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Jun 30, 2023
Merchants Bank Q2 2023 Earnings Report
Merchants Bancorp's financial performance demonstrated strength, marked by profitable loan growth and diversified noninterest income.
Key Takeaways
Merchants Bancorp reported a strong second quarter in 2023, with a net income of $65.3 million and diluted earnings per share of $1.31. The company saw significant growth in total assets and deposits, driven by increases in mortgage warehouse, multi-family, and healthcare loan portfolios. The company effectively managed expenses and capital, maintaining a solid expense ratio and return on average assets.
Net income for the second quarter of 2023 increased by $11.4 million, or 21%, compared to the second quarter of 2022.
Total assets reached $15.9 billion as of June 30, 2023, an 11% increase compared to March 31, 2023.
Unused borrowing capacity increased to $5.3 billion during the quarter, enhancing the ability to execute plans for future growth.
Total deposits increased to $13.1 billion, a 15% increase compared to March 31, 2023.
Merchants Bank
Merchants Bank
Forward Guidance
The advisory letter provided guidance related to the methodology used to determine and source the receipts in the state of Indiana for the Company’s mortgage origination and warehousing service lines. In effect, the guidance provided the Company the ability to revise its state income tax apportionment calculation to reduce its Indiana tax and related deferred tax liabilities. Additionally, the change in methodology is expected to result in a 1.0% to 1.5% reduction in the Company’s overall effective tax rate in the future.
Positive Outlook
- Ability to revise state income tax apportionment calculation
- Expected reduction in Indiana tax liabilities
- Expected refunds from amended state returns
- Projected 1.0% to 1.5% reduction in overall effective tax rate
- Improved tax efficiency due to new state tax apportionment provisions
Challenges Ahead
- Uncertainty in predicting the exact financial impact of the tax changes
- Potential for adjustments based on future interpretations of the tax code
- Dependence on the State of Indiana's continued adherence to the advisory letter
- Complexity in implementing the revised tax apportionment methodology
- Possible need for ongoing monitoring to ensure compliance with changing regulations