Merchants Bancorp (MBIN) Q1 2025 earnings summary

Executive summary

• Net income for Q1 2025 was $58.2 million, down 33% year-over-year and 39% sequentially, mainly due to lower noninterest income, higher expenses, and market uncertainty delaying loan originations and conversions.

• Diluted EPS was $0.93, a 48% decrease from Q1 2024 and 50% sequentially, with negative valuation adjustments to servicing rights and derivatives.

• Tangible book value per share reached a record $34.90, up 19% year-over-year and 2% sequentially.

• Core deposits grew 30% year-over-year to $10.7 billion, now 86% of total deposits; brokered deposits fell 70% to $1.7 billion.

• Warehouse loan funding volume rose 49% to $11.9 billion, outpacing the 2% industry growth in single-family residential loan volumes.

Financial highlights

• Net interest income was $122.2 million, down 4% year-over-year and 9% sequentially; net interest margin declined to 2.89% from 3.14% year-over-year.

• Noninterest income dropped 42% year-over-year and 60% sequentially, mainly from lower loan servicing fees, lower gain on sale of loans, and negative fair value adjustments.

• Noninterest expense increased 26% year-over-year, driven by higher salaries, credit risk transfer premiums, and deposit insurance costs.

• Provision for credit losses rose 63% to $7.7 million, primarily related to the multi-family portfolio.

• Efficiency ratio worsened to 42.27% from 29.13% year-over-year.

Outlook and guidance

• Management expects continued growth in core deposits and maintains significant unused borrowing capacity of $4.7 billion.

• The company remains focused on originating low-risk, government-backed loans and selling a significant portion to manage liquidity and risk.

• Management remains confident in strategic direction, citing a strong loan pipeline and ongoing investments in growth and operational improvements.

• Temporary setbacks from lower gain on sale and asset quality deterioration are expected to be mitigated as market conditions stabilize.

• No material changes in risk factors or critical accounting policies since year-end 2024.