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Merchants Bancorp (MBIN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 EPS was $0.97, a strong rebound vs Q2 ($0.60) and above Wall Street consensus of $0.79*, driven by lower provision expense and stronger gain-on-sale; net income was $54.7M .
  • Total “revenue” per S&P Global was $141.8M*, below the $164.1M* consensus, while company-reported net interest income was $128.1M and noninterest income was $43.0M; efficiency ratio worsened to 45.2% as commissions and legal/tax costs rose .
  • Credit metrics mixed: provision fell 45% q/q to $29.2M and special mention declined 9% to $155.7M, but NPLs rose to 2.81% of loans, mainly one multi-family relationship; criticized loans edged down to $582.2M .
  • Liquidity and funding improved: core deposits rose 12% q/q to $12.8B (92% of deposits) and brokered deposits fell 9% q/q to $1.1B; unused borrowing capacity reached $5.9B (30% of assets) .
  • Potential stock catalysts: EPS beat vs consensus*, continued deposit mix improvement and CRT execution (new $557.1M healthcare CDS), offset by higher NPLs and expense pressures .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • EPS and net income rebounded q/q as provision for credit losses declined 45% to $29.2M; EPS rose to $0.97 from $0.60 in Q2 .
  • Gain on sale of loans increased to $24.7M (+6% q/q, +47% y/y), aided by multi-family secondary market sales and a Freddie Mac Q-Series securitization .
  • Core deposit mix strengthened to 92% of total deposits, with core deposits up $1.4B q/q to $12.8B; brokered deposits fell to $1.1B .
  • “We are pleased with the strong rebound in earnings this quarter… [and] the strong activity in gain on sale of loans” — Michael F. Petrie, CEO .
  • “Asset quality trends improved, with lower provision expenses and reduced criticized assets… strong liquidity, core deposit growth” — Michael J. Dunlap, President & COO .

What Went Wrong

  • Efficiency ratio worsened to 45.16% (from 43.16% in Q2) as salaries/benefits rose 25% y/y and other legal/tax/insurance expenses increased; credit risk transfer premium expense was $4.2M .
  • NPLs increased to 2.81% (from 2.39% in Q2), primarily due to one multi-family relationship; total delinquencies rose to $336.2M .
  • S&P “revenue” missed consensus*, indicating softer top-line versus market expectations despite internal strength in NII and gain-on-sale [GetEstimates Q3 2025].

Note: *Values retrieved from S&P Global.

Financial Results

Headline P&L and Returns

MetricQ3 2024Q1 2025Q2 2025Q3 2025
EPS (Diluted, $)1.17 0.93 0.60 0.97
Net Income ($MM)61.27 58.24 37.98 54.70
Net Interest Income ($MM)132.82 122.20 128.72 128.06
Noninterest Income ($MM)16.74 23.69 50.48 43.01
Provision for Credit Losses ($MM)6.90 7.73 53.03 29.24
Efficiency Ratio (%)41.00 42.27 43.16 45.16
ROA (%)1.34 1.31 0.80 1.16

Margins and Balance Sheet KPIs

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Interest Margin (%)2.99 2.89 2.83 2.82
Interest Rate Spread (%)2.43 2.38 2.33 2.33
Total Assets ($B)18.65 18.80 19.14 19.35
Core Deposits ($B)9.39 (Dec’24) 10.69 (Mar’25) 11.43 (Jun’25) 12.79 (Sep’25)
Brokered Deposits ($B)2.53 (Dec’24) 1.72 (Mar’25) 1.25 (Jun’25) 1.14 (Sep’25)
NPLs/Loans (%)2.68 (Dec’24) 2.73 (Mar’25) 2.39 (Jun’25) 2.81 (Sep’25)
Criticized Loans ($MM)697.30 (Dec’24) 589.17 (Jun’25) —582.20 (Sep’25)
Allowance for Credit Losses ($MM)84.55 (Dec’24) 83.41 (Mar’25) 91.81 (Jun’25) 93.33 (Sep’25)
Tangible Book Value/Share ($)32.38 34.90 35.42 36.31
CET1 (%)8.9 —9.5 9.8

Revenue and EPS vs. Estimates (S&P Global)

MetricQ3 2025 ConsensusQ3 2025 Actual
EPS (Primary, $)0.79*0.97
Revenue ($MM)164.1*141.8*

Note: *Values retrieved from S&P Global.

Segment Net Income

Segment ($MM)Q3 2024Q2 2025Q3 2025
Multi-family Mortgage Banking8.07 9.27 12.08
Mortgage Warehousing15.94 22.99 23.56
Banking44.98 14.57 29.55
Other(7.72) (8.85) (10.49)
Total61.27 37.98 54.70

Additional KPIs

KPIQ3 2024Q2 2025Q3 2025
Gain on Sale of Loans ($MM)16.73 23.34 24.67
Servicing Rights FV Adj ($MM)(6.73) prior period context +0.258 +2.123
Quarterly Charge-offs ($MM)2.10 46.10 29.50
Liquidity: Unused Borrowing Capacity ($B)4.3 (Dec’24) 5.0 (Jun’25) 5.9 (Sep’25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal revenue/margin/tax guidanceFY/Q4 outlookNone disclosedNone disclosedMaintained (no formal guidance)
Dividends – Common ($/share)Q4 2025$0.10 (ongoing quarterly)$0.10 payable Jan 2, 2026Maintained
Dividends – Preferred Series C ($/share; per depositary $0.375)Q4 2025Ongoing$15.00Maintained
Dividends – Preferred Series D ($/share; per depositary $0.5156)Q4 2025Ongoing$20.625Maintained
Dividends – Preferred Series E ($/share; per depositary $0.4765)Q4 2025Ongoing$19.06Maintained

Earnings Call Themes & Trends

Note: An official Q3 2025 earnings call transcript was not available in our document system; themes are drawn from company earnings materials.

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Asset quality (provision/criticized)Q1: NPLs 2.73% on variable-rate stress; substandard reserves $20.9M . Q2: Provision surged on new appraisals and suspected fraud; special mention fell 58%, criticized loans down 19% q/q . NPLs declined to 2.39% .Provision fell 45% q/q to $29.2M; special mention down 9% to $155.7M; criticized loans $582.2M; NPLs rose to 2.81% (one relationship) .Improving provision and criticized mix; NPLs mixed (up on single name).
Liquidity & fundingQ1: Core deposits 86% of total; unused lines $4.7B . Q2: Core deposits 90%; unused lines $5.0B .Core deposits 92%; unused lines $5.9B (30% of assets) .Steady improvement in deposit mix and contingent liquidity.
Credit risk transfer (CRT)Q1: CLN/CDS coverage inception $2.9B; loans subject $2.2B . Q2: Upsized swap; arrangements addressed $3.7B; loans subject $2.8B .Executed CDS on $557.1M healthcare pool; loans subject to credit protection $2.4B .Continued active CRT execution; coverage maintained.
Gain-on-sale/securitizationQ1: Gain-on-sale pressured by market uncertainty . Q2: Gain-on-sale +101% q/q; Freddie Mac Q-Series securitization .Gain-on-sale +6% q/q; further Q-Series securitization .Sustainably strong secondary activity.
Margin/mixQ1: NIM 2.89% down on mix shift to warehouse loans . Q2: NIM 2.83% with similar mix effects .NIM 2.82%; spread 2.33%; warehouse volumes remain elevated .Margins stable but pressured by business mix.
Capital & TBVQ1: TBV $34.90; CET1 est 9.2% . Q2: TBV $35.42; CET1 9.5% .TBV $36.31; CET1 9.8% .Ongoing capital accretion and TBV growth.
Expenses & DI assessmentsQ1: Deposit insurance up with underperforming assets; CRT premiums higher . Q2: DI expense +28% y/y; CRT premium $4.8M .DI expense +31% y/y; CRT premium $4.2M; other legal/tax/insurance up .Expense headwinds persist as asset quality normalizes.

Management Commentary

  • “We are pleased with the strong rebound in earnings this quarter… and the strong activity in gain on sale of loans… enhances capital efficiency and reduces risk exposure.” — Michael F. Petrie, Chairman & CEO .
  • “Asset quality trends improved, with lower provision expenses and reduced criticized assets… strong liquidity, core deposit growth, and effective capital management.” — Michael J. Dunlap, President & COO .
  • Q2 setup context: “Despite a difficult second quarter… increase in our provision… largely associated with mortgage fraud or suspected fraud… robust gain on sale of loans” — Michael F. Petrie .

Q&A Highlights

  • An official Q3 2025 earnings call transcript was not available in our system; no Q&A items could be verified or cited. We relied on the company’s 8-K and press releases for management tone and strategic messaging .

Estimates Context

  • EPS beat: $0.97 actual vs $0.79* consensus; 3 estimates contributed to the EPS consensus*. Likely upward revisions to EPS estimates post-print .
  • “Revenue” miss (S&P-defined): $141.8M* actual vs $164.1M* consensus; 2 estimates contributed to revenue consensus*. This gap may reflect differences in bank revenue definitions relative to company metrics (NII + noninterest income) [GetEstimates Q3 2025].
  • Target Price Consensus Mean: $40.00* (unchanged vs “actual” field) [GetEstimates Q3 2025].

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • EPS outperformance vs consensus* alongside lower provision expense is a near-term positive; watch for continued normalization of credit costs .
  • Deposit mix and liquidity strength (core deposits 92%; $5.9B unused lines) provide flexibility to manage interest expense and asset levels into 2026 .
  • Gain-on-sale momentum and recurring Q-Series securitizations support noninterest income durability, partially offsetting margin pressure from warehouse mix .
  • NPL uptick to 2.81% was concentrated in one multi-family relationship; monitoring resolution path and any incremental charge-offs is prudent .
  • Expense headwinds (commissions, DI assessments, legal/insurance, CRT premiums) weighed on efficiency; a stable-to-improving asset quality could allow efficiency to retrace in coming quarters .
  • Ongoing CRT utilization (new $557.1M healthcare CDS) is a strategic risk management lever; expect continued use to optimize capital and credit risk .
  • Dividend declaration across common and preferred underscores capital confidence; TBV/share reached a record $36.31, supporting valuation and medium-term thesis .

Note: *Values retrieved from S&P Global.