Key Highlights

  • Diluted EPS of USD 2.06 rose 112% from USD 0.97 and cleared the USD 1.39 consensus estimate.
  • Net income of USD 105.2 million increased 92% year over year as noninterest income climbed 88% to USD 80.8 million.
  • Nonperforming loans fell 12% from June to USD 180.3 million, while criticized loans edged up 3% to USD 460.1 million.
  • Tangible book value per share reached a record USD 41.64, the thirty-first consecutive quarterly high.

Merchants Bancorp (NASDAQ:MBIN) reported third-quarter 2026 net income of USD 105.2 million, up from USD 54.7 million a year earlier and USD 78.3 million in the second quarter. Diluted earnings per share were USD 2.06 against USD 0.97, above a consensus estimate of USD 1.39. Net interest income of USD 144.2 million plus noninterest income of USD 80.8 million gives total revenue of about USD 225.0 million, above a consensus estimate of USD 182.95 million.

Chairman and CEO Michael Petrie linked the result to the diversified business model and pointed to record tangible book value, lower nonperforming loans and sharply lower charge-offs. The efficiency ratio improved to 35.35% from 45.16% a year ago, helped by positive valuation adjustments within noninterest income.

Noninterest Income, Net Interest Income and Credit

Noninterest income rose by USD 37.8 million. Loan servicing fees carried a USD 28.2 million positive fair value adjustment to servicing rights, mostly in Multi-family Mortgage Banking, and other income included a USD 19.1 million gain on floor derivatives in the Warehouse segment. Gain on sale of loans fell 23%. The company described the servicing and derivative marks as a natural hedge against pressure on mortgage production in a higher-rate setting.

Net interest income grew 13%, and the net interest margin was 2.83% versus 2.82% a year earlier. Average loan yields slid 48 basis points to 6.40%, but interest expense fell 4% as average certificates of deposit dropped 50%. The provision for credit losses was USD 12.0 million versus USD 29.2 million, and charge-offs were USD 3.9 million against USD 29.5 million. The allowance for credit losses on loans stood at USD 82.1 million.

Balance Sheet and the Loan Exchange Deal

Total assets were USD 20.9 billion, down 2% from June and up 7% from year-end 2025. Deposits grew 6% sequentially to USD 15.0 billion, with core deposits of USD 14.3 billion making up 95% of the total, while brokered deposits dropped 44% to USD 723.5 million. Available liquidity was USD 13.0 billion, or 62% of assets, and the total risk-based capital ratio was 13.3%.

On September 14, 2026, the company acquired The Loan Exchange for USD 13.9 million to build out single-family mortgage production and jumbo lending. Management said the acquired operations may weigh on earnings and lift expenses during the initial ramp-up period.

Lines to Follow in the Next Report

Four items frame the coming quarters. Criticized loans of USD 460.1 million rose 3% from June even as nonperforming loans reached 1.47% of loans receivable, down from 1.67%. Substandard loans grew USD 48.8 million while special mention balances fell to USD 181.4 million. Fair value gains of USD 28.2 million on servicing rights and USD 19.1 million on floor derivatives made up a large part of the noninterest income gain. The Loan Exchange integration carries elevated early costs, and delinquent loans of USD 215.6 million rose 4% from June.