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Merchants Bancorp

Merchants Bancorp Reports First Quarter 2025 Results

  • First quarter 2025 net income of $58.2 million, decreased $28.8 million compared to first quarter of 2024 and decreased $37.4 million compared to the fourth quarter 2024, reflecting market uncertainty that delayed origination closings and permanent loan conversions in a growing pipeline, which negatively impacted the recognition of gain on sale and net interest margin. The decrease in net income was also impacted by unfavorable fair market value adjustments to servicing rights and derivatives compared to prior periods.
  • First quarter 2025 diluted earnings per common share of $0.93 decreased 48% compared to the first quarter of 2024 and decreased 50% compared to the fourth quarter of 2024.
  • Unfavorable fair market value adjustments to servicing rights on loans and interest rate floor derivatives negatively impacted results during the first quarter of 2025 by approximately $0.05 per diluted common share, compared to the $0.29 per share impact of positive fair market value adjustments in the first quarter of 2024 and $0.21 in the fourth quarter of 2024.
  • Tangible book value per common share reached a record-high of $34.90 and increased 19% compared to $29.26 in the first quarter of 2024 and increased 2% compared to $34.15 in the fourth quarter of 2024.
  • As of March 31, 2025, the Company had $4.7 billion in unused borrowing capacity with the Federal Home Loan Bank and the Federal Reserve Discount window, representing 25% of total assets.
  • Total assets of $18.8 billion increased 5% compared to March 31, 2024, and was essentially unchanged compared to December 31, 2024.
  • Loans receivable of $10.3 billion, net of allowance for credit losses on loans, decreased $346.8 million, or 3%, compared to March 31, 2024, and decreased $10.3 million compared to December 31, 2024.
  • Core deposits of $10.7 billion increased $2.5 billion, or 30%, compared to March 31, 2024 and increased $1.3 billion, or 14%, compared to December 31, 2024. Core deposits now represent 86% of total deposits, reaching the highest level the Company has reported since March 2022.
  • Brokered deposits of $1.7 billion decreased $4.0 billion, or 70%, compared to March 31, 2024, and decreased $815.7 million compared to December 31, 2024.
  • The Company redeemed all outstanding shares of the Series B Preferred Stock for approximately $125.0 million on January 2, 2025, at the liquidation preference of $1,000 per share (equivalent to $25 per depositary share).

CARMEL, Ind. , April 28, 2025 /PRNewswire/ -- Merchants Bancorp (the "Company" or "Merchants") (Nasdaq: MBIN), parent company of Merchants Bank, today reported first quarter 2025 net income of $58.2 million, or diluted earnings per common share of $0.93. This compared to $87.1 million, or diluted earnings per common share of $1.80 in the first quarter of 2024, and compared to $95.7 million, or diluted earnings per common share of $1.85 in the fourth quarter of 2024.

"Despite some challenges this quarter, we remain confident in our strategic direction and outlook for future performance. The lower gain on sale of loans and recent deterioration in asset quality are temporary setbacks. Our ongoing efforts to optimize loan workouts and to invest in growth opportunities position us for a stronger and more resilient future.  Our loan pipeline remains strong, and we are well-positioned to execute when the uncertain interest rate environment becomes clearer for our borrowers," said Michael F. Petrie, Chairman and CEO of Merchants.

Michael J. Dunlap, President and Chief Operating Officer of Merchants, added, "Our team has shown remarkable dedication and resilience in navigating new challenges. We are proud of our culture of collaboration and innovation, which drives us to continuously improve and adapt to an ever-changing environment. As we move forward, we are focused on enhancing our operations and investing in our people and processes to ensure long-term success. Together, we are committed to building a stronger foundation for future growth and delivering value to our stakeholders and communities."

Net income of $58.2 million for the first quarter of 2025 decreased by $28.8 million, or 33%, compared to the first quarter of 2024, reflecting market uncertainty that delayed origination closings and permanent loan conversions in a growing pipeline, which negatively impacted the recognition of gain on sale and net interest margin.  The decrease in net income was primarily driven by a $17.2 million, or 42%, decrease in noninterest income, a $12.8 million, or 26%, increase in noninterest expense, a $4.9 million, or 4%, decrease in net interest income, and a $3.0 million, or 63%, increase in provision for credit losses on loans, which was partially offset by a $9.0 million, or 33%, decrease in provision for income tax. Of the $28.8 million decrease in net income, $19.3 million, or $0.34 per diluted common share, was attributable to changes in valuation adjustments. Noninterest income included a $754,000 negative fair market value adjustment to servicing rights and a $2.3 million negative fair market value adjustment to derivatives, which compared to positive fair market value adjustments of $14.0 million to servicing rights and $2.3 million to derivatives, in the first quarter of 2024.

Net income of $58.2 million for the first quarter 2025 decreased by $37.4 million, or 39%, compared to the fourth quarter of 2024, reflecting market uncertainty that delayed origination closings and permanent loan conversions in a growing pipeline, which negatively impacted the recognition of gain on sale and net interest margin.  The decrease in net income was primarily driven by a $35.5 million, or 60%, decrease in noninterest income, a $12.4 million, or 9% decrease in net interest income, and a $5.0 million, or 187%, increase in provision for credit losses on loans, which was partially offset by a $14.0 million, or 43%, decrease in provision for income taxes. Of the $37.4 million decrease in net income, $16.0 million, or $0.26 per diluted common share, was attributable to changes in valuation adjustments.  The decrease in noninterest income reflected lower gain on sale of loans, loan servicing fees, syndication and asset management fees, and other income. Noninterest income included a $754,000 negative fair market value adjustment to servicing rights and a $2.3 million negative fair market value adjustment to derivatives, which compared to positive adjustments of $10.4 million and $2.6 million, respectively, in the fourth quarter of 2024. 

Preferred Stock Redemption

The Company redeemed all outstanding shares of the Series B Preferred Stock for approximately $125.0 million on January 2, 2025, at the liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The $4.2 million expenses associated with the original issuance, which were capitalized in 2019, were recognized through retained earnings upon redemption, thus reducing net income available to common shareholders. Similarly, the redemption resulted in an excise tax of $1.2 million that will not be payable until 2025 taxes are due in 2026, and any future issuance of shares until one year after the redemption can offset the amount of excise tax that will be paid.

Total Assets

Total assets of $18.8 billion at March 31, 2025 increased by $975.2 million, or 5%, compared to March 31, 2024, and remained essentially unchanged compared to December 31, 2024. The increase compared to March 31, 2024 was primarily driven by higher balances in the mortgage warehouse portfolios, as well as securities held to maturity.

Return on average assets was 1.31% for the first quarter of 2025 compared to 2.07% for both the first quarter of 2024 and the fourth quarter of 2024. 

Asset Quality

The allowance for credit losses on loans of $83.4 million, as of March 31, 2025, increased by $7.7 million, or 10%, compared to March 31, 2024, and decreased by $973,000, or 1%, compared to December 31, 2024.  The $7.7 million increase compared to March 31, 2024 was primarily related to loans in the multi-family portfolio, which were partially offset by charge-offs. The decrease compared to December 31, 2024 was driven by $10.5 million in charge-offs that were partially offset by a $9.5 million increase in provision expense on loans, primarily related to the multi-family portfolio.  

The $83.4 million allowance for credit losses on loans as of March 31, 2025, compared to the net charge-offs of $20.2 million over the last twelve months ended March 31, 2025, could absorb four years of losses, assuming recent loss levels continue.

The Company recorded charge-offs for five customers, primarily in the multi-family loan portfolio, totaling $10.5 million, and recorded $28,000 of recoveries during the first quarter 2025. This compares to $925,000 in charge-offs and $1,000 in recoveries during the first quarter of 2024 and to $10.6 million in charge-offs and $136,000 of recoveries in the fourth quarter of 2024.

As of March 31, 2025, non-performing loans were $284.6 million, or 2.73% of loans receivable, compared to $131.8 million, or 1.22%, as of March 31, 2024, and $279.7 million, or 2.68%, as of December 31, 2024.  The increase in non-performing loans compared to March 31, 2024 was primarily driven by multi-family and healthcare customers with delinquent payments on variable rate loans that have required higher payments, as well as the financial deterioration of a few sponsors.  The higher payments are associated with the floating nature of the loan terms, which has resulted in elevated interest rates relative to when the loans were originated. The $4.9 million increase compared to December 31, 2024 was primarily due to one multi-family customer. Delinquency levels on total loans have modestly increased by $10.1 million, to $334.7 million, compared to December 31, 2024.

As of March 31, 2025, all substandard loans have been evaluated for impairment and these loans have specific reserves of $20.9 million. Although there has been an increase in adversely classified loans, underlying asset values remain strong overall and loans are well-collateralized.

The Company has been making additional efforts to reduce its credit risk through loan sale and securitization activities since 2019.  In April of 2023, as well as March and December of 2024, the Company strategically executed credit protection arrangements through a credit linked note and credit default swaps totaling $2.9 billion in loans to reduce risk of losses, with incremental coverage ranging from 13-14% of the unpaid principal balances for each arrangement.  Despite having credit protection on these loans, the Company also continues to carry an allowance for credit losses on loans held for investment. As of March 31, 2025, the balance of loans subject to credit protection arrangements was $2.2 billion.

Securities Available for Sale

Total securities available for sale of $961.2 million as of March 31, 2025 decreased by $100.1 million, or 9%, compared to March 31, 2024, and decreased by $18.9 million, or 2%, compared to December 31, 2024. The decrease compared to March 31, 2024 was primarily due to maturities and repayments, as well as fair value adjustments that were partially offset by purchases.

Securities Held to Maturity

Total securities held to maturity of $1.6 billion as of March 31, 2025 increased by $431.1 million, or 37%, compared to March 31, 2024, and decreased $58.4 million, or 4%, compared to December 31, 2024. The increase compared to March 31, 2024 was primarily due to purchases of senior investment securities backed by residential and healthcare loans retained as part of credit risk transfer securitization transactions originated by the Company. The lower-risk, senior certificates represent nearly 90% of the beneficial interests, while the remaining subordinated certificates are held by third parties, thereby minimizing the risk of loss to the Company.

Total Deposits

Total deposits of $12.4 billion at March 31, 2025 decreased by $1.6 billion, or 11%, compared to March 31, 2024, and increased by $486.2 million, or 4%, compared to December 31, 2024. The decrease compared to March 31, 2024 was driven by reductions in brokered certificates of deposit accounts, in favor of additional cost-effective borrowing. The change compared to December 31, 2024 was primarily due to growth in core deposits.

Core deposits of $10.7 billion at March 31, 2025 increased by $2.5 billion, or 30%, from March 31, 2024 and increased by $1.3 billion, or 14%, from December 31, 2024. Core deposits represented 86% of total deposits at March 31, 2025, 59% of total deposits at March 31, 2024, and 79% of total deposits at December 31, 2024.

Total brokered deposits of $1.7 billion at March 31, 2025 decreased $4.0 billion, or 70%, from March 31, 2024 and decreased $815.7 million, or 32%, from December 31, 2024.   As of March 31, 2025, brokered certificates of deposit had a weighted average remaining duration of 67 days.

Liquidity

Cash balances of $521.3 million as of March 31, 2025 increased by $12.5 million, or 2%, compared to March 31, 2024 and increased by $44.7 million, or 9%, compared to December 31, 2024.  The Company continues to have significant borrowing capacity, with unused lines of credit totaling $4.7 billion as of March 31, 2025 compared to $5.6 billion at March 31, 2024 and $4.3 billion at December 31, 2024.  Furthermore, its $3.3 billion line of credit availability with the Federal Reserve Bank of Chicago alone could fund 107% of its uninsured deposits, which represented approximately 24% of total bank deposits as of March 31, 2025.

This liquidity enhances the Company's ability to effectively manage interest expense and asset levels in the future. Additionally, the Company's business model is designed to continuously sell or securitize a significant portion of its loans, which provides flexibility in managing its liquidity. 

Comparison of Operating Results for the Three Months Ended

March 31, 2025 and 2024

Net Interest Income of $122.2 million decreased $4.9 million, or 4%, compared to $127.1 million, reflecting lower interest income and higher interest expense on borrowings, which were partially offset by lower interest expense on deposits.

  • Net interest margin of 2.89% decreased 25 basis points compared to 3.14%. The margin was negatively impacted by a significant shift in business mix, as lower-margin loans held for sale balances, consisting of primarily warehouse loans, grew by $480.3 million, or 14%, and warehouse repurchase agreements grew by $265.3 million, or 23%, while higher-margin loans receivable balances contracted by $339.1, or 3%.
  • Interest rate spread of 2.38% decreased 20 basis points compared to 2.58%.

Interest Income of $287.2 million decreased $27.0 million, or 9%, compared to $314.2 million. The decrease primarily reflected lower average yields on loans and loans held for sale, partially offset by higher average balances on securities held to maturity.

  • Average yields on loans and loans held for sale of 7.06% decreased 105 basis points compared to 8.11%.
  • Average balances of $13.8 billion for loans and loans held for sale increased $256.2 million, or 2% compared to $13.5 billion.
  • Average balances of $1.6 billion for securities held to maturity increased $447.1 million, or 37%, compared to $1.2 billion.

Interest Expense of $165.0 million decreased $22.1 million, or 12%, compared to $187.1 million.  The decrease reflected lower average balances at lower average rates on certificates of deposit that were partially offset by higher average balances at lower average rates on borrowings.

  • Average balances of $3.4 billion for certificates of deposit decreased by $2.3 billion, or 41%, compared to $5.7 billion.
  • Average interest rates of 4.67% for certificates of deposit decreased by 73 basis points compared to 5.40%.
  • Average balances of $3.1 billion for borrowings increased by $2.4 billion, or 336%, compared to $716.9 million.
  • Average interest rates of 5.33% for borrowings decreased by 370 basis points compared to 9.03%.

Noninterest Income of $23.7 million decreased $17.2 million, or 42%, compared to $40.9 million, primarily due to a $19.3 million change in valuation adjustments. The $17.2 million decrease reflected a $15.4 million, or 79%, decrease in loan servicing fees and a $2.8 million, or 47%, decrease other income, partially offset by a $2.3 million, or 24%, increase in gain on sale of loans.    

  • Loan servicing fees included a $754,000 negative fair market value adjustment to servicing rights, with a $1.2 million negative adjustment in the Banking segment and a $449,000 positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $14.0 million positive fair market value adjustment to servicing rights in the prior period with a $0.8 million positive adjustment in the Banking segment and a $13.2 million positive adjustment in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases in rising 10-year interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates on escrow deposits.
  • Other income included a $2.3 million negative fair market value adjustment to the floor derivatives compared to a $2.3 million positive fair market value adjustment in the prior period.
  • Gain on sale of loans increased $2.3 million, or 24%, reflecting higher volume in the multi-family loan portfolio.

Noninterest Expense of $61.7 million increased $12.8 million, or 26%, compared to $48.9 million, primarily due to a $6.8 million, or 23%, increase in salaries and employee benefits to support business growth, including $2.5 million associated with the addition of production staff, which is expected to elevate production, gain on sale and expenses in future quarters as well.  Also contributing to the higher expenses during the quarter, was a $3.9 million increase in credit risk transfer premium expense associated with ongoing credit default swaps that were executed in March and December 2024, as well as a $2.1 million, or 41%, increase in deposit insurance expense, reflecting an increase in underperforming assets, coupled with an increase in total assets.

Comparison of Operating Results for the Three Months Ended

March 31, 2025 and December 31, 2024

Net Interest Income of $122.2 million decreased $12.4 million, or 9%, compared to $134.6 million, primarily due to lower average yields on lower average balances on loans and loans held for sale. These decreases were partially offset by lower average balances on certificates of deposit at lower rates.

  • Net interest margin of 2.89% decreased 10 basis points compared to 2.99%. The margin was negatively impacted by a shift in business mix, as lower-margin loans held for sale balances, consisting of primarily warehouse loans, grew by $211.9 million, or 6%, and higher-margin loans receivable balances contracted by $11.3 million during the quarter.
  • Interest rate spread of 2.38% decreased 8 basis points compared to 2.46%.

Interest Income of $287.2 million decreased $34.1 million, or 11%, compared to $321.3 million, primarily reflecting a decrease in average yield and balances on loans and loans held for sale and a decrease in average yield on securities held to maturity.

  • Average yields on loans and loans held for sale of 7.06% decreased 37 basis points compared to 7.43%.
  • Average balances of $13.8 billion for loans and loans held for sale decreased $534.7 million, or 4%, compared to $14.3 billion.
  • Average yields on securities held to maturity of 6.01% decreased 46 basis points compared to 6.47%.

Interest Expense of $165.0 million decreased $21.7 million, or 12% compared to $186.7 million. The decrease was primarily driven by lower average balances at lower rates on certificates of deposit and partially offset by higher average balances on money market accounts.  

  • Average balances of $3.4 billion for certificate of deposit accounts decreased $746.2 million, or 18%, compared to $4.1 billion.
  • Average interest rates of 4.67% for certificate of deposit accounts decreased 35 basis points compared to 5.02%.
  • Average balances of $5.1 billion for interest-bearing checking accounts decreased $458.3 million, or 8%, compared to $5.6 billion.
  • Average interest rates of 4.01% for interest-bearing checking accounts decreased 18 basis points compared to 4.19%.

Noninterest Income of $23.7 million decreased $35.5 million, or 60%, primarily due to an $13.4 million, or 54%, decrease in gain on sale of loans, a $10.9 million, or 73%, decrease in loan servicing fees, a $5.9 million, or 64%, decrease in syndication and asset management fees, and a $5.3 million, or 63%, decrease in other income.

  • Gain on sale of loans decreased $13.4 million, as elevated interest rates have contributed to delays in borrowers converting to permanent loans.
  • Loan servicing fees included a $754,000 negative fair market value adjustment to servicing rights, with a $1.2 million negative adjustment in the Banking segment and a $449,000 positive adjustment in the Multi-family Mortgage Banking segment. This compared to a $10.4 million positive fair market value adjustment to servicing rights in the prior period, with a $2.5 million positive adjustment in the Banking segment and a $7.9 million positive adjustment in the Multi-family Mortgage Banking segment. The value of servicing rights generally increases in rising 10-year interest rate environments and declines in falling interest rate environments due to expected prepayments and earning rates on escrow deposits.
  • Other income included a $2.3 million negative fair market value adjustment to floor derivatives compared to a $2.6 million positive fair market value adjustment to derivatives in the fourth quarter of 2024.

Noninterest Expense of $61.7 million decreased $1.5 million, or 2%, compared to $63.2 million, primarily driven by a $2.2 million, or 44%, decrease in professional fees, which was partially offset by a $1.9 million, or 98%, increase in credit risk transfer premium expense.

About Merchants Bancorp

Ranked as a top performing U.S. public bank by S&P Global Market Intelligence, Merchants Bancorp is a diversified bank holding company headquartered in Carmel, Indiana operating multiple segments, including Multi-family Mortgage Banking that primarily offers multi-family housing and healthcare facility financing and servicing (through this segment it also serves as a syndicator of low-income housing tax credit and debt funds); Mortgage Warehousing that offers mortgage warehouse financing, commercial loans, and deposit services; and Banking that offers retail and correspondent residential mortgage banking, agricultural lending, and traditional community banking.  Merchants Bancorp, with $18.8 billion in assets and $12.4 billion in deposits as of March 31, 2025, conducts its business primarily through its direct and indirect subsidiaries, Merchants Bank of Indiana, Merchants Capital Corp., Merchants Capital Investments, LLC, Merchants Capital Servicing, LLC, Merchants Asset Management, LLC, and Merchants Mortgage, a division of Merchants Bank of Indiana. For more information and financial data, please visit Merchants' Investor Relations page at investors.merchantsbancorp.com.

Forward-Looking Statements 

This press release contains forward-looking statements which reflect management's current views with respect to, among other things, future events and financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, management cautions that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.  A number of important factors could cause actual results to differ materially from those indicated in these forward-looking statements, including the impacts of factors identified in "Risk Factors" or "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.  Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

 

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)














March 31,


December 31,


September 30,


June 30,


March 31,



2025


2024


2024


2024


2024

Assets











Cash and due from banks


$              15,609


$              10,989


$              12,214


$              10,242


$              17,924

Interest-earning demand accounts


505,687


465,621


589,692


530,640


490,831

Cash and cash equivalents


521,296


476,610


601,906


540,882


508,755

Securities purchased under agreements to resell


1,550


1,559


3,279


3,304


3,329

Mortgage loans in process of securitization


389,797


428,206


430,966


209,244


142,629

Securities available for sale ($626,271, $635,946, $682,975, $682,774
and $700,640 utilizing fair value option, respectively)


961,183


980,050


953,063


1,017,019


1,061,288

Securities held to maturity ($1,605,151, $1,664,674, $1,756,203,
$1,291,960 and $1,176,178 at fair value, respectively)


1,606,286


1,664,686


1,755,047


1,291,110


1,175,167

Federal Home Loan Bank (FHLB) stock and other equity securities


217,850


217,804


184,050


67,499


64,215

Loans held for sale (includes $75,920, $78,170, $91,084, $102,873 and
$84,513 at fair value, respectively)


3,983,452


3,771,510


3,808,234


3,483,076


3,503,131

Loans receivable, net of allowance for credit losses on loans of
$83,413, $84,386, $84,549, $81,028 and $75,712, respectively


10,343,724


10,354,002


10,261,890


10,933,189


10,690,513

Premises and equipment, net


67,787


58,617


53,161


46,833


42,450

Servicing rights


189,711


189,935


177,327


178,776


172,200

Interest receivable


82,811


83,409


86,612


90,360


90,303

Goodwill 


8,014


8,014


8,014


8,014


8,014

Other assets and receivables 


424,339


571,330


329,427


343,116


360,582

Total assets


$       18,797,800


$       18,805,732


$       18,652,976


$       18,212,422


$       17,822,576

Liabilities and Shareholders' Equity











  Liabilities











Deposits











Noninterest-bearing


$            313,296


$            239,005


$            311,386


$            383,260


$            319,872

Interest-bearing


12,092,869


11,680,971


12,580,501


14,533,807


13,655,789

Total deposits


12,406,165


11,919,976


12,891,887


14,917,067


13,975,661

Borrowings 


4,001,744


4,386,122


3,568,721


1,159,206


1,835,985

Deferred tax liabilities


35,740


25,289


19,530


25,098


43,935

Other liabilities


193,416


231,035


233,731


222,904


190,527

Total liabilities


16,637,065


16,562,422


16,713,869


16,324,275


16,046,108

Commitments and  Contingencies











Shareholders' Equity











Common stock, without par value











Authorized - 75,000,000 shares











Issued and outstanding  - 45,881,706 shares, 45,767,166 shares,
45,764,023 shares, 45,757,567 shares and 43,354,718 shares


240,512


240,313


239,448


238,492


139,950

Preferred stock, without par value - 5,000,000 total shares authorized











7% Series A Preferred stock - $25 per share liquidation preference











Authorized - no shares at March 31, 2025, December 31, 2024,
September 30, 2024 or June 30, 2024 and 3,500,000 shares at
March 31, 2024











Issued and outstanding - no shares at March 31, 2025,
December 31, 2024, September 30, 2024 or June 30, 2024 and
2,081,800 shares at March 31, 2024


—


—


—


—


50,221

6% Series B Preferred stock - $1,000 per share liquidation
preference











Authorized - no shares at March 31, 2025, and 125,000 shares
for all prior periods











Issued and outstanding - no shares at March 31, 2025, and
125,000 shares for all prior periods presented (equivalent to
5,000,000 depositary shares)


—


120,844


120,844


120,844


120,844

6% Series C Preferred stock - $1,000 per share liquidation
preference











Authorized - 200,000 shares











Issued and outstanding - 196,181 shares (equivalent to
7,847,233 depositary shares) 


191,084


191,084


191,084


191,084


191,084

8.25% Series D Preferred stock - $1,000 per share liquidation
preference











Authorized - 300,000 shares











Issued and outstanding - 142,500 shares (equivalent to
5,700,000 depositary shares) 


137,459


137,459


137,459


137,459


137,459

7.625% Series E Preferred stock - $1,000 per share liquidation
preference











Authorized - 230,000 shares











Issued and outstanding - 230,000 shares (equivalent to
9,200,000 depositary shares) 


222,748


222,748


—


—


—

Retained earnings


1,369,009


1,330,995


1,250,176


1,200,778


1,138,083

Accumulated other comprehensive (loss) income


(77)


(133)


96


(510)


(1,173)

Total shareholders' equity


2,160,735


2,243,310


1,939,107


1,888,147


1,776,468

Total liabilities and shareholders' equity


$       18,797,800


$       18,805,732


$       18,652,976


$       18,212,422


$       17,822,576

 

Consolidated Statement of Income

(Unaudited)

(In thousands, except share data)

















Three Months Ended


Change



March 31,


December 31,


March 31, 


1Q25


1Q25



2025


2024


2024


vs. 4Q24


vs. 1Q24

Interest Income














Loans


$

239,280


$

266,719


$

271,998


-10 %


-12 %

Mortgage loans in process of securitization



3,743



5,662



1,720


-34 %


118 %

Investment securities:














Available for sale



12,358



13,453



14,388


-8 %


-14 %

Held to maturity



24,358



27,673



20,522


-12 %


19 %

FHLB stock and other equity securities (dividends)



4,372



4,123



844


6 %


418 %

Other



3,093



3,716



4,701


-17 %


-34 %

Total interest income



287,204



321,346



314,173


-11 %


-9 %

Interest Expense














Deposits



123,941



144,009



171,022


-14 %


-28 %

Short-term borrowings



33,364



34,263



7,222


-3 %


362 %

Long-term borrowings



7,703



8,450



8,873


-9 %


-13 %

Total interest expense



165,008



186,722



187,117


-12 %


-12 %

Net Interest Income



122,196



134,624



127,056


-9 %


-4 %

Provision for credit losses



7,727



2,689



4,726


187 %


63 %

Net Interest Income After Provision for Credit Losses



114,469



131,935



122,330


-13 %


-6 %

Noninterest Income














Gain on sale of loans



11,619



25,020



9,356


-54 %


24 %

Loan servicing fees, net



4,010



14,953



19,402


-73 %


-79 %

Mortgage warehouse fees



1,513



1,413



982


7 %


54 %

Loss on sale of investments available for sale (1)



—



—



(108)


—


100 %

Syndication and asset management fees



3,389



9,323



5,303


-64 %


-36 %

Other income



3,162



8,436



5,939


-63 %


-47 %

Total noninterest income



23,693



59,145



40,874


-60 %


-42 %

Noninterest Expense














Salaries and employee benefits



36,419



37,536



29,596


-3 %


23 %

Loan expense



798



704



956


13 %


-17 %

Occupancy and equipment



2,351



2,284



2,237


3 %


5 %

Professional fees



2,894



5,135



4,099


-44 %


-29 %

Deposit insurance expense



7,228



6,473



5,125


12 %


41 %

Technology expense



2,374



2,038



1,854


16 %


28 %

Credit risk transfer premium expense



3,862



1,947



—


98 %


100 %

Other expense



5,738



7,085



5,045


-19 %


14 %

Total noninterest expense



61,664



63,202



48,912


-2 %


26 %

Income Before Income Taxes



76,498



127,878



114,292


-40 %


-33 %

Provision for income taxes (2)



18,259



32,212



27,238


-43 %


-33 %

Net Income


$

58,239


$

95,666


$

87,054


-39 %


-33 %

   Dividends on preferred stock



(10,265)



(10,728)



(8,667)


-4 %


18 %

   Impact of preferred stock redemption



(5,371)



—



—


100 %


100 %

Net Income Available to Common Shareholders


$

42,603


$

84,938


$

78,387


-50 %


-46 %

Basic Earnings Per Share


$

0.93


$

1.86


$

1.81


-50 %


-49 %

Diluted Earnings Per Share


$

0.93


$

1.85


$

1.80


-50 %


-48 %

Weighted-Average Shares Outstanding














Basic



45,824,022



45,765,458



43,305,985





Diluted



45,914,083



45,924,176



43,466,647



















(1) Includes $0, $0, and $(108) respectively, related to accumulated other comprehensive losses reclassifications.





(2) Includes $0, $0, and $26 respectively, related to income tax benefit for reclassification items.





 

Key Operating Results

(Unaudited)

($ in thousands, except share data)

















Three Months Ended


Change





March 31,


December 31,


March 31,


1Q25


1Q25





2025


2024


2024


vs. 4Q24


vs. 1Q24















Noninterest expense



$                  61,664


$                    63,202


$           48,912


-2 %


26 %















Net interest income (before provision for credit losses)



122,196


134,624


127,056


-9 %


-4 %


Noninterest income



23,693


59,145


40,874


-60 %


-42 %


Total income



$                145,889


$                  193,769


$         167,930


-25 %


-13 %















Efficiency ratio



42.27 %


32.62 %


29.13 %


965

bps

1,314

bps



























Average assets



$           17,831,950


$             18,512,380


$    16,793,072


-4 %


6 %


Net income



58,239


95,666


87,054


-39 %


-33 %


Return on average assets before annualizing



0.33 %


0.52 %


0.52 %






Annualization factor



4.00


4.00


4.00






Return on average assets



1.31 %


2.07 %


2.07 %


(76)

bps

(76)

bps














Return on average tangible common shareholders' equity (1)



10.65 %


22.10 %


25.34 %


(1,145)

bps

(1,469)

bps














Tangible book value per common share (1)



$                    34.90


$                      34.15


$             29.26


2 %


19 %















Tangible common shareholders' equity/tangible assets (1)



8.52 %


8.32 %


7.12 %


20

bps

140

bps














Consolidated ratios













Total capital/risk-weighted assets(2)



13.0

%

13.9

%

11.7

%





Tier I capital/risk-weighted assets(2)



12.4

%

13.3

%

11.2

%





Common Equity Tier I capital/risk-weighted assets(2)



9.2

%

9.3

%

8.0

%





Tier I capital/average assets(2)



12.1

%

12.1

%

10.5

%


















(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Measures" below:





















(2) As defined by regulatory agencies; March 31, 2025 shown as estimates and prior periods shown as reported.  




















Certain non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations and cash flows computed in accordance with GAAP; however, they do have a number of limitations.  As such, the reader should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable  to non-GAAP financial measures that other companies use.  A reconciliation of GAAP to non-GAAP financial measures is below.  Net Income Available to Common Shareholders excludes preferred stock dividends.  Tangible common shareholders' equity is calculated by excluding the balance of goodwill and other intangible assets and preferred stock from the calculation of total equity.  Tangible Assets is calculated by excluding the balance of goodwill and intangible assets.  Tangible book value per share is calculated by dividing tangible common shareholders' equity by the number of shares outstanding.     































Three Months Ended


Change





March 31,


December 31,


March 31,


1Q25


1Q25





2025


2024


2024


vs. 4Q24


vs. 1Q24















Net income



$                  58,239


$                    95,666


$           87,054


-39 %


-33 %


Less: preferred stock dividends  



(10,265)


(10,728)


(8,667)


-4 %


18 %


Less: preferred stock redemption



(5,371)


-


-


100 %


100 %


Net income available to common shareholders



$                  42,603


$                    84,938


$           78,387


-50 %


-46 %















Average shareholders' equity



$             2,160,169


$               2,084,627


$      1,747,660


4 %


24 %


Less: average goodwill & intangibles



(8,070)


(8,076)


(10,494)


—


-23 %


Less: average preferred stock



(552,633)


(538,970)


(499,608)


3 %


11 %


Average tangible common shareholders' equity



$             1,599,466


$               1,537,581


$      1,237,558


4 %


29 %















Annualization factor



4.00


4.00


4.00






Return on average tangible common shareholders' equity



10.65 %


22.10 %


25.34 %


(1,145)

bps

(1,469)

bps














Total equity



$             2,160,735


$               2,243,310


$      1,776,468


-4 %


22 %


Less: goodwill and intangibles



(8,068)


(8,073)


(8,163)


—


-1 %


Less: preferred stock



(551,291)


(672,135)


(499,608)


-18 %


10 %


Tangible common shareholders' equity



$             1,601,376


$               1,563,102


$      1,268,697


2 %


26 %















Assets



$           18,797,800


$             18,805,732


$    17,822,576


—


5 %


Less: goodwill and intangibles



(8,068)


(8,073)


(8,163)


—


-1 %


Tangible assets



$           18,789,732


$             18,797,659


$    17,814,413


—


5 %















Ending common shares



45,881,706


45,767,166


43,354,718



















Tangible book value per common share



$                    34.90


$                      34.15


$             29.26


2 %


19 %


Tangible common shareholders' equity/tangible assets



8.52 %


8.32 %


7.12 %


20

bps

140

bps

 

Merchants Bancorp

Average Balance Analysis

($ in thousands)

(Unaudited)














Three Months Ended


March 31, 2025


December 31, 2024


March 31, 2024


Average


Yield/


Average


Yield/


Average


Yield/


Balance

Interest

Rate 


Balance

Interest

Rate 


Balance

Interest

Rate 

Assets:
























Interest-earning deposits, and other interest or
dividends

$       511,077

$     7,465

5.92 %


$      499,308

$     7,839

6.25 %


$        346,150

$     5,545

6.44 %

Securities available for sale

961,065

12,358

5.21 %


986,063

13,453

5.43 %


1,085,114

14,388

5.33 %

Securities held to maturity

1,643,703

24,358

6.01 %


1,701,595

27,673

6.47 %


1,196,633

20,522

6.90 %

Mortgage loans in process of securitization

277,426

3,743

5.47 %


414,883

5,662

5.43 %


137,890

1,720

5.02 %

Loans and loans held for sale

13,751,197

239,280

7.06 %


14,285,852

266,719

7.43 %


13,494,961

271,998

8.11 %

     Total interest-earning assets

17,144,468

287,204

6.79 %


17,887,701

321,346

7.15 %


16,260,748

314,173

7.77 %

Allowance for credit losses on loans

(86,711)




(85,772)




(71,544)



Noninterest-earning assets

774,193




710,451




603,868















Total assets

$  17,831,950




$  18,512,380




$    16,793,072



























Liabilities & Shareholders' Equity:
























Interest-bearing checking

$    5,121,343

50,609

4.01 %


$    5,579,688

58,781

4.19 %


5,070,393

60,688

4.81 %

Savings deposits

146,359

15

0.04 %

#

145,599

15

0.04 %


201,860

219

0.44 %

Money market 

3,398,469

34,506

4.12 %

#

2,961,272

33,288

4.47 %


2,817,382

33,644

4.80 %

Certificates of deposit

3,369,269

38,811

4.67 %

#

4,115,462

51,925

5.02 %


5,694,933

76,471

5.40 %

    Total interest-bearing deposits

12,035,440

123,941

4.18 %


12,802,021

144,009

4.48 %


13,784,568

171,022

4.99 %













Borrowings

3,125,935

41,067

5.33 %


3,047,586

42,713

5.58 %


716,853

16,095

9.03 %

    Total interest-bearing liabilities

15,161,375

165,008

4.41 %


15,849,607

186,722

4.69 %


14,501,421

187,117

5.19 %













Noninterest-bearing deposits

294,248




352,374




332,172



Noninterest-bearing liabilities

216,158




225,772




211,819















    Total liabilities

15,671,781




16,427,753




15,045,412















    Shareholders' equity

2,160,169




2,084,627




1,747,660















Total liabilities and shareholders' equity

$  17,831,950




$  18,512,380




$    16,793,072















Net interest income


$  122,196




$ 134,624




$ 127,056














Net interest spread



2.38 %




2.46 %




2.58 %













Net interest-earning assets

$    1,983,093




$    2,038,094




$     1,759,327















Net interest margin



2.89 %




2.99 %




3.14 %













Average interest-earning assets to
average interest-bearing liabilities



113.08 %




112.86 %




112.13 %

 

Supplemental Results

(Unaudited)

($ in thousands)


















Net Income







Three Months Ended







March 31,



December 31,



March 31,







2025



2024



2024



Segment













Multi-family Mortgage Banking




$              3,413



$          22,183



$             16,609



Mortgage Warehousing




15,398



24,402



20,190



Banking




47,107



56,287



56,425



Other




(7,679)



(7,206)



(6,170)



Total




$            58,239



$          95,666



$             87,054

































Total Assets







March 31, 2025


December 31, 2024


March 31, 2024






Amount

%


Amount

%


Amount

%


Segment













Multi-family Mortgage Banking




$          460,441

3 %


$        479,099

2 %


$           416,454

2 %


Mortgage Warehousing




5,902,165

31 %


6,000,624

32 %


5,369,299

30 %


Banking




12,002,564

64 %


11,761,202

63 %


11,760,028

66 %


Other




432,630

2 %


564,807

3 %


276,795

2 %


Total




$     18,797,800

100 %


$   18,805,732

100 %


$      17,822,576

100 %
































Gain on Sale of Loans







Three Months Ended







March 31,



December 31,



March 31,







2025



2024



2024



Loan Type













Multi-family




$            10,125



$          24,026



$               8,423



Single-family




206



413



280



Small Business Association (SBA)




1,288



581



653



Total




$            11,619



$          25,020



$               9,356

































Servicing Rights







Three Months Ended







March 31,



December 31,



March 31,







2025



2024



2024
















Balance, beginning of period




$          189,935



$        177,327



$           158,457



Additions













Purchased servicing




-



-



-



Originated servicing




3,338



5,373



2,166



Subtractions













Paydowns




(2,808)



(3,172)



(2,387)



Changes in fair value




(754)



10,407



13,964



Balance, end of period




$          189,711



$        189,935



$           172,200



 

 

Supplemental Results

(Unaudited)

($ in thousands)

















Loans Receivable and Loans Held for Sale






March 31,



December 31,



March 31,






2025



2024



2024














Mortgage warehouse repurchase agreements




$       1,408,239



$     1,446,068



$        1,142,994


Residential real estate (1)




1,332,601



1,322,853



1,321,300


Multi-family financing




4,600,117



4,624,299



4,096,606


Healthcare financing




1,583,290



1,484,483



2,464,685


Commercial and commercial real estate (2)(3)




1,418,741



1,476,211



1,666,751


Agricultural production and real estate




79,190



77,631



65,977


Consumer and margin loans




4,959



6,843



7,912


Loans receivable




10,427,137



10,438,388



10,766,225


    Less: Allowance for credit losses on loans




83,413



84,386



75,712


Loans receivable, net




$     10,343,724



$   10,354,002



$      10,690,513














Loans held for sale




3,983,452



3,771,510



3,503,131


Total loans, net of allowance




$     14,327,176



$   14,125,512



$      14,193,644














(1)     Includes $1.2 billion, $1.2 billion and $1.2 billion of All-In-One © first-lien home equity lines of credit as of March 31, 2025,
December 31, 2024 and March 31, 2024, respectively.


(2)    Includes $0.8 billion, $0.9 billion and $1.1 billion of revolving  lines of credit collateralized primarily by mortgage servicing rights as of
March 31, 2025, December 31, 2024 and March 31, 2024, respectively.


(3)     Includes only $19.5 million, $18.7 million and $6.8 million of non-owner occupied commercial real estate as of March 31, 2025,
December 31, 2024 and March 31, 2024, respectively.  


















Loan Credit Risk Profile





March 31, 2025


December 31, 2024


March 31, 2024





Amount

%


Amount

%


Amount

%













Pass 




$       9,695,595

93.0 %


$     9,741,087

93.4 %


$      10,410,748

96.7 %

Special mention




407,895

3.9 %


379,969

3.6 %


232,122

2.2 %

Substandard




323,647

3.1 %


317,332

3.0 %


123,355

1.1 %

Doubtful




—

—


—

—


—

—

Loans receivable




$     10,427,137

100.0 %


$   10,438,388

100.0 %


$      10,766,225

100.0 %

Charge-offs (year-to-date)




$            10,507



$          10,587



$                  925


Recoveries (year-to-date)




$                   28



$               136



$                      1


















Nonperforming Loans






March 31,



December 31,



March 31,






2025



2024



2024














Nonaccrual loans




$          284,019



$        279,716



$             78,804


90 days past due and still accruing




585



6



52,982


Total nonperforming loans




$          284,604



$        279,722



$           131,786


Other real estate owned




$              7,049



$            8,209



—


Total nonperforming assets




$          291,653



$        287,931



$           131,786


Nonperforming loans to total loans receivable




2.73 %



2.68 %



1.22 %


Nonperforming assets to total assets




1.55 %



1.53 %



0.74 %


















Delinquent Loans






March 31,



December 31,



March 31,






2025



2024



2024














Delinquent loans: 












    Loans receivable




$          304,560



$        292,263



$           188,742


    Loans held for sale




30,103



32,343



30,150


Total delinquent loans




$          334,663



$        324,606



$           218,892


Total loans receivable and loans held for sale




$     14,410,589



$   14,209,898



$      14,269,356


   Delinquent loans to total loans 




2.32 %



2.28 %



1.53 %


 

 

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SOURCE Merchants Bancorp