MBIN

Merchants Bancorp ($MBIN) CEO Bets Big with $500K Purchase Amid Stock Plunge - Value Play or Falling Knife?

08/25/2025 20:40

Merchants Bancorp ($MBIN) is an Indiana-based regional bank holding company operating three core business segments: multi-family mortgage banking, mortgage warehousing, and traditional banking services. Founded in 1990, the company specializes in financing multi-family housing and healthcare facilities through government-sponsored mortgage programs and employs approximately 663 people. With a current market capitalization of about $1.48 billion, it falls into the small-cap category. The most significant signal investors should pay attention to is the aggressive buying activity by executives in recent months. CEO Michael Dury purchased 16,000 shares at $31.66 on July 30, 2025, alone, investing $506,480 in a single day. This marks his fourth purchase this year, following two transactions in May totaling $258,668. CFO Sean Sievers also bought 2,500 shares at $29.75 on August 1, while CAO Darin Thomas invested a total of $99,628 across two transactions on August 22. This concentrated buying by management sends a powerful signal that the current stock price is significantly undervalued relative to intrinsic value. Indeed, $MBIN shares have plummeted approximately 37% from their July 2024 peak of $52.05 to current levels around $33. The stock has struggled to recover since a devastating 14.6% single-day drop in late July 2024 following loan charge-off concerns, creating what executives apparently view as a compelling buying opportunity. However, the stock decline had legitimate reasons. In Q2 2024 earnings, the company recognized $3.5 million in loan charge-offs, primarily in the multi-family portfolio, and non-performing loans increased from 1.22% in March to 1.30% in June. The allowance for credit losses also rose by $5.3 million compared to March. More recently, Q2 2025 results disappointed with EPS of $0.60, significantly below the $1.12 analyst estimate. Yet management's buying conviction becomes compelling when considering the company's fundamental business model and financial strength. $MBIN's Q4 2024 performance was stellar, with EPS of $1.85 beating estimates of $1.29 by 56%. Revenue surged 27.5% to $193.77 million, and the provision for credit losses came in at just $2.7 million versus an expected $8.4 million. TTM profit margins remain robust at 42.33%, with ROE at 12.43%. Industry experts are closely watching $MBIN's situation. Wells Fargo recently identified the company as a potential capital raising candidate among regional banks, citing AOCI (accumulated other comprehensive income) issues and commercial real estate concerns. The company has indeed kept its options open, registering a $500 million mixed shelf with the SEC in May 2025. Key variables for the outlook include real estate portfolio health and adaptability to economic changes. Rising expectations for Fed rate cuts could benefit the entire banking sector. Additionally, $MBIN's specialization in multi-family housing finance—an area with government policy support—provides relatively stable demand expectations. Positive signals investors should watch include quarterly stabilization of non-performing loan ratios, slowing growth in credit loss provisions, and market share expansion in multi-family mortgage operations. Warning signs to monitor include non-performing loans exceeding 1.5%, consecutive large charge-offs, and capital ratios approaching regulatory requirements. In an optimistic scenario, Fed rate cuts and real estate market stabilization could normalize credit costs, potentially driving shares back to the mid-$40s range. The most likely base case involves sideways trading with gradual recovery. The risk scenario centers on commercial real estate market deterioration leading to additional large charge-offs or recession-driven credit cost spikes. While management's aggressive buying is clearly a positive signal, investors still need a cautious approach. Current valuations appear attractive relative to intrinsic value, but the broader regional banking sector's uncertainties and $MBIN's specific credit risk factors require comprehensive consideration.