Merchants Bancorp (MBIN): A Bull Case Theory 

We came across a bullish thesis on Merchants Bancorp on Valueinvestorsclub.com by LDMR. In this article, we will summarize the bulls’ thesis on MBIN. Merchants Bancorp’s share was trading at $32.82 as of November 26th. MBIN’s trailing P/E was 7.54 according to Yahoo Finance.

Merchants Bancorp (MBIN) sits in a rare position among U.S. banks, trading below book value despite delivering a long-term average ROE of 21% and industry-leading BVPS and EPS growth of 27% and 25% since 2016. The disconnect stems from what appear to be temporary issues, mainly a surge in delinquent loans tied to an unprecedented fraud scheme that affected numerous lenders.

Although this raises questions about oversight, the losses are concentrated in government-backed multifamily and healthcare portfolios, limiting long-term damage. Founders Michael Petrie and Randall Rogers, who still own ~40% of the company, have a decades-long track record of entering capital-constrained niches like mortgage warehousing and scaling high-ROE businesses built on originate-to-sell lending. Their multifamily segment alone recently posted an extraordinary 11.6% ROA, translating into triple-digit ROE when levered, driven by gain-on-sale economics and credit-transfer tools that enhance capital efficiency.

While delinquency headlines have pressured sentiment, MBIN continues to generate substantial pre-tax, pre-provision earnings, providing a cushion to absorb losses while remaining profitable. As provisioning normalizes over the next 12–24 months, ROE could return to the mid-teens and eventually back toward 20%, restoring the company’s historical performance profile. At 0.9x book and roughly 4–5x normalized earnings, the stock embeds overly pessimistic assumptions.

If book value compounds toward $60 by 2028 and the market assigns even a modest 1.5x multiple—below its historical median—shares could approach $90, representing a potential triple in three years. With founders nearing retirement, a future sale also remains a reasonable upside scenario. While MBIN’s complex, high-velocity lending model carries inherent “black box” risks, its earnings power, aligned ownership, and temporary nature of current issues create an attractive risk/reward as delinquency resolution becomes the key catalyst.

Previously we covered a bullish thesis on Bank OZK by Ryan Hess in November 2024, which highlighted its disciplined RESG lending model, strong profitability, and long-term growth execution. The company’s stock price has depreciated approximately by 6.75% since our coverage. This is because macro concerns around construction lending weighed on sentiment. The thesis still stands as its risk-adjusted returns remain resilient. LDMR shares a similar view on Merchants Bancorp but emphasizes its niche high-ROE model.

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Disclosure: None.