Merchants Bancorp
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
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-K
Period ended 2023-12-31; filed 2024-03-12.
0001558370-24-003005
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0001558370-25-001941
Item 7. 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 190 previous paragraphs and 195 current paragraphs.
46 unchanged; 104 reworded; 40 added; 35 removed; 5 previous and 5 current paragraphs rearranged.
Tables are not compared: 52 previous and 61 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 (40)
Current report
In response to rising inflation during 2022-2023, the Federal Reserve aggressively increased the federal funds rate. Starting from near-zero levels in early 2022, the rate was raised multiple times, reaching 5.33% by the end of 2023. This was the highest level since January 2008 and was aimed at curbing inflationary pressures. The 10-year Treasury yield, which is a key benchmark for mortgage rates, also saw significant increases. It rose from around 1.5% at the beginning of 2022 to approximately 3.88% by the end of 2023. This increase was driven by expectations of higher inflation and the Federal Reserve’s rate hikes. The 30-year mortgage rate followed a similar trend, rising sharply in response to the Federal Reserve’s rate hikes. It peaked at over 7% in 2022, the highest level since 2002, and remained elevated throughout 2023. The higher interest rates during this period significantly reduced mortgage affordability and refinancing activity, leading to a decline in mortgage volumes across the industry.
Current report
During 2024, the Federal Reserve began to cut interest rates and by the end of 2024, the federal funds rate had been reduced to around 4.33%. Following suit, the 30-year mortgage rate began to decline and by the end of 2024, it had fallen to approximately 6.85%. The rate cuts in 2024 began to revive the mortgage market. Lower mortgage rates improved affordability and spurred a resurgence in mortgage volumes, particularly in refinancing activity. Conversely, the 10-year Treasury yield had begun to decline, but in late-2024 began to rise on inflation expectations and strong economic growth. By the end of 2024, it had reached 4.58%. The broader economic environment in 2024 was characterized by strong economic growth, moderating inflation, and robust corporate earnings, which further supported the recovery in mortgage volumes.
Current report
On April 1, 2024, the Company redeemed all outstanding shares of the 7.00% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock at a price equal to the liquidation preference of $25 per share, or $52.0 million, using cash on hand.
Current report
As of 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 were to reset quarterly. The rate was 9.42% for the three months ended December 31, 2024.See “Capital Resources” section of “Liquidity”, later in this Item 7 for more information.
Current report
On November 25, 2024, the Company issued 9,200,000 depositary shares, each representing a 1/40 th interest in a share of its 7.625% Fixed Rate Reset Series E Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $230.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $7.3 million paid to third parties, the Company received total net proceeds of $222.7 million.
Current report
On January 2, 2025, the Company redeemed all outstanding shares of the 6.00% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock at a price equal to the liquidation preference of $1,000 per share (equivalent to $25 per depositary share), or $125.0 million, using cash on hand.
Current report
Issuance of Common Stock. On May 16, 2024, the Company completed a common stock offering of 2.4 million shares, resulting in net proceeds of $97.7 million.
Current report
The interest rate spread of 2.47% for the year ended December 31, 2024, decreased 4 basis points compared to 2.51% for the year ended December 31, 2023. Our net interest margin decreased 3 basis points, to 3.03%, for the year ended December 31, 2024 from 3.06% for the year ended December 31, 2023.
Current report
December 31, 2023. The increase in certificates of deposit is in part due to the implementation of our new online account opening system which has made it more efficient for existing customers to open accounts as well as broaden our customer base to reach new markets.
Current report
Interest expense on borrowings increased $67.2 million, or 128%, to $119.7 million for the year ended December 31, 2024 from $52.5 million for the year ended December 31, 2023. The increase in interest was primarily due to an increase of $1.2 billion, or 192%, in the average balance of borrowings of $1.8 billion compared to $627.5 million for the year ended December 31, 2023. The higher level of collateralized borrowing, largely from the FHLB, was primarily due to it being a more cost-effective funding option than utilizing brokered deposits. There was a 184 basis point decrease in the average cost of borrowings to 6.53%, compared to 8.37% for the year ended December 31, 2023.
Current report
The $24.3 million total provision for credit losses consisted of $23.7 million for the ACL-Loans, $2.2 million for the ACL-OBCEs, net of $1.0 million for the ACL-Guarantees for the release of reserves related to a loan securitization and $0.6 million for the release of FMBI’s ACL-Loans for loans sold.
Current report
Noninterest Income. Noninterest income of $148.1 million for the year ended December 31, 2024 increased $33.4 million, or 29%, compared to $114.7 million for the year ended December 31, 2023. The increase was primarily due to higher gain on sale, increased loan servicing fees, and higher syndication and asset management fees. The increases were partially offset by a decrease in other noninterest income.
Current report
Gain on sale of loans of $62.3 million for the year ended December 31, 2024 increased $14.1 million, or 29%, compared to $48.2 million for the year ended December 31, 2023. The increase in gain on sale of loans reflects the successful execution of the Company’s strategy to grow the business segment and to increase non-interest income.
Current report
Syndication and asset management fees of $19.7 million for the year ended December 31, 2024 increased $7.3 million, or 59%, for the year ended December 31, 2024 compared to $12.4 million the year ended December 31, 2023. The increase was attributable to the additional $1.1 billion in equity raised by our LIHTC syndication platform during 2024.
Current report
Other noninterest income of $17.0 million for the year ended December 31, 2024 decreased $3.2 million, or 16%, compared to the year ended December 31, 2023. Other noninterest income included a $2.5 million negative adjustment to the fair value of floor derivatives for the year ended December 31, 2024 compared to a $6.6 million positive fair value adjustment for the year ended December 31,2023. The floor derivatives are associated with arrangements whereby there is a guaranteed minimum interest rate the Company will receive on certain assets bearing variable interest rates. The change in value was driven largely by the change in market interest rates during the period. Also included in other noninterest income were changes in fair value on certain securities available for sale that the Company elected to account for under the fair value option, with changes in fair value reflected in earnings. The Company also has put options associated with these securities that provide protection against any change in value. By design, the fair value adjustments of the securities and the put options should be substantially equal and offsetting. For the year ended December 31, 2024 there was a $17.9 million negative fair value adjustment on the securities that were offset by a $17.9 million positive fair value adjustment on the put options, hence having no net gain or loss recognized. Also seeNote 3: Investment Securities, Note 15: Derivative Financial Instruments, andNote 16: Disclosures about Fair Value of Assets and Liabilities.
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 continually strive to strengthen our various levels of credit and risk management.
Current report
In addition to elevated reserves for credit losses on loans compared to December 2023, the Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019. In April of 2023, as well as March and December of 2024, the Company strategically executed credit protection arrangements through a credit linked note and credit default swaps, totaling $2.9 billion in loans on the closing date, to reduce risk of losses, with incremental coverage ranging from 13-14% of the unpaid principal balances for each arrangement. These loans have credit protection and also have an allowance for credit losses. As of December 31, 2024, the balance of loans in credit protection arrangements was $2.3 billion, compared to $934.6 million as of December 31, 2023.
Current report
Total loans greater than 30 days past due were $292.3 million at December 31, 2024 compared to $183.5 million at December 31, 2023. The increase in delinquent 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.
Current report
Loans classified as Special Mention totaled $380.0 million at December 31, 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.
Current report
Loans classified as Substandard loans totaled $317.3 million at December 31, 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. Substantially all substandard loans as of December 31, 2024 have been evaluated for impairment and these loans have specific reserves of $23.4 million. Although there has been an increase in adversely classified loans, underlying asset values remain strong overall and loans are well-collateralized.
Current report
The percentage of commercial real estate loans as a percentage of total Tier I risk-based capital, including the ACL-Loans, has decreased from 455% to 348% for the years ended December 31, 2023 and 2024, respectively.
Current report
The $15.2 million increase in gain on sale of loans reflects the successful execution of the Company’s strategy to grow the business segment and to increase non-interest income.
Current report
Total Assets. Total assets of $18.8 billion at December 31, 2024 increased 11%, compared to $17.0 billion at December 31,2023. The increase was due primarily to growth in loans and loans held for sale, as well as 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 2024 that was offset by a decline in loans in the healthcare portfolio that were sold into the securitization. There was also an increase in mortgage loans in process of securitization due to increased activity in the secondary market.
Current report
Mortgage Loans in Process of Securitization. Mortgage loans in process of securitization of $428.2 million at December 31, 2024 increased $317.6 million, or 287%, compared to $110.6 million at December 31, 2023. These
Current report
The Company is a nationwide lender, especially in our largest portfolios of multi-family and healthcare financing. The tables below provide loans receivable for these two portfolios, including the five highest geographic concentrations.
Current report
The following table presents the contractual maturity distribution of loans receivable at December 31, 2024 and an analysis of these loans that have fixed and floating interest rates. The table does not take into account repricing or other forecast assumptions.
Current report
The ACL-Loans of $84.4 million at December 31, 2024 increased $12.6 million, or 18%, compared to $71.8 million at December 31, 2023, reflecting an $16.7 million net increase in specific reserves, primarily related to five customers, and loan growth in multi-family loan portfolios. This increase was partially offset by lower loan balances due to the securitization of healthcare loans, which reduced the allowance by approximately $4.4 million.
Current report
The $84.4 million allowance for credit losses on loans as of December 31, 2024, compared to the net charge offs of $10.5 million over the last twelve months ended December 31, 2024, could absorb eight years of losses, assuming recent loss levels continue.
Current report
Goodwill. Goodwill of $8.0 million at December 31, 2024 decreased $7.8 million, or 49%, compared to $15.8 million at December 31,2023. The goodwill associated with FMBI was extinguished upon the sale of their branches to unaffiliated third parties on January 26, 2024.
Current report
Servicing Rights. Servicing rights of $189.9 million at December 31, 2024 increased $31.5 million, or 20%, compared to December 31, 2023. During the year ended December 31, 2024, originated servicing of $18.7 million and a positive fair market value adjustment of $22.7 million were partially offset by paydowns of $9.9 million. The $22.7 million positive fair market value adjustment consisted of a positive fair market value adjustment of $20.5 million for multi-family and healthcare mortgages and a positive fair market value adjustment of $2.2 million for single-family mortgages and SBA loans during the year ended December 31, 2024.
Current report
Other Assets and Receivables. Other assets and receivables of $571.3 million at December 31, 2024 increased $264.2 million, or 86%, compared to $307.1 million at December 31, 2023. The 86% increase in other assets and receivables was primarily due to investments and receivables associated with low-income housing tax credit investments and prepaid assets associated with the January 2, 2025 redemption of Series B Preferred Stock.
Current report
Borrowings. Borrowings of $4.4 billion at December 31, 2024 increased $3.4 billion, or 355%, from $964.1 million at December 31, 2023. The increase was primarily due to $3.4 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, using the most cost-effective options available. SeeNote 14: Borrowings for further information.
Current report
The Company redeemed all outstanding shares of the Series A Preferred Stock on April 1, 2024 for $52.0 million at a price equal to the liquidation preference of $25 per share, using cash on hand.
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 were to reset quarterly. The rate was 9.42% for the three months ended December 31 2024.
Current report
The Company redeemed all outstanding shares of the Series B Preferred Stock on January 2, 2025, at a price equal to the liquidation preference of $1,000 per share (equivalent to $25 per depositary share), or $125.0 million, using cash on hand. As of the redemption date the Series B Preferred Stock did not have any accrued, but unpaid dividends.
Current report
*7.625% Series E Preferred Stock.*On November 25, 2024, the Company issued 9,200,000 depositary shares, each representing a 1/40 th interest in a share of its 7.625% Fixed Rate Reset Series E Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $230.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $7.3 million paid to third parties, the Company received total net proceeds of $222.7 million.
Current report
Dividends declared for preferred shareholders in 2024 totaled $34.9 million. After the redemption of Series B preferred stock in January, $10.3 million in dividends are expected be declared to preferred shareholders in the first quarter of 2025. For more information, seeNote 18: Preferred Stock.
Current report
Common Shares/Dividends. On May 13, 2024, the Company issued 2.4 million shares of the Company’s common stock, without par value, at a public offering price of $43.00 per share in an underwritten public offering. The aggregate gross offering proceeds for the shares issued by the Company was $103.2 million, and after deducting underwriting discounts, commissions, and offering expenses of $5.5 million paid to third parties, the Company received total net proceeds of $97.7 million.
Current report
Capital Adequacy.
Current report
FMBI was subject to these measures prior to the sale of its branches and the merger of its remaining charter into Merchants Bank in January 2024. As of December 31, 2023, FMBI met all capital adequacy requirements (as set forth in the table above). The FDIC categorized FMBI as well capitalized at that time and there are no conditions or events since that notification that management believes would have changed that category.
Removed paragraphs (35)
Previous report
to Federal Reserve data, thirty-year mortgage rates rose to over 7% during 2022 for the first time since 2002, and remained elevated until the end of 2023, when rates began to fall slightly below 7%.
Previous report
As described further in Item 1 - “Supervision and Regulation—Merchants Bank—Capital Requirements and Basel III” the federal regulators finalized and adopted rules regarding the community bank leverage ratio (“CBLR”) in November 2019. Under CBLR, if a qualifying depository institution or depository institution holding company elected to use such measure, such institution or holding company was considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeded a 9% threshold, subject to a limited two quarter grace period, during which the leverage ratio could not go 100 basis points below the then applicable threshold, and would not be required to calculate and report risk-based capital ratios. At September 30, 2022 the Company’s total assets exceeded $10 billion, off-balance sheets exposures exceeded 25% of total assets, and the allowable grace periods under the CBLR rules expired. Accordingly, the Company has been reporting fully phased-in Basel III risk-based capital ratios since September 30, 2022.
Previous report
During 2024, dividends on the Company’s 7% Series A and 6% Series B Preferred Stock are scheduled to reset at higher rates in April 2024 and October 2024, respectively. At that time, we shall have the option to pay higher dividends, redeem the shares, or refinance them with another preferred offering.** **See “Capital Resources” section of “Liquidity”, later in this Item 7 for more information.
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Our net interest margin increased nine basis points, to 3.06%, for the year ended December 31, 2023 from 2.97% for the year ended December 31, 2022.
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Interest income of $21.6 million on securities available for sale increased $18.8 million, or 670%, during 2023. The average balance of securities available for sale increased $300.7 million, or 93%, to $623.7 million for the year ended December 31, 2023, from $323.0 million for the year ended December 31, 2022. The average yield increased 260
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Interest expense on borrowings increased $39.9 million, or 316%, to $52.5 million for the year ended December 31, 2023 from $12.6 million for the year ended December 31, 2022. The increase reflected a 624 basis point increase in the average cost of borrowings to 8.37%, compared to 2.13% for the year ended December 31, 2022. The increase was primarily related to the credit linked notes issued by the Company in 2023. Also contributing to the increase in interest expense for borrowings was an increase of $33.1 million, or 6%, in the average balance of borrowings of $627.5 million compared to $594.4 million for the year ended December 31, 2022.
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The $40.2 million total provision for credit losses consisted of $37.5 million for the ACL-Loans and $2.7 million for the allowance for off-balance sheet credit exposures (“ACL-OBCEs”).
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Noninterest Income. Noninterest income of $114.7 million for the year ended December 31, 2023 decreased $11.3 million, or 9%, compared to $125.9 million for the year ended December 31, 2022. The decrease was primarily due to lower gain on sale and loan servicing fees that were partially offset by higher syndication and asset management fees.
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Gain on sale of loans of $48.2 million for the year ended December 31, 2023 decreased $16.0 million, or 25%, compared to $64.2 million for the year ended December 31, 2022. The decrease in gain on sale of loans was associated with a business mix shift in multi-family lending from volumes sold in the secondary market towards those maintained on the balance sheet.
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Partially offsetting the decrease in noninterest income was a $3.5 million increase in syndication and asset management fees, which reached $12.4 million for the year ended December 31, 2023.
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Total loans greater than 30 days past due were $183.5 million at December 31, 2023 compared to $39.8 million at December 31, 2022. Since the majority of loans to customers have variable rates, the rapid increase in interest rates over the last several quarters negatively impacted borrowers by increasing their required payment amounts.
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Special Mention loans were $191.3 million at December 31, 2023 compared to $137.8 million in Special Mention (Watch) loans at December 31, 2022. While these categories are not precisely comparable as described inNote 5: Loans and Allowance for Credit Losses, the increase was primarily due to the increase in interest rates for our borrowers.
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Substandard loans were $128.6 million at December 31, 2023 compared to $64.8 million at December 31, 2022. The increase in substandard loans was primarily due to the increase in nonperforming loans described above.
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Total Assets. Total assets of $17.0 billion at December 31, 2023 increased $4.3 billion, or 34%, compared to $12.6 billion at December 31, 2022. The increase was due primarily to significant growth in the multi-family, healthcare, commercial lines of credit collateralized by mortgage servicing rights, and mortgage warehouse loan portfolios.
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The following table shows the maturity distribution and weighted average yields of the securities available for sale and held to maturity portfolio:
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The $870.6 million increase in multi-family financing loan balances was primarily in the construction and bridge portfolios that were generated through our multi-family segment and will remain on our balance sheet until they convert to permanent financing or are otherwise paid off over the next one to three years. Although overall production volumes have declined compared to the twelve months ended December 31, 2022, loan balances have increased as borrowers have been hesitant to convert to permanent financing at recently elevated interest rate levels, which has slowed loan sales to the secondary market.
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The $752.3 million increase in healthcare financing was due to increased volume associated with the credit link notes transaction where loans were transferred from loans held for sale during the first quarter of 2023.
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The $664.4 million increase in commercial and commercial real estate was primarily due to higher revolving lines of credit on collateralized mortgage servicing rights during the period.
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The $287.7 million increase in mortgage warehouse lines of credit was due to higher loan volume from increased sales efforts and market exits of several competitors.
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The $145.9 million increase in residential real estate loans was primarily due an increase in All-in-One first-lien home equity line of credit.
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The ACL-Loans of $71.8 million at December 31, 2023 increased $27.7 million, or 63%, compared to December 31, 2022. The increase was primarily in the healthcare and multi-family financing portfolios, due to a combination of loan growth, changes in qualitative factors, and specific reserves.
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Goodwill. Goodwill of $15.8 million at December 31, 2023 remained unchanged compared to December 31, 2022. As of December 31, 2023, the Company’s market capitalization was well above its book value, despite stock
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market volatility. Given the continued strength of the Company’s results, we do not believe there exists any impairment to goodwill or intangible assets.
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Servicing Rights. Servicing rights of $158.5 million at December 31, 2023 increased $12.2 million, or 8%, compared to December 31, 2022. During the year ended December 31, 2023, originated and purchased servicing of $15.3 million and a positive fair market value adjustment of $4.6 million were partially offset by paydowns of $7.6 million.
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Other Assets and Receivables. Other assets and receivables of $306.4 million at December 31, 2023 increased $148.9 million, or 95%, compared to $157.4 million at December 31, 2022. The 95% increase in other assets and receivables was primarily due to investments in low-income housing tax credit funds and investments in joint ventures that are involved in single-family, multi-family, and healthcare debt financing. Also contributing to the increase were protective derivatives associated with the acquisition of certain investment securities from a warehouse customer, in addition to higher valuations on derivatives. SeeNote 11: Other Assets and Receivablesfor additional information.
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As of December 31, 2023, brokered certificates of deposit had a weighted average remaining duration of 55 days. 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”).
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Borrowings. Borrowings of $964.1 million at December 31, 2023 increased $33.7 million, or 4%, from December 31, 2022. The increase was primarily due to the issuance of senior credit linked notes in March 2023 that was partially offset by decreased borrowing from the FHLB and Federal Reserve. Depending on rates and timing, borrowing can be a more effective liquidity management alternative than utilizing brokered certificates of deposits. The Company utilizes borrowing facilities from the FHLB, the Federal Reserve’s discount window, and the American Financial Exchange (“AFX”).
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*7% Series A Preferred Stock.*In March 2019 the Company issued 2,000,000 shares of 7.00% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $25.00 per share (“Series A Preferred Stock”). The Company received net proceeds of $48.3 million after underwriting discounts, commissions and direct offering expenses. In April 2019, the Company issued an additional 81,800 shares of Series A Preferred Stock to the underwriters related to their exercise of an option to purchase additional shares under the associated underwriting agreement, resulting in an addition $2.0 million in net proceeds, after underwriting discounts.
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Dividends on the Series A Preferred Stock, to the extent declared by the Company’s board, are payable quarterly at an annual rate of $1.75 per share through March 31, 2024. After such date, quarterly dividends were to accrue and be payable at a floating rate equal to three-month LIBOR plus a spread of 460.5 basis points per year. However, the terms of the Series A Preferred Stock permit us to replace three-month LIBOR if we determine that LIBOR has been discontinued or is no longer viewed as an acceptable benchmark for similar securities. With the cessation of published three-month LIBOR rates as of June 30, 2023, the Company has determined that three-month LIBOR has been discontinued and is no longer an acceptable benchmark. The Company has replaced three-month LIBOR with Federal Reserve’s three month Secured Overnight Financing Rate (“SOFR”). The Company believes that three-month SOFR represents the most comparable replacement benchmark, is an industry-accepted substitute, and is consistent with expectations of investors in securities similar to the Series A Preferred Stock. In addition to replacing three-month LIBOR with three-month SOFR, the terms of the Series A Preferred Stock permit us to adjust the spread to ensure that the payable floating rate remains comparable. Therefore, if the Series A Preferred Stock remains outstanding on or after April 1, 2024, in addition to using three-month SOFR as a benchmark, the Company will increase the spread by 26.2 basis points, which is consistent with industry practice and the recommendation of the Federal Reserve’s
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Alternative Reference Rates Committee, resulting in the Company paying a floating rate of three-month SOFR plus a spread of 486.7 basis points during the floating rate period. The Company has received all necessary regulatory approvals to redeem the Series A Preferred Stock and on February 28, 2024 announced that it will redeem all outstanding shares of the Series A Preferred Stock on April 1, 2024 at a price equal to the liquidation preference of $25.00 per share. As of the redemption date the Series A Preferred Stock will not have any accrued but unpaid dividends. The Company will redeem the Series A Preferred Stock using cash on hand.
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6% Series B Preferred Stock. In August 2019 the Company issued 5,000,000 depositary shares, each representing a 1/40 th interest in a share of its 6.00% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000.00 per share (equivalent to $25.00 per depositary share)(“Series B Preferred Stock”). After deducting underwriting discounts, commissions, and direct offering expenses, the Company received total net proceeds of $120.8 million.
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Dividends on the Series B Preferred Stock, to the extent declared by the Company’s board, are payable quarterly at an annual rate of $60.00 per share (equivalent to $1.50 per depositary share) through September 30, 2024. After such date, quarterly dividends were to accrue and be payable at a floating rate equal to three-month LIBOR plus a spread of 456.9 basis points per year. However, the terms of the Series B Preferred Stock permit us to replace three-month LIBOR if we determine that LIBOR has been discontinued or is no longer viewed as an acceptable benchmark for similar securities. With the cessation of published three-month LIBOR rates as of June 30, 2023, the Company has determined that three-month LIBOR has been discontinued and is no longer an acceptable benchmark. The Company has replaced three-month LIBOR with Federal Reserve’s three month Secured Overnight Financing Rate (“SOFR”). The Company believes that three-month SOFR represents the most comparable replacement benchmark, is an industry-accepted substitute, and is consistent with expectations of investors in securities similar to the Series B Preferred Stock. In addition to replacing three-month LIBOR with three-month SOFR, the terms of the Series B Preferred Stock permit us to adjust the spread to ensure that the payable floating rate remains comparable. Therefore, if the Series B Preferred Stock remains outstanding on or after October 1, 2024, in addition to using three-month SOFR as the benchmark, the Company will increase the spread by 26.2 basis points, which is consistent with industry practice and the recommendation of the Federal Reserve’s Alternative Reference Rates Committee, resulting in the Company paying a floating rate of three-month SOFR plus a spread of 483.1 basis points during the floating rate period. The Company may also redeem the Series B Preferred Stock at its option, subject to regulatory approval, on or after October 1, 2024.
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6% Series C Preferred Stock. On March 23, 2021, the Company issued 6,000,000 depositary shares, each representing a 1/40 th interest in a share of its 6.00% Fixed Rate Series C Non-Cumulative Perpetual Preferred Stock, without par value (the “Series C Preferred Stock”), and with a liquidation preference of $1,000.00 per share (equivalent to $25.00 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $150.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $5.1 million paid to third parties, the Company received total net proceeds of $144.9 million.
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On May 6, 2021, our 8% preferred shareholders participated in a private offering to replace their redeemed 8% preferred shares with the Company’s 6% Series C preferred stock. Accordingly, 46,181 shares (1,847,233 depositary shares) of the Company’s 6% Series C preferred stock were issued at a price of $25 per depositary share. The total capital raised from the private offering was $46.2 million, net of $23,000 in expenses.
Previous report
Dividends on the Series D Preferred Stock, to the extent declared by the Company’s board, are payable quarterly. The Company may redeem the Series D Preferred Stock, in whole or in part, at our option, on any dividend payment date on or after October 1, 2027, subject to the approval of the appropriate federal banking agency, at the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption. If the Series D Preferred Stock remains outstanding on October 1, 2027, its dividend rate would reset to the 5-year Treasury rate, plus 4.34% and would remain at that level for an additional 5 years.
Reworded paragraphs (104)
Previous wording
We are a diversified bank holding company headquartered in Carmel, Indiana and registered under the Bank Holding Company Act of 1956, as amended. We currently operate in multiple business segments, including Multi-family Mortgage Banking that offers multi-family housing and healthcare facility financing and servicing, as well as syndicated low-income housing tax credit and debt funds; Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers portfolio lending for multi-family and healthcare facility loans, retail and correspondent residential mortgage banking, agricultural lending, Small Business Administration (“SBA”) lending, and traditional community banking.
Current wording
We are a diversified bank holding company headquartered in Carmel, Indiana and registered under the Bank Holding Company Act of 1956, as amended. We currently operate in multiple business segments, including Multi-family Mortgage Banking that offers multi-family housing and healthcare facility financing and servicing, as well as syndicated low-income housing tax credit and debt funds; Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers portfolio lending for multi-family and healthcare facility loans, retail and correspondent residential mortgage banking, agricultural lending, SBA lending, and traditional community banking.
Previous wording
Our business consists primarily of funding fixed rate, low risk, multi-family, residential and SBA loans meeting underwriting standards of government programs under an originate to sell model, and retaining adjustable rate loans as held for investment to reduce interest rate risk. The gain on sale of these loans and servicing fees contribute to noninterest income. The funding source is primarily from mortgage custodial, municipal, retail, commercial, and brokered deposits, and short-term borrowing. We believe that the combination of net interest income and noninterest income from the sale of low risk profile assets results in lower than industry charge-offs and a lower expense base which serves to maximize net income and higher than industry shareholder return.
Current wording
Our business consists of funding low risk, multi-family, residential, and SBA loans meeting underwriting standards of government programs under an originate to sell model, and retaining adjustable-rate loans as held for investment to reduce interest rate risk. The gain on sale of these loans and servicing fees contribute to noninterest income. The funding source is primarily from mortgage custodial, municipal, retail, commercial, brokered deposits, and short-term borrowing. We believe that the combination of net interest income and noninterest income from the sale of low risk profile assets results in lower than industry charge-offs and a lower expense base, which serves to maximize net income and higher than industry shareholder return.
Previous wording
See “Company Overview and Our Business Segments,” in* Item 1“Business”, “Operating Segment Analysis for the Years Ended December 31, 2023 and 2022” in Item 7 “Management’s Discussion and Analysis of Financial Condition and the Results of Operations”,and “Segment Information,” inNote 26: Segment Information** for further information about our segments.*
Current wording
See “Company Overview and Our Business Segments,” in* Item 1“Business”, “Operating Segment Analysis for the Years Ended December 31, 2024 and 2023” in Item 7 “Management’s Discussion and Analysis of Financial Condition and the Results of Operations”,and “Segment Information,” inNote 23: Segment Information** for further information about our segments.*
Previous wording
As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition. We evaluate the comparative levels and trends of the line items in our consolidated balance sheet and income statement as well as various financial ratios that are commonly used in our industry. We analyze these ratios and financial trends against our own historical performance, our budgeted performance, and the financial condition and performance of comparable financial institutions in our region.
Current wording
As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition. We evaluate the comparative levels and trends of the line items on our consolidated balance sheets and statements of income, as well as various financial ratios that are commonly used in our industry. We analyze these ratios and financial trends against our own historical performance, our budgeted performance, and the financial condition and performance of comparable financial institutions in our region.
Previous wording
Gain on sale of loans includes placement and origination fees, capitalized servicing rights, trading gains and losses, gains and losses on certain derivatives and other related income. Loan servicing fees are collected as payments are received for loans in the servicing portfolio and reduced by amortization on servicing rights. Fair value adjustments to the value of servicing rights are also included in noninterest income. Mortgage warehouse fees are accrued at the time of funding. Syndication fee income is recognized at the point in time when investor equity capital is obtained primarily to acquire qualifying investments in low-income housing tax credit projects for its funds. Related asset management fees for syndicated low-income housing tax credit or debt funds are recognized over time. Other noninterest income includes the recognition and changes in value to protective derivatives associated with certain investment securities.
Current wording
Gain on sale of loans includes placement and origination fees, capitalized servicing rights, trading gains and losses, gains and losses on certain derivatives and other related income. Loan servicing fees are collected as payments are received for loans in the servicing portfolio and reduced by amortization on servicing rights. Fair value adjustments to the value of servicing rights are also included in noninterest income. Mortgage warehouse fees are accrued at the time of funding. Syndication fee income is recognized at the point in time when investor equity capital is obtained primarily to acquire qualifying investments in LIHTC projects for its funds. Related asset management fees for syndicated LIHTC or debt funds are recognized over time. Other noninterest income includes the recognition and changes in value to protective derivatives associated with certain investment securities, as well as income earned on joint ventures.
Previous wording
Noninterest expense. Noninterest expense includes, among other things: (a) salaries and employee benefits, including commissions; (b) loan origination and servicing expenses; (c) occupancy and equipment expense; (d) professional fees; (e) FDIC insurance expense; (f) technology expense; and (g) other general and administrative expenses.
Current wording
Noninterest expense. Noninterest expense includes, among other things: (a) salaries and employee benefits, including commissions; (b) loan origination and servicing expenses; (c) occupancy and equipment expense; (d) professional fees; (e) FDIC insurance expense; (f) technology expense; (g) credit risk transfer premium expense; and (h) other general and administrative expenses.
Previous wording
Loan origination and servicing expenses include third party processing for financing activities and loan-related origination expenses. Occupancy expense includes depreciation expense on our owned properties, lease expense on our leased properties and other occupancy-related expenses. Equipment expense includes furniture, fixtures and equipment related expenses. Professional fees include legal, accounting, consulting and other outsourcing arrangements. FDIC insurance expense represents the assessments that we pay to the FDIC for deposit insurance. Technology expense includes data processing fees paid to our third-party data processing system provider and other data service providers.
Current wording
Loan origination and servicing expenses include third party processing for financing activities and loan-related origination expenses. Occupancy expense includes depreciation expense on our owned properties, lease expense on our leased properties and other occupancy-related expenses. Equipment expense includes furniture, fixtures and equipment related expenses. Professional fees include legal, accounting, consulting and other outsourcing arrangements. FDIC insurance expense represents the assessments that we pay to the FDIC for deposit insurance. Technology expense includes data processing fees paid to our third-party data processing system provider, cybersecurity fees, and other data service providers. Credit risk transfer premium expense includes premiums paid for our credit default swap arrangements. Other general and administrative expenses include expenses associated with servicing expense, advertising, marketing, travel, meals, training, supplies, and postage, among other miscellaneous expenses.
Previous wording
Return on Average Equity. Return on average equity is the measure of annual net income divided by the value of our total shareholders’ equity, expressed as a percentage. It reflects how efficiently equity investments are turned into profits. Changes in profitability and the ability to effectively manage levels of capital can influence this measure. The higher the ratio, the more profitable our Company is.
Current wording
Return on Average Equity. Return on average equity is the measure of annual net income divided by the value of our total shareholders’ equity, expressed as a percentage. It reflects how efficiently equity investments are turned into profits. Changes in profitability and the ability to effectively manage levels of capital can influence this measure. The higher the ratio, the more profitable our Company becomes.
Previous wording
Asset Quality. We manage the diversification and quality of our assets based upon factors that include: (a) the level, distribution, severity and trend of problem, classified, delinquent, nonaccrual, nonperforming and restructured assets; (b) the adequacy of our allowance for credit losses on loans (“ACL-Loans”); (c) the diversification and quality of loan and investment portfolios; (d) the extent of counterparty risks; (e) credit risk concentrations; (f) the liquidity of our assets; and (g) other factors.
Current wording
Asset Quality. We manage the diversification and quality of our assets based upon factors that include: (a) the level, distribution, severity and trend of problem, classified, delinquent, nonaccrual, nonperforming and restructured assets; (b) the adequacy of our ACL-Loans; (c) the diversification and quality of loan and investment portfolios; (d) the extent of counterparty risks; (e) credit risk concentrations; (f) the liquidity of our assets; and (g) other factors.
Previous wording
Economic and Interest Rate Environment. The results of our operations are highly dependent on economic conditions, mortgage volumes, and market interest rates. Residential mortgage volumes fluctuate based on market interest rates, economic conditions, and the credit parameters set by government agencies, such as Fannie Mae, Freddie Mac, and Ginnie Mae, and other market participants. Prior to May 2022, the Board of Governors of the Federal Reserve System (“Federal Reserve”) continued to reduce interest rates, leading to historically low overnight interest rates in the range of 0.0% to 0.25%, which was the lowest the rates had been since 2009. The overnight federal funds rate that the Federal Reserve uses to affect economic conditions affects the entire term structure of interest rates, so rates on longer term debt (like mortgages) also moved lower. As inflation increased throughout 2022 and 2023, on the heels of the COVID-19 pandemic, the Federal Reserve responded by rapidly increasing interest rates to the highest levels seen since January 2008, as the Federal funds rate steadily increased and stabilized to 5.33% as of December 31, 2023. According
Current wording
Economic and Interest Rate Environment. The results of our operations are highly dependent on economic conditions, mortgage volumes, and market interest rates. Residential mortgage volumes fluctuate based on market interest rates, economic conditions, and the credit parameters set by government agencies, such as Fannie Mae, Freddie Mac, and Ginnie Mae, and other market participants.
Previous wording
The lower interest rates in 2020 contributed to the significant loan growth we experienced for the year ended December 31, 2020, particularly related to single family mortgage refinancing activity that increased net interest income and noninterest income in our Mortgage Warehousing segment. Growth moderated and declined during the years ended December 31, 2021, 2022 and 2023 in this line of business as interest rates increased, and it may not resume until rates stabilize or decline in 2024. Supporting this expectation are industry forecasts from the Mortgage Bankers Association, which has forecasted a 22% increase in single-family residential mortgage volume, to $2.001 trillion for 2024, from $1.639 trillion in 2023, and an increase of 17%, to $2.339 trillion in 2025, followed by an increase to $2.436 trillion for 2026. The higher rate environment has also slowed multi-family permanent, agency-eligible loan originations and sales to the secondary market.
Current wording
Supporting this expectation are industry forecasts from the Mortgage Bankers Association, which has forecasted a 16% increase in single-family residential mortgage volume, to $2.055 trillion for 2025, from $1.779 trillion in 2024, and an increase of 15%, to $2.369 trillion in 2026, followed by an increase to $2.455 trillion for 2027. The higher rate environment has also slowed multi-family permanent, agency-eligible loan originations and sales to the secondary market, but improved by late 2024.
Previous wording
Regulatory Environment. We believe an important trend affecting community banks in the United States over the foreseeable future will be related to heightened regulatory capital requirements, regulatory burdens generally, and interest margin compression. We expect that troubled community banks will continue to face significant challenges when attempting to raise capital. We also believe that heightened regulatory capital requirements will make it more difficult for even well-capitalized, healthy community banks to grow in their communities by taking advantage of opportunities in their markets that result as the economy improves. We believe these trends will favor community banks that have sufficient capital, a diversified business model and a strong deposit franchise.
Current wording
Regulatory Environment. We believe an important trend affecting community banks in the United States over the foreseeable future will be related to heightened regulatory capital requirements, regulatory burdens generally, and interest margin compression. We expect that troubled community banks could face significant challenges when attempting to raise capital. We also believe that heightened regulatory capital requirements will make it more difficult for even well-capitalized, healthy community banks to grow in their communities by taking advantage of opportunities in their markets that result as the economy improves. We believe these trends will favor community banks that have sufficient capital, a diversified business model and a strong deposit franchise.
Previous wording
Allowance for Credit Losses on Loans (“ACL-Loans”). One of our key operating objectives has been, and continues to be, maintenance of an appropriate level of ACL-Loans in our loan portfolio. The provision for credit losses recorded in prior years was primarily due to growth in our loan portfolio, as our historical loss rates remained very low. As we anticipate that our loan portfolio overall will continue to grow in 2024, we could expect the provision to increase, but could also be influenced by any changes to problem loans in our portfolio or the loan type mix within the portfolio. It could also be influenced by external market factors, such as interest rates and economic activity. Additional details are provided in the ACL-Loans portion of the Comparison of Financial Condition at December 31, 2023 and December 31, 2022. Because there could be unforeseen future losses, the Company continues to monitor the situation and may need to adjust future expectations as developments occur.
Current wording
ACL-Loans. One of our key operating objectives has been, and continues to be, maintenance of an appropriate level of ACL-Loans in our loan portfolio. The provision for credit losses recorded in prior years was primarily due to growth in our loan portfolio, as our historical loss rates remained very low. As we anticipate that our loan portfolio overall will continue to grow in 2025, we could expect the provision to increase, but could also be influenced by any changes to problem loans in our portfolio or the loan type mix within the portfolio. It could also be influenced by external market factors, such as interest rates and the economic environment. Additional details are provided in the ACL-Loans portion of the Comparison of Financial Condition at December 31, 2024 and December 31, 2023. Because there could be unforeseen future losses, the Company continues to monitor the situation and may need to adjust future expectations as developments occur.
Previous wording
8.25% Series D Preferred Stock. On September 27, 2022, the Company issued 5,200,000 depositary shares, each representing a 1/40 th interest in a share of its 8.25% Fixed Rate Reset Series D Non-Cumulative Perpetual Preferred Stock, without par value (the “Series D Preferred Stock”), and with a liquidation preference of $1,000.00 per share (equivalent to $25.00 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $130.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $4.6 million paid to third parties, the Company received total net proceeds of $125.4 million. On September 30, 2022, the Company issued an additional 500,000 shares of Series D Preferred Stock to the underwriters
Current wording
Issuance and Redemption of Preferred Stock. On September 27, 2022, the Company issued 5,200,000 depositary shares, each representing a 1/40th interest in a share of its 8.25% Fixed Rate Reset Series D Non-Cumulative Perpetual Preferred Stock, without par value, and with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $130.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $4.6 million paid to third parties, the Company received total net proceeds of $125.4 million. On September 30, 2022, the Company issued an additional 500,000 depositary shares of Series D Preferred Stock to the underwriters related to their exercise of an
Previous wording
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 wording
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.
Previous wording
Loan Sales and Securitizations. Growth in the loan origination pipeline has prompted the Company to seek additional avenues to effectively manage regulatory capital levels and reduce credit risk, in addition to issuing preferred stock. Accordingly, we have completed several loan sale and securitization transactions. In doing so, the Company has been able to effectively reduce its risk-weighted assets and maintain well-capitalized capital ratios. Also seeNote 5: Loans and Allowance for Credit Losses on Loans.
Current wording
Credit Risk Transfers, Loan Sales and Securitizations. Growth in the loan origination pipeline has prompted the Company to seek additional avenues to effectively manage regulatory capital levels and reduce credit risk, in addition to issuing preferred and common stock. Accordingly, we have completed several loan sale and securitization transactions, as well as credit default swaps and credit linked notes. In doing so, the Company has been able to effectively reduce its risk-weighted assets and maintain well-capitalized capital ratios. Also seeNote 5: Loans and Allowance for Credit Losses on Loans.
Previous wording
General. Net income of $279.2 million for the year ended December 31, 2023 increased by $59.5 million, or 27%, compared to net income of $219.7 million for the year ended December 31, 2022. The increase was primarily driven by a $129.5 million, or 41%, increase in net interest income. The increase was partially offset by a $38.6 million, or 28%, increase in noninterest expense, $22.9 million, or 133%, increase in provision for credit losses, and an $11.3 million, or 9%, decrease in noninterest income.
Current wording
General. Net income of $320.4 million for the year ended December 31, 2024 increased by $41.2 million, or 15%, compared to net income of $279.2 million for the year ended December 31, 2023. The increase was primarily driven by a $74.5 million, or 17%, increase in net interest income, a $33.4 million, or 29%, increase in noninterest income, as well as $16.0 million, or 40%, decrease in provision for credit losses. The increases to net income were partially offset by a $49.2 million or 28%, increase in noninterest expense.
Previous wording
Net Interest Income. Net interest income of $448.1 million for the year ended December 31, 2023 increased $129.5 million, or 41%, compared to $318.6 million for the year ended December 31, 2022. The 41% increase reflected a $597.0 million, or 124%, increase in interest income from higher yields and average balances on loans and loans held for sale, as well as higher average balances of securities held to maturity. These increases were partially offset by a $467.4 million, or 288%, increase in interest expense from higher interest rates and average balances of deposits, as well as higher rates on borrowings that were primarily related to the credit linked notes issued by the Company in March 2023. The interest rate spread of 2.51% for the year ended December 31, 2023, decreased 21 basis points compared to 2.72% for the year ended December 31, 2022.
Current wording
Net Interest Income. Net interest income of $522.6 million for the year ended December 31, 2024 increased $74.5 million, or 17%, compared to $448.1 million for the year ended December 31, 2023. The 17% increase reflected a $224.9 million, or 21% increase in interest income from higher average balances and yields on loans and loans held for sale, and higher average balances of securities held to maturity, as well as higher yields and average balances on securities available for sale. These increases were partially offset by a $150.4 million, or 24%, increase in interest expense primarily due to higher average balances on borrowings, as well as higher average balances and rates on certificates of deposit and interest-bearing checking.
Previous wording
Interest Income. Interest income of $1.1 billion for the year ended December 31, 2023 increased $597.0 million, or 124%, compared to $480.8 million for the year ended December 31, 2022. This increase was primarily attributable to an increase in both higher average yields and average balances of loans and loans held for sale, as well as higher average balances in securities 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 $1.3 billion for the year ended December 31, 2024 increased $224.9 million, or 21%, compared to $1.1 billion for the year ended December 31,2023. This increase was primarily attributable to higher average balances and yields on loans and loans held for sale, and higher average balances of securities held to maturity, as well as higher yields and average balances on securities available for sale. The higher yields were in response to higher interest rates set by the Federal Reserve.
Previous wording
Interest income of $959.7 million for loans and loans held for sale increased $507.7 million, or 112%, during 2023. The average balance of loans, including loans held for sale, during the year ended December 31, 2023 increased $3.1 billion, or 33%, to $12.4 billion compared to $9.3 billion for the year ended December 31, 2022. The average yield on loans increased 288 basis points, to 7.73% for the year ended December 31, 2023, compared to 4.85% for the year ended December 31, 2022. The increase in average balances of loans and loans held for sale was primarily due to increases in the healthcare, commercial lines of credit collateralize by mortgage servicing rights real estate and multi-family portfolios, but all loan portfolios contributed to the growth during the period. The increase in the average yield reflected a significant portion of our loan portfolio with adjustable rates that increased with market rates.
Current wording
Interest income of $1.1 billion for loans and loans held for sale increased $153.7 million, or 16%, during 2024. The average balance of loans, including loans held for sale, during the year ended December 31, 2024 increased $1.8 billion, or 14%, to $14.2 billion compared to $12.4 billion for the year ended December 31, 2023. The average yield on loans increased 12 basis points, to 7.85% for the year ended December 31, 2024, compared to 7.73% for the year ended December 31, 2023. The increase in average balances of loans and loans held for sale was primarily due to increases in the mortgage warehouse and multi-family portfolios, partially offset by a decrease in the healthcare portfolio associated with a sale of loans as part of a securitization transaction. The higher average yield reflected the impact of the Federal Reserve increase in market rates.
Previous wording
Interest income of $70.0 million for securities held to maturity increased $57.6 million, or 465%, during 2023. The average balance of securities held to maturity, during the year ended December 31, 2023 increased $820.0 million, to $1.1 billion compared to $277.5 million for the year ended December 31, 2022. The average yield on securities held to maturity increased 192 basis points, to 6.38 % for the year ended December 31, 2023, compared to 4.46% for the year ended December 31, 2022. The increase in average balance of securities held to maturity was primarily related to held to maturity securities acquired as part of loan securitizations that the Company originated.
Current wording
Interest income of $90.1 million for securities held to maturity increased $20.1 million, or 29%, during 2024. The average balance of securities held to maturity, during the year ended December 31, 2024 increased $240.2 million, to $1.3 billion compared to $1.1 billion for the year ended December 31, 2023. The average yield on securities held to maturity increased 35 basis points, to 6.73 % for the year ended December 31, 2024, compared to 6.38% for the year ended December 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 that the Company originated.
Previous wording
basis points, to 3.47% for the year ended December 31, 2023, compared to 0.87% for the year ended December 31, 2022. The increase in average balances of securities available for sale was primarily associated with the acquisition of certain securities from a warehouse customer that provide protective put options and interest rate floor derivatives to prevent losses in value.
Current wording
Interest income of $57.5 million on securities available for sale increased $35.9 million, or 166%, during 2024. The average balance of securities available for sale increased $406.6 million, or 65%, to $1.0 billion for the year ended December 31, 2024, from $623.7 million for the year ended December 31, 2023. The average yield increased 211 basis points, to 5.58% for the year ended December 31, 2024, compared to 3.47% for the year ended December 31, 2023. The increase in average yield reflects the acquisition of a private label security from a warehouse customer as part of a securitization in December 2023. The increase in average balances of securities available for sale was primarily associated with the acquisition of certain securities from a warehouse customer that provide protective put options and interest rate floor derivatives to prevent losses in value.
Previous wording
Interest income of $11.6 million on interest-earning deposits and other increased $7.6 million, or 187%, during 2023. The average balance of interest-earning deposits and other decreased $321.1 million, or 57%, to $240.8 million for the year ended December 31, 2023, from $561.9 million for the year ended December 31, 2022. The average yield increased 480 basis points, to 5.74% for the year ended December 31, 2023, compared to 0.94% for the year ended December 31, 2022.
Current wording
Interest income of $27.3 million on interest-earning deposits and other interest or dividends increased $13.5 million, or 97%, during 2024. The average balance of interest-earning deposits and other increased $201.7 million, or 84%, to $442.4 million for the year ended December 31, 2024, from $240.8 million for the year ended December 31, 2023. The average yield increased 43 basis points, to 6.17% for the year ended December 31, 2024, compared to 5.74% for the year ended December 31, 2023. The increase in average balances reflected higher dividends associated with the purchase of additional shares of FHLB stock and the purchase of other equity securities.
Previous wording
Interest income of $12.7 million for mortgage loans in process or securitization increased $4.2 million, or 50%, during 2023. The average balance of mortgage loans in process of securitization increased $3.8 million, or 2%, to $257.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The average yield increased 160 basis points, to 4.91% for the year ended December 31, 2023, compared to 3.31% for the year ended December 31, 2022.
Current wording
Interest income of $14.5 million for mortgage loans in process or securitization increased $1.8 million, or 15%, during 2024. The average balance of mortgage loans in process of securitization increased $16.8 million, or 7%, to $274.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The average yield increased 37 basis points, to 5.28% for the year ended December 31, 2024, compared to 4.91% for the year ended December 31, 2023. The increase in average balances was primarily due to a higher origination volume of loans pending settlement for sale on the secondary market.
Previous wording
Interest Expense. Total interest expense of $629.7 million for the year ended December 31, 2023 increased $467.4 million, or 288%, compared to $162.3 million for the year ended December 31, 2022.
Current wording
Interest Expense. Total interest expense of $780.1 million for the year ended December 31, 2024 increased $150.4 million or 24%, compared to $629.7 million for the year ended December 31, 2023.
Previous wording
Interest expense on deposits increased $427.6 million, or 286%, to $577.2 million for the year ended December 31, 2023 compared to $149.6 million for the year ended December 31, 2022. The increase was primarily due to higher rates on certificates of deposit, interest-bearing checking, and money market accounts, as well as higher average balances on certificates of deposit. The higher rates on our deposits were in response to higher interest rates set by the Federal Reserve.
Current wording
Interest expense on deposits increased $83.1 million, or 14%, to $660.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was primarily due to higher average balances and rates on certificates of deposit and higher average balances on interest-bearing checking accounts. The higher rates on our deposits were primarily due to the change in market rates.
Previous wording
Interest expense of $233.1 million for certificate of deposit accounts increased $201.9 million during 2023. The average balance of certificates of deposit of $4.6 billion for the year ended December 31, 2023 increased $3.0 billion, or 194%, compared to $1.6 billion for the year ended December 31, 2022. The average rate on certificates of deposit was 5.08% for the year ended December 31, 2023, which was a 308 basis point increase compared to 2.00% for year ended December 31, 2022.
Current wording
Interest expense of $285.9 million for certificate of deposit accounts increased $52.8 million during 2024. The average balance of certificates of deposit of $5.3 billion for the year ended December 31, 2024 increased $751.0 million, or 16%, compared to $4.6 billion for the year ended December 31, 2023. The average rate on certificates of deposit was 5.35% for the year ended December 31, 2024, which was a 27 basis point increase compared to 5.08% for year ended
Previous wording
Interest expense of $216.5 million for interest-bearing checking accounts increased $147.4 million during 2023. The average balance of interest-bearing checking accounts of $4.7 billion for the year ended December 31, 2023 increased $567.4 million, or 14%, compared to $4.1 billion for the year ended December 31, 2022. The average yield of interest-bearing checking accounts was 4.59% for the year ended December 31, 2023, which was a 293 basis point increase compared to 1.66% for year ended December 31, 2022.
Current wording
Interest expense of $240.2 million for interest-bearing checking accounts increased $23.7 million during 2024. The average balance of interest-bearing checking accounts of $5.2 billion for the year ended December 31, 2024 increased $505.2 million, or 11%, compared to $4.7 billion for the year ended December 31, 2023. The average yield of interest-bearing checking accounts was 4.60% for the year ended December 31, 2024, which was a 1 basis point increase compared to 4.59% for year ended December 31, 2023.
Previous wording
Interest expense of $126.4 million for money market accounts increased $77.6 million during 2023. The average balance of money market accounts of $2.8 billion for the year ended December 31, 2023 increased $153.8 million, or 6%, compared to $2.7 billion for the year ended December 31, 2022. The average yield of money market accounts was 4.51% for the year ended December 31, 2023, which was a 267 basis point increase compared to 1.84% for year ended December 31, 2022.
Current wording
Interest expense of $134.0 million for money market accounts increased $7.6 million during 2024. The average balance of money market accounts of $2.8 billion for the year ended December 31, 2024 increased $40.4 million, or 1%, compared to the year ended December 31, 2023. The average yield of money market accounts was 4.71% for the year ended December 31, 2024, which was a 20 basis point increase compared to 4.51% for year ended December 31, 2023.
Previous wording
Included in interest expense on 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 8.36% and 1.56%, to an effective rate of 8.37% and 2.13% for the year ended December 31, 2023 and 2022, respectively.
Current wording
Included in interest expense on 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 6.25% and 8.36%, to an effective rate of 6.53% and 8.37% for the year ended December 31, 2024 and 2023, respectively.
Previous wording
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
Current wording
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.
Previous wording
Provision for Credit Losses. We recorded a total provision for credit losses of $40.2 million for the year ended December 31, 2023, an increase of $22.9 million, compared to $17.3 million for the year ended December 31, 2022.
Current wording
Provision for Credit Losses. We recorded a total provision for credit losses of $24.3 million for the year ended December 31, 2024, a decrease of $16.0 million, compared to the year ended December 31, 2023.
Previous wording
The ACL-Loans was $71.8 million, or 0.70% of loans receivable at December 31, 2023, compared to $44.0 million, or 0.59% of loans receivable at December 31, 2022. The higher ACL-Loans reflected increases associated with loan growth, changes in qualitative loss factors, and specific reserves. Additional details are provided in the ACL-Loans portion of the Comparison of Financial Condition at December 31, 2023 and 2022, and inNote 1: Nature of Operations and Significant Accounting PoliciesandNote 5: Loans and Allowance for Credit Losses.** **
Current wording
The ACL-Loans was $84.4 million, or 0.81% of loans receivable at December 31, 2024, compared to $71.8 million, or 0.70% of loans receivable at December 31, 2023. The higher ACL-Loans reflected increases associated with specific reserves, loan growth, and adjustments to qualitative loss factors that were partially offset by charge-offs. Additional details are provided in the ACL-Loans portion of the Comparison of Financial Condition at December 31, 2024 and 2023, and inNote 1: Nature of Operations and Significant Accounting PoliciesandNote 5: Loans and Allowance for Credit Losses.** **
Previous wording
Loan servicing fees of $26.2 million for the year ended December 31, 2023 decreased $4.0 million, or 13%, compared to the year ended December 31, 2022. Loan servicing fees included a $4.6 million positive adjustment to the fair value of servicing rights for the year ended December 31, 2023, compared to a $19.8 million positive adjustment to the fair value of servicing rights for the year ended December 31, 2022.
Current wording
Loan servicing fees of $43.7 million for the year ended December 31, 2024 increased $17.5 million, or 67%, compared to $26.2 million for the year ended December 31, 2023. Loan servicing fees included a $22.7 million positive adjustment to the fair value of servicing rights for the year ended December 31, 2024, compared to a $4.6 million positive adjustment to the fair value of servicing rights for the year ended December 31, 2023.
Previous wording
Noninterest Expense. Noninterest expense of $174.6 million for the year ended December 31, 2023 increased $38.6 million, or 28%, compared to $136.1 million for the year ended December 31, 2022. The increase was due primarily to a $19.1 million, or 21%, increase in salaries and employee benefits associated with higher commissions on higher production volume and to support loan growth, as well as a $10.1 million, or 292% increase in FDIC deposit insurance expenses. The efficiency ratio was at 31.03% for the year ended December 31, 2023, compared with 30.61% for the year ended December 31, 2022.
Current wording
Noninterest Expense. Noninterest expense of $223.8 million for the year ended December 31, 2024 increased $49.2 million, or 28%, compared to $174.6 million for the year ended December 31, 2023. The increase was due primarily to a $22.5 million, or 21%, increase in salaries and employee benefits associated with higher commissions on higher production volume and to support business growth, a $12.6 million, or 93% increase in FDIC deposit insurance expenses that reflected the transition in classification to a large bank exceeding $10 billion in assets, an increase in criticized loans, and the growth in assets that increased our base assessment. Also contributing to the increase was a $6.3 million increase in credit risk transfer premium expense associated with ongoing credit default swaps that were executed in March and December 2024.
Previous wording
Income Taxes. Provision for income tax of $68.7 million for the year ended December 31, 2023 decreased $2.7 million, or 4%, compared to $71.4 million for the year ended December 31, 2022. The decrease reflected tax benefits of $12.2 million related to tax refunds receivable and changes to state apportionment calculations that were partially offset by taxes on higher pre-tax income.
Current wording
Income Taxes. Provision for income tax of $102.3 million for the year ended December 31, 2024 increased $33.6 million, or 49%, compared to $68.7 million for the year ended December 31, 2023. The increase was primarily due to a $12.2 million tax benefit recorded in 2023 related to tax refunds and changes to state apportionment calculations, as well as higher pre-tax income. The effective tax rate was 24.2% for the year ended December 31, 2024 and 19.7% for the year ended December 31, 2023.
Previous wording
Total nonperforming loans (nonaccrual and greater than 90 days late but still accruing) were $82.0 million, or 0.80% of total loans, at December 31, 2023, compared to $26.7 million, or 0.36% of total loans, at December 31, 2022. The increase in nonperforming loans compared to both periods was primarily due to six customers in our multi-family and healthcare portfolios.** **
Current wording
Total nonperforming loans (nonaccrual and greater than 90 days late but still accruing) were $279.7 million, or 2.68% of total loans receivable, at December 31, 2024, compared to $82.0 million, or 0.80% of total loans receivable, at December 31, 2023. The increase in nonperforming 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 since origination. The increase was also attributable to the financial deterioration of 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.
Previous wording
As a percentage of nonperforming loans, the ACL-Loans was 87% at December 31, 2023 compared to 165% at December 31, 2022. The decrease in percentage was due to an increase in nonperforming loans. The increase in nonperforming loans was primarily related to increases in the nonaccrual classification and have all been individually evaluated for impairment.
Current wording
As a percentage of nonperforming loans, the ACL-Loans was 30% at December 31, 2024 compared to 87% at December 31, 2023. The decrease in percentage compared to both periods was due to an increase in nonperforming loans, substantially all of which have been individually evaluated for impairment.
Previous wording
We had $41,000 of recoveries and $9.8 million of charge offs primarily related to one customer, during the year ended December 31, 2023, and $753,000 of recoveries and $1.3 million of charge offs during the year ended December 31, 2022.
Current wording
For the year ended December 31, 2024, there were $10.6 million of charge offs primarily related to four customers and $136,000 of recoveries compared to $9.8 million of charge offs and $41,000 of recoveries during the year ended December 31, 2023.
Previous wording
We operate in three primary segments: Multi-Family Mortgage Banking, Mortgage Warehousing, and Banking, as discussed in*“Our Business Segments” of Item 1* andNote 26: Segment Information. The reportable segments are consistent with the internal reporting and evaluation of the principal lines of business of the Company.
Current wording
We operate in three primary segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking, as discussed in*“Our Business Segments” of Item 1* andNote 23: Segment Information. The reportable segments are consistent with the internal reporting and evaluation of the principal lines of business of the Company.
Showing the first 40 of 104 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
The efficiency ratio was at 33.37% for the year ended December 31, 2024, compared with 31.03% for the year ended December 31, 2023.
Current report — wording carried from elsewhere
Our segment financial information was compiled utilizing the policies described inNote 1: Nature of Operations and Summary of Significant Accounting Policies, andNote 23: Segment Information,* *included elsewhere in
Current report — wording carried from elsewhere
increase in single-family residential loan volumes from the year ended December 31, 2024 to the year ended December 31, 2023, according to the Mortgage Bankers Association.
Current report — wording carried from elsewhere
the liquidation preference, plus any declared and unpaid dividends (without regard to any undeclared dividends) to, but excluding, the date of redemption.
Current report — wording carried from elsewhere
carried on the balance sheet at fair value and the changes in fair value are reported in earnings in the period in which the changes occur.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Other general and administrative expenses include expenses associated with servicing expense, advertising, marketing, travel, meals, training, supplies, and postage, among other miscellaneous expenses.
Previous report — wording carried elsewhere
Issuance and Redemption of Preferred Stock. On September 27, 2022, the Company issued 5,200,000 depositary shares, each representing a 1/40th interest in a share of its 8.25% Fixed Rate Reset Series D Non-Cumulative Perpetual Preferred Stock, without par value (the “Series D Preferred Stock”), and with a liquidation preference of $1,000.00 per share (equivalent to $25.00 per depositary share). The aggregate gross offering proceeds for the shares issued by the Company was $130.0 million, and after deducting underwriting discounts and commissions and offering expenses of approximately $4.7 million paid to third parties, the Company received total net proceeds of $125.3 million. On September 30, 2022, the Company issued an additional 500,000 depositary shares of Series D Preferred Stock to the underwriters 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.
Previous report — wording carried elsewhere
multiplied by prior volume). Changes applicable to both volume and rate have been allocated to volume. Yields have been calculated on a pre-tax basis.
Previous report — wording carried elsewhere
The effective tax rate was 19.7% for the year ended December 31, 2023 and 24.5% for the year ended December 31, 2022.
Previous report — wording carried elsewhere
The total volume of loans originated and acquired through our multi-family business was $6.2 billion for the year ended December 31, 2023, a decrease of $2.7 billion, or 30%, compared to $8.9 billion for the year ended December 31, 2022. Loans originated include bridge loans housed in our banking segment while borrowers await conversion to