Executive Summary

Q4 2024 delivered a sharp rebound: net income rose to $95.7M and diluted EPS to $1.85, up 56% and 58% QoQ respectively, driven by a 253% QoQ surge in noninterest income from higher gain on sale, servicing fees, and derivative marks .
Asset quality mixed: nonperforming loans increased to $279.7M (2.68% of loans) vs. 2.04% in Q3 and 0.80% a year ago, though charge-offs remained modest at $4.2M and delinquencies declined $56.3M sequentially .
Balance sheet and capital strengthened: tangible book value per share reached a record $34.15 (+25% YoY); CET1 improved to 9.1% as MBIN issued $222.7M of Series E preferred, executed a $1.2B credit default swap, and redeemed $125M of Series B preferred in early 2025 .
Liquidity remained ample with $4.3B of unused capacity (FRB line alone ~111% of uninsured deposits), and deposit mix continued to improve (core deposits $9.4B; brokered down to $2.5B) despite a $972M QoQ decline in total deposits .

What Went Well and What Went Wrong

What Went Well
- Powerful earnings rebound: Q4 diluted EPS $1.85 vs. $1.17 in Q3 and $1.58 in Q4’23; noninterest income rose 253% QoQ on stronger gain on sale, servicing, syndication fees, and a favorable $10.4M MSR and $2.6M derivative mark (reversing Q3 negatives) .
- Capital and TBV momentum: Tangible book value per share hit a record $34.15 (+25% YoY; +5% QoQ); CET1 estimated 9.1% and total capital 13.6% supported by Series E preferred issuance and risk transfer actions .
- Management tone/confidence: “Record-breaking performance in 2024… superior business model provides for growth and higher earnings in any environment,” said CEO Michael Petrie; President Dunlap highlighted “financial flexibility” and risk mitigation via credit protection transactions .
What Went Wrong
- Asset quality pressure: NPLs rose to $279.7M (2.68%) from $210.9M (2.04%) in Q3 and $82.0M (0.80%) in Q4’23, primarily in multi-family and healthcare variable-rate loans; Q4 charge-offs were $4.2M .
- Deposit outflows QoQ: Total deposits fell $971.9M (-8%) QoQ to $11.9B (though mix improved as brokered declined to $2.5B and core stayed high at $9.4B) .
- Expense elevation YoY: Noninterest expense rose 20% YoY (deposit insurance +61% YoY; CRT premium expense added $1.9M), though the efficiency ratio improved to 32.62% QoQ .

Financial Results

Summary P&L (USD, $ Millions except per-share; periods oldest → newest)

Metric	Q4 2023	Q3 2024	Q4 2024
Net Interest Income	$124.3	$132.8	$134.6
Noninterest Income	$34.5	$16.7	$59.1
Total Income	$158.8	$149.6	$193.8
Provision for Credit Losses	$6.7	$6.9	$2.7
Noninterest Expense	$52.6	$61.3	$63.2
Income Before Taxes	$99.5	$81.3	$127.9
Net Income	$77.5	$61.3	$95.7
Diluted EPS	$1.58	$1.17	$1.85

Margins & Efficiency

Metric	Q4 2023	Q3 2024	Q4 2024
Net Interest Margin (%)	3.05%	2.99%	2.99%
Interest Rate Spread (%)	2.48%	2.43%	2.46%
Efficiency Ratio (%)	33.11%	41.00%	32.62%
ROAA (%)	1.86%	1.34%	2.07%
ROATCE (%)	23.60%	14.43%	22.10%

Segment Net Income (USD, $ Millions)

Segment	Q4 2023	Q3 2024	Q4 2024
Multi-family Mortgage Banking	$8.6	$8.1	$22.2
Mortgage Warehousing	$26.4	$15.9	$24.4
Banking	$50.0	$45.0	$56.3
Other	($7.5)	($7.7)	($7.2)
Total	$77.5	$61.3	$95.7

Key Balance Sheet & Capital KPIs (period-end unless noted; USD)

KPI	Q4 2023	Q3 2024	Q4 2024
Total Assets ($B)	$17.0	$18.7	$18.8
Total Deposits ($B)	$14.06	$12.89	$11.92
Brokered Deposits ($B)	—	$2.8	$2.5
Cash Balances ($M)	$584.4 (cash & equivalents)	$601.9	$476.6
Securities AFS ($B)	$1.11	$0.95	$0.98
Securities HTM ($B)	$1.01	$1.76	$1.66
Loans Receivable, Net ($B)	$10.13	$10.26	$10.35
Allowance for Credit Losses ($M)	$71.8	$84.5	$84.4
Nonperforming Loans ($M)	$82.0	$210.9	$279.7
NPLs / Loans (%)	0.80%	2.04%	2.68%
Tangible BVPS ($)	$27.40	$32.38	$34.15
CET1 (%)	7.8%	9.0%	9.1%
Tier 1 Capital (%)	11.1%	11.7%	13.0%
Total Capital (%)	11.6%	12.4%	13.6%
TCE / TA (%)	7.00%	7.95%	8.32%

Drivers and Mix Notes

Noninterest income YoY: +72% on net loan servicing (+$17.1M YoY), gain on sale (+$5.7M), and syndication/asset management fees (+$4.4M); included +$10.4M MSR FV and +$2.6M derivative FV in Q4 .
QoQ bridge: +$42.4M noninterest income on MSR/derivative reversal and higher multi-family gain on sale (+$8.3M), with efficiency ratio improving to 32.62% from 41.00% .
Liquidity capacity: $4.3B total unused lines; FRB line covers ~111% of uninsured deposits (uninsured ~24% of total) .

Guidance Changes

No formal quantitative FY or quarterly guidance was provided. Management executed capital and funding actions and declared dividends as below.

Metric	Period	Previous Guidance	Current Update	Change
Capital – Series E Preferred Issuance	Completed Nov 25, 2024	N/A	$222.7M net proceeds 7.625% Series E preferred closed	Completed
Capital – Series B Preferred Redemption	Jan 2, 2025	N/A	Redeemed ~$125.0M at par	Completed
Credit Risk Transfer (CDS)	Dec 27, 2024	N/A	CDS on $1.2B warehouse loans executed	Completed
Common Dividend	Q4 2024	$0.09 prior quarter	$0.09 per share payable Jan 2, 2025	Maintained
Preferred Dividends (B/C/D)	Q4 2024	As scheduled	B: $0.59/ds; C: $0.375/ds; D: $0.5156/ds payable Jan 2, 2025	Declared
Preferred Dividend (E)	Q4 2024	New series	Initial $7.84 per share ($0.196 per ds) payable Jan 2, 2025	Initiated

Earnings Call Themes & Trends

Note: No Q4 2024 earnings call transcript was available in our document set. Themes below reflect management commentary across Q2–Q4 press releases.

Topic	Previous Mentions (Q2 2024, Q3 2024)	Current Period (Q4 2024)	Trend
MSR/Derivative Fair Value	Q2: +$5.1M MSR FV; Q3: -$6.7M MSR FV and -$7.7M derivatives pressured EPS	Q4: +$10.4M MSR FV and +$2.6M derivatives aided EPS (~$0.21/sh impact)	Reversal to positive
Credit Risk Transfer/Securitization	Q2: Freddie Mac Q-series MF securitization; Q3: $629M healthcare REMIC executed	Q4: CDS on $1.2B warehouse loans; portfolio CRT coverage ~$2.3B loans	Expanding risk transfer
Deposit Mix	Q2: core deposits up; brokered up QoQ; Q3: core up to 78% of deposits; brokered down to $2.8B	Q4: core $9.4B (79%); brokered down to $2.5B; duration 49 days	Mix improving
Liquidity & Uninsured Deposit Coverage	Q2 lines: $7.0B; FRB covers 118% of uninsured; Q3 lines: $5.1B; FRB 120%	Q4 lines: $4.3B; FRB 111% of uninsured (~24% of deposits)	Ample, trending lower
Asset Quality	Q2 NPLs 1.30%; Q3 NPLs 2.04%; specific reserves up	Q4 NPLs 2.68%; charge-offs still modest; delinquencies down QoQ	NPLs rising; losses contained
Capital Actions	Q2 $97.7M common raise; CET1 8.7%	Q4 $222.7M Series E; CET1 9.1%; redeem Series B	Strengthened

Management Commentary

CEO Michael Petrie: “Our record-breaking performance in 2024… demonstrates that our superior business model provides for growth and higher earnings in any environment… total assets… $18.8B… tangible book value per share… $34.15 per share” .
President/COO Michael Dunlap: “Despite increases in nonperforming loans… delinquencies have declined, and charge-offs have been minimal… credit risk transfer… common and preferred stock offerings, strengthened our capital position and further mitigated risk” .

Q&A Highlights

No Q4 2024 earnings call transcript was available in our document set; therefore Q&A highlights and guidance clarifications are unavailable at this time.

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 was unavailable due to access limits in this session. As a result, we cannot provide EPS or revenue comparisons versus consensus for Q4 2024 at this time. The reported diluted EPS was $1.85 and net income $95.7M .
Implication: Given the magnitude of QoQ upside in noninterest income and favorable marks, estimate revisions may move higher for 2025 if management’s non-spread businesses (multi-family production, servicing, syndication/AM fees) remain strong; however, rising NPLs may temper credit cost assumptions .

Key Takeaways for Investors

Earnings power proved resilient: Q4 EPS rebounded to $1.85 on stronger fees and favorable MSR/derivative marks, offsetting a flat NIM and higher operating costs .
Noninterest engines accelerating: Gain on sale (+50% QoQ) and syndication/AM fees (+408% QoQ) underscore momentum in multi-family and fee-based lines that are less rate-sensitive near term .
Credit normalization is the swing factor: NPLs rose to 2.68% (from 2.04% in Q3), but charge-offs remained minimal; specific reserves were increased and CRT/loan sales reduce tail risk .
Capital/liquidity are strategic differentiators: CET1 9.1%, TBVPS $34.15, and $4.3B of borrowing capacity support growth and optionality; Series E issuance and Series B redemption optimize capital stack .
Deposit mix quality improved: Brokered down to $2.5B (from $2.8B in Q3 and -$3.4B YoY) with core at $9.4B (79% of deposits), reducing funding beta and duration risk .
Near-term focus: monitor fee momentum (multi-family pipeline, servicing fees), MSR/derivative mark sensitivity to the rate path, and credit performance in multi-family/healthcare variable-rate cohorts .
Medium-term thesis: originate-to-sell model, active CRT/securitization toolkit, and disciplined capital management underpin structurally higher through-cycle ROATCE if asset quality stabilizes .

Merchants Bancorp (MBIN)·Q4 2024 Earnings Summary