MB
Merchants Bancorp (MBIN)·Q2 2025 Earnings Summary
Executive Summary
- Q2 2025 was challenged by a sharp increase in provision for credit losses ($53.0M), driving EPS down to $0.60 as MBIN addressed multifamily collateral markdowns and loans tied to suspected mortgage fraud; underlying franchise metrics (gain on sale, deposits, liquidity, TBV) improved .
- Results missed S&P Global consensus: EPS $0.60 vs $1.12 estimate (−46%), revenue $126.2M vs $161.1M estimate (−22%). Mix shift toward lower‑margin warehouse activity and elevated risk costs were the primary headwinds .
- Offsetting positives: gain on sale of loans more than doubled QoQ to $23.3M aided by a $373.3M Freddie Mac Q‑Series securitization; core deposits rose to 90% of total; unused borrowing capacity increased to $5.0B; record tangible book value reached $35.42 .
- Asset quality actions accelerated: Q2 charge‑offs of $46.1M; criticized loans fell 19% QoQ with “special mention” down 58%; management upsized credit default swap protection and reiterated loan collateral coverage .
- No formal financial guidance was provided; the Board declared a $0.10 common dividend and routine preferred dividends during Q2, with another dividend declaration in August for Q3 .
What Went Well and What Went Wrong
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What Went Well
- Gain on sale inflected: $23.3M (+101% QoQ; +109% YoY) on stronger multifamily volumes and a Freddie Mac Q‑Series securitization .
- Funding quality and liquidity improved: core deposits rose to 90% of total; brokered deposits fell 27% QoQ and 50% YTD; unused borrowing capacity reached $5.0B (26% of assets) .
- Tangible book value per share set a record at $35.42 (+1% QoQ; +13% YoY) despite elevated provisioning; management emphasized resilience and risk management enhancements .
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What Went Wrong
- Credit costs surged: provision for credit losses rose to $53.0M (from $7.7M in Q1) due to multifamily collateral value declines and loans tied to suspected fraud; Q2 charge‑offs were $46.1M (14 customers) .
- Margin pressure persisted: NIM fell 6 bps QoQ to 2.83% on a shift toward lower‑margin warehouse loans and repo funding, while higher‑margin loans receivable contracted net $338.7M QoQ .
- Noninterest expense jumped 25% QoQ to $77.3M on growth investments (production staff), legal/receiver costs, deposit insurance, and higher credit risk transfer premiums .
Financial Results
Estimate comparison (S&P Global):
- EPS: $0.60 actual vs $1.12 estimate (−46%)*
- Revenue: $126.2M actual vs $161.1M estimate (−22%)*
- EPS estimates count: 3; Revenue estimates count: 2*
- Target price consensus: $40; 3 estimates*
Values retrieved from S&P Global.
Segment net income ($M)
KPIs and balance sheet/credit
Gain on sale of loans ($M)
Guidance Changes
Earnings Call Themes & Trends
Note: No Q2 2025 earnings call transcript could be located; themes drawn from company press materials.
Management Commentary
- “Despite a difficult second quarter… we are encouraged by the resilience of our underlying earnings, the significant increase in gain on sale of loans, and the continued growth in our tangible book value… We were also pleased to see a 17% reduction in total delinquencies and a 58% decline in loans receivable classified as special mention during the quarter.” — Michael F. Petrie, Chairman & CEO .
- “We have implemented strategies to address our asset quality issues and to enhance our overall risk management practices to ensure long-term resilience.” — Michael J. Dunlap, President & COO .
- Key messages: accelerated loss recognition on identified troubled multifamily credits (including suspected fraud cases), improving criticized loan trends, deposit quality inflecting higher, and liquidity/capital planning supported by CRT and securitizations .
Q&A Highlights
- No Q2 2025 earnings call transcript was available; no Q&A to summarize. Commentary above reflects press release disclosures – –.
Estimates Context
- EPS: $0.60 vs $1.12 consensus (−46%); Revenue: $126.2M vs $161.1M (−22%); 3 EPS and 2 revenue estimates in the quarter; consensus target price $40 (3 estimates). Drivers of the miss were the outsized provision for credit losses and incremental noninterest expenses tied to remediation and risk management, partially offset by stronger gain on sale and fees .
Values retrieved from S&P Global.
Key Takeaways for Investors
- Credit clean‑up largely drove the print: $53.0M provision and $46.1M charge‑offs recognized against identified multifamily exposures, while criticized loans fell 19% QoQ and “special mention” declined 58%—a potential inflection in adverse migration .
- Core funding and liquidity are strong, mitigating rate and funding risks: core deposits at 90% of total; brokered trimmed to $1.25B; $5.0B of borrowing capacity available (26% of assets) .
- Earnings power ex‑credit remained resilient: NII rose 5% QoQ; gain on sale doubled QoQ; syndication/asset management fees up 186% QoQ .
- Margin headwinds continue near term given mix shift (warehouse loans, repo), though deposit re‑mix and lower‑rate borrowings help; watch NIM trajectory as warehouse volumes and repo leverage evolve .
- CRT and securitizations are meaningful risk/capital tools (coverage on $2.8B loans as of Q2; Q‑Series securitization executed), providing loss protection and balance sheet flexibility .
- With EPS/revenue misses vs consensus and heightened credit costs, estimate revisions likely move lower near term; an improving criticized loan trend and sustained core funding could be catalysts as credit normalizes* .
Values retrieved from S&P Global.
Additional details and cross‑references:
- Revenue/earnings drivers: Noninterest income +113% QoQ to $50.5M on gain on sale and fee strength; NII +5% QoQ to $128.7M; provision +$45.3M QoQ to $53.0M; noninterest expense +25% QoQ to $77.3M .
- Deposit composition: Core deposits +$744.6M QoQ to $11.4B (90% of total); brokered deposits −$463.9M QoQ to $1.25B .
- Capital/Book: TBV/share $35.42 (+13% YoY); CET1 ratio ~9.5%; Tier 1 RBC 12.8% (regulatory estimates) .
- Dividends: Q2 declared common $0.10 and routine preferred payouts; Q3 maintained the same levels .