First Internet Bancorp (INBK) stock intrinsic value fair value estimate & owner earnings analysis

First Internet Bancorp is a branchless, digitally delivered bank based in Indiana. It gathers consumer and small-business deposits online across the United States and lends nationwide: SBA and other small-business loans (it ranked as the 7th largest SBA 7(a) lender for the SBA's 2025 fiscal year), franchise finance through a partnership with ApplePie Capital, investor commercial real estate, construction, healthcare practice finance, public finance and consumer loans. It also earns fees from mortgage banking and fintech partnerships. WHAT HAPPENED IN 2025. This was a bad year. The company reported a net loss of $35.2 million ($4.03 per share). Two things drove it: (1) a $72.3 million provision for credit losses, up from $17.1 million, after net charge-offs of $61.0 million, mostly in small business lending (39.7 million charged off) and franchise finance (21.8 million); nonperforming loans roughly doubled to $58.5 million; and (2) a $38.2 million pre-tax loss on selling its single-tenant lease loan book (about $848 million of proceeds), a deliberate move to shrink the balance sheet and lift profitability. After the sale, net interest margin improved to 2.09% from 1.74%, and net interest income rose to $113.8 million from $87.4 million. Book value per share was $41.41 at year end and equity was 6.46% of assets. HOW WE MEASURE EARNINGS. We start from operating cash flow, remove swings in loans held for sale and other working balances, and subtract stock compensation and maintenance capital spending. For a bank we also subtract the provision for credit losses. Operating cash flow adds it back because it is non-cash, but the principal it represents is really lost, so leaving it in would overstate what shareholders can take out. We did not deduct the one-time $38.2 million loss on the loan sale, since it will not recur. On this basis, owner earnings per share were: 2017 $2.29, 2018 $3.04, 2019 $2.15, 2020 -$3.93 (heavy building and premises spending), 2021 $2.85, 2022 $3.07, 2023 $0.51, 2024 $3.84 and 2025 -$5.01. We use the median of all nine years, $2.29, because a bank's earnings only make sense across a full credit cycle: the window includes the 2020 shock, the 2023 stress and the 2025 credit event. Year-to-year results are volatile because provisions swing widely. Owner earnings fell in 2025 (from $3.84 to -$5.01), so we assume no near-term rebound in the base case. BASE CASE ($38.20 per share). Owner earnings stay at about $2.29 per share indefinitely, with no growth. That is a return of roughly 5.5% on book value, below the level the bank earned in better years, because 2025 showed that its higher-yielding small business and franchise loans can lose real money. We credit no growth: the bank shrank its balance sheet in 2025, and nothing contracted or steadily repeated over many years supports an assumed growth rate. Left out on purpose: the improved margin and management's profitability targets, because they have not yet shown up in a full year of owner earnings. What keeps the earnings going after year 10 is a deposit franchise that has operated since 1999 and produced positive owner earnings in seven of the last nine years. BEAR CASE ($9.40 per share). Credit losses in small business and franchise finance stay at elevated levels: provisions of roughly $50 million in each of the next two years (still below 2025) and about $30 million in year three, then back to about $17 million, the 2023-2024 level. Before provisions, owner earnings run about $3.00 per share. That gives owner earnings of about -$2.70 per share for two years, about -$0.40 in year three, and about $1.05 per share afterward. This case is real risk, not a remote one: the loan-loss reserve covers only about 95% of nonperforming loans, equity is only 6.46% of assets, the bank carries $107 million of subordinated debt, and about $1.4 billion of certificates of deposit mature within a year. Leverage is reflected here and not by subtracting debt from value. BULL CASE ($58.30 per share). Credit costs return to about $17 million a year immediately and the wider margin holds, so owner earnings run about $3.50 per share, in line with the best years of the last decade ($3.04 in 2018, $3.07 in 2022, $3.84 in 2024). No growth is assumed beyond that. WHAT COULD MAKE THIS WRONG. If the 2025 losses prove concentrated in a few older loan vintages, the bull case is closer than we show. If losses continue to spread into other portfolios, or if fintech-related deposits or brokered funding become harder to keep, the bear case is closer. We could not reconcile management's adjusted figures to our owner-earnings basis and did not use them. Our conclusion is based on the bank's 2025 annual report filed in March 2026. The margin-of-safety price is set at a substantial discount to the base value, about half, because of the credit deterioration, thin capital and the wide gap between our bear and bull cases; it also assumes evidence that credit losses are peaking.