First Internet Bancorp’s Q1 Results Highlight Persistent Challenges Amid Sector Gains

First Internet Bancorp (INBK) delivered a stark reminder this week that even in a sector benefiting from rising interest rates and robust loan demand, execution remains paramount. The digital banking company reported first-quarter 2025 earnings that fell far short of expectations, underscoring a recurring pattern of missed forecasts and investor skepticism. While the bank highlighted gains in net interest margin and loan growth, its stock has cratered 30% year to date—a decline three times worse than the broader market’s performance.

The numbers tell a story of bifurcated progress. First Internet’s diluted EPS of $0.11 was a staggering 85% below analyst estimates, marking its fourth consecutive quarter of missing targets. Year-over-year, the metric collapsed from $0.59 in Q1 2024. Revenue totaled $87.3 million, but the portion of income “net of interest expense” ($35.5 million) missed Street forecasts by 3.2%, signaling potential missteps in cost management or revenue mix.

Even as net interest margin expanded to 1.82%—a 15-basis-point improvement from Q4—management’s ability to translate this into bottom-line results has been inconsistent. Total loans rose by $83.8 million, or 2%, to $4.3 billion, with a loans-to-deposits ratio of 86%, suggesting manageable liquidity. Credit quality remained stable, with nonperforming loans at 0.80% of total loans. Yet these positives were overshadowed by the EPS shortfall, which CEO David Becker attributed to “ongoing investments in technology and infrastructure to diversify revenue streams.”

The disconnect between First Internet’s operational metrics and its stock price is striking. While the bank’s net interest margin expanded and loan growth accelerated, its shares have been punished by a market increasingly intolerant of earnings volatility. Compare this to peer Camden National (CAC), which is expected to report a 15% EPS jump to $0.99 in Q1, alongside 37% revenue growth. The Zacks Industry Rank for Banks—Northeast places the sector in the top 23% of all industries, yet First Internet languishes with a Zacks Rank of #3 (Hold), reflecting mixed analyst sentiment.

Investors are left to weigh two narratives: First Internet’s structural advantages, including its tech-driven platform and improving margin trends, against its repeated failure to meet earnings expectations. The company’s full-year 2025 consensus calls for $4.11 EPS and $163.75 million in revenue—numbers that would require a dramatic turnaround from Q1’s $0.11 EPS. Management will need to convince skeptics during its April 24 conference call that the EPS miss was an anomaly, not a sign of deeper issues.

The stakes are high. First Internet’s valuation is now at a critical crossroads. Its price-to-book ratio has fallen to 1.2x, below its five-year average of 1.6x, suggesting the market is pricing in significant risk. Meanwhile, Camden National trades at 2.1x price-to-book, a stark contrast. For First Internet to regain investor trust, it must not only hit revised estimates but also articulate a clearer path to profitability—one that bridges the gap between its operational strengths and its bottom line.

In the end, First Internet’s story is a microcosm of the banking sector’s dual realities: a strong macro backdrop for lenders coexists with heightened scrutiny of execution. While the Northeast bank sector’s Zacks Rank suggests favorable tailwinds, First Internet’s ability to harness them hinges on accountability. Until then, its stock remains a cautionary tale—a company with the tools to succeed but an earnings record that keeps investors at arm’s length.

Conclusion: First Internet Bancorp’s Q1 results reveal a company caught between structural positives and persistent execution challenges. With a stock down 30% year to date and four consecutive EPS misses, the market has little patience for excuses. While loan growth and margin expansion offer hope, the path to recovery demands more than just talking points. To justify its valuation, First Internet must deliver on revised estimates—and quickly. With peers like Camden National outperforming and sector dynamics favorable, the window to prove itself is narrowing. For now, investors are right to remain skeptical.