $29.2 million for the six months ended June 30, 2024 on securities available for sale increased $21.3 million, or 273%, compared to the six months ended June 30, 2023. The average balance of securities available for sale increased $502.4 million, or 90%, to $1.1 billion for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, and the average yield increased 270 basis points, to 5.52% for the six months ended June 30, 2024, compared to 2.82% for the six months ended June 30, 2023.
Current report
Interest income of $40.3 million for the six months ended June 30, 2024 on securities held to maturity increased $7.3 million, or 22%, compared to the six months ended June 30, 2023. The average balance of securities held to maturity, during the six months ended June 30, 2024 increased $74.3 million, or 7%, to $1.2 billion compared to the six months ended June 30,2023. The average yield on securities held to maturity increased 84 basis points, to 6.88% for the six months ended June 30, 2024 ended, compared to 6.04% for the six months ended June 30, 2023.
Current report
Interest income of $11.8 million for the six months ended June 30, 2024 on interest-earning deposits and other increased $6.3 million, or 114%, compared to $5.5 million for the six months ended June 30, 2023. The average balance of interest-earning deposits and other increased $175.0 million, or 81%, to $392.3 million for the six months ended June 30, 2024, from $217.3 million for the six months ended June 30, 2023, and the average yield increased 92 basis points, to 6.03% for the six months ended June 30, 2024, compared to 5.11% for the six months ended June 30, 2023.
Current report
Interest Expense. Total interest expense of $387.3 million for the six months ended June 30, 2024 increased $124.2 million, or 47%, compared to $263.1 million for the six months ended June 30, 2023.
Current report
Interest expense on deposits increased $108.4 million, or 45%, to $350.7 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase was primarily due to increases in both average balances and higher rates for certificate of deposit accounts and interest-bearing checking accounts, as well as higher rates on money market accounts.
Current report
Interest expense of $164.8 million for the six months ended June 30, 2024 for certificates of deposits increased $71.2 million, or 76%, compared to $93.6 million for the six months ended June 30, 2023. The average balance of certificates of deposit accounts was $6.1 billion for the six months ended June 30, 2024, an increase of $2.1 million, or 52%, compared to the six months ended June 30, 2023. The average rate on certificates of deposit accounts was 5.42% for the six months ended June 30, 2024, which was a 74 basis point increase compared to 4.68% for the six months ended June 30, 2023.
Current report
Interest expense of $118.8 million for the six months ended June 30, 2024 for interest-bearing checking accounts increased $29.9 million, or 34%, compared to $88.9 million for the six months ended June 30, 2023. The average balance of interest-bearing checking accounts of $5.0 billion for the six months ended June 30, 2024 increased $822.1 million, or 20%, compared to $4.2 billion for the six months ended June 30, 2023. The average rate on interest-bearing checking accounts was 4.78% for the six months ended June 30, 2024, which was a 49 basis point increase compared to 4.29% for the six months ended June 30, 2023.
Current report
Interest expense of $66.9 million for the six months ended June 30, 2024 for money market accounts increased $7.7 million, or 13%, compared to the six months ended June 30, 2023. The average balance of money market accounts of $2.8 billion for the six months ended June 30, 2024 increased $4.1 million compared to the six months ended June 30, 2023. The average rate on money market accounts was 4.80% for the six months ended June 30, 2024, which was a 54 basis point increase compared to 4.26% for the six months ended June 30, 2023.
Current report
Interest expense of $36.6 million for the six months ended June 30, 2024 for borrowings increased $15.8 million, or 76%, compared to $20.8 million for the six months ended June 30, 2023. The increase was primarily due to a $336.7 million, or 63%, increase in average balances to fund loan growth and an increase of 61 basis points in the average rate of borrowings, to 8.42% compared to 7.81% for the six months ended June 30, 2023. Also included in borrowings, is our warehouse structured financing agreements that provide for additional interest payments for a portion of the earnings generated. As a result, the cost of borrowings increased from a base rate of 7.93% and 7.43%, to an effective rate of 8.42% and 7.81% for the six months ended June 30,2024 and 2023, respectively.
Current report
Provision for Credit Losses. We recorded a provision for credit losses of $14.7 million for the six months ended June 30, 2024, a decrease of $14.8 million, or 50%, compared to $29.5 million for the six months ended June 30, 2023. The decrease was primarily due to lower loan charge-offs and relative changes to qualitative factors.
Current report
Noninterest Income. Noninterest income of $72.2 million for the six months ended June 30, 2024 increased $28.1 million, or 64%, compared to $44.1 million for the six months ended June 30, 2023. The increase was primarily due to a $19.3 million, or 175%, increase in loan servicing fees, a $4.5 million, or 73%, increase in other income, a $3.4 million, or 67%, increase in syndication and asset management fees, and $2.4 million, or 13%, increase in gain on sale of loans compared to the six months ended June 30,2023.
Current report
The increase in loan servicing fees reflected higher positive adjustments to fair value of servicing rights. Included in loan servicing fees was a $19.0 million positive adjustment to the fair value of servicing rights for the six months ended June 30, 2024, compared to a positive adjustment of $0.5 million for the six months ended June 30,2023. The $4.5 million increase in other income is primarily due to $3.5 million in fee income related to derivatives. The $3.4 million increase in syndication and asset management fees increased as we continue to experience growth in this line of business.
Current report
Noninterest Expense. Noninterest expense of $99.3 million for the six months ended June 30, 2024 increased $20.2 million, or 26%, compared to $79.1 million for the six months ended June 30, 2023. The increase was primarily due to a $10.1 million, or 21%, increase in salaries and employee benefits primarily due to higher commissions associated with loan growth, as well as a $4.7 million, or 79%, increase in deposit insurance. Other expenses increased $3.1 million, or 32%, primarily due to ongoing premium expense on the credit default swap that was executed in March 2024.
Current report
The efficiency ratio was at 30.33% for the six months ended June 30, 2024, compared with 31.58% for the six months ended June 30, 2023.
Current report
Income Taxes. Provision for income taxes of $50.0 million for the six months ended June 30, 2024 increased $28.3 million, or 131%, compared to $21.6 million for the six months ended June 30, 2023. The increase reflected a $13.0 million tax benefit recorded in the second quarter of 2023 related to tax refunds and changes to state tax apportionment calculations, as well as taxes on higher pre-tax income during the six months ended June 30, 2024. The effective tax rate was 23.4% for the six months ended June 30, 2024 and 15.2% for the six months ended June 30, 2023.
Current report
Multi-family Mortgage Banking.
Current report
The Multi-family Mortgage Banking segment reported net income of $9.0 million for the three months ended June 30, 2024, a decrease of $2.2 million, or 20%, compared to $11.2 million for the three months ended June 30, 2023. The decrease in net income was primarily due to a tax benefit recorded in the second quarter of 2023 that was related to tax refunds and changes in state tax apportionment calculations.
Current report
Results included a $4.5 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2024 compared to a $2.1 million positive fair market value adjustment for the three months ended June 30, 2023.
Current report
The volume of loans originated and acquired for sale in the secondary market decreased by $329.5 million, or 49%, to $338.7 million, for the three months ended June 30, 2024, compared to $668.2 million for the three months ended June 30, 2023.
Current report
The Multi-family Mortgage Banking segment reported net income of $25.6 million for the six months ended June 30, 2024, an increase of $12.4 million, or 94%, from the $13.2 million of net income reported for the six months ended June 30, 2023. The increase in net income was primarily due to a $19.9 million increase in servicing fees, as well as a $3.3 million increase in syndication and asset management fees as we continue to see growth in this line of business, and a $1.4 million increase in gain on sale of loans. These increases to net income were partially offset by a $5.6 million increase in noninterest expense, primarily associated with an $8.0 million increase in income tax expense reflecting a tax benefit recorded in the second quarter of 2023 related to tax refunds and changes in state tax apportionment calculations, as well as higher salaries and benefits to support business growth.
Current report
Loan servicing fees for the six months ended June 30, 2024 included a positive fair market value adjustment of $17.7 million on servicing rights, compared to a negative fair market value adjustment of $0.1 million for the six months ended June 30, 2023.
Showing the first 40 of 51 passages. Open the source sections for the rest.
Removed paragraphs (19)
Previous report
The $390.5 million increase in mortgage warehouse lines of credit was due to higher loan volume from increased sales efforts and market exits of competitors.
Previous report
The $108.0 million increase in healthcare financing was due to higher loan originations.
Previous report
The $90.4 million increase in multi-family financing was due to higher origination volume for construction, bridge and other loans generated through our multi-family segment that will remain on our balance sheet until they convert to permanent financing or are otherwise paid off over an average of one to three years.
Previous report
Other Assets & Receivables. Other assets and receivables of $360.4 million at March 31, 2024 increased by $54.1 million, or 18%, compared to December 31, 2023. The increase was primarily due to $52.0 million prepaid funding for the April 1, 2024, Series A Preferred Stock redemption.
Previous report
Deposits. Deposits of $14.0 billion at March 31, 2024 decreased $85.8 million, or 1%, compared to $14.1 billion December 31, 2023. The decrease was primarily due to a $1.1 billion decrease in brokered demand deposit accounts partially offset by an increase of $885.6 million in brokered certificate of deposits. Total demand deposits decreased $900.9 million, partially offset by an increase in total certificates of deposit of $790.1 million and an increase in total savings deposits of $24.9 million. As of March 31, 2024, approximately 88% of the total deposits at Merchants Bank reprice within three months.
Previous report
Although our brokered deposits are short-term in nature, they may be more rate sensitive compared to other sources of funding. In the future, those depositors may not replace their brokered deposits with us as they mature, or we may have to pay a higher rate of interest to keep those deposits or to replace them with other deposits or other sources of funds. Not being able to maintain or replace those deposits as they mature would adversely affect our liquidity. Additionally, if Merchants Bank does not maintain its well-capitalized position, it may not accept or renew any brokered deposits without a waiver granted by the Federal Deposit Insurance Corporation (“FDIC”).
Previous report
Special Mention (Watch) loans were $232.1 million at March 31, 2024, compared to $191.3 million at December 31, 2023. The increase was primarily due to higher interest rates that negatively impact our borrowers’ ability to make higher required payments.
Previous report
General. Net income of $87.1 million for the three months ended March 31, 2024 increased by $32.1 million, or 58%, compared with $55.0 million for the three months ended March 31, 2023, primarily driven by a $26.4 million, or 26%, increase in net interest income and a $17.0 million, or 722%, increase in loan servicing fees that was partially offset by a $14.1 million, or 41%, increase in noninterest expense. Results for the three months ended March 31, 2024 included a $14.0 million positive fair market value adjustment to servicing rights compared to a $2.9 million negative adjustment for the three months ended March 31, 2023.
Previous report
deposits, as well as higher rates on borrowings. The interest rate spread of 2.58% for the three months ended March 31, 2024 decreased 18 basis points compared to 2.76% for the three months ended March 31, 2023.
Previous report
Our net interest margin decreased 13 basis points, to 3.14%, for the three months ended March 31, 2024 compared to 3.27% for the three months ended March 31, 2023.
Previous report
Interest income of $5.5 million for the three months ended March 31, 2024 on interest-bearing deposits and other increased $3.4 million, or 155%, compared to the three months ended March 31, 2023. The average balance of interest-earning deposits and other of $346.2 million increased $161.7 million, or 88%, compared to $184.5 million for the three months ended March 31, 2023. The average yield increased 166 basis points to 6.44%, for the three months ended March 31, 2024 compared to 4.78% for the three months ended March 31, 2023.
Previous report
Interest expense of $76.5 millionfor the three months ended March 31, 2024 for certificate of deposit accounts increased $41.5 million, or 119%, compared to $34.9 million for the three months ended March 31, 2023. The average balance of certificates of deposits was $5.7 billion for the three months ended March 31, 2024, which increased $2.4 billion, or 71%, compared to the three months ended March 31, 2023. The average interest rate on certificates of deposits
Previous report
was 5.40% for the three months ended March 31, 2024, which was a 114 basis point increase compared to 4.26% for the three months ended March 31, 2023.
Previous report
Interest expense of $60.7 millionfor the three months ended March 31, 2024 for interest-bearing checking accounts increased $20.0 million, or 49%, compared to the three months ended March 31, 2023. The average balance of interest-bearing checking accounts was $5.1 billion for the three months ended March 31, 2024, which increased $1.0 billion, or 25%, compared to the three months ended March 31, 2023. The average yield of interest-bearing checking was 4.81% for the three months ended March 31, 2024, which was a 74 basis point increase compared to 4.07% for the three months ended March 31, 2023.
Previous report
Noninterest Income. Noninterest income of $40.9 million for the three months ended March 31, 2024 increased $26.6 million, or 187%, compared to $14.3 million for the three months ended March 31, 2023. The increase was primarily due to a $17.0 million, or 722%, increase in loan servicing fees, a $4.1 million, or 338%, increase in syndication and asset management fees, a $3.0 million, or 103%, increase in other income and a $2.6 million, or 39%, increase in gain on sale of loans.
Previous report
Loan servicing fees included a $14.0 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2024, compared to a $2.9 million negative adjustment to fair value of servicing rights for the three months ended March 31, 2023. The $2.6 million, or 39%, increase in gain on sale of loans resulted from higher interest rates across the industry that have led lower multi-family volumes sold in the secondary market. The $3.0 million increase in other income included a $2.3 million gain on derivatives for interest rate protection.
Previous report
Multi-family Mortgage Banking. The Multi-family Mortgage Banking segment reported net income of $16.6 million for the three months ended March 31, 2024, an increase of $14.6 million, or 745%, from net income of $2.0 million reported for the three months ended March 31, 2023. The increase in net income was primarily due to a $16.4 million increase in servicing fees, as well as higher syndication and asset management fees, and higher gain on sale of loans.
Previous report
Banking. The Banking segment reported net income of $56.4 million for the three months ended March 31, 2024, an increase of $7.1 million, or 14%, compared to $49.3 million for the three months ended March 31, 2023. The increase in net income was primarily due to higher net interest income from higher yields and average balances on loans.
Previous report
The results included a $0.8 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2024, compared to a $0.7 million negative adjustment to fair value of servicing rights for the three months ended March 31, 2023.
Reworded paragraphs (64)
Previous wording
Management’s discussion and analysis of the financial condition at March 31, 2024 and results of operations for the three months ended March 31, 2024 and 2023, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto, appearing in Part I, Item 1 of this Form 10-Q.
Current wording
Management’s discussion and analysis of the financial condition at June 30, 2024 and results of operations for the three and six months ended June 30,2024 and 2023, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto, appearing in Part I, Item 1 of this Form 10-Q.
Previous wording
The estimates and judgments that management believes have the most effect on its reported financial position and results of operations are set forth within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no
Current wording
The estimates and judgments that management believes have the most effect on its reported financial position and results of operations are set forth within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no significant changes in critical accounting policies or the assumptions and judgments utilized in applying these policies since those reported for the year ended December 31, 2023.* *
Previous wording
As of March 31, 2024, we had approximately $17.8 billion in total assets, $14.0 billion in deposits, and $1.8 billion in total shareholders’ equity. Total assets as of March 31, 2024 included approximately $508.8 million of cash and cash equivalents, $3.5 billion of loans held for sale and $10.7 billion of loans receivable, net of ACL-Loans. Assets also included $142.6 million of mortgage loans in the process of securitization that represent pre-sold multi-family rental real estate loan originations in primarily Government National Mortgage Association (“Ginnie Mae”), Federal National Mortgage Association (“Fannie Mae”), and Federal Home Loan Mortgage Corporation (“Freddie Mac”) mortgage-backed securities pending settlements that typically occur within 30 days. There were also $1.2 billion in securities classified as held to maturity. Additionally, we had $1.1 billion in securities available for sale, the majority of which were acquired from a warehouse customer, and others are typically match funded with related custodial deposits or required to collateralize our credit-linked notes. There are restrictions on the types of securities we hold, as these are funded by certain custodial deposits where we set the cost of deposits based on the yield of the related securities. Other assets at March 31, 2024 were $360.4 million which primarily represents low-income housing tax credits and prepaid assets associated with the April 1, 2024 redemption of Series A Preferred Stock. Servicing rights at March 31, 2024 were $172.2 million based on the fair value of the loan servicing, which are primarily Ginnie Mae multi-family servicing rights with 10-year call protection.
Current wording
As of June 30, 2024, we had approximately $18.2 billion in total assets, $14.9 billion in deposits and $1.9 billion in total shareholders’ equity. Total assets as of June 30, 2024 included approximately $540.9 million of cash and cash equivalents, $3.5 billion of loans held for sale, and $10.9 billion of loans receivable, net of Allowance for credit losses on loans (“ACL-loans”). Assets also included $209.2 million of mortgage loans in process of securitization that represent pre-sold multi-family rental real estate loan originations in primarily Government National Mortgage Association (“Ginnie Mae”), Federal National Mortgage Association (“Fannie Mae”), and Federal Home Loan Mortgage Corporation (“Freddie Mac”) mortgage-backed securities pending settlements that typically occur within 30 days. There
Previous wording
Total Assets. Total assets of $17.8 billion at March 31, 2024 increased $870.1 million, or 5%, compared to $17.0 billion at December 31, 2023. The increase was due primarily to growth in the warehouse, healthcare, and multi-family loan portfolios as well as loans held for sale.
Current wording
Total Assets. Total assets of $18.2 billion at June 30, 2024 increased 7% compared to $17.0 billion at December 31, 2023. The increase was due primarily to growth in the warehouse, multi-family, and healthcare loan portfolios, as well as loans held for sale.
Previous wording
Cash and Cash Equivalents. Cash and cash equivalents of $508.8 million at March 31, 2024 decreased $75.7 million, or 13%, compared to December 31, 2023. The 13% decrease reflected $52 million in cash delivered to our Transfer Agent for the April 1, 2024 redemption of Series A Preferred Stock described inNote 14: Preferred StockandNote 17: Subsequent Events. Included in cash equivalents was $39.2 million in restricted cash associated with the March 2023 issuance of senior credit linked notes described inNote 1: Basis of Presentation andNote 11: Borrowings.
Current wording
Cash and Cash Equivalents. Cash and cash equivalents of $540.9 million at June 30, 2024 decreased $43.5 million, or 7%, compared to $584.4 million at December 31, 2023. Included in cash equivalents was $37.0 million in restricted cash associated with the March 2023 issuance of senior credit linked notes described inNote 1: Basis of Presentation and the Company’s 2023 Annual Report on Form 10–K*.*
Previous wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $142.6 million at March 31, 2024 increased $32.0 million, or 29%, compared to $110.6 million at December 31, 2023. These represent loans that our banking subsidiary, Merchants Bank, has funded and are held pending settlement, primarily as Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities with a firm investor commitment to purchase the securities. The 29% increase was primarily due to a higher origination volume of loans that had not yet settled with government agencies.
Current wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $209.2 million at June 30, 2024 increased $98.6 million, or 89%, compared to $110.6 million at December 31,2023. These represent loans that our banking subsidiary, Merchants Bank, has funded and are held pending settlement, primarily as Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities with a firm investor commitment to purchase the securities. The 89% increase was primarily due to a higher origination volume of loans pending settlement date.
Previous wording
Securities Available for Sale. Securities available for sale of $1.1 billion at March 31, 2024 decreased $52.4 million, or 5%, compared to December 31, 2023. The decrease in securities available for sale was primarily due to $246.4 in calls, maturities, repayments, sales and other adjustments, partially offset by purchases of $194.0 million during the period.
Current wording
Securities Available for Sale. Securities available for sale of $1.0 billion at June 30, 2024 decreased $96.7 million, or 9%, compared to December 31, 2023. The decrease in securities available for sale was primarily due to $399.5 in calls, maturities, repayments, sales and other adjustments, partially offset by purchases of $302.8 million during the period.
Previous wording
Included in securities available for sale were $700.6 million of investments for which a fair value option was elected. Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the unaudited condensed consolidated balance sheets with changes in the fair value recognized in earnings as they occur.
Current wording
Included in securities available for sale were $682.8 million of investments for which a fair value option was elected. Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the unaudited condensed consolidated balance sheets with changes in the fair value recognized in earnings as they occur.
Previous wording
As of March 31, 2024, Accumulated Other Comprehensive Losses (“AOCL”) of $1.2 million, related to securities available for sale, improved $1.3 million, or 53%, compared to losses of $2.5 million at December 31, 2023. The $1.2
Current wording
As of June 30, 2024, Accumulated Other Comprehensive Losses (“AOCL”) of $0.5 million losses, related to securities available for sale, decreased $2.0 million, or 80%, compared to losses of $2.5 million at December 31, 2023. The $0.5 million of AOCL as of June 30,2024 represented less than 1% of total equity and less than 1% of total securities available for sale.
Previous wording
Securities Held to Maturity. Securities held to maturity of $1.2 billion at March 31, 2024 decreased $29.1 million, or 2%, compared to December 31, 2023. The decrease was due to remittances of loan payments underlying the securities during the period. These securities were acquired in 2022 and 2023 as part of securitization transactions.
Current wording
Securities Held to Maturity. Securities held to maturity of $1.3 billion at June 30, 2024 increased $86.9 million, or 7%, compared to $1.2 billion at December 31, 2023. The increase was due to purchases of $155.3 million partially offset by remittances of loan payments underlying the securities during the period.
Previous wording
Loans Held for Sale. Loans held for sale of $3.5 billion at March 31, 2024 increased $358.4 million, or 11%, compared to $3.1 billion at December 31, 2023. The increase in loans held for sale was due primarily to an increase in warehouse participations, as we experienced higher volume. Loans held for sale are comprised primarily of single-family residential real estate loan participations that meet Fannie Mae, Freddie Mac, or Ginnie Mae eligibility. It also includes a growing portfolio of multi-family loans.
Current wording
Loans Held for Sale. Loans held for sale of $3.5 billion at June 30, 2024 increased $338.3 million, or 11%, compared to $3.1 billion at December 31, 2023. The increase in loans held for sale was due primarily to an increase in warehouse participations, as we experienced higher volume. Loans held for sale are comprised primarily of single-family residential real estate loan participations that meet Fannie Mae, Freddie Mac, or Ginnie Mae eligibility.
Previous wording
Loans Receivable, Net. Loans receivable, net, of $10.7 billion at March 31, 2024, which are comprised of loans held for investment, increased $562.7 million, or 6%, compared to $10.1 billion at December 31, 2023. The increase in net loans was comprised primarily of:
Current wording
Loans Receivable, Net. Loans receivable, net, of $10.9 billion at June 30, 2024, which are comprised of loans held for investment, increased $805.4 million, or 8%, compared to $10.1 billion at December 31,2023. The increase in net loans was comprised primarily of:
Previous wording
As of March 31, 2024, approximately 94% of the total net loans at Merchants Bank reprice within three months, which reduces the risk of market rate increases.
Current wording
As of June 30, 2024, approximately 94% of the total net loans reprice within three months, which reduces the risk of market rate increases.
Previous wording
Allowance for Credit Losses on Loans (“ACL-Loans”). The ACL-Loans of $75.7 million at March 31, 2024 increased $4.0 million, or 6%, compared to December 31, 2023, primarily reflecting increases associated with growth in the multi-family and healthcare portfolios, as well as changes in specific reserves and loss factors to reflect industry conditions.
Current wording
Allowance for Credit Losses on Loans (“ACL-Loans”). The ACL-Loans of $81.0 million at June 30, 2024 increased $9.3 million, or 13%, compared to December 31, 2023, primarily reflecting increases associated with loan charge-offs, increases in specific reserves, loan growth in the multi-family and healthcare portfolios, and changes to qualitative loss factors to reflect changes in industry and market conditions. Additional details provided in the ACL-Loans portion of the Comparison of Financial Condition at June 30, 2024 and December 31, 2023 and inNote 4: Loans and Allowance for Credit Losses on Loans.
Previous wording
Also influencing the overall level of the ACL-Loans is our differentiated strategy to typically hold loans with shorter durations and to maintain agency underwriting standards that enable us to sell the majority of our loans under government programs.
Current wording
Also influencing the overall level of the ACL-Loans is our differentiated strategy to typically hold loans with shorter durations and to maintain agency underwriting standards that enable us to sell or refinance the majority of our loans under government programs.
Previous wording
Goodwill. Goodwill of $8.0 million at March 31, 2024 decreased $7.8 million, or 49%, compared to $15.8 million at December 31, 2023. The goodwill associated with FMBI was eliminated upon the sale of their branches to unaffiliated third parties on January 26, 2024.
Current wording
Goodwill. Goodwill of $8.0 million at June 30, 2024 decreased $7.8 million, or 49%, compared to $15.8 million at December 31,2023. The goodwill associated with FMBI was eliminated upon the sale of their branches to unaffiliated third parties on January 26, 2024.
Previous wording
adjustment of $14.0 million and originated or purchased servicing of $2.2 million were partially offset by paydowns of $2.4 million. The $14.0 million positive fair market value adjustment reflected $13.2 million for multi-family mortgages and $0.8 million for single-family and SBA mortgages during the three months ended March 31, 2024.
Current wording
Servicing Rights. Servicing rights of $178.8 million at June 30, 2024 increased $20.3 million, or 13%, compared to $158.5 million at December 31, 2023. During the six months ended June 30, 2024, originated servicing of $5.9 million and a positive fair market value adjustment of $19.0 million were partially offset by paydowns of $4.6 million. The $19.0 million positive fair market value adjustment reflected $17.7 million for multi-family mortgages and $1.3 million for single-family mortgages and SBA loans during the six months ended June 30, 2024.
Previous wording
Servicing rights are recognized in connection with salesof loans when we retain servicing of the sold loans, as well as upon purchases of loan servicing portfolios. The servicing rights are recorded and carried at fair value. The fair value increase recorded during the three months ended March 31, 2024 was driven by higher interest rates that impacted fair market value adjustments. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments and earnings rates on escrow deposits.
Current wording
Servicing rights are recognized in connection with salesof loans when we retain servicing of the sold loans. The servicing rights are recorded and carried at fair value. The fair value increase recorded during the six months ended June 30,2024 was driven by higher interest rates that impacted fair market value adjustments. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments and earnings rates on escrow deposits.
Previous wording
Core deposits increased by $132.0 million, or 2%, to $8.2 billion at March 31, 2024 compared to December 31, 2023. Core deposits represented 59% of total deposits at March 31, 2024 compared to 58% of total deposits at December 31, 2023.
Current wording
Core deposits increased by $705.9 million, or 9%, to $8.8 billion at June 30, 2024 compared to December 31, 2023. Core deposits represented 59% of total deposits at June 30, 2024 compared to 58% of total deposits at December 31, 2023.
Previous wording
We have decreased our use of brokered deposits by $217.8 million, or 4%, to $5.8 billion at March 31, 2024 compared to $6.0 billion at December 31, 2023. Brokered deposits represented 41% of total deposits at March 31, 2024, compared to 42% of total deposits at December 31, 2023. As of March 31, 2024, brokered certificates of deposit had a weighted average remaining duration of 57 days.
Current wording
We have increased our use of brokered deposits by $149.7 million, or 3%, to $6.1 billion at June 30, 2024 compared to December 31, 2023. Brokered deposits represented 41% of total deposits at June 30, 2024 compared to 42% of total deposits at December 31, 2023. As of June 30, 2024, brokered certificates of deposit had a weighted average remaining duration of 70 days.
Previous wording
Compared to December 31, 2023, interest-bearing deposits increased $114.4 million, or 1%, to $13.7 billion at March 31, 2024, and noninterest-bearing deposits decreased $200.2 million, or 38%, to $319.9 million at March 31, 2024.
Current wording
Compared to December 31, 2023, interest-bearing deposits increased $992.4 million, or 7%, to $14.5 billion at June 30, 2024, and noninterest-bearing deposits decreased $136.8 million, or 26%, to $383.3 million at June 30, 2024.
Previous wording
Uninsured deposits totaled approximately $2.1 billion as of March 31, 2024, representing less than 15% of total deposits. Since 2018, the Company has offered its customers an opportunity to insure balances in excess of $250,000 through our Insured Cash Sweep program that extends FDIC protection up to $100 million. The balance of deposits in this program was $1.7 billion as of March 31, 2024.
Current wording
Uninsured deposits represented approximately 15% of total deposits. Since 2018, the Company has offered its customers an opportunity to insure balances in excess of $250,000 through our insured cash sweep program that extends FDIC protection up to $100 million. The balance of deposits in this program was $1.5 billion as of June 30, 2024 compared to $1.6 billion as of December 30, 2023 and $1.7 billion as of June 30, 2023. Our line of credit with the Federal Reserve Board could fund 118% of our uninsured deposits.
Previous wording
Borrowings. Borrowings of $1.8 billion at March 31, 2024 increased $871.9 million, or 90%, compared to $964.1 million at December 31, 2023. The increase was primarily due to an increase of $654.9 million in FHLB advances, an increase of $50.0 million in the usage of the Federal Reserve’s discount window and an increase of $175.0 million in American Financial Exchange (“AFX”) borrowings. Depending on rates and timing, borrowing can be a more effective liquidity management alternative than utilizing brokered certificates of deposits. The Company primarily utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, and AFX. SeeNote 11: Borrowings for further information.
Current wording
Borrowings. Borrowings increased $195.1 million, or 20%, to $1.2 billion at June 30, 2024, compared to $964.1 million at December 31,2023. The increase was primarily due to $202.6 million in additional FHLB advances. Depending on rates and timing, borrowing can be a more effective liquidity management alternative than utilizing brokered certificates of deposits. The Company primarily utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, and AFX. SeeNote 11: Borrowings for further information.
Previous wording
The Company continues to have significant borrowing capacity based on available collateral. As of March 31, 2024, unused lines of credit totaled $5.6 billion, compared to $6.0 billion at December 31, 2023.
Current wording
The Company continues to have significant borrowing capacity based on available collateral. As of June 30, 2024, unused lines of credit totaled $7.0 billion, compared to $6.0 billion at December 31, 2023.
Previous wording
Total Shareholders’ Equity. Total shareholders’ equity was $1.8 billion as of March 31, 2024. The $75.4 million increase compared to December 31, 2023 resulted primarily from the net income of $87.1 million, which was partially offset by dividends paid on common and preferred shares of $12.6 million during the period.
Current wording
Total Shareholders’ Equity. Total shareholders’ equity of $1.9 billion at June 30, 2024, increased $187.1 million, or 11%, compared to $1.7 billion as of December 31,2023. The $187.1 million increase resulted primarily from net income of $163.4 million and net proceeds of $97.7 million from a common stock offering, which was partially offset by redemption of 7% Series A Preferred Stock for $52.0 million and dividends paid on common and preferred shares of $24.4 million during the period.* *
Previous wording
Total nonperforming loans (nonaccrual and greater than 90 days past due but still accruing) were $131.8 million, or 1.22% of loans receivable at March 31, 2024, compared to $82.0 million, or 0.80%, of total loans at December 31, 2023 and $65.3 million, or 0.76%, at March 31, 2023. The increase in non-performing loans compared to December 31, 2023 was primarily due to three customers with delinquent payments of 90 days or more. As of March 31, 2024, only 13 customers were classified in nonaccrual status and eight were delinquent by 90 days or more, but still accruing interest, with full payment expected.
Current wording
Total nonperforming loans (nonaccrual and greater than 90 days late but still accruing) were $143.5 million, or 1.30%, of total loans at June 30, 2024, compared to $82.0 million, or 0.80%, of total loans at December 31, 2023 and $68.4 million, or 0.69%, at June 30,2023. The increase in non-performing loans compared to both periods was driven by multi-family and healthcare customers with delinquent payments on variable rate loans that have required higher payments due to interest rates remaining at elevated levels.
Previous wording
As a percentage of nonperforming loans, the ACL-Loans was 57% at March 31, 2024 compared to 87% at December 31, 2023 and 79% at March 31, 2023. The changes compared to both periods were primarily due to an increase in nonperforming loans.
Current wording
As a percentage of nonperforming loans, the ACL-Loans was 56% at June 30, 2024 compared to 87% at December 31, 2023 and 92% at June 30, 2023. The decrease in percentage compared to both periods was due to an increase in nonperforming loans, all of which have been individually evaluated for impairment.
Previous wording
Total loans greater than 30 days past due were $188.7 million at March 31, 2024, $183.5 million at December 31, 2023, and $83.5 million at March 31, 2023. The increase compared to March 31, 2023 was due to the delinquency of six multi-family customers and four healthcare customers.
Current wording
Total loans greater than 30 days past due were $234.8 million at June 30, 2024, $183.5 million at December 31, 2023, and $92.9 million at June 30,2023. The increase in non-performing loans compared to both periods was driven by multi-family and healthcare customers with delinquent payments on variable rate loans that have required higher payments due to interest rates remaining at elevated levels.
Previous wording
During the three months ended March 31, 2024, there was one charge-off of a commercial loan for $925,000 and $1,000 of recoveries, compared to no charge-offs and $7,000 of recoveries for the three months ended March 31, 2023.
Current wording
During the three months ended June 30, 2024 there were $3.5 million of charge-offs and $15,000 of recoveries, compared to $9.5 million of charge-offs and $2,000 recoveries for the three months ended June 30, 2023.
Previous wording
Net Interest Income. Net interest income of $127.1 million for the three months ended March 31, 2024 increased $26.4 million, or 26%, compared with $100.7 million for the three months ended March 31, 2023. The increase reflected higher average balances and yields on loans and loans held for sale, as well as higher average yields and average balances of securities available for sale, which were partially offset by higher average balances and interest rates on
Current wording
Net Interest Income. Net interest income of $128.1 million for the three months ended June 30, 2024 increased $22.5 million, or 21%, compared with $105.6 million for the three months ended June 30, 2023. The 21% increase reflected higher average balances and yields on loans and loans held for sale, as well as higher average yields and balances of securities available for sale, which were partially offset by higher average balances and interest rates on deposits, as well as higher average balances on borrowings. The interest rate spread of 2.45% for the three months ended June 30, 2024 increased 4 basis points compared to 2.41% for the three months ended June 30,2023.
Previous wording
Interest Income. Interest income of $314.2 million for the three months ended March 31, 2024 increased $102.9 million, or 49%, compared with $211.3 million for the three months ended March 31, 2023. This increase reflected an increase in both average balances and yields of loans and loans held for sale, as well as securities available for sale and held to maturity. The higher yields were in response to higher interest rates set by the Federal Reserve.
Current wording
Interest Income. Interest income of $328.3 million for the three months ended June 30, 2024 increased $70.2 million, or 27%, compared with $258.1 million for the three months ended June 30,2023. This increase reflected an increase in both average balances and yields of loans and loans held for sale, as well as securities available for sale. The higher yields were in response to higher interest rates set by the Federal Reserve.
Previous wording
Interest income of $272.0 million for the three months ended March 31, 2024 for loans and loans held for sale increased $82.5 million, or 44%, compared to the three months ended March 31, 2023. The average balance of loans, including loans held for sale, of $13.5 billion increased $2.9 billion, or 27%, compared $10.6 billion for the three months ended March 31, 2023. The average yield on loans increased 86 basis points to 8.11%, for the three months ended March 31, 2024, compared to 7.25% for the three months ended March 31, 2023. The increase in average balances of loans and loans held for sale was primarily due to increases in warehouse, multi-family, and healthcare loans, as well as loans held for sale, during the period.
Current wording
Interest income of $284.4 million for the three months ended June 30, 2024 for loans and loans held for sale increased $55.7 million, or 24%, compared to $228.7 million for the three months ended June 30, 2023. The average balance of loans, including loans held for sale, during the three months ended June 30, 2024 increased $2.4 billion, or 20%, to $14.3 billion compared to the three months ended June 30,2023. The average yield on loans increased 30 basis points, to 7.97% for the three months ended June 30, 2024, compared to 7.67% for the three months ended June 30,2023. The increase in average balances of loans and loans held for sale was primarily due to increases in the multi-family, healthcare, and loans held for sale.
Previous wording
Interest income of $14.4 million for the three months ended March 31, 2024 on securities available for sale increased $12.1 million, or 535%, compared to the three months ended March 31, 2023. The average balance of securities available for sale of $1.1 billion increased $639.5 million, or 144%, compared to $445.6 million for the three months ended March 31, 2023. The average yield increased 327 basis points to 5.33%, for the three months ended March 31, 2024 compared to 2.06% for the three months ended March 31, 2023. The increase in average balances of securities available for sale was primarily associated with the acquisition of certain securities in from a warehouse customer in December 2023 that provide protective put options and interest rate floor derivatives to prevent losses in value.
Current wording
Interest income of $14.8 million for the three months ended June 30, 2024 on securities available for sale increased $9.2 million, or 166%, compared to $5.6 million for the three months ended June 30, 2023. The average balance of securities available for sale of $1.0 billion increased $366.5 million, or 54%, compared to $672.9 million for the three months ended June 30, 2023. The average yield increased 240 basis points, to 5.72% for the three months ended June 30, 2024, compared to 3.32% for the three months ended June 30, 2023. The increase in average balances of securities available for sale was primarily associated with the acquisition of certain securities from a warehouse customer in December 2023 that provide protective put options and interest rate floor derivatives to prevent losses in value.
Previous wording
Interest income of $20.5 million for the three months ended March 31, 2024 for securities held to maturity increased $4.8 million, or 30%, compared to the three months ended March 31, 2023. The average balance of securities held for maturity of $1.2 billion increased $81.4 million, or 7%, compared to $1.1 billion for the three months ended March 31, 2023. The average yield increased 117 basis points 6.90% for the three months ended March 31, 2024 compared to 5.73% for the three months ended March 31, 2023. The increase in average balance of securities held to maturity was primarily related to held to maturity securities acquired as part of loan securitizations.
Current wording
Interest income of $19.8 million for the three months ended June 30, 2024 for securities held to maturity increased $2.5 million, or 14%, compared to $17.3 million for the three months ended June 30, 2023. The average balance of securities held to maturity, during the three months ended June 30, 2024 increased $67.2 million, or 6%, to $1.2 billion compared to the three months ended June 30,2023. The average yield on securities held to maturity increased 51 basis points, to 6.86% for the three months ended June 30, 2024, compared to 6.35% for the three months ended June 30, 2023. The increase in average balance of securities held to maturity was primarily related to held maturity securities acquired as part of loan securitizations.
Previous wording
Interest Expense. Total interest expense of $187.1 for the three months ended March 31, 2024 increased $76.5 million, or 69%, compared with $110.6 million for the three months ended March 31, 2023.
Current wording
Interest Expense. Total interest expense of $200.2 million for the three months ended June 30, 2024 increased $47.7 million, or 31%, compared to $152.5 million for the three months ended June 30, 2023.
Previous wording
Interest expense on deposits increased $66.6 million, or 64%, to $171.0 million for the three months ended March 31, 2024, from $104.4 million for the three months ended March 31, 2023. The increasewas primarily due to higher rates average balances and rates on certificates of deposit and interest-bearing checking, as well as higher rates on borrowings.
Current wording
Interest expense on deposits increased $41.9 million, or 30%, to $180.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily due to higher average balances and rates on certificates of deposit and interest-bearing checking accounts. The higher rates on our deposits were in response to higher interest rates set by the Federal Reserve.
Previous wording
Interest expense on borrowings of $16.1 million for the three months ended March 31, 2024 increased $9.9 million, or 161%, compared to $6.2 million the three months ended March 31, 2023. The increase was due primarily to a 386 basis point increase in the average cost of borrowings to 9.03%, compared to 5.17% for the three months ended March 31, 2023. Also included in borrowings, our warehouse structured financing agreements provide for an additional interest payment for a portion of the earnings generated. As a result, the cost of borrowings increased from a base rate of 8.50% and 4.82%, to an effective rate of 9.03% and 5.17% for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Interest expense of $20.5 million for the three months ended June 30, 2024 on borrowings increased $5.9 million, or 40%, compared to $14.7 million for the three months ended June 30, 2023. The increase reflected an increase of $439.8 million, or 74%, in the average balance of borrowings, to $1.0 billion compared to the three months ended June 30, 2023. Also included in borrowings, our warehouse structured financing agreements provide for additional interest payments for a portion of the earnings generated. As a result, the cost of borrowings increased from a base rate of 7.53% and 9.53%, to an effective rate of 8.00% and 9.94% for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Provision for Credit Losses. We recorded a provision for credit losses of $4.7 million for the three months ended March 31, 2024, a decrease of $2.1 million, or 31%, over the three months ended March 31, 2023. The $4.7 million provision for credit losses consisted of $4.9 million for the ACL-Loans and a negative provision of $0.2 million for the ACL-OBCE’s. The ACL-Loans was $75.7 million, or 0.70% of total loans, at March 31, 2024, compared to $71.8 million, or 0.70% of total loans, at December 31, 2023, and $51.8 million, or 0.60%, at March 31, 2023. The increases in the ACL-Loans compared to both prior periods reflected increases associated with loan growth in the multi-family and healthcare portfolios, as well as changes in specific reserves and loss factors to reflect industry conditions. Additional details are provided in the ACL-Loans portion of the Comparison of Financial Condition at March 31, 2024 and December 31, 2023 and inNote 4: Loans and Allowance for Credit Losses on Loans.
Current wording
The $10.0 million provision for credit losses consisted of $8.8 million for the ACL-Loans and $1.2 million for the ACL-OBCE’s. The ACL-Loans was $81.0 million, or 0.74%, of total loans, at June 30, 2024, compared to $71.8 million, or 0.70%, of total loans, at December 31, 2023, and $63.0 million, or 0.64%, at June 30,2023.
Previous wording
Servicing fees included a $13.2 million positive fair market value adjustment to servicing rights for the three months ended March 31, 2024, compared to a $2.2 million negative adjustment to fair value of servicing rights for the three months ended March 31, 2023.
Current wording
Loan servicing fees included a $5.1 million positive fair market value adjustment to servicing rights for the three months ended June 30, 2024, compared to a $3.4 million positive adjustment to fair value of servicing rights for the three months ended June 30, 2023.
Previous wording
Noninterest Expense. Noninterest expense of $48.9 million for the three months ended March 31, 2024 increased $14.1 million, or 41%, compared to $34.8 million for the three months ended March 31, 2023. The increase was due primarily to a $7.5 million, or 34%, increase in salaries and employee benefits associated with higher commissions on higher production volume. Also contributing to the higher expenses was a $2.9 million, or 135%, increase in FDIC deposit insurance expenses reflecting our growth in assets and the change in fee structure, as we are now classified as a large financial institution over $10 billion. Also, impacting the higher expenses was a $1.8 million, or 81%, increase in professional fees. The efficiency ratio was at 29.1% in the three months ended March 31, 2024, compared with 30.3% in the three months ended March 31, 2023.
Current wording
Noninterest Expense. Noninterest expense of $50.4 million for the three months ended June 30, 2024 increased $6.1 million, or 14%, compared to $44.3 million for the three months ended June 30, 2023. The increase was due primarily to a $2.6 million, or 10%, increase in salaries and employee benefits to support business growth, as well as a $1.8 million, or 47%, increase in FDIC deposit insurance expenses. The higher noninterest expense also reflected a $1.6 million, or 27%, increase in other expenses primarily associated with ongoing premium expense on the credit default swap that was executed in March 2024.
Showing the first 40 of 64 pairs. Open the source sections for the rest.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
were also $1.3 billion in securities classified as held to maturity, most of which were acquired through loan securitizations. Additionally, we had $1.0 billion in securities available for sale, the majority of which were acquired from a warehouse customer through loan securitizations, and others are match funded or required to collateralize our credit-linked notes. Other assets at June 30, 2024 totaled $343.1 million, which primarily represents low-income housing tax credits. Servicing rights at June 30, 2024 totaled $178.8 million based on the fair value of the loan servicing, which are primarily GNMA multi-family servicing rights with 10-year call protection.
Current report — wording carried from elsewhere
The efficiency ratio was at 31.59% for the three months ended June 30, 2024, compared with 32.71% for the three months ended June 30, 2023.
Current report — wording carried from elsewhere
Comparison of Operating Results for the Six Months Ended June 30, 2024 and 2023
Current report — wording carried from elsewhere
The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Yields have been calculated on a pre-tax basis. Nonaccrual loans are included in loans and loans held for sale.
Current report — wording carried from elsewhere
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in weighted average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Yields have been calculated on a pre-tax basis.
Current report — wording carried from elsewhere
The following table summarizes the increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates:
Current report — wording carried from elsewhere
A summary of the gain on sale of loans for the six months ended June 30, 2024 and 2023 is below:
Current report — wording carried from elsewhere
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used in operating activities was ($332.7) million and $(543.0) million for the
Current report — wording carried from elsewhere
related to their exercise of an option to purchase additional shares under the associated underwriting agreement, resulting in an additional $12.1 million in net proceeds, after deducting $0.4 million in underwriting discounts.
Current report — wording carried from elsewhere
and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year period.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
significant changes in critical accounting policies or the assumptions and judgments utilized in applying these policies since those reported for the year ended December 31, 2023.
Previous report — wording carried elsewhere
million of AOCL as of March 31, 2024 represented less than 1% of total equity and 1% of total securities available for sale.
Previous report — wording carried elsewhere
Servicing Rights. Servicing rights of $172.2 million at March 31, 2024 increased $13.7 million, or 9%, compared to $158.5 million at December 31, 2023. During the three months ended March 31, 2024, a positive fair market value
Previous report — wording carried elsewhere
Banking segment has a well-diversified customer and borrower base and has experienced significant growth over the past three years.
Previous report — wording carried elsewhere
FHLB advances, the Federal Reserve discount window, brokered deposits, or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.
Previous report — wording carried elsewhere
liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.