Merchants Bancorp Reports $58.2 Million Net Income, 33% Decrease in Q1 2025

Merchants Bancorp reported a net income of $58.2 million for the first quarter of 2025, a decrease of $28.8 million, or 33%, compared to $87.1 million in the same period of 2024. This decline was attributed to several factors, including a 42% drop in noninterest income, a 26% rise in noninterest expenses, a 4% decrease in net interest income, and a 63% increase in the provision for credit losses. The diluted earnings per share fell to $0.93, down from $1.81 a year earlier. The company noted that market uncertainties had delayed origination closings and permanent loan conversions, negatively impacting both the recognition of gains on sales and net interest margins.

Total assets remained stable at approximately $18.8 billion, reflecting a slight increase of 5% year-over-year. Loans receivable, net of allowance for credit losses, decreased by $346.8 million, or 3%, compared to the previous year, while loans held for sale increased by $211.9 million, or 6%. Core deposits rose significantly, reaching $10.7 billion, a 30% increase from the prior year, while brokered deposits saw a substantial decline of 70%, totaling $1.7 billion. The company’s net interest margin decreased to 2.89% from 3.14% in the previous year, influenced by a shift in business mix towards lower-margin loans.

Strategically, Merchants Bancorp completed the redemption of all outstanding shares of its Series B Preferred Stock for approximately $125 million on January 2, 2025. The company also reported a significant increase in the volume of warehouse loans funded, amounting to $11.9 billion for the quarter, a 49% increase compared to the same period in 2024. The Multi-family Mortgage Banking segment originated and acquired loans totaling $934.4 million, marking a 4% increase year-over-year.

Operationally, the company’s efficiency ratio rose to 42.27% from 29.13% a year earlier, primarily due to increased noninterest expenses, including a notable rise in salaries and employee benefits. The provision for credit losses increased to $7.7 million, reflecting heightened credit risk in the multi-family portfolio. As of March 31, 2025, the allowance for credit losses on loans was $83.4 million, representing 0.80% of total loans, which the company believes is adequate to absorb expected future losses.

Looking ahead, Merchants Bancorp remains focused on managing its credit risk and optimizing its capital structure. The company has $4.7 billion in unused borrowing capacity with the Federal Home Loan Bank and the Federal Reserve, providing a buffer against potential liquidity challenges. The management anticipates that the strategic initiatives undertaken, including the focus on core deposits and the reduction of brokered deposits, will enhance the company's financial stability and support future growth.