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Merchants Bank Q1 2025 Earnings Report
Merchants Bancorp reported a decrease in net income and diluted earnings per common share for the first quarter of 2025, primarily due to market uncertainty impacting loan originations and fair market value adjustments.
Key Takeaways
Merchants Bancorp reported a net income of $58.2 million for the first quarter of 2025, a significant decrease compared to both the first and fourth quarters of 2024. Diluted earnings per common share also fell to $0.93. The decline was attributed to market uncertainty delaying loan closings and conversions, unfavorable fair market value adjustments to servicing rights and derivatives, and a decrease in noninterest income.
Net income for Q1 2025 was $58.2 million, a decrease of $28.8 million (33%) from Q1 2024 and $37.4 million (39%) from Q4 2024.
Diluted earnings per common share for Q1 2025 were $0.93, down 48% from Q1 2024 and 50% from Q4 2024.
Unfavorable fair market value adjustments to servicing rights and interest rate floor derivatives negatively impacted Q1 2025 results by approximately $0.05 per diluted common share.
Tangible book value per common share reached a record-high of $34.90, an increase of 19% compared to Q1 2024 and 2% compared to Q4 2024.
Merchants Bank
Merchants Bank
Merchants Bank Revenue by Segment
Revenue by Segment
Multi-family Mtg Bank Revenue
CapyFin.com Forward Guidance
Despite current challenges, Merchants Bancorp remains confident in its strategic direction and future performance, with ongoing efforts to optimize loan workouts and invest in growth opportunities. The company is focused on enhancing operations and investing in its people and processes to ensure long-term success and build a stronger foundation for future growth.
Positive Outlook
- The loan pipeline remains strong, indicating potential for future origination growth once market uncertainty subsides.
- Ongoing efforts to optimize loan workouts are expected to improve asset quality over time.
- Investments in growth opportunities are anticipated to position the company for a stronger and more resilient future.
- The company's business model, which involves continuously selling or securitizing a significant portion of its loans, provides flexibility in managing liquidity.
- Significant borrowing capacity with the Federal Home Loan Bank and the Federal Reserve Discount window enhances liquidity.
Challenges Ahead
- Market uncertainty has delayed origination closings and permanent loan conversions, negatively impacting gain on sale and net interest margin.
- Unfavorable fair market value adjustments to servicing rights and derivatives have negatively impacted recent results.
- The increase in non-performing loans, primarily driven by multi-family and healthcare customers with delinquent payments on variable rate loans, poses a challenge.
- Higher interest rates have led to increased payments for floating-rate loans, contributing to delinquencies.
- Increased expenses, including salaries and employee benefits for production staff and credit risk transfer premium expense, are expected to continue in future quarters.