Analyzing First Internet Bancorp (NASDAQ:INBK) & First Merchants (NASDAQ:FRME)

First Internet Bancorp (NASDAQ:INBK) and First Merchants (NASDAQ:FRME) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, valuation, risk, institutional ownership, dividends, profitability and earnings.

Dividends

First Internet Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 0.9%. First Merchants pays an annual dividend of $1.48 per share and has a dividend yield of 3.6%. First Internet Bancorp pays out -6.7% of its earnings in the form of a dividend. First Merchants pays out 45.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. First Merchants has raised its dividend for 13 consecutive years. First Merchants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares First Internet Bancorp and First Merchants”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Internet Bancorp	$322.87 million	0.72	-$35.17 million	($3.60)	-7.38
First Merchants	$1.05 billion	2.46	$226.00 million	$3.23	12.73

First Merchants has higher revenue and earnings than First Internet Bancorp. First Internet Bancorp is trading at a lower price-to-earnings ratio than First Merchants, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

65.5% of First Internet Bancorp shares are owned by institutional investors. Comparatively, 73.9% of First Merchants shares are owned by institutional investors. 6.2% of First Internet Bancorp shares are owned by insiders. Comparatively, 1.8% of First Merchants shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares First Internet Bancorp and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Internet Bancorp	-9.01%	-0.55%	-0.04%
First Merchants	17.56%	9.14%	1.15%

Analyst Ratings

This is a breakdown of current ratings and price targets for First Internet Bancorp and First Merchants, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Internet Bancorp	1	2	2	1	2.50
First Merchants	0	2	3	0	2.60

First Internet Bancorp presently has a consensus target price of $29.38, indicating a potential upside of 10.52%. First Merchants has a consensus target price of $46.00, indicating a potential upside of 11.83%. Given First Merchants’ stronger consensus rating and higher probable upside, analysts plainly believe First Merchants is more favorable than First Internet Bancorp.

Volatility and Risk

First Internet Bancorp has a beta of 0.87, indicating that its share price is 13% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 0.87, indicating that its share price is 13% less volatile than the S&P 500.

Summary

First Merchants beats First Internet Bancorp on 14 of the 17 factors compared between the two stocks.

About First Internet Bancorp

First Internet Bancorp operates as the bank holding company for First Internet Bank of Indiana that provides commercial, small business, consumer, and municipal banking products and services to individuals and commercial customers in the United States. The company accepts non-interest bearing and interest-bearing demand deposit, commercial deposit, savings, money market, and Banking-as-a-Service brokered deposit accounts, as well as certificates of deposit. It also offers commercial and industrial, owner-occupied and investor commercial real estate, construction, residential mortgage, home equity, line of credit and home improvement, small installment, term, and other consumer loans, as well as single tenant lease financing, and public and healthcare finance; franchise finance; and small business lending. In addition, the company is involved in the purchase, manage, service, and safekeeping of municipal securities; and provision of public and municipal lending and leasing products to government entities. Further, the company offers corporate credit card and treasury management services. First Internet Bancorp was founded in 1998 and is headquartered in Fishers, Indiana.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.