MBIN

Merchants Bancorp is a diversified Indiana bank holding company concentrated in multi-family/healthcare CRE, mortgage warehouse lending, and LIHTC syndication. FY2025 was a clear setback: net income fell 31.7% to $219M and diluted EPS dropped 40% to $3.78, breaking a multi-year uptrend (net income ran $227M→$220M→$279M→$320M into 2024 before the reset). Per the 10-K, the decline was driven primarily by a $93.5M (+385%) jump in the provision for credit losses, a $76.1M (+34%) rise in noninterest expense, and a 1% dip in net interest income. Net interest margin compressed from 3.03% to 2.86% and the efficiency ratio deteriorated sharply from 33.37% to 44.01% — though management attributes ~680bps of that to credit default swap premiums, collateral-preservation costs on nonperforming loans, and added production staff. ROE fell to a mediocre-for-a-bank 9.6%.

The offsetting story is genuinely constructive. Criticized loans fell 27% to $508.2M even as provisions surged, which reads as conservative reserve-building rather than realized deterioration. Tangible book value per share grew 10% to $37.51, core deposits rose 20% to $11.3B (now 87% of deposits) while higher-cost brokered deposits fell 31%, and the company holds $5.3B of unused FHLB/Fed borrowing capacity. Warehouse loan volume jumped 46% to $66.3B and the LIHTC franchise raised $700.7M in new fund equity. With ~96% of loans repricing within three months, the book is positioned defensively against rate moves.