Sign in

You're signed outSign in or to get full access.

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

  • 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 .
  • 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

MetricQ4 2024Q1 2025Q2 2025
Net Interest Income ($M)134.624 122.196 128.719
Noninterest Income ($M)59.145 23.693 50.480
Total Income ($M)193.769 145.889 179.199
Provision for Credit Losses ($M)2.689 7.727 53.027
Net Income ($M)95.666 58.239 37.981
Diluted EPS ($)1.85 0.93 0.60
Net Interest Margin (%)2.99 2.89 2.83

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)

SegmentQ4 2024Q1 2025Q2 2025
Multi‑family Mortgage Banking22.183 3.413 9.269
Mortgage Warehousing24.402 15.398 22.986
Banking56.287 47.107 14.574
Other(7.206) (7.679) (8.848)

KPIs and balance sheet/credit

KPIQ4 2024Q1 2025Q2 2025
Nonperforming Loans / Loans (%)2.68 2.73 2.39
Allowance for Credit Losses on Loans ($M)84.386 83.413 91.811
Net Charge‑offs in Quarter ($M)4.2 10.5 46.1
Core Deposits / Total Deposits (%)79 86 90
Total Deposits ($B)11.920 12.406 12.687
Brokered Deposits ($B)~2.5 ~1.7 1.254
Unused Borrowing Capacity ($B)4.3 4.7 5.0
Tangible Book Value/Share ($)34.15 34.90 35.42

Gain on sale of loans ($M)

Loan TypeQ4 2024Q1 2025Q2 2025
Multi‑family24.026 10.125 19.815
Single‑family0.413 0.206 2.428
SBA0.581 1.288 1.099
Total25.020 11.619 23.342

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common dividend ($0.10/sh)Q2 2025Declared, rec. 6/13/25, pay 7/1/25New/maintained dividend policy
Preferred dividends (Series C $0.375, D $0.5156, E $0.4765 per depos. sh)Q2 2025DeclaredMaintenance of preferred payouts
Common dividend ($0.10/sh)Q3 2025Declared, rec. 9/15/25, pay 10/1/25Maintained
Formal revenue/margin/tax guidanceNot providedN/A (no numeric guidance)

Earnings Call Themes & Trends

Note: No Q2 2025 earnings call transcript could be located; themes drawn from company press materials.

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Asset quality and fraud‑related multifamily exposuresQ4: NPLs rose to 2.68%; specific reserves built; credit risk transfer expanded . Q1: NPLs 2.73%; allowance $83.4M; charge‑offs $10.5M .Provision $53.0M; $46.1M charge‑offs (14 customers); substandard up to $417.7M; special mention down 58%; criticized loans down 19% QoQ .Stabilizing within criticized; losses recognized; remediation ongoing.
Funding mix and liquidityQ4: core 79%; brokered 2.5B; unused capacity $4.3B . Q1: core 86%; brokered 1.7B; capacity $4.7B .Core 90%; brokered 1.25B; capacity $5.0B (62% of assets incl. liquid resources) .Improving core mix and liquidity.
Margin and business mixQ4 NIM 2.99% with nonaccrual reversal impact . Q1 NIM 2.89% pressured by shift to warehouse/loans‑for‑sale .NIM 2.83%, continued mix shift to warehouse and repo; higher‑margin loans receivable contracted .Ongoing mild compression.
Gain on sale/securitizationQ4: gain on sale $25.0M; securitization activities supportive . Q1: gain on sale $11.6M .Gain on sale $23.3M; completed $373.3M Freddie Mac Q‑Series securitization .Rebound QoQ.
Credit risk transfer (CRT)Q4: executed CDS on $1.2B warehouse loans; CRT balance $2.3B . Q1: CRT balance $2.2B .Upsized CDS in June; CRT coverage across $3.7B cumulatively; $2.8B balance under protection .Expanded/maintained.

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 .