Merchants Bancorp
For the period ended Sep 30, 2024. Filed Nov 8, 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.
Sep 30, 2024 · Filed Nov 8, 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 2024-06-30; filed 2024-08-09.
0001558370-24-011741
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001558370-24-015053
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 173 previous paragraphs and 179 current paragraphs.
65 unchanged; 88 reworded; 24 added; 17 removed; 3 previous and 2 current paragraphs rearranged.
Tables are not compared: 32 previous and 37 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 (24)
Current report
Total Assets. Total assets of $18.7 billion at September 30, 2024 increased $1.7 billion, or 10%, compared to $17.0 billion at December 31, 2023. The increase was due primarily to growth in loans held for sale and in the warehouse and multi-family loan portfolios. There was also an increase in securities held to maturity compared to December 31, 2023, primarily due to the purchase of a security representing healthcare loans sold into a securitization in the third quarter of 2024 that was offset by a decline in loans in the healthcare portfolio that were sold into the securitization.
Current report
As of September 30, 2024, Accumulated Other Comprehensive Income (“AOCI”) of $0.1 million, related to securities available for sale, increased $2.6 million, or 104%, compared to accumulated losses of $2.5 million at December 31,2023.
Current report
Although there has been an increase in adversely classified loans, asset values remain strong overall and loans are well-collateralized. Loans are underwritten to strict agency guidelines. We have continued to strengthen our various levels of credit and risk management.
Current report
a few sponsors. Credit quality is expected to improve with the recent reduction in interest rates. After six months of consecutive loan performance, the loans are placed back on accrual status.
Current report
The $84.5 million allowance for credit losses on loans as of September 30, 2024, compared to the net charge-offs of $6.7 million over the last twelve months ended September 30, 2024, could absorb 13 years of losses if recent loss levels continued into the future.
Current report
In addition to the elevated ACL-loans, the Company has been making efforts to minimize its credit risk through loan sale and securitization activities since 2019. In April 2023 and March 2024, the Company strategically entered into credit protection arrangements through a credit linked note and credit default swap, respectively, for $1.7 billion in loans to reduce our risk of losses with incremental coverage of approximately 14% on those covered loans. The balance of loans in those covered portfolios as of September 30, 2024 was $1.3 billion.
Current report
General. Net income of $61.3 million for the three months ended September 30, 2024 decreased by $20.2 million, or 25%, compared with $81.5 million for the three months ended September 30,2023. The decrease reflected
Current report
Interest income of $7.7 million for the three months ended September 30, 2024 on interest-earning deposits, and other interest or dividends increased $3.7 million, or 96%, compared to the three months ended September 30, 2023. The average balance of interest-earning deposits and other of $484.7 million increased $225.1 million, or 87%, compared to $259.6 million for the three months ended September 30, 2023. The average yield increased 31 basis points, to 6.30% for the three months ended September 30, 2024, compared to 5.99% for the three months ended September 30, 2023.
Current report
Interest Expense. Total interest expense of $206.1 million for the three months ended September 30, 2024 increased $26.9 million, or 15%, compared to $179.2 million for the three months ended September 30, 2023. The increase reflected higher average balances on borrowings and interest-bearing checking accounts, partially offset by lower average rates on borrowings and lower average balances on certificates of deposit. Also included in borrowings, our warehouse structured financing agreements provided for additional interest payments for a portion of earnings generated.
Current report
Interest expense of $40.4 million for the three months ended September 30, 2024 on borrowings increased $24.1 million, or 148%, compared to $16.3 million for the three months ended September 30, 2023. The increase reflected an increase of $1.8 billion, or 254%, in the average balance of borrowings, to $2.5 billion compared to the three months ended September 30,2023, partially offset by a decrease of 271 basis points in the average rate of borrowings, to 6.39% compared to 9.10% for the three months ended September 30, 2023. The higher level of collateralized borrowing was primarily due to it being a more cost-effective funding option than utilizing brokered deposits.
Current report
Interest expense on deposits increased $2.8 million, or 2%, to $165.7 million for the three months ended September 30, 2024 compared to $162.9 million for the three months ended September 30, 2023. The increase was primarily due to higher average balances on interest-bearing checking accounts partially offset by lower average balances on certificates of deposit.
Current report
Other income included a $7.7 million negative fair market value adjustment to interest rate floor derivatives on loans that didn’t occur in the prior comparative period.
Current report
Interest income of $44.0 million for the nine months ended September 30, 2024 on securities available for sale increased $30.0 million, or 214%, compared to the nine months ended September 30, 2023. The average balance of securities available for sale increased $452.6 million, or 76%, to $1.0 billion for the nine months ended September 30, 2024 compared to $592.5 million for the nine months ended September 30, 2023, and the average yield increased 247 basis points, to 5.63% for the nine months ended September 30, 2024, compared to 3.16% for the nine months ended September 30, 2023.
Current report
Interest income of $19.4 million for the nine months ended September 30, 2024 on interest-earning deposits and other interest or dividends increased $10.0 million, or 106%, compared to the nine months ended September 30, 2023. The average balance of interest-earning deposits and other increased $191.8 million, or 83%, to $423.3 million for the nine months ended September 30, 2024, from $231.5 million for the nine months ended September 30, 2023, and the average yield increased 68 basis points, to 6.13% for the nine months ended September 30, 2024, compared to 5.45% for the nine months ended September 30, 2023.
Current report
Interest Expense. Total interest expense of $593.4 million for the nine months ended September 30, 2024 increased $151.1 million, or 34%, compared to $442.3 million for the nine months ended September 30, 2023. The higher interest expense reflected increases in both deposits and borrowings, with a shift towards higher collateralized borrowings that has become a more cost-effective option that utilizing brokered deposits.
Current report
Noninterest Income. Noninterest income of $89.0 million for the nine months ended September 30, 2024 increased $8.8 million, or 11%, compared to $80.2 million for the nine months ended September 30, 2023. The increase was primarily due to a $8.4 million, or 29%, increase in gain on sale of loans and a $2.9 million, or 39%, increase in syndication and asset management fees compared to the nine months ended September 30,2023.
Current report
servicing rights for the nine months ended September 30, 2024, compared to a positive adjustment of $12.2 million for the nine months ended September 30,2023.
Current report
The Multi-family Mortgage Banking segment reported net income of $8.1 million for the three months ended September 30, 2024, a decrease of $6.6 million, or 45%, compared to $14.7 million for the three months ended September 30, 2023. The decrease in net income was primarily due to a decrease in loan servicing fees related to negative fair market value adjustments, as well as increased salaries and employee benefits reflecting higher commissions on higher production volume, partially offset by increased gain on sale of loans.
Current report
The Banking segment reported net income of $45.0 million for the three months ended September 30, 2024, a decrease of $7.5 million, or 14%, compared to the three months ended September 30, 2023. The decrease was primarily
Current report
due to a lower gain on sale of loans and loan servicing fees, as well as an increase in noninterest expense, partially offset by an increase in net interest income.
Current report
Noninterest income for the three months ended September 30, 2024 included a negative fair market value adjustment of $1.6 million on servicing rights, compared to a positive fair market value adjustment of $1.2 million for the three months ended September 30, 2023.
Current report
The Banking segment reported net income of $153.8 million for the nine months ended September 30, 2024, an increase of $9.4 million, or 6%, compared to $144.4 million for the nine months ended September 30, 2023. The increase in net income was primarily due to higher net interest income and lower provision for loan losses, which was partially offset by a higher provision for income taxes and higher noninterest expense that reflected increased deposit insurance premiums and ongoing premium expenses on the credit default swap executed in March 2024. Lower gain on sale of loans also partially offset the increases to net income.
Current report
Noninterest income for the nine months ended September 30, 2024 included a negative fair market value adjustment of $0.3 million on servicing rights, compared to a positive fair market value adjustment of $1.8 million for the nine months ended September 30, 2023.
Current report
On October 1, 2024, the dividends on the Series B Preferred stock started to accrue at a floating rate of 3-month SOFR plus 4.831% and will reset quarterly. The rate will be 9.42% for the fourth quarter 2024.
Removed paragraphs (17)
Previous report
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 report
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 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.
Previous 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.
Previous report
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 report
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 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
The Banking segment reported net income of $52.4 million for the three months ended June 30, 2024, an increase of $9.7 million, or 23%, compared to $42.7 million for the three months ended June 30, 2023. The increase in net income
Previous report
was primarily due to higher net interest income from higher average balances and yields on loans and loans held for sale that were partially offset by higher average balances and rates on deposits.
Previous report
Noninterest income for the three months ended June 30, 2024 included a positive fair market value adjustment of $0.6 million on single-family servicing rights, compared to a positive fair market value adjustment of $1.3 million for the three months ended June 30, 2023.
Previous report
The Banking segment reported net income of $108.8 million for the six months ended June 30, 2024, an increase of $16.8 million, or 18%, compared to $92.0 million for the six months ended June 30, 2023. The increase in net income was primarily due to higher net interest income from higher average balances and yields on loans that were partially offset by increased interest expense primarily due to higher average balances and rates on deposits and borrowings.
Previous report
Noninterest income for the six months ended June 30, 2024 included a positive fair market value adjustment of $1.3 million on single-family servicing rights, compared to a positive fair market value adjustment of $0.6 million for the six months ended June 30, 2023.
Reworded paragraphs (88)
Previous 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.
Current wording
Management’s discussion and analysis of the financial condition at September 30, 2024 and results of operations for the three and nine months ended September 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
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
Current wording
As of September 30, 2024, we had approximately $18.7 billion in total assets, $12.9 billion in deposits and $1.9 billion in total shareholders’ equity. Total assets as of September 30, 2024 included approximately $10.3 billion of loans receivable, net of allowance for credit losses on loans (“ACL-Loans”) and $3.8 billion of loans held for sale. There were also $1.8 billion in securities classified as held to maturity, most of which were acquired through loan securitizations. Assets also included $953.1 million 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. Additionally, we had $601.9 million of cash and cash equivalents, $431.0 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. Other assets at September 30, 2024 totaled $329.4 million, which primarily represents low-income
Previous wording
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 wording
housing tax credits. Servicing rights at September 30, 2024 totaled $177.3 million based on the fair value of the loan servicing, which are primarily Ginnie Mae multi-family servicing rights with 10-year call protection.
Previous 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*.*
Current wording
Cash and Cash Equivalents. Cash and cash equivalents of $601.9 million at September 30, 2024 increased $17.5 million, or 3%, compared to $584.4 million at December 31, 2023. Included in cash equivalents was $45.7 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 $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.
Current wording
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $431.0 million at September 30, 2024 increased $320.4 million, or 290%, 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 290% 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 $1.0 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.
Current wording
Securities Available for Sale. Securities available for sale of $953.1 million at September 30, 2024 decreased $160.6 million, or 14%, compared to December 31, 2023. The decrease in securities available for sale was primarily due to $662.2 in calls, maturities, repayments, sales and other adjustments, partially offset by purchases of $501.6 million during the period.
Previous 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.
Current wording
Included in securities available for sale were $683.0 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
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.
Current wording
Securities Held to Maturity. Securities held to maturity of $1.8 billion at September 30, 2024 increased $550.8 million, or 46%, compared to $1.2 billion at December 31, 2023. The increase was due to purchases of $689.8 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 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.
Current wording
Loans Held for Sale. Loans held for sale of $3.8 billion at September 30, 2024 increased $663.5 million, or 21%, 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 pool eligibility. It also includes a growing contribution of multi-family loans that are expected to be sold or securitized within the next year.
Previous 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:
Current wording
Loans Receivable, Net. Loans receivable, net of ACL-Loans, of $10.3 billion at September 30, 2024, which are comprised of loans held for investment, increased $134.1 million, or 1%, compared to $10.1 billion at December 31,2023. The increase in net loans was comprised primarily of:
Previous 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.
Current wording
Allowance for Credit Losses on Loans. The ACL-Loans of $84.5 million at September 30, 2024 increased $12.8 million, or 18%, compared to December 31, 2023, reflecting an $8.0 million increase in specific reserves, primarily related to two customers, and loan growth in both the warehouse and multi-family loan portfolios. Additional details provided in the ACL-Loans portion of the Comparison of Financial Condition at September 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 or refinance the majority of our loans under government programs.
Current wording
Also influencing the overall level of the ACL-Loans is our differentiated strategy to primarily hold loans with shorter durations while maintaining agency underwriting standards that enable us to sell or refinance the majority of our loans under agency and government programs.
Previous 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.
Current wording
Servicing Rights. Servicing rights of $177.3 million at September 30, 2024 increased $18.9 million, or 12%, compared to December 31, 2023. During the nine months ended September 30, 2024, originated servicing of $13.3 million and a positive fair market value adjustment of $12.3 million were partially offset by paydowns of $6.7 million. The $12.3 million positive fair market value adjustment reflected a positive fair market value adjustment of $12.6 million for multi-family mortgages and a negative fair market value adjustment of $0.3 million for single-family mortgages and SBA loans during the nine months ended September 30, 2024.
Previous 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.
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 nine months ended September 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
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 wording
Other Assets and Receivables. Other assets and receivables of $329.4 million at September 30, 2024 increased $22.3 million, or 7%, compared to December 31,2023. The increase in other assets and receivables was primarily due to receivables associated with low-income housing tax credit investments.
Previous wording
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 wording
Deposits. Deposits of $12.9 billion at September 30, 2024 decreased $1.2 billion, or 8%, compared to $14.1 billion at December 31, 2023. The decrease was primarily due to a $1.0 billion decrease in certificates of deposit, a $150.2 million decrease in demand deposits and a decrease of $12.5 million in savings deposits. As of September 30,2024, approximately 81% of the total deposits reprice within three months.
Previous 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.
Current wording
Core deposits increased by $2 billion, or 25%, to $10.1 billion at September 30, 2024 compared to December 31, 2023. Core deposits represented 78% of total deposits at September 30, 2024 compared to 58% of total deposits at December 31, 2023.
Previous 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.
Current wording
We have decreased our use of brokered deposits by $3.2 million, or 53%, to $2.8 billion at September 30, 2024 compared to $6.0 billion at December 31, 2023. Brokered deposits represented 22% of total deposits at September 30, 2024 compared to 42% of total deposits at December 31, 2023. The shift away from brokered deposits was primarily due to more cost-effective funding options that utilized our collateralized borrowing capacity. As of September 30, 2024, brokered certificates of deposit had a weighted average remaining duration of 56 days.
Previous 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.
Current wording
Compared to December 31, 2023, interest-bearing deposits decreased $960.9 million, or 7%, to $12.6 billion at September 30, 2024, and noninterest-bearing deposits decreased $208.7 million, or 40%, to $311.4 million at September 30, 2024.
Previous 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.
Current wording
Uninsured deposits represented approximately 20% 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 September 30, 2024 compared to $1.6 billion as of December 30, 2023 and $1.8 billion as of September 30, 2023. The Company’s line of credit with the Federal Reserve Bank of Chicago could fund 120% of uninsured deposits.
Previous 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.
Current wording
Borrowings. Borrowings increased $2.6 billion, or 270%, to $3.6 billion at September 30, 2024, compared to $964.1 million at December 31, 2023. The increase was primarily due to $2.6 billion in additional FHLB advances. The higher level of collateralized borrowing was primarily due to it being a more cost effective funding option than utilizing brokered deposits. The Company primarily utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, and AFX. SeeNote 12: Borrowings for further information.
Previous 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.
Current wording
The Company continues to have significant borrowing capacity based on available collateral. As of September 30, 2024, unused lines of credit totaled $5.1 billion, compared to $6.0 billion at December 31, 2023.
Previous 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.* *
Current wording
Total Shareholders’ Equity. Total shareholders’ equity of $1.9 billion at September 30, 2024, increased $238.0 million, or 14%, compared to $1.7 billion as of December 31,2023. The $238.0 million increase resulted primarily from net income of $224.7 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 $36.3 million during the period.* *
Previous 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.
Current wording
Total nonperforming loans (nonaccrual and greater than 90 days late but still accruing) were $210.9 million, or 2.04%, of total loans at September 30, 2024, compared to $82.0 million, or 0.80%, of total loans at December 31, 2023 and $60.2 million, or 0.60%, at September 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 largely due to elevated interest rates. The increase was also attributable to the financial deterioration of
Previous 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.
Current wording
As a percentage of nonperforming loans, the ACL-Loans was 40% at September 30, 2024 compared to 87% at December 31, 2023 and 111% at September 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 $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.
Current wording
Total loans greater than 30 days past due were $257.5 million at September 30, 2024, $183.5 million at December 31, 2023, and $125.4 million at September 30,2023. The increase in non-performing loans compared to both periods was primarily driven by multi-family customers with delinquent payments on variable rate loans that have required higher payments due to interest rates remaining at elevated levels.
Previous wording
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 wording
Loans classified as Special Mention totaled $351.4 million at September 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 multi-family and healthcare financing loan portfolios.
Previous wording
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 wording
Loans classified as Substandard totaled $287.8 million at September 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. All substandard loans as of September 30, 2024 have been evaluated for impairment and these loans have specific reserves of $19.2 million.
Previous 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.
Current wording
During the three months ended September 30, 2024 there were $2.1 million of charge-offs and $7,000 of recoveries, compared to $21,000 of charge-offs and $31,000 recoveries for the three months ended September 30, 2023.
Previous wording
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 wording
For the nine months ended September 30, 2024, there were $6.4 million of charge-offs and $23,000 of recoveries, compared to $9.6 million of charge-offs and $40,000 of recoveries for the nine months ended September 30, 2023.
Previous 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.
Current wording
Net Interest Income. Net interest income of $132.8 million for the three months ended September 30, 2024 increased $15.4 million, or 13%, compared with $117.4 million for the three months ended September 30, 2023. The 13% increase reflected an increase in average balances on loans and loans held for sale, which were partially offset by higher average balances on borrowings. The interest rate spread of 2.43% for the three months ended September 30, 2024 decreased 1 basis points compared to 2.44% for the three months ended September 30,2023.
Previous wording
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 wording
Our net interest margin of 2.99% for the three months ended September 30, 2024 remain unchanged compared to the three months ended September 30,2023. The margin was negatively impacted by approximately 6 basis points in the third quarter of 2024 from the net reversal of $2.9 million in accrued interest income associated with the movement of loans into nonaccrual status.
Previous 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.
Current wording
Interest Income. Interest income of $338.9 million for the three months ended September 30, 2024 increased 14%, compared with $296.7 million for the three months ended September 30,2023. This increase primarily reflecting an increase in average balances of loans and loans held for sale, as well as increased average yields and balances on securities available for sale.
Previous 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.
Current wording
Interest income of $290.3 million for the three months ended September 30, 2024 for loans and loans held for sale increased $23.7 million, or 9%, compared to $266.6 million for the three months ended September 30, 2023. The average balance of loans, including loans held for sale, during the three months ended September 30, 2024 increased $1.2 billion, or 9%, to $14.6 billion compared to $13.4 billion for the three months ended September 30,2023. The average yield on loans increased 2 basis points, to 7.91% for the three months ended September 30, 2024, compared to 7.89% for the three months ended September 30,2023. The increase in average balances of loans and loans held for sale was primarily due to increases in the loans held for sale, warehouse and multi-family loan portfolios.
Previous 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.
Current wording
Interest income of $14.9 million for the three months ended September 30, 2024 on securities available for sale increased $8.7 million, or 140%, compared to $6.2 million for the three months ended September 30, 2023. The average balance of securities available for sale of $1.0 billion increased $354.6 million, or 54%, compared to $656.6 million for the three months ended September 30, 2023. The average yield increased 210 basis points, to 5.84% for the three months ended September 30, 2024, compared to 3.74% for the three months ended September 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 $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.
Current wording
Interest income of $22.1 million for the three months ended September 30, 2024 for securities held to maturity increased $4.7 million, or 27%, compared to $17.4 million for the three months ended September 30, 2023. The average balance of securities held to maturity, during the three months ended September 30, 2024 increased $248.4 million, or 24%, to $1.3 billion compared to $1.0 billion for the three months ended September 30,2023. The average yield on securities held to maturity increased 17 basis points, to 6.82% for the three months ended September 30, 2024, compared to 6.65% for the three months ended September 30, 2023. The increase in average balance of securities held to maturity was primarily related to securities held to maturity acquired as part of loan securitizations.
Previous wording
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 wording
Interest expense of $62.6 million for the three months ended September 30, 2024 on interest-bearing checking accounts increased $4.0 million, or 7%, compared to $58.6 million for the three months ended September 30, 2023. The average balance of interest-bearing checking accounts of $5.3 billion for the three months ended September 30, 2024 increased $415.2 million, or 9%, compared to $4.9 billion for the three months ended September 30, 2023. The average yield of interest-bearing checking accounts was 4.70% for the three months ended September 30, 2024, which was a 6 basis point decrease compared to 4.76% for three months ended September 30, 2023.
Previous wording
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 wording
Interest expense of $69.2 million for the three months ended September 30, 2024 on certificates of deposit decreased $1.5 million, or 2%, compared to $70.7 million for the three months ended September 30, 2023. The average balance of certificates of deposit of $5.0 billion for the three months ended September 30, 2024 decreased $223.4 million, or 4%, compared to the three months ended September 30, 2023. The average rate on certificates of deposit was 5.47% for the three months ended September 30, 2024, which was a 13 basis point increase compared to 5.34% for three months ended September 30, 2023.
Previous wording
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 wording
Provision for Credit Losses. We recorded a total provision for credit losses of $6.9 million for the three months ended September 30, 2024, an increase of $2.9 million, or 72%, compared to the three months ended September 30, 2023. The 72% increase reflected higher specific reserves on a relatively small number of borrowers.
Previous wording
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 wording
The provision for the three months ended September 30, 2024 reflected $8.0 million for specific reserves, primarily related to two customers, and $1.9 million related to charge-offs in excess of reserves, partially offset by a reduction of $3.8 million due to lower loan balances associated with the corresponding healthcare loan securitization.
Showing the first 40 of 88 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Loan servicing fees included a $6.7 million negative fair market value adjustment to servicing rights for the three months ended September 30, 2024, compared to a $11.6 million positive adjustment to fair value of servicing rights for the three months ended September 30, 2023. The value of servicing rights generally increases in rising interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates on escrow deposits.
Current report — wording carried from elsewhere
Noninterest income also included a $0.4 million increase in loan servicing fees due to higher positive adjustments to fair value of servicing rights. Included in loan servicing fees was a $12.3 million positive adjustment to the fair value of
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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.
Previous report — wording carried 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