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Investing.com -- Merchants Bancorp (NASDAQ:MBIN) reported second quarter earnings that fell well short of analyst expectations, as increased provisions for credit losses related to multi-family property values and mortgage fraud investigations weighed heavily on results. The company’s shares fell 2% following the announcement.
The Indiana-based bank reported second quarter earnings per share of $0.60, missing analyst estimates of $1.12 by a substantial margin. Revenue came in at $179.2 million, exceeding the consensus estimate of $161.1 million. Net income for the quarter was $38 million, down 50% compared to $76.4 million in the same quarter last year and 35% lower than the $58.2 million reported in the first quarter of 2025.
The earnings decline was primarily driven by a $43.1 million increase in provision for credit losses, which the company attributed to "estimated declines on multi-family property values after receiving new appraisals and the ongoing investigation of borrowers involved in mortgage fraud or suspected fraud."
"Despite a difficult second quarter, marked by an increase in our provision for credit losses and charge-offs largely associated with mortgage fraud or suspected fraud that has also impacted a number of other multi-family lenders, we are encouraged by the resilience of our underlying earnings," said Michael F. Petrie, Chairman and CEO of Merchants.
The company’s total assets reached $19.1 billion, up 2% from the previous quarter. Loans receivable increased 1% to $10.4 billion, while core deposits grew 7% to $11.4 billion compared to the first quarter. Tangible book value per common share reached a record high of $35.42, up 13% YoY.
Noninterest income rose 61% YoY to $50.5 million, driven by a 109% increase in gain on sale of loans and a 200% increase in syndication and asset management fees. However, noninterest expenses also climbed 54% to $77.3 million, reflecting higher salaries and costs associated with nonperforming loans.
The bank recorded $46.1 million in charge-offs during the quarter, primarily in its multi-family loan portfolio, though it noted that total delinquencies declined by 17% compared to the previous quarter.
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