Is Merchants Bancorp's (MBIN) Multi-Family Loan Exposure Testing Its Credit Discipline and Profit Model?

• Merchants Bancorp recently reported its second quarter 2025 results, revealing US$46.1 million in charge-offs across 14 multi-family loan customers and no recoveries, alongside a significant year-over-year drop in net income and earnings per share.
• This marks a considerable increase in loan losses compared to previous quarters and suggests growing pressure on the bank's credit quality and profitability.
• We’ll explore how elevated charge-offs in the multi-family loan portfolio shape the investment narrative for Merchants Bancorp.

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What Is Merchants Bancorp's Investment Narrative?

To be comfortable investing in Merchants Bancorp right now, you have to believe the company can absorb spikes in credit losses while still managing to deliver value over time. The latest quarterly report, with US$46.1 million in charge-offs mainly in the multi-family loan book and net income cut nearly in half year-over-year, brings a sharp focus to asset quality and near-term profitability. Previously, the investment case leaned on affordable valuation, analyst optimism, consistent dividends, and expectations for earnings growth ahead of the market. With these charge-offs, priorities may shift: short-term catalysts like loan growth and earnings expansion could remain under pressure if credit issues persist, while confidence in risk controls and capital strength is more vital than ever. The company's ability to reassure on credit quality now feels central to the outlook.

But beneath the headline numbers, there’s a bigger risk investors can’t afford to ignore. Merchants Bancorp's shares have been on the rise but are still potentially undervalued. Find out how large the opportunity might be.

Exploring Other Perspectives

Simply Wall St Community members supplied five fair value estimates, ranging from US$27.73 to a very large US$21,279.89. While opinions vary significantly, recent multi-family loan charge-offs raise questions about risk, giving readers plenty of viewpoints to weigh before forming their own outlook on Merchants Bancorp’s path forward.

Explore 5 other fair value estimates on Merchants Bancorp - why the stock might be worth 10% less than the current price!

Build Your Own Merchants Bancorp Narrative

Disagree with this assessment? Create your own narrative in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Merchants Bancorp research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Merchants Bancorp research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Merchants Bancorp's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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